Wells Fargo CEO to Unveil Cost Reduction Plan By Reuters

2/2 © Reuters. FILE PHOTO: A pedestrian passes a Wells Fargo & Co bank in San Francisco 2/2

By Imani Moise (Reuters) – Wells Fargo (NYSE 🙂 & Co Chief Executive Charlie Scharf will give investors more details on his long-awaited recovery plan for the scandal-plagued bank this week. Although Wall Street expects Wells Fargo to report a 38% profit drop on Friday in the context of the coronavirus pandemic, investors have grown more optimistic in anticipation of details about the expansive cost-cutting plans. Wells Fargo shares have risen 45% since Scharf advanced a strategic update in October, outperforming JPMorgan Chase & Co (NYSE 🙂 and Bank of America Corp (NYSE :). Wells Fargo’s management has promised a transformation since its 2016 fraudulent account scandal with little to show for the effort, but now it feels different, Raymond James analyst David Long said. Scharf “really changed the internal attitude to make improving the bank’s governance the number one priority,” Long said. Scharf began making changes shortly after taking command in October 2019, though he has yet to provide firm targets or timelines for progress. He installed a large number of outside leaders, reviewed the reporting segments, and began to ditch secondary business. It also implemented weekly and monthly reviews to increase oversight and address regulators’ concerns more efficiently. In a sign of progress in repairing Wells Fargo’s relationship with regulators, the Office of the Comptroller of the Currency terminated a consent order related to the bank’s anti-money laundering compliance earlier this month. But Wells’s biggest obstacles remain and he has a long way to go to catch up with his peers. Efficiency rates in Wells’ largest lines of business lag far behind other large banks. Additionally, the continued need for spending to satisfy regulators and the presence of a punitive asset cap until Wells proves it has fixed the risk management failures that led to widespread customer abuse will continue to hamper the bank’s ability to compete effectively. “Other banks have not been operating under these consent orders, so they have been able to spend a good deal of their shared mind thinking about operational efficiency and the future,” Long said. Wells has not.

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