Wells Fargo To Cut 3,800 Jobs; End "Non-Prime" Mortgages
online.wsj.com
excerpt:
Wells Fargo & Co. (WFC) said it will shut down a unit that makes what the San Francisco bank calls "non-prime" real estate, auto and credit card loans and stop originating non-prime mortgages, eliminating a total of 3,800 jobs, or 1.4% of its work force.
The third-largest U.S. bank in stock-market value behind J.P. Morgan Chase & Co. (JPM) and Bank of America Corp. (BAC) announced the closing of all 638 Wells Fargo Financial stores across the U.S. Many of the locations are storefronts that drew customers who didn't seek loans through traditional Wells Fargo bank branches.
At the end of March, Wells Fargo Financial had $39.4 billion in secured real-estate and auto loans, or about 5% of the company's total loans of $781.43 billion. About 6.1% of the unit's secured real-estate loans were considered prime, with the rest classified by Wells Fargo as "non-prime," a category considered by analysts to be similar to subprime.
Loan losses rose as the U.S. economy stumbled, but Wells Fargo has said that the performance of the unit's secured real-estate loans was similar to portfolios of prime loans for the overall industry.
"Our network of U.S.-based consumer finance stores, which have historically operated as an independent sales channel from our bank operations, have served customers well for more than 100 years," said David Kvamme, president of Wells Fargo Financial, "but the economics of a separate Wells Fargo Financial channel are no longer viable, especially now that our customers have access to the largest banking and mortgage store network in the United States."
The company said less than 2% of its real-estate loans were originated in Wells Fargo Financial stores in the first quarter.
Wells Fargo said the consumer-finance unit's consumer- and commercial-loan products will be available through the branch network and home-mortgage stores acquired in the company's 2008 merger with Wachovia Corp.
About 2,800 jobs, or 20% of the unit's work force, will be cut in the next 60 days, followed by an additional 1,000 in the next year. Remaining workers will be assigned to other Wells Fargo businesses, according to the company.
The move is expected by Wells Fargo to result in restructuring charges of about $185 million on a pretax basis, including severance costs of $137 million, or two cents a share, in the second quarter. The remaining charges will occur in the second half of 2010, primarily in the third quarter. Wells Fargo said cost savings from the restructuring "are expected to offset these charges in the first year and a half."
--------
Perhaps Wells Fargo has finally seen the light, but here's a great flashback! The following editorial was published by Investor's Business Daily back in 2008. This is one of my favorite articles from that year. This is a must read!
The Real Culprits in This Meltdown
investors.com |
