US Big Four Bank Wells Fargo Hints at Large-Scale Layoffs Due to COVID-19

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Wells Fargo, the third-largest U.S. bank, has indicated it will proceed with layoffs due to the impact of the novel coronavirus (COVID-19). In addition, it announced an unusual move in the financial industry by cutting dividends.

On the 10th (local time), major foreign media outlets reported, citing sources, that Wells Fargo may lay off thousands of employees starting at the end of the year. Furthermore, Wells Fargo is taking steps to strengthen its financial soundness, such as announcing a reduction in dividends for the third quarter this year following the U.S. Federal Reserve's stress test.

A source said, "We are reviewing costs and conducting a comprehensive strategy review," adding, "The financial performance is very poor." Wells Fargo has avoided direct comments on this matter.

If these layoffs occur, they are expected to be the first major layoffs among U.S. banks since the COVID-19 pandemic.

Until now, U.S. banks have postponed layoffs as a last resort while preparing for loan losses. However, with the four major U.S. banks?Wells Fargo, Citigroup, JPMorgan Chase, and Bank of America?expected to collectively report nearly $25 billion in loan loss provisions in their second-quarter earnings next week, interpretations suggest that layoffs have become inevitable. This amount exceeds the $24 billion in loan losses recorded in the first quarter and is higher than the loan losses during the global financial crisis over a decade ago.

Wells Fargo's Chief Financial Officer (CFO), John Shrewsberry, stated in June, "Plans to reduce workforce and cut expenses, including real estate, will need to be implemented during this year."

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