Wells Fargo Cuts Mortgage Staff As Volume Falls
April 07 2011 - 5:30PM
Dow Jones News
Wells Fargo & Co. (WFC) cut 1,900 employees in its mortgage
business because demand for new mortgages has dropped.
The San Francisco bank, the nation's fourth largest by assets,
has given notice last month to mostly interim employees in loan
processing, underwriting and servicing working in its operations
centers ranging from Minneapolis and Chicago to Wilmington, N.C.
Bloomberg News and the Charlotte Observer reported the layoffs
earlier.
Wells Fargo has set its sights on cost saving this year, and
Howard Atkins, who was chief financial officer until February, told
Dow Jones in January the bank is "really trying to...take the next
step" in lowering the costs of operating the massive bank. "I don't
think there will be any branch closings, but there could be staff
reductions," he said.
Layoffs will likely become more widespread at Wells Fargo and in
the banking industry overall as banks try to become more efficient
and offset weak revenue growth and sluggish loan demand. The
mortgage business is particularly cyclical and tied to interest
rates that set mortgage rates. Such rates have been rising, and
refinancings and home purchases have slowed.
The cuts add up to about 3% of Wells Fargo's mortgage staff,
including interim positions that are tied directly to origination
volumes. Most of the layoffs are these interim employees, who were
told when hired that their position could be short term, a
spokesman said. On Dec. 31, Wells Fargo's overall headcount was
272,200.
The bank is expected to report first-quarter results on April
20.
"Industry-wide mortgage applications are down nearly 30% from
2010 averages," Sanford Bernstein analyst John McDonald wrote in a
recent analyst report, and Wells Fargo "is managing for
significantly lower production volumes in '11." Moreover, Wells
Fargo "typically loses some market share in a purchase-driven
market, as opposed to the refi-driven markets of 2009 and 2010 when
it gained significant share. To cushion the blow, management noted
that it is aggressively managing its production capacity [i.e.
variable headcount] in 2011 based on its view of origination
volumes it will see."
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com
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