Wells Fargo lays off more than 200 business bankers in US: sources

[NEW YORK] Wells Fargo & Co has laid off more than 200 bankers in its US lending divisions in recent months, as the bank reacted to business trends and restructured some units, sources familiar with the matter said this week.

Many of the cuts were focused on Wells Fargo's team that gives loans to energy companies and farmers, two portfolios in which the company is traditionally strong. The energy lending team sits within the investment bank and the agriculture group is part of commercial banking. The company has about 6,000 commercial bankers in the United States.

The fourth-largest US lender by assets cut the unit that specialises in agricultural lending by at least 25 per cent, according to four sources with direct knowledge of the matter.

Over the summer, 22 bankers were axed from its energy team, according to two other sources.

Many of the agriculture cuts were concentrated in rural areas, one source told Reuters, including North Dakota and South Dakota where staff was cut in half. Wells Fargo plans to create a smaller group of agricultural bankers in one of its new centralised hubs who will work with customers, the person said.

Representatives for Wells Fargo confirmed the cuts but did not elaborate on how many agricultural bankers were laid off.

While the move marks Wells Fargo's latest bid to centralise operations and shed risk, the move comes as a blow to energy companies and increasingly cash-strapped farmers.

With fewer bankers on hand in local markets, some small companies and family farmers will likely need to find a new lender, said three sources familiar with the businesses.

The staffing cuts are particularly ill-timed for the bank's soybean, corn and grain farm customers, who are looking to renew loans to finance their spring planting operations.

Wells Fargo is the biggest bank lender to the US agriculture sector, according to the American Bankers Association. An Wells Fargo executive told Reuters the bank intends to retain that position and there has been no strategic move to reduce exposure. The moves were made because the commercial bank wants to align resources to better serve clients who do more business with the bank.

The bank is currently hiring agricultural bankers in markets like California, Wyoming and Idaho, a bank spokeswoman said. After the hires the total reduction to the team will be 5 per cent.

SCALING BACK

Federal data analysed by Reuters shows Wells Fargo is following other large US banks in scaling back exposure to farmers. The bank's Federal Deposit Insurance Corporation (FDIC)-insured units have pared US$1.24 billion, or 15.3 per cent, of their farm-loan holdings between the end of Dec 2016 and June 30 of this year, according to the most recent data from the regulator.

Wells Fargo has also been traditionally regarded as one of the most active lenders to the US oil and gas sector. But its energy team was still recovering from hefty losses it booked in 2016, when crude prices plunged to US$26 a barrel and forced a number of bankruptcies in the sector.

The unit created a separate credit resolution group to try to work with customers to stem the losses. Since then the bank has disbanded its Energy Capital Group and put less emphasis on lending, two of the sources said.

Another Wells Fargo spokeswoman, Hannah Sloane, said the bank remains committed to the sector and has expanded the business over the past three years.

"We regularly review and evaluate the needs of our clients and the dynamics in the markets we serve in order to ensure we align our resources accordingly," she said.

Wells Fargo has been working to centralise operations to improve risk controls since 2016, when a wide-ranging sales practices scandal erupted and placed the bank under a regulatory microscope. The Federal Reserve has prevented the bank from increasing its balance sheet until it believes it has made significant changes to its risk management and compliance structures.

Revenue in Wells Fargo's wholesale bank, which houses the merged banking unit, has fallen every year since the scandal and fell another 2 per cent during the first six months of 2019. The unit has had some trouble attracting new business in the wake of the scandal, Reuters has reported.

REUTERS