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Wells Fargo & Company (NYSE:) is actively seeking ways to streamline its operations and cut costs, with a focus on reducing its real estate holdings and staff numbers, according to an announcement made on Thursday. The bank’s Chief Financial Officer, Mike Santomassimo, is leading the initiative.
Since the third quarter of 2020, the bank has eliminated nearly 40,000 positions. Management believes that even before the COVID-19 pandemic, the company had excess real estate properties, which it has been gradually offloading in recent years.
The bank’s exposure to commercial real estate loans, especially office loans, has raised concerns amid macroeconomic uncertainties and a slow return to office work. However, Wells Fargo’s management has indicated that its other portfolios have been performing well, which has eased pressure on its commercial real estate portfolio.
In recent times, the bank’s loan balance has seen a minor decline as it has pulled back from auto originations. With an asset cap still in place until full compliance with regulatory requirements regarding risk management and compliance is achieved, significant growth in the loan balance is unlikely. This could potentially impact the growth of net interest income.
Despite these challenges, Wells Fargo continues to repurchase its shares in the third quarter, albeit at a slower rate than in the first half of 2023. As of the end of the second quarter in 2023, the bank boasted a strong liquidity position with a liquidity coverage ratio of 123%, exceeding the regulatory minimum of 100%. Its liquid assets, comprising cash and due from banks as well as interest-earning deposits with banks, amounted to $155.33 billion at that time. This robust liquidity position has likely facilitated capital deployment activities.
In terms of market performance, over the past six months, Wells Fargo’s shares have appreciated by 8.8%, outpacing the industry’s growth rate of 5%.
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