Wells Fargo shuttering hundreds of branches as customers embrace mobile banking

(Courtesy of Jacksonville Business Journal)

Wells Fargo plans to close 450 of its almost 6,000 branches nationwide as it cuts costs and adjusts to more customers banking outside a branch.

The bank, led by CEO Tim Sloan, said it cut 93 branches in the first half of this year, with more than half of those closures, 54, occurring in the second quarter. The pace will increase, with the bank expecting to shutter 200 branches this year and 250 in 2018.

But times are changing. The Philadelphia Business Journal published a cover story last week on banks pulling back from branches. The newspaper quoted a banking veteran who expects the number of bank branches nationally to be sliced in half within 10 years, with remaining locations taking up less space on average and offering more self-service features, including employee-less bank branches. Bank of America (NYSE: BAC) is pioneering such branches.

Wells Fargo’s branch pruning garnered more headlines as details were revealed on where branch closures will occur. Wells said late Thursday that it hasn’t announced any Bay Area branch closings, pointing out that it’s actually opening a branch in San Francisco’s Ingleside neighborhood on Aug. 7.

But such is not the case in nearby states.

Wells (NYSE: WFC) is closing five branches in New Mexico, where it hasn’t opened a new location since 2005, sister paper Albuquerque Business First reported Thursday.

The branch closures aren’t entirely unexpected since the bank is seeking to cut $2 billion in expenses by the end of 2018 to free up money for investing elsewhere in the business and then cut another $2 billion by the end of 2019 to boost profits.

The expense cuts occur in the wake of Wells Fargo’s fake accounts scandal and a changing banking landscape. Many bank customers prefer to handle more of their banking online, often over their mobile phones. May marked the first time that Wells had more mobile active customers than online active customers.

“Our physical distribution strategy is driven by customer behavior and market factors,” said Wells Fargo spokeswoman Edith Robles. “Our branch and ATM strategies reflect our customers’ migration to virtual channels. More transactions are occurring outside the branch and mobile continues to be the channel of choice for millions of our customers.”

Wells is also making progress in cutting its real estate costs beyond the branch network. The bank expects to save about $150 million through its ongoing site consolidation that will see office space usage decline by another 2 million square feet.

It appears no expense is going unexamined. Wells anticipates saving $200 million on travel this year.

The bank also reduced its workforce by 2,200 employees during the second quarter, although some of those cuts were likely through attrition.

Wells said its most recent visit and customer loyalty scores were at their highest level since the bank said last September that it would pay $185 million in regulatory fines for employees opening up to 2 million deposit and credit accounts without customers’ authorization.

That may help explain why Wells Fargo’s stock has also done relatively well, with shares changing hands at $55 Thursday, up more than 12 percent when compared to last year. Two Fed rate increases this year are also helping shares of Wells and other banks as loans reprice faster than the interest they pay on deposits.

Wells Fargo’s quarterly earnings also reflected some of the bank’s long-standing strategies. For instance, Wells pulled back on certain types of lending, citing increased competition that it says hurts credit standards.

The bank said auto loans fell 17 percent, or $2.5 billion, in the second quarter vs. this year’s first quarter as the bank tightened lending criteria.

Wells expects its auto lending to continue to decline in the second half of the year.

The nation’s largest commercial real estate lender saw those loans fall by $982 million in the second quarter from the first quarter.

“Our growth has been modestly below that of the industry for the first half of the year,” Shrewsberry said of its commercial lending business. “We’ve remained disciplined, adhering to our underwriting standards in a competitive market.”

The bank is taking steps to boost lending such as making interest-only jumbo mortgages to strong borrowers and testing credit card offers through digital channels.

The bank is also helping customers avoid overdrafts by introducing a zero balance email alert sent to an online banking customer during the day when their available balance is zero or negative.

Wells Fargo is also sharpening its focus on its core businesses and shedding some operations.

Earlier this month, Wells Fargo said it would sell its business focused on providing shareholder services to more than 1,200 corporate clients.

Wells Fargo Shareowner Services, based in suburban Minneapolis and employing 400 people, is being sold to Britain’s Equiniti Group for $227 million in a deal expected to close by the end of the first quarter of 2018.

In June, the bank sold its commercial insurance unit to USI Insurance Services. Last year, Wells sold its crop-insurance business for $1.05 billion to Zurich Insurance Group.

Wells Fargo is the third-largest bank in Central Florida, with $6.76 billion in local deposits.

Morgan Stanley to curb veteran adviser recruiting

(Courtesy of Reuters.com)

The corporate logo of financial firm Morgan Stanley is pictured on the company's world headquarters in New York, U.S. April 17, 2017. REUTERS/Shannon Stapleton

The corporate logo of financial firm Morgan Stanley is pictured on the company’s world headquarters in New York, U.S. April 17, 2017.

 

Morgan Stanley, the biggest U.S. brokerage by head count, told brokers Tuesday that it is standing down from the expensive recruitment wars, following similar steps taken earlier this month by competitor Bank of America (BAC.N) Merrill Lynch.

Morgan Stanley, which has more than 15,000 brokers, will “significantly reduce experienced adviser recruiting,” according to a staff memo from Morgan Stanley co-heads Shelley O’Connor and Andy Saperstein that was viewed by Reuters. The news was reported earlier on Tuesday by the Wall Street Journal.

Merrill Lynch announced that, starting in June, it will no longer offer new prospects or recruits big upfront bonus checks to join its firm, a common and costly industry practice.

For years, brokerage executives have complained about the ceaseless competition among Wall Street firms to offer ever more lucrative recruitment packages to gain top advisers and their clients and assets.

The offers included a substantial sign-on check, plus a l bonus paid out over seven to 10 years based on sales and growth targets. They were used as the primary way to expand wealth management businesses, but critics said recruitment costs often outweighed returns.

Morgan Stanley will honor any approved recruitment offers made and in the “pipeline” by June 16 for brokers who are set to join the firm on or before Sept. 1, according to the memo.

UBS AG’s (UBSG.S) Wealth Management Americas last year announced plans to curb recruiting.

Wells Fargo to launch pilot with Facebook Messenger

(Courtesy of Jacksonville Business Journal)

Wells Fargo & Co. is launching a pilot to test an artificial intelligence-driven experience through Facebook Messenger.

The San Francisco-based bank — the third-largest bank in Central Florida — has hinted at incorporating financial services into third-party environments for a while now. Steve Ellis, head of Wells Fargo’s Innovation Group, talked about implementing banking tools in Facebook Messenger with sister paper Charlotte Business Journal earlier this year.

“It all comes back to making it easier for customers to do business with you,” Ellis said at the time.

“Our goal is to deliver information ‘in the moment’ to help customers make better informed financial decisions,” Ellis said in a statement Tuesday. “AI technology allows us to take an experience that would have required our customers to navigate through several pages on our website, and turn it into a simple conversation in a chat environment. That’s a huge time- saving convenience for busy customers who are already frequent users of Messenger.”

Wells Fargo (NYSE: WFC) says it has provided assistance to customers through Facebook since 2009. In May 2016, the bank adopted Messenger and its main channel for addressing customer questions and problems.

Facebook users have been able to send and receive money on Messenger since 2015. The social-media platform announced April 11 users can now send and receive money between groups of people on Messenger, using Android phones or desktop computers. Facebook (NASDAQ:FB) did not immediately respond to a request for comment on the Wells Fargo pilot.

Most of Wells Fargo’s customer engagements now happen over Messenger, rather than on its public news feed.

The bank announced in February Ellis would lead a new team called the artificial intelligence enterprise solutions team. Since its sales scandal emerged last September, Tim Sloan, Wells Fargo’s new CEO, has said the bank is relying on technology to rebuild trust.

Most of the large banks in the U.S. are experimenting with artificial intelligence. Charlotte, N.C.-based Bank of America’s virtual assistant, called Erica, is expected to launch this summer.