Wells Fargo & Company WFC has announced another round of job cuts, this time in the mortgage servicing segment of its Milwaukee office. The San Francisco-based company is set to lay off 1,142 employees on grounds of subdued delinquencies.
Driven by the sub-prime mortgage crisis in 2008, banks across the U.S increased their workforce to serve rising mortgage delinquencies and foreclosures. However, with the housing market on a rebound and gradual recovery in the economy, the volume and severity of such loans have gone down. Moreover, as per sources, there has been a drop in demand for new homes in the U.S.
Notably, Wells Fargo’s total delinquency and foreclosure ratio declined 61 basis points year over year to 5.79% as of Dec 31, 2014.
As a result, the company now plans to return to normal staffing levels. Reportedly, the Milwaukee office, which is among the company’s smaller loan servicing unit, will be shut down by the end of Jul 2015. Further, the discharged workers will be offered severance and opportunities to apply to other open positions in the bank.
Of the total jobs at stake, 20 are based in Charlotte, 7 in Fort Mill. Currently, the company has 265,000 employees, with 48,000 within its home lending business.
We believe the slashing of jobs will help improve work-force efficiency and reduce expenses. This, in turn, would provide opportunities for improving operating leverage and pulling up earnings in the quarters ahead.
Currently, Wells Fargo carries a Zacks Rank #3 (Hold).
Other banks have also been following the same strategy of late, with Bank of America Corp. BAC laying off 202 workers in its Legacy Asset Servicing unit in Feb 2015, and JPMorgan Chase & Co. JPM announcing the slashing of 3000 jobs in its consumer and community banking division in Nov 2014.
On the other hand, contrary to such moves, U.S. Bancorp USB announced its plans to recruit additional 4500 employees by the end of 2015.
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