Wells Fargo & Co (NYSE:WFC) is reportedly planning to shut down 450 branches in the U.S as part of its plan to maximize efficiency.
The company has a strong reputation among analysts as one of the most efficient banks but the efficiency has recently started to decrease. The firm is trying to adapt to the changing situations and it recently announced that it plans to slash its annual expenses by $2 billion by the end of 2019. One of the major strategies for achieving this goal is to shut down some of the branches in its network.
Wells Fargo has 5,977 locations in the U.S. and this is significantly higher than the number of branches owned by JPMorgan Chase & Co. (NYSE:JPM) which has the second highest number of branches in the U.S. The company has established the need to shut down about 450 of those branches in order to help in maintaining its efficiency.
“There are minimal immediate savings recognized from branch closures due to the initial closing costs. So therefore, most of the expense benefit from the 200 branches we close this year will not be realized until next year,”stated Wells Fargo CEO, Timothy Sloan.
Branch closure is already ongoing
Wells Fargo has already started closing some of its branches as part of its plan to boost efficiency. The company has so far shut down about 94 branches within the first half of this year including 54 branches closed within the second quarter of 2017. The bank plans to shut down an extra 250 branches in 2018. Investors do not expect the closure of some of the company’s branches to immediately reflect its bottom line.
There are a few factors that have contributed to the company’s decision to close down some of its branches. This includes the fact that online banking is rapidly developed over the past few years and it offers a more efficient path for banks to serve their customers. As a result, there is less need for many branches since customers no longer need to physically visit branches. It therefore gives the bank an opportunity to pursue further development of digital channels.
Wells Fargo stock closed the latest trading session on Tuesday at $54.80.