Of all the banks, Wells Fargo (NYSE: WFC) is the least attractive because of the two-year scandal that tarnished the brand. In 2015, it admitted its employees opened accounts for customers to inflate sales numbers. When JP Morgan (NYSE: JPM) or Morgan Stanley (NYSE: MS) offer better growth prospects and are not surrounded by controversy, does Wells’ cost cut change anything for investors?
In the next three years, the bank will cut headcount by 5 – 10% as it transforms the company. The press release outlined the transformation plan requires a shift in its business model. It must streamline operations and boost efficiency. CEO Tim Sloan is relying on technology to replace workers.
WFC must cut costs, regardless of its controversial costs. Other banks are doing the same, embracing technology to increase customer service quality. Interest rates are going up and taxes are falling, which is a tailwind for Wells Fargo and all other financial institutions. As Bank of America (NYSE: BAC) and Citi (NYSE: C) both rebound, WFC will lag but eventually, it will recover on the stock market.
Takeaway
Hold Wells Fargo and get rewarded a dividend of over 3 percent, compared to 1.9% with BAC stock and 2.4% with Citi. The stock is more attractive after the CEO outlined a cost-cutting plan that ultimately benefits shareholders.
