By Imani Moise and P.J. Huffstutter
(Reuters) – Wells Fargo & Co
Most of the cuts were in Wells Fargo’s commercial bank and many impacted its team that gives loans to farmers. The bank has also made cuts to its energy lending group. Energy and agriculture are two portfolios in which the company is traditionally strong.
The fourth-largest U.S. lender by assets cut the unit that specializes in agricultural lending by at least 25%, according to four sources with direct knowledge of the matter.
Representatives for Wells Fargo confirmed the cuts but did not elaborate on how many agricultural bankers were laid off.
Over the summer, 22 bankers were axed from its energy team, according to two other sources. The cuts represented about 7% of the energy group, a spokeswoman said.
The energy lending team sits within the investment bank and the agriculture group is part of commercial banking. The company has about 6,000 commercial bankers in the United States.
Many of the agriculture cuts were concentrated in rural areas, one source told Reuters, including North Dakota and South Dakota where staff was cut in half. Wells Fargo plans to create a smaller group of agricultural bankers in one of its new centralized hubs who will work with customers, the person said.
While the move marks Wells Fargo’s latest bid to centralize operations and shed risk, the move comes as a blow to energy companies and increasingly cash-strapped farmers.
With fewer bankers on hand in local markets, some small companies and family farmers will likely need to find a new lender, said three sources familiar with the businesses.
The staffing cuts are particularly ill-timed for the bank’s soybean, corn and grain farm customers, who are looking to renew loans to finance their spring planting operations.
Wells Fargo is the biggest bank lender to the U.S. agriculture sector, according to the American Bankers Association. An Wells Fargo executive told Reuters the bank intends to retain that position and there has been no strategic move to reduce exposure. The moves were made because the commercial bank wants to align resources to better serve clients who do more business with the bank.
The bank is currently hiring agricultural bankers in markets like California, Wyoming and Idaho, a bank spokeswoman said. After the hires the total reduction to the team will be 5%.
Federal data analyzed by Reuters shows Wells Fargo is following other large U.S. banks in scaling back exposure to farmers. The bank’s Federal Deposit Insurance Corporation (FDIC)-insured units have pared $1.24 billion, or 15.3%, of their farm-loan holdings between the end of December 2016 and June 30 of this year, according to the most recent data from the regulator.
Wells Fargo has also been traditionally regarded as one of the most active lenders to the U.S. oil and gas sector. But its energy team was still recovering from hefty losses it booked in 2016, when crude prices plunged to $26 a barrel and forced a number of bankruptcies in the sector. (https://www.reuters.com/article/us-wells-fargo-energy-idUSKCN0XA09K)
The unit created a separate credit resolution group to try to work with customers to stem the losses. Since then the bank has disbanded its Energy Capital Group and put less emphasis on lending, two of the sources said.
Another Wells Fargo spokeswoman, Hannah Sloane, said the bank remains committed to the sector and has expanded the business over the past three years.
“We regularly review and evaluate the needs of our clients and the dynamics in the markets we serve in order to ensure we align our resources accordingly,” she said.
Wells Fargo has been working to centralize operations to improve risk controls since 2016, when a wide-ranging sales practices scandal erupted and placed the bank under a regulatory microscope. The Federal Reserve has prevented the bank from increasing its balance sheet until it believes it has made significant changes to its risk management and compliance structures.
Revenue in Wells Fargo’s wholesale bank, which houses the merged banking unit, has fallen every year since the scandal and fell another 2% during the first six months of 2019. The unit has had some trouble attracting new business in the wake of the scandal, Reuters has reported.
(Reporting by Imani Moise in New York and P.J. Huffstutter in Chicago; Editing by Matthew Lewis)