Sam Spade's San Francisco

The San Francisco bank will move many of the unit’s offerings into its 6,600 bank branches and 2,200 Wells Fargo Home Mortgage locations.

But in a key move, Wells will no longer offer subprime mortgages. Less than 2 percent of all Wells Fargo’s mortgages were originated in Wells Fargo Financial offices in the first quarter.

“Our network of U.S.-based consumer finance stores, which have historically operated as an independent sales channel from our bank operations, have served customers well for more than 100 years,” said David Kvamme, president of Wells Fargo Financial (NYSE: WFC).

“But the economics of a separate Wells Fargo Financial channel are no longer viable, especially now that our customers have access to the largest banking and mortgage store network in the United States," Kvamme said.

Wells did not have an immediate comment on what role proposed regulations on consumer finance had on its decision to close Wells Fargo Financial and discontinue making subprime mortgages -- a frequent source of tension between the bank and community activists in recent years.

Commenting on proposed financial reform in a speech last month in San Francisco, Wells Fargo CEO John Stumpf said, “The devil is in the details, and I haven’t met the devil yet.”

Wells said closing down Wells Fargo Financial will incur pre-tax charges of about $185 million, with $137 million, or 2 cents per share, hitting in the second quarter for employee-severance costs. The remaining charges are expected to be largely reflected in third-quarter results.

Cost savings from closing Wells Fargo Financial are expected to offset these charges in the first year and a half.

Of the 14,000 employees working at Wells Fargo Financial, about 2,800 positions will be cut in the next 60 days and another 1,000 positions will be eliminated in the next 12 months. The remainder of the employees are being reassigned to other Wells Fargo businesses. Wells employs more than 278,000 people.

The move will also create more empty storefronts in strip centers across the nation.

“We know that this decision will be extremely difficult for those dedicated team members and their families who will be affected,” Kvamme said. “We have already identified positions for thousands of our employees and are committed to finding new positions for as many impacted team members as possible.”

Mark Calvey covers banking and finance for the San Francisco Business Times.
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Read his blog postings at Bay Area BizTalk.

Original post: Wells shutters Wells Fargo Financial, cutting 3,800 jobs - San Francisco Business Times