It's a question for investors after the company acknowledged this week that it will reduce its workforce by 5% to 10% over the next three years to meet aggressive cost-cutting targets. With a current staff of about 265,000, that works out to as many as 26,500 employees.
A year ago, during a hearing in Washington, U.S. Senator Elizabeth Warren suggested to CEO Tim Sloan that the bank's stated plan to cut $4 billion in costs by the end of 2019 would mean that he would have to cut more than 20,000 employees. And Sloan responded, "You're using math inappropriately."
In an e-mail Thursday, the Massachusetts Democrat's office reminded reporters of the exchange -- with a kindly attached video clip -- and demanded that Sloan be fired. Her rationale is that thousands of Wells Fargo employees are likely to lose their jobs due to poor management decisions - namely, pushing employees to sell as many products and accounts to customers as possible, including some cases where the products or accounts weren't needed.
"Obviously Senator Warren was correct," said Dick Bove, a five-decade Wall Street analyst who now manages a bank-focused investment fund at Rafferty Holdings LLC. "If you're gonna cut that much in costs, you may not know exactly what you're going to do, but you should know that you have to fire a whole lot of people."
While Warren is just one of 100 U.S. senators, her comments shouldn't be taken lightly. Not only do many politics-watchers think she might run for president in 2020, but her harsh questioning in the Senate of Sloan's predecessor, John Stumpf, over Wells Fargo's alleged mistreatment of customers immediately preceded his "retirement" in late 2016.
Since then, the bank has reported more than $2 billion in elevated legal costs to the scandals, which included the opening of millions of unauthorized accounts. And earlier this year, the Federal Reserve took the draconian step of ordering the Federal Reserve to refrain from further asset growth until corporate governance and risk-management improves. Warren also got Fed Chairman Jerome Powell in May to agree to hold a vote of the central bank's board of governors prior to releasing Wells Fargo from the sanctions.
Betsy Duke, chairwoman of Wells Fargo's board of trustees, said in a statement e-mailed Friday by a company spokeswoman that Sloan has the "unanimous support of the board, and this support has never wavered."
"In his two years as CEO, Tim has driven significant transformational change at Wells Fargo, which is benefiting all stakeholders," Duke said. The spokeswoman declined to comment further, and Sloan wasn't available for an interview.
Warren's e-mail came after the bank issued a press release Thursday noting that Sloan had informed employees in a "town hall" meeting of the coming headcount reductions. He cited "changing customer preferences, including the accelerating adoption of digital self-service capabilities, the focus on operational excellence and ongoing commitment to efficiency." The decline will come from both "displacements," i.e. firings, as well as "normal team-member attrition," the bank said.
And that's exactly the point Warren made during the October 2017 senate hearing: It's employees who suffer from management's mistakes.
In May 2017, months before the hearing, Wells Fargo had announced to investors that it would cut $2 billion in non-interest expenses by 2018, and another $2 billion by 2019. As Bove says, any bank executive or analyst could have easily extrapolated the consequences by glancing at its income statement; nearly 60% of Wells Fargo's non-interest expenses last year were taken up by salaries, bonuses, commissions or employee benefits.
In other words, it would be nearly impossible for the bank to cut such a large chunk of costs without firing scads of employees. But Sloan pushed back.
"Now that the fake account scandal has tanked Wells Fargo's reputation, your way of pumping up the bottom line and keeping Wall Street investors happy is to slash costs by firing low-level employees," Warren told Sloan in the hearing.
"Senator, you're using math to -- " Sloan said.
"Yes, I do use math," Warren interjected.
"You're using math inappropriately," said Sloan, who previously served as Wells Fargo's CFO.
To the CEO's credit, he refused to promise at the time that he wouldn't fire employees.
"I have a responsibility to the 270,000 team members to make sure that the company is in existence and successful, year after year after year," Sloan told Warren.
Yet, earlier in 2018, Wells Fargo sought and received permission from the Federal Reserve to buy back $24.5 billion of its own stock over the coming year, a financial-engineering tactic used to increase earnings per share - and thus to provide a short-term boost the stock price. Such a move supports Warren's contention that investors come before rank-and-file employees.
It isn't exactly a shining public-relations moment for Wells Fargo, or the CEO, after more than two years of not-exactly-shining public-relations moments.
David Hendler, principal at the bank-analysis firm Viola Risk Advisors in New York, says he thinks Sloan should go - if, for nothing else, to make a clean break with the bank's recent scandals.
"These negative headlines seem to recur frequently," Hendler said. "They're tainted by it."
And haunted by Warren's math.
To be a profitable investor and build long-term wealth, you need the right information and techniques. Join TheStreet Oct. 13, 2018 for a special investing event for sophisticated and active traders. Register for "Invest Like the Pros: Jim Cramer's Boot Camp for Investors" here. Canopy Growth CEO Bruce Linton and Constellation Brands president and COO Bill Newlands will talk exclusively with Cramer at TheStreet's Oct. 13 investor conference.