Wells Fargo (WFC) had to make some tough calls to stay on course with its turnaround plan. It’s one of three industry developments that impact Wells and our other bank name, Morgan Stanley (MS). Wells Fargo said this week that more layoffs are on the horizon for 2024, as the bank doubles down on efficiency and cost cuts. Elsewhere, Morgan Stanley’s asset management division raised over $1 billion for growth investing , The Wall Street Journal reported Thursday, in the latest sign its long-dormant deal-making business could start to show signs of life. At the same time, the banking industry is facing the prospect of fresh regulations that threaten to chip away at profits for both firms. Banks are wading through decades-high interest rates and higher funding costs as economic uncertainty grips the sector. The KBW Bank Index, which tracks the performance of the biggest U.S. bank stocks, is down 13.85% year-to-date, compared to the S & P 500 ‘s 19.91% gains since the start of 2023. While Jim Cramer recently described the sector as the laggard of the stock market, he maintains that the stocks of both firms are still a buy. With Morgan Stanley, in particular, Jim said shares should be purchased “aggressively” because of its great dividend yield and cheap valuation. Still, recent headlines shed light on how our financial names are pushing forward amid a tough operating environment. Cost cuts The news: During a Goldman Sachs conference Tuesday, Wells Fargo CEO Charlie Scharf warned of large severance costs for the bank’s fourth quarter. “We’re looking at something like $750 million to a little less than a billion dollars of severance in the fourth quarter that we weren’t anticipating, just because we want to continue to focus on efficiency,” Scharf said. He added that the firm needs to get even “more aggressive” on managing headcount and is “not even close” to where it should be on efficiency. Wells Fargo has already laid off more than 227,000 staffers — roughly 4.7%…
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