What Will Progress Look Like on Wells Fargo's Efficiency Initiatives?
On the bank's most recent earnings call, Wells Fargo (NYSE: WFC) CEO Charlie Scharf revealed the widely anticipated first details behind what could end up being a transformative cost savings initiative for the bank. The initiative is aimed at improving Wells Fargo's dreadfully high efficiency ratio in order to get more in line with its peers, which would certainly make the bank's stock price and valuation more competitive. Let's take a look at what we just learned about the initiatives Scharf laid out, and what kind of progress we can expect to see in 2021.
The efficiency ratio is a closely watched metric by bank investors that is a measure of a bank's expenses expressed as a percentage of total revenue, so the lower the ratio, the better. For instance, a 60% efficiency ratio means a bank spent $0.60 to generate every $1 of revenue. Since Wells Fargo's phony accounts scandal was revealed in 2016, the bank has seen expenses soar in order to deal with lawsuits, fines from regulators, and the need to invest in its regulatory infrastructure so it can one day get back into compliance with regulators.
Image source: Wells Fargo.
Source Fool.com
