wells fargo financial

Wells Fargo said Wednesday that it will eliminate 3,800 jobs, cease origination of subprime loans and close more than 600 offices, a reminder that employment ailments and financial woes still hound the economy.

San Francisco-based Wells Fargo will close its 638 Wells Fargo Financial stores. The 6,600 bank branches will not be affected by the massive restructuring of the company's consumer finance division. The job cuts could include hundreds in California and dozens in the Bay Area.

"The economics of a separate Wells Fargo Financial channel are no longer viable," said David Kvamme, president of Wells Fargo Financial. "Our customers have access to the largest banking and mortgage store network in the United States."

The bank operates 74 Wells Fargo Financial branches in California, according to information from the company's website.

Of those, 11 are in the Bay Area, the bank's website shows. The local Wells Fargo Financial stores are in Fremont, Concord, Pleasanton, San Leandro, San Pablo, San Jose, Sunnyvale, Gilroy, San Francisco, Santa Rosa and Fairfield.

The job cuts could total about 435 in California and 65 in the Bay Area — if the staff reductions mirror the proportion of Wells Fargo stores in the state and region.

Wells Fargo on Wednesday did not provide any specific information about the local effect of the employment reductions.

One analyst was not surprised that Wells Fargo is ending subprime loan originations. The primary surprise is that it took so long, said Marian Kessler, analyst and portfolio manager with Portland, Ore.-based Becker Capital Management.

"It's like locking the barn after the horse has gotten out," Kessler said. "Better late than never."

During the height of the housing bubble, subprime loans typically were provided to borrowers with blemishes on their credit or income that was less than robust.

Failures for these kinds of loans ushered in the nation's worst financial crisis in decades.

"Banks are finally getting an understanding of properly understanding the underwriting that's needed to provide credit to people," Kessler said.

About 2,800 of the jobs involved will be eliminated during the next two months. Another 1,000 jobs will be cut over the next 12 months.

"We know that this decision will be extremely difficult for those dedicated team members and their families who will be affected," said Kvamme, the Wells Fargo Financial president.

Wells Fargo Financial has about 14,000 employees. So the job cuts amount to 27 percent of the organization's total workforce. Wells Fargo had 267,400 employees at the end of the first quarter.

"That's a big chunk of their consumer finance unit," Kessler said. "That's a pretty substantial job loss."

The remaining employees will be transferred to other business units within Wells Fargo, the company 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," Kvamme said.

The downsizing was an inevitable consequence of the collapse of the mortgage bubble — and an era of easy money and loose lending rules, analysts said.

"Wells Fargo wasn't alone in providing subprime loans. Every bank was like that, the whole group did it," Kessler said. "Unfortunately, a lot of these jobs were created out of a belief the credit cycle would last ad infinitum."

Wells Fargo & Co. /quotes/comstock/13*!wfc/quotes/nls/wfc (WFC 26.66, +1.51, +6.00%) said late Wednesday it is restructuring its Wells Fargo Financial division, including closing 638 Wells Fargo Financial stores in the U.S. As part of the consolidation, Wells Fargo plans to eliminate a total of 3,800 positions. The financial firm will also incur 2 cents a share in the second quarter for severance costs with remaining charges to be reflected mostly in the third quarter.