Wells Fargo & Co. said it would close 638 Wells Fargo Financial stores in the U.S. and stop originating nonprime mortgages, resulting in the layoffs of 3,800 employees in the next 12 months.
About 2,800 jobs, or 20% of the unit's work force, will be cut in the next 60 days and another 1,000 in the next year. Remaining workers will be assigned to other Wells Fargo businesses.
The banking giant plans to post second-quarter restructuring charges of 2 cents a share. Other charges are expected in the third and fourth quarters. Cost savings from the restructuring are expected to offset the charges in the first year and a half.
Wells Fargo's consumer and commercial loan products will be available through the expanded network of community banking and home mortgage stores acquired in its 2008 merger with Wachovia.
The company said less than 2% of its real estate loans were originated in Wells Fargo Financial stores in the first quarter.
"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," said David Kvamme, president of Wells Fargo Financial.
Customers with Wells Fargo Financial consumer loans and clients of the unit's commercial businesses will continue to be served without disruption, the company said.
Well Fargo's shares were at $26.67, up a penny, in after-hours trading. The stock was down 1% this year as of the close, better than market averages.