Cost cuts make banks more attractive to investors
Wells Fargo (WFC) recently cut jobs and closed divisions — a true sign of the times, unfortunately.
Yet, one analyst says cost reduction measures can signal to investors that a firm is getting its financial house in order. Seeking Alpha explains:
Layoffs and cost reduction are not the easiest way to get things running smoothly, but in Well Fargo's case like Bank of America, where revenue growth isn't explosive, it's extremely effective in helping out the bottom line - and subsequently, building value for the company's shareholders. There's two ways to increase profits, it's business 101 - lowering cost or raising revenue. As long as the net profit at the end of the day is up, it's not a major concern as to how it takes place - through one, another, or a combination of the two. In this case, the company remains fundamentally sound and with plenty of cash.
Source: Seeking Alpha