Wells Fargo names Charles Scharf as CEO

Bloomberg

Wells Fargo & Co named Charlie Scharf chief executive officer, marking a new era in the bank’s efforts to turn itself around after a series of scandals claimed two previous CEOs in the past three years.
Scharf, the CEO of Bank of New York (BNY) Mellon Corp, will replace interim chief Allen Parker on October 21, capping a wide-ranging hunt for an outsider able to fix relations with the government and reinvigorate the San Francisco-based lender, which has seen its stock fall behind rivals’ in recent months.
“With more than 24 years in leadership roles in the banking and payments industries, including as CEO of Visa Inc and Bank of New York Mellon, Charlie has demonstrated a strong track record,” Wells Fargo Chair Betsy Duke said in a statement announcing the move.
The appointment ends a six-month search after former chief Tim Sloan stepped down in March, bowing to political and regulatory scrutiny. The process drew fire from some investors who said the board was taking too long and failing to update the market on its progress. Parker, Wells Fargo’s general counsel, has been running the bank in the interim.
“Given Scharf’s industry experience and familiarity with the challenges, we have more confidence the company will be able to move quickly and remediate lingering regulatory issues, improve expense leverage and reignite growth,” David George, an analyst at Robert W Baird & Co, said in a note.
Scharf, 54, will be charged with mending ties in Washington, where Wells Fargo’s problems are hardly over: The bank still faces several investigations and outstanding consent orders, including a growth restriction imposed by the Federal Reserve. Because of the intense regulatory scrutiny, Scharf’s appointment was subject to approval from the Office of the Comptroller of the Currency, which said in a statement it had “no supervisory objection.”
Other problems await Scharf in some of the company’s core businesses. The bank has posted years of muted revenue growth, now compounded by falling interest rates and declining loan balances. JPMorgan Chase & Co has pulled ahead of Wells Fargo in consumer banking, generating about $2 billion more from the business. Two years ago, Wells Fargo was ahead by almost $1 billion.
Scharf has had several roles leading businesses that directly deal with consumers, Kevin Barker, an analyst at Piper Jaffray & Co, said, noting that the new CEO will be the first outsider to lead the bank in several decades.
One incentive that helped persuade Scharf to make the jump: a 40 percent pay hike.
His target compensation was set at $23 million, compared with $16.5 million in his final full year at Bank of New York.
Wells Fargo’s business model is still “extraordinary,” Scharf, a longtime protege of JPMorgan CEO Jamie Dimon, said. Resolving regulatory issues will be his top priority, he said, adding that he’s not yet set a timeline for strategy or targets.
Duke said on the call that “we’re pretty well along” on the bulk of the regulatory work needed.
Wells Fargo has brought in several JPMorgan veterans, including Chief Risk Officer Amanda Norton and technology head Saul Van Beurden, as it turned over its top ranks in the past three years. Throughout Wells Fargo’s CEO search, JPMorgan — the nation’s largest lender — was widely seen as having the most current and former executives capable of doing the job.
Scharf joined Visa as its CEO in November of 2012 after a decade at JPMorgan, where he led retail banking before taking over an investment arm. He oversaw Visa during a time when the industry’s profits snowballed as consumers around the world increasingly turned to electronic payments.
Then he moved to Bank of New York, where he struggled to turn the trust and custody bank around — shares are still below where they were when he took over more than two years ago.
Scharf left Visa in 2016 to be closer to his family on the East Coast. He’ll run Wells Fargo from New York, according to the statement.
The bank’s new CEO “may be pivotal in moving Wells Fargo forward from recent issues and executing a long-term strategy to drive profitable growth,” Alison Williams and Neil Sipes, analysts at Bloomberg Intelligence, said in a note.
“In addition to his CEO roles at BNY Mellon and Visa, Scharf’s experience in running JPMorgan’s retail business will serve him well in his new role.”
Scandal erupted at Wells Fargo in 2016, with the revelation that employees had opened millions of potentially fake accounts to meet sales goals. The ensuing fallout claimed then-CEO John Stumpf, and the board chose Sloan, a three-decade Wells Fargo veteran and Stumpf’s heir apparent, to take the top job.
As part of the fix, Wells Fargo has been focussing on cutting expenses, which have been pushed higher by legal costs, remediation and fines.