For more than two years, Wells Fargo & Co.'s board maintained an insider could reform the bank. Now that Tim Sloan has stepped down, directors are changing their tune — and must find an outsider who wants the job.
Between a pair of visits to Capitol Hill and facing public criticism from the Federal Reserve and the Office of the Comptroller of the Currency, Sloan quit Thursday as chief executive officer. The bank placed its general counsel in charge temporarily as it starts an external search for a successor.
"The board has concluded that seeking someone from the outside is the most effective way to complete the transformation at Wells Fargo," Chair Betsy Duke said.
Seeking a fresh start by enlisting an outsider marks a major break for the industry. The nation's four largest commercial banks haven't made that move since they were created in a wave of mergers in the 1990s. Bank of America Corp. came closest in 2009, when it struggled to persuade several external candidates to lead it through crisis-era probes. It ultimately promoted Brian Moynihan, a lawyer already running the consumer business.
Recruiters and investors say the pool of plausible successors is shallow, the job description daunting and the price tag steep. Rivals can withhold tens of millions of dollars in compensation from defectors. Paying enough to make a candidate whole risks a firestorm with the same critics who called for Mr. Sloan's head.
Investors applauded Sloan's departure. Shares of the company were up 2.2% to $50.15 at 7:13 a.m in New York.
What Bloomberg Intelligence Says
"Democrats will pressure the bank for more changes as it searches for a new CEO. A Wall Street friendly pick will likely attract fresh criticism. Yet Democrats won't be able to push new legislation or restrictions without Republican support, which isn't likely." — Nathan R. Dean and Ben Elliott, government analysts
Bank watchers have suggested a long list of potential candidates who could be approached for the job. Here are five seen as among the most likely:
Wells Fargo's biggest rival, JPMorgan Chase & Co., is widely seen as having the most executives capable of running the company. Gordon Smith, 60, is a potential contender for his own bank's top job, as Jamie Dimon handed off some responsibility at the beginning of last year in promoting him to co-president. Smith also runs JPMorgan's consumer-banking unit, the biggest revenue contributor.
His business has attracted deposits and won new clients with its Sapphire Reserve credit card. Smith joined the bank in 2007 from American Express Co., and he's awaiting more than $50 million of unvested equity awards, according to data compiled by Bloomberg.
JPMorgan's chief financial officer, more than a decade younger than Smith, is another potential Dimon successor. While Marianne Lake has never run any of JPMorgan's major business lines, she's well-known to investors and analysts for her handle on a sprawling bank's operations.
Wells Fargo, which made Duke the first female chair of one of the largest U.S. banks in 2017, could make Lake the first woman to ever run one of them.
Another retail candidate is Dean Athanasia, head of Bank of America Corp.'s consumer and small-business division. He's leading a branch expansion into new states and has cut costs and boosted loans at the bank's largest profit contributor. The former Yale football player, based in Boston, previously was a wealth-management executive, which would be useful since Wells Fargo has a $1.7 trillion wealth business.
Citigroup Inc.'s Latin America chief has experience with both a U.S. retail-banking business and shaking things up. Jane Fraser ran Citi's U.S. consumer business before taking her current role in 2015, and she's since sold off operations across Brazil, Argentina and Colombia to simplify the unit and boost profitability.
The former JPMorgan executive, who shoots sporting clays, studies military history and likes to rise before dawn, was a candidate last year for the top job at Deutsche Bank AG. Instead, Matt Zames became president of private equity firm Cerberus Capital Management –- where, ironically, he's now advising the troubled German giant. He helped clean up after JPMorgan's London Whale mess, which might be good practice for righting Wells.