Wells Fargo names BNY Mellon's Charles Scharf CEO

Scharf will lead the efforts to turn the bank around after a series of scandals

Sep 27, 2019 @ 8:40 am

By Bloomberg News

Wells Fargo & Co. named Charles 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 Mellon Corp., will take over at Wells Fargo on Oct. 21, replacing interim chief Allen Parker, the bank said Friday in a statement. Shares of the company rose 2.3% in early trading in New York.

"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 the statement.

Mr. 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.

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He's also inheriting problems in some of the company's core businesses. Revenue dropped in four of the past six quarters, and loan balances have been falling over the past two years.

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.

Wells Fargo's business model is still "extraordinary," Mr. Scharf, a longtime protegee of JPMorgan CEO Jamie Dimon, said on a conference call Friday.

Resolving regulatory issues will be his top priority, he said, adding that he's not yet set a timeline for strategy or targets.

Ms. 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.

East Coast ties

Mr. 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.

But Mr. Scharf resigned from 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.

At Bank of New York, he struggled to turn the trust and custody bank around, as shares are still below where they were when he took over more than two years ago.

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."

Wells Fargo's board of directors conducted a months-long search for someone outside the bank to fill the top slot after Tim Sloan abruptly stepped down in March, bowing to pressure from regulators, politicians and investors. Mr. Parker, the bank's general counsel who joined in 2017, has been running the bank since then.

Scandal erupted at the company 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 Mr. Sloan, a three-decade Wells Fargo veteran and Mr. Stumpf's heir apparent, to take the top job.

Problems emerged in more business lines during Mr. Sloan's time at the top, prompting additional scrutiny and calls for his ouster from lawmakers including Massachusetts Democrat Elizabeth Warren.

The rebukes from politicians and regulators got louder, culminating in a congressional hearing and a pair of public criticisms from the Office of the Comptroller of the Currency and the Federal Reserve in March. Mr. Sloan announced his retirement days later.

As part of the fix, Wells Fargo has been focusing on cutting expenses, which have been pushed higher by legal costs, remediation and fines. The company still employs more people than any other U.S. bank, and its revenue per employee has trailed most major competitors in recent years.

Mr. Sloan had said he planned to cut head count — currently at 262,800 — by as much as 10% over three years, but Mr. Scharf may decide on a different route.

Mr. Parker will continue at Wells Fargo as the company's general counsel, according to the statement.

[More: Makeover at Wells Fargo Advisors well-received]

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