Wells Fargo Names Charles Scharf President, CEO--3rd Update

By Rachel Louise Ensign 

Wells Fargo & Co. named Bank of New York Mellon Corp. Chief Executive Charles Scharf as its new CEO, ending a six-month search for a leader capable of restoring the bank's battered reputation and improving its standing with regulators.

Wells Fargo said Mr. Scharf will join the bank as president and CEO on Oct. 21. He succeeds C. Allen Parker, Wells Fargo's general counsel, who has been serving as interim chief since Timothy Sloan resigned in late March.

Mr. Scharf spent four years as the CEO of Visa before taking the BNY Mellon job in July 2017. Prior to joining Visa, he was a top lieutenant to JPMorgan Chase & Co. CEO James Dimon and spent seven years running the bank's sprawling consumer operation.

Wells Fargo shares rose about 5% following the announcement.

Mr. Scharf has a tough job ahead of him at Wells Fargo, which has been struggling to right itself since a fake-account scandal erupted at the bank three years ago. Atop the agenda is getting back in the good graces of regulators, who have been unsatisfied with its response to problems exposed by the sales scandal. The bank's operations also have suffered.

He will tackle the challenge from afar. Mr. Scharf will remain in New York but told investors on a call Friday morning that he will make frequent trips to San Francisco, where Wells Fargo is based, and Charlotte, N.C., where many of its employees work.

Mr. Scharf has experience with turnarounds. He was tasked with overhauling BNY Mellon, a bank that handles much of Wall Street's vital back-end work, such as tracking the value of securities. He has slashed expenses but has been reluctant to set concrete targets for the revamp. Revenue growth has been muted, and the stock has fallen 9% in the past year.

Wells Fargo embarked on its own overhaul following the sales scandal, reorganizing divisions and appointing new executives. Yet problems continued to emerge throughout the bank over the past three years. Nearly every one of its business lines is under investigation by a government agency, including the Justice Department and the Securities and Exchange Commission.

Wells Fargo enjoyed a sterling reputation as a bank that dodged the worst abuses of the financial crisis until September 2016, when it came to light that bank employees had opened potentially millions of accounts without customer knowledge. Mr. Sloan, a Wells Fargo veteran, took over as CEO at the height of the scandal, following John Stumpf's resignation. By that point, the bank's folksy image was in tatters.

Restoring it has proved difficult, especially where regulators are concerned. In February 2018, the Federal Reserve took the unprecedented step of capping the bank's growth, citing risk-management deficiencies.

A few months later, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency imposed a $1 billion fine on the bank for misconduct in its auto- and mortgage-lending business. The OCC said it found risk-management deficiencies that "constituted reckless, unsafe or unsound practices," leading to improper charges to hundreds of thousands of consumers.

Regulators stepped up their pressure on the bank earlier this year, leading to Mr. Sloan's resignation.

"I could not keep myself in a position where I was becoming a distraction." Mr. Sloan said in a call with investors announcing his resignation.

The search was the subject of intense speculation in the banking business and beyond. Warren Buffett, whose Berkshire Hathaway Inc. is Wells Fargo's largest shareholder, complicated the search when he said the bank should avoid hiring someone with Wall Street roots.

Wells Fargo's board focused on top executives at the biggest banks and the CEOs of large regional lenders. In the first months of the search, several top candidates told Wells Fargo they weren't interested in the job.

Allison Prang and Justin Baer contributed to this article.

Write to Rachel Louise Ensign at [e-mail]

(END) Dow Jones Newswires

September 27, 2019 10:29 ET (14:29 GMT)

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