By Rachel Louise Ensign
Charles Scharf starts Monday as CEO of Wells Fargo & Co. Big
changes could follow.
Mr. Scharf, who previously ran Bank of New York Mellon Corp. and
Visa Inc., is the first outsider to run Wells Fargo in decades and
the fourth person to lead the bank since a 2016 fake-account
scandal left its folksy image in tatters. The firm is still in hot
water with overseers, who have curbed its growth and slapped it
with fines. Top regulators believe Mr. Scharf is likely to
reshuffle the bank's executive ranks, people familiar with the
matter said.
The protégé of JPMorgan Chase & Co. CEO James Dimon brings a
career spent shaking up the status quo to a firm that has been
criticized for insularity and unwillingness to change. Wells Fargo
in late 2016 appointed company veteran Timothy Sloan to the CEO
job, but he failed to get the bank's regulatory issues under
control. He resigned in March and was temporarily replaced by the
bank's general counsel.
Mr. Scharf must also grapple with the more humdrum tasks of
reversing revenue declines and cutting costs. He is expected to
review the firm's business strategy, though he has said he needs to
get to know the bank better before making any big decisions. Wells
Fargo's stock is flat compared with before the scandal, while the
KBW Nasdaq bank index is up more than 40% in the same period. The
firm reported sharply lower profits last week after booking a $1.6
billion charge for legal costs related to the scandal.
"Charlie is the right executive at the right time who will get
the wheels back on the stagecoach," said Ed Herlihy, a partner at
law firm Wachtell, Lipton, Rosen & Katz who has known Mr.
Scharf for years, referring to the bank's equine logo.
Mr. Scharf for years worked as a deputy to Mr. Dimon at
JPMorgan. He ran that firm's retail bank and helped negotiate its
crisis-era purchase of Washington Mutual.
"He will get to the issues very quickly," said Todd Maclin, who
worked with Mr. Scharf at JPMorgan. "And he will make changes
quickly."
Where Mr. Dimon is gregarious, Mr. Scharf is more reserved but
still direct like his old boss, people who have worked with the men
said. "He speaks like an annual report," one former colleague said.
"There's not a wrong word" -- a quality that could play well in
Washington.
After Mr. Scharf became Visa CEO in 2012, he pursued new
relationships with financial-technology companies and cut
aggressive deals with merchants over swipe fees. Those measures
lifted Visa's bottom line but were sometimes controversial.
The firm, for instance, entered into a 2016 pact in which PayPal
Holdings Inc. agreed to make it easier for customers to use Visa
cards. "It took a lot of courage on his part," PayPal CEO Dan
Schulman said. "The prevailing opinion at the time was that PayPal
was going to be a disrupter of what banks were trying to go do as
opposed to an ally."
Mr. Scharf abruptly resigned from San Francisco-based Visa after
four years, saying he needed to be closer to family in New
York.
He took the top job at BNY Mellon in 2017. Armed with a board
mandate to reinvigorate the company's growth prospects, he slashed
expenses, consolidated real estate and invested heavily in
technology. He removed all private offices and pushed to restrict
staff from working at home.
The pace of change didn't endear him to many of the staid bank's
employees. Investors are still waiting for the plan to produce
meaningful revenue growth.
At Wells Fargo, the board was thrilled to land a banker with CEO
experience after a number of top candidates were uninterested in
the job. Mr. Scharf initially took a pass on the San
Francisco-based bank but changed his mind when he was told he could
continue to live in New York, The Wall Street Journal has
reported.
Lawmakers, regulators and others have blasted Wells Fargo not
just for the fake-account scandal but for executives' response to
it in the three years since.
Wells Fargo has fired thousands of low-level branch employees,
though even the bank's own board has questioned whether the junior
staffers were really the ones to blame. The bank says it has held
staffers at all levels accountable.
Across the firm, employees have been subject to constant
reorganizations. Some have had new bosses or reporting lines every
few months.
Mr. Scharf isn't shunning the old guard at Wells Fargo. He
already sought advice from former executives including Mr. Sloan,
people familiar with the matter said.
The bank's board would be open to a shake-up of executive
management, a person familiar with the matter said. Some top
executives are company veterans, including Chief Financial Officer
John Shrewsberry, payments executive Avid Modjtabai and wholesale
bank head Perry Pelos.
On a call with analysts announcing his appointment, Mr. Scharf
said his priority is resolving regulatory issues. The lender has no
shortage of them: It recently had hundreds of private regulatory
warnings known as "Matters Requiring Attention," people familiar
with the matter said. Hiring staffers to help fix these issues has
been costly and forced the bank to dial back expense-cutting
targets. The bank recently put new restrictions on employee travel
to try to save money.
The bank has also said it started discussions to settle a joint
Justice Department and Securities and Exchange Commission probe
into the fake-account scandal. Investigators have interviewed
former executives including Mr. Sloan, people familiar with the
matter said.
The bank's main business lines have also struggled, in part
because the regulatory issues have distracted managers and rattled
some customers.
Even in cities where Wells Fargo's branches have long dominated,
like Denver, the bank is starting to lose deposit market share to
rivals like Bank of America Corp. and JPMorgan.
The bank reported last week/ that third-quarter revenue fell in
its consumer and commercial units. It rose in the wealth-management
segment but only because of a one-time gain from the sale of a
business.
--AnnaMaria Andriotis, David Benoit and Justin Baer contributed
to this article.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
October 21, 2019 08:14 ET (12:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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