Wells Fargo & Co. (NYSE: WFC) has been embroiled in scandal for far too long. Its shares have lagged rival banks as it has been under asset restrictions in the wake of its many scandals, and Wells Fargo has been operating without a permanent chief executive officer since Timothy Sloan was forced out after being considered still too close to the situations that had been there under John Stumpf.
Now Wells Fargo is set to enter a new chapter under a new CEO, after announcing that Charles Scharf would be the new head of the company. Scharf is well known in the banking community, and he also will serve as president and a member of Wells Fargo’s board of directors with an effective date of October 21, 2019.
As far as why Scharf is well known in the community, he is leaving his role as board chair and CEO of Bank of New York Mellon Corp. (NYSE: BK). Prior to his role at BNY Mellon, he served as CEO of Visa and he had been a managing director of the private investment arm, called One Equity Partners, and had other roles inside JPMorgan.
Scharf will continue to be located in New York, and he currently serves on the board of directors of Microsoft. He is also shown to be a member of the Business Council, chair of the New York City Ballet and a member of the board of trustees for Johns Hopkins University.
One interesting aspect about serving as CEO of Wells Fargo is that the money-center bank is based in San Francisco. With Scharf based in New York, will this create any leadership gaps? Scharf had departed from Visa in San Francisco in 2016 to be closer to his family in New York. There seems to be little concern about this at the current time, but New York is much closer to regulators in Washington, D.C., and New York City, and anyone taking this role had to assume there would be lots of regulatory interaction.
Wells Fargo’s board of directors had appointed C. Allen Parker as interim CEO and as president and a member of the board back in March of this year, and efforts to bring in an outside CEO have been slow and challenging. Many bankers were reluctant to take on a job that would come with more government oversight and constant scrutiny than at almost any other bank. And non-bank CEOs reportedly had been considered, but now the replacement is known.
Allen Parker will continue to serve in his existing roles until Scharf joins the company in October, and thereafter he will support the transition as a member of the company’s leadership team and general counsel.
It appears as though Wells Fargo scored a victory here. According to the most recent data on its website, BNY Mellon counted a whopping $35.5 trillion in assets under custody or administration. The custodial bank also managed another $1.8 trillion in assets under management, and it has a presence in 35 nations. It also counts almost 50,000 employees.
In a simultaneous release, BNY Mellon announced today that Thomas P. (Todd) Gibbons has been appointed as interim-CEO and a member of the board. That will be effective immediately. Gibbons is a 30-year veteran of BNY Mellon and had served as the bank’s chief financial officer from 2008 through 2017.
Wells Fargo shares had been up just 6% so far in 2019 and were down almost 10% from this time a year ago. The post-appointment reaction had Wells Fargo shares indicated up 2.9% at $50.27, in a 52-week trading range of $43.02 to $55.04 and with a consensus price target of $48.58 from Refinitiv.
What is a gain for Wells Fargo also appears to be a loss of BNY Mellon, as the post-announcement reaction took away more than 1.5% of its value to a pre-open level of $45.90. Its 52-week trading range is $40.52 to $54.27. While shares of BNY Mellon also had underperformed with a drop of 1% so far in 2019 and nearly an 11% drop from a year earlier, that was largely due to interest rates and how the rate cuts and due to the (flattening and inverted) yield curve more than due to management issues.
Wells Fargo Board Chair Betsy Duke said of the replacement:
I am delighted to welcome Charlie as our new CEO. Charlie is a proven leader and an experienced CEO who has excelled at strategic leadership and execution and is well-positioned to lead Wells Fargo’s continued transformation. 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 in initiating and leading change, driving results, strengthening operational risk and compliance, and innovating amid a rapidly evolving digital landscape. Charlie’s financial and business acumen, integrity, passion for diversity and inclusion, and commitment to strong talent management are important qualities considered by our board’s search committee.