CHARLOTTE, N.C. _ Wells Fargo has named Charles Scharf as CEO of the troubled bank, its third permanent leader since a major scandal over fake accounts erupted three years ago.
Scharf replaces Wells' former CEO Tim Sloan, who stepped down in March. The bank's general counsel Allen Parker has been filling in as interim CEO.
Scharf had previously served as CEO of Bank of New York Mellon since 2017. He starts in his role Oct. 21, and will be based in New York.
"I am honored and energized by the opportunity to assume leadership of this great institution, which is important to our financial system and in the midst of fundamental change," Scharf said in a news release. "I have deep respect for all the work that has taken place to transform Wells Fargo, and I look forward to working closely with the board, members of the management team, and team members."
Before Bank of New York Mellon, Scharf was CEO of Visa Inc. and managing director of the private investment arm of JPMorgan Chase & Co. He also held the roles of CEO of Retail Financial Services at JPMorgan Chase and CEO of the retail division at Bank One Corp, which merged with JPMorgan in 2004.
Sloan, a longtime Wells Fargo veteran, had been named CEO after the accounts scandal was revealed in 2016. In announcing his departure, Sloan said external attention on him was a distraction that impacted the efforts to move Wells Fargo forward.
The same day Sloan announced he was stepping down, Wells' board said it planned to look outside the company for its next CEO.
It's been nearly six months since Sloan stepped down, but on a conference call, Wells Fargo Board Chair Betsy Duke said the length of the process was typical.
"I know six months sounds like a long time when you're not hearing anything, but when we first started we were advised that six months was a normal, average time for a search like this," she said.
The decision to hire an outsider came after regulators and some members of Congress continued to criticize Wells under Sloan's leadership. Such criticism focused on not just the accounts scandal _ where employees opened millions of accounts without customer permission to meet high-pressure sales goals _ but also newer disclosures of customer harm in other areas, such as mortgages.
The San Francisco-based bank employs approximately 26,000 people in the Charlotte region, its largest employment hub.
TURNOVER AT THE TOP
This is the latest change at the top at Wells Fargo since the fake accounts scandal.
Following those revelations, and two heated congressional hearings on the scandal, John Stumpf retired as CEO in 2016 after more than three decades with the bank. Wells then promoted Sloan, at the time president and chief operating officer, as Stumpf's replacement.
Under Sloan, Wells implemented a series of changes to address its problems and restore its image. Those included eliminating product sales goals for retail bankers in branches and call centers.
But also during Sloan's tenure, Wells disclosed fresh problems in other areas, including foreign exchange, wealth management, auto lending and add-on products such as identity theft protection.
Such disclosures led regulators and lawmakers to express frustration with the bank.
U.S. Sen. Elizabeth Warren, a Massachusetts Democrat and presidential candidate, had repeatedly called for Sloan to resign. And the bank's consumer abuses caused the Federal Reserve to impose an unprecedented cap on its growth last year, a restriction that's still in place.
Sloan stepped down after coming under blistering congressional scrutiny during a March hearing on Capitol Hill. At that hearing, U.S. Rep. Maxine Waters, a California Democrat, told Sloan that he had failed to keep the bank "out of trouble."
On the conference call, Scharf said he's focused on making sure the bank continues to deal with its issues while building on the strengths of its business.
"There are clearly challenges," he said. "The company is clearly focused on dealing with the challenges and putting them behind us."
INDUSTRY EXPERIENCE
Scharf spent a little over two years as the CEO of Bank of New York Mellon, which provides financial services for institutions, corporations or individual investors.
At BNY Mellon, Scharf was also tasked with a turnaround: He cut expenses at the centuries-old institution, originally founded as the Bank of New York by Alexander Hamilton. The company's stock has fallen about 9% this year.
Before Bank of New York Mellon, Scharf was CEO of Visa Inc. and managing director of the private investment arm of JPMorgan Chase & Co. He also held the roles of CEO of Retail Financial Services at JPMorgan Chase and CEO of the retail division at Bank One Corp, which merged with JPMorgan in 2004.
Scharf's target annual compensation at Wells is $23 million, which includes his base salary as well as cash and equity incentives, according to a filing with the U.S. Securities and Exchange Commission. That's about 25% higher than Sloan's salary of $18.4 million last year.
Kyle Sanders, a financial services analyst at Edward Jones, said Scharf's experience made him an ideal choice. Multiple executives of major banks turned down or were reluctant to take the job, the Wall Street Journal has reported.
"We were starting to wonder if they were ever going to find anybody," Sanders said. "We kind of thought this was someone that really wasn't attainable."
When Scharf stepped down at Visa, he said he couldn't spend as much time in San Francisco as was needed to "do the job effectively." He noted that his family lived on the East Coast.
Now, he'll take the helm of another San Francisco-based company, though he'll stay in New York.
Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, said it's important that the leader of Wells be based in its headquarters city, especially given the cultural issues it has had.
But on the conference call, Scharf said he'll be spending time in San Francisco and Charlotte, among the other places the company has operations.
"These jobs, whether it's the Wells Fargo job or any other job I had, you spend very little time actually in your office," he said. "This is a broad and national franchise."
GETTING 'BACK IN GEAR'
When Parker was named interim CEO, Wells Fargo Chair Duke said the board concluded that hiring an outsider is "the most effective way to complete the transformation at Wells Fargo."
Several media outlets reported that Cathy Bessant, Bank of America's Charlotte-based chief operations and technology officer, was in the running for the job.
There was also speculation that Parker would be kept in the job permanently.
Unlike Sloan, interim CEO Parker was not at Wells during the years the bank's employees were opening accounts without customer permission.
Parker joined Wells in March 2017, more than six months after the accounts scandal broke. The Duke University graduate previously worked for New York-based law firm Cravath, Swaine & Moore.
Because of that, Elson said he considered Parker to be an outsider.
He said he was disappointed that Parker wasn't selected. As a lawyer, Parker understands the regulations banks must navigate, said Elson, who's also a Wells shareholder.
"He wasn't part of the problem," Elson said. "His life was not defined by Wells Fargo. He was brought in to help clean up the problem."
Sanders said the announcement puts the bank "back in gear."
"From a strategic standpoint, it's kind of been on pause ever since Tim Sloan left," he said.
Elson said he's happy that someone with strong credentials was chosen, given that it was a "tough job to fill." Scharf's biggest challenge, he said, will be to grow the bank, which has seen its shares decline about 7.5% in the past year.
"I think the bank is stabilized. It's a question of getting it back into a growth mode," he said. "Hopefully he will have the ability and the running room to allow it to grow again."
