Wells Fargo's new CEO faces an enormous challenge cleaning up the mess left by his predecessors
AFTER MONTHS of fruitless searching, Wells Fargo has filled its top job at last. On October 21st Charles Scharf , the former boss of BNY Mellon, will take over as chief executive officer of Wells. He faces an enormous challenge cleaning up the mess left by his predecessors. What once appeared to be the bank’s brilliance at opening new accounts turned out in 2016 to be the result of Wells employees seeking to excel on internal performance metrics—in other words, fraud.
Since then federal supervisors have imposed more than a dozen restrictions on Wells’s business. These include capping assets at $1.95trn, their level in 2017. This has hobbled the firm. Even as the assets of JPMorgan Chase, America’s largest bank, have grown by 8%, those of Wells have shrunk by 3%. Although the cap may be lifted in 2020, relations with regulators are still tense.
Mr Scharf will also be taking on all the usual difficulties in running an enormous bank in 2019: operating it efficiently and developing slick digital products that can compete with those being put out by less distracted competitors. On a conference call with investors shortly after the announcement, one analyst asked which of these three goals—compliance, efficiency and digitisation—would be the priority. He replied that they all were, and that solving them together was a “virtuous circle”.
Mr Scharf’s résumé has gaps. BNY Mellon’s assets, at $343bn, are less than a fifth of Wells’s. Its consumer business in tiny by comparison, with just $10bn in assets in 2018. But he also has notable strengths. Before running BNY Mellon he was the boss of Visa, a giant payments firm. He started his banking career at Consumer Credit, a consumer-finance company run by Jamie Dimon, now the boss of JP Morgan Chase, and Sandy Weill, who used to run Citigroup, America’s third-largest bank.
Shareholders seem to be reserving judgement. Wells’s share price rose 4.2% after the announcement. That is unsurprising: the wait for a new boss has been long, and investors dislike leaderless firms. With Mr Scharf in charge Wells’s most acute problem—finding someone to run it—has been solved. The question now is whether he can solve the rest.
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