Morningstar | Sloan Steps Down as Wells Fargo CEO; Interim CEO Selected as Board Begins Search for Replacement
We are not surprised by the general idea behind Wells Fargo’s announcement that Tim Sloan is stepping down as CEO and will retire. However, we are surprised a bit by the abruptness. It has been our view that Sloan, while better than John Stumpf, could not be the leader of the new Wells. Still, we thought he would likely finish out 2019 and retire in 2020. Either way, Sloan eventually had to step down, and this should help the bank move one step further away from its scandal-ridden past. We are not altering our fair value estimate for the bank.We see positives and negatives in the latest executive shakeup for Wells. This is, despite the pain of the process, a catalyst for change and should help remove some of the political pressure the bank has been under. We think Sloan recognized this. Sloan, whether fair or not, never had a chance. Because he was associated with the previous regime, which was associated with the scandals, the bull's eye on his back would never be removed. Therefore, this change should remove some of that immediate pressure on the bank. However, it is also clear that the bank does not have a robust succession plan in place, and upheaval within the top ranks continues.
Allen Parker, Wells’ general counsel, has been selected to serve as interim CEO while the board looks for a new permanent CEO. We agree with the board’s conclusion that it is best to look outside Wells for this position. Given the nature of Wells’ past issues, if someone were selected from within the bank and with a significant history with the bank, he or she would probably face some of the same issues Sloan has been up against, whether fair or not. Parker himself is from outside Wells, having joined the bank just two years ago. Finding a new CEO who can step in and bring some trust and positive momentum back to the Wells franchise will be a key next step for the bank.
Sloan’s tenure has been difficult. Some of the difficulty was unavoidable and simply came with the territory; however, some of it was self-inflicted. For example, disappointments such as missing the asset cap removal guidance set by management have not helped. One key point we will highlight is that the level of continuing upheaval supports the notion that the issues at the bank are deep-seated and will take a long time to change. Reforming decades of past mistakes at an institution as large as Wells is a difficult and time-consuming endeavor. This is one step in the right overall direction, but there will be more steps required from here before the bank is out of the woods.
Wells Fargo & Company is a financial and a bank holding company. Through its subsidiaries, the company provides banking, investment and mortgage products and services, as well as consumer and commercial finance. The company provides consumer financial products and services including checking and savings accounts, credit and debit cards, and automobile, student, mortgage and home equity and small business lending, as well as financial planning, private banking, investment management, and fiduciary services. The company also provides financial solutions including commercial loans and lines of credit, letters of credit, asset-based lending, trade financing, treasury management, and investment banking services.
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Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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