Wells Fargo Wagon is Coming Down the Street...

...to look for a new CEO

After just three years, Wells Fargo CEO Tim Sloan will step down at the end of June. C. Allen Parker, the company's general counsel, is the interim CEO. One interesting fact about this case is that Wells Fargo is looking for a CEO outside of the bank. Bringing in outsiders is rare for such a large corporation as Wells Fargo. Generally, banks keep the job inside the company.

Tim Sloan, Former CEO of Wells Fargo


Why did Sloan step down?

  1. Problems and controversy have plagued Wells Fargo. Sloan was named CEO in October 2016, when the fake-accounts scandal was at its height. The account scandal occurred when the public discovered that managers were creating millions of fake bank accounts -- without the knowledge of customers -- in order to meet sales quotas. While the scandal resulted in the former CEO, John Stumpf, leaving, Sloan inherited distrust in the bank and heavy supervision from the government. The scandals hurt Wells Fargo. While other banks like the S&P 500 are up more than 12 percent, Wells Fargo shares lag behind at up only ~5 percent this year. 
  2. Government scrutiny likely contributed to Sloan's decision. Senator Elizabeth Warren is extremely vocal in her criticism of Sloan; she even called for his imprisonment. Her pressure for new leadership and Congress' pressure, in general, contributed to Sloan's retirement. Similar to how we talked about the government regulating monopolies only when consumers are being harmed, the customers were definitely affected by the banking scandal. As such, the government began pressuring Wells Fargo to be more transparent. 

Results of his Retirement

After Sloan announced he would be stepping down, shares for Wells Fargo jumped; shares rose 3% in after-hours trading. Analyst Dick Bove commented that “I don’t think this stock is worth buying". His assumption seemed to be proven correct when shares dipped shortly after the spike. Bove added that Sloan “did a phenomenally good job.”
Wells Fargo also has to look for a new CEO. As I said above, Wells Fargo is looking outside of its company to find a new person for the job. The banking world is an example of an oligopoly, so there are few other companies to choose from. The idea of oligopolies isn't the focus of this post, but I highly recommend the topic for someone else to write about! Check out the graphic here to see how limited your banking options really are. Bove predicts that a member from JP Morgan is a likely candidate for the CEO position.



Sources
https://www.cnn.com/2019/03/28/investing/wells-fargo-ceo-retire-tim-sloan/index.html
https://www.cnbc.com/2019/03/29/heres-who-could-replace-tim-sloan-as-ceo-of-wells-fargo.html
https://www.cnbc.com/2019/03/29/dick-bove-on-wells-fargo-i-dont-think-this-stock-is-worth-buying.html
https://www.forbes.com/sites/gurufocus/2019/03/29/wells-fargo-stock-jumps-as-ceo-tim-sloan-steps-down/#36896ecf52d9
https://www.thestreet.com/video/jim-cramer-tim-sloan-retire-wells-fargo-ceo--14911381

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