Wells Fargo turns to a no-nonsense professional
Successions at Wells Fargo are supposed to be orderly. Former chief Dick Kovacevich has said that the single most important job of any board and CEO should be to spend seven years finding and then grooming an internal successor.
That makes this week’s ructions at the San Francisco-based bank all the more remarkable.
On Monday Tim Sloan, president and chief operating officer of Wells, took a step closer to the top job in a reshuffle that appeared designed to buy long-serving CEO John Stumpf a little time to get to grips with a deepening fake-account scandal.
By Wednesday Mr Sloan had the top job, effective immediately, and Mr Stumpf was gone after 34 years. Mr Stumpf signed off with a few words of hope for “the goodwill the stagecoach [Well’s emblem] continues to enjoy with tens of millions of customers”.
Mr Sloan, seven years younger than Mr Stumpf at 56, takes the helm at a critical moment for a bank which had cantered pretty serenely through the financial crisis and its aftermath. Not for Wells the multibillion-dollar penalties for fixing interest rates or rogue trading scandals that have dogged other banks
Alone among the big US banks, Wells had generated double-digit returns on equity every year since 2010. It was prized by investors for its ability to pump out about $5bn of net profit, quarter after quarter. It was also the only big bank allowed by regulators to get bigger through acquisitions, snapping up tens of billions of dollars of assets from the fast-shrinking GE Capital.
Mr Sloan, the son of an auto industry executive from Michigan, was the key man for Wells on those deals, which were carried out in an intense burst last year.
“I have a ton of respect for Tim Sloan and his team,” says Keith Sherin, GE Capital’s former chairman and chief executive. “They did everything they said they would in an incredibly professional way.”
Mr Sloan has a reputation as a no-nonsense operator. He joined the bank 29 years ago, spending almost all of his time in the wholesale and commercial banking operations, and he still stays close to clients where he can.
“I think there’s, like, three of him,” says Perry Pelos, a 29-year Wells veteran who replaced Mr Sloan as head of the wholesale business earlier this week. “I don’t know anyone who works as hard as he does. He’ll go anywhere, do anything.”
That history may stand him in good stead as Wells fights to restore its reputation after a scandal in another part of the bank. Revelations that Wells’ consumer division has sacked more than 5,000 staff over five years for allowing as many as 2m accounts to be opened without customers’ permission, have prompted probes from a host of government agencies. Several former employees have told the FT they feared for their jobs if they failed to hit aggressive sales goals handed down from regional managers.
Mr Sloan is more disheveled and more self-effacing than Mr Stumpf, who got roasted in Congress over the scandal. Videos of Elizabeth Warren, the Democratic senator from Massachusetts, accusing the former Wells chief of “gutless leadership”, have more than 1m views on YouTube.
At Wells’ biennial investor day in May, Mr Sloan, formerly the company’s chief financial officer, introduced his successor with a gracious line about an “upgrade”.
Mr Sloan has three grown children, and lives with his wife in San Marino, a plush suburb of Los Angeles. Colleagues say he has little time for leisure, or fancy parties in Davos, but gets in a round of golf when he can.
In that sense, he could be the right kind of character — earnest and low-key — to restore Wells’ lustre. But Mr Sloan has his work cut out for him. New account openings have dropped sharply since the scandal and profits have dipped for four consecutive quarters.
The bank’s handling of the affair so far “has been about the worst I’ve ever seen”, says Mike Mayo, a veteran Wall Street analyst.