Wells Fargo & Co. (NYSE: WFC) is reportedly still sifting through the ranks of former Goldman Sachs executives in search of a replacement for CEO Tim Sloan. There are apparently two candidates under consideration: Harvey Schwartz, former Goldman Sachs president and co-chief operating officer, and another as yet unidentified contender.
The New York Post on Thursday reported the bank’s talks with Schwartz, citing two unnamed sources who have been briefed on the negotiations. Wells Fargo Chair Betsy Duke told Bloomberg News that the report is incorrect:
Rumors that Wells Fargo’s board of directors reached out to potential CEO candidates are completely false. Tim Sloan has the unanimous support of the board, and this support has never wavered.
Sloan took the reins at Wells Fargo in October 2016 following former CEO John Stumpf’s retirement in the wake of a scandal that cost the bank $185 million in fines for creating some 2 million checking and credit-card accounts without customers’ knowledge or consent. The number of fake accounts later grew to nearly 3.5 million.
While the bank may have stopped creating phony accounts, its problems have spread to other parts of Wells Fargo’s businesses. The bank discovered that its mortgage banking business had fined some mortgage holders for a problem that was the bank’s own fault. Wells Fargo was forced to repay some $3.4 million to brokerage customers because financial advisers touted products what were quite likely to result in losses. And then it illegally repossessed more than 800 cars from families of U.S. military service members.
Sloan was responsible for the bank’s wholesale division during the period when the phony accounts were being set up. From a shareholders point of view, probably Sloan’s biggest sin has been his failure to get the Federal Reserve to lift a restriction on growing the bank’s assets beyond their level at the end of 2017. He also received a $1 million pay raise this year, in a kind of salt-in-the-wound move by the bank’s board.
U.S. Senator and presidential candidate Elizabeth Warren sent a letter to Fed chair Jerome Powell in February demanding that the central bank keep its cap on Wells Fargo’s growth until Sloan is replaced. Powell later said he agreed with Warren that the ban on adding to the bank’s assets should remain until Wells Fargo had demonstrated that it had fixed its many problems, one of which may be assumed to be Sloan, although Powell did not name him.
Schwartz, or another outsider, could take over and not be saddled with all the baggage that Sloan brought along. While the bank typically promotes from within, the one place it prefers to recruit top talent from is Goldman Sachs, according to the Post’s report. A former Goldman president and chief operating officer, and former director of the National Economic Council under President Trump, Gary Cohn also was reportedly approached about the top job at Wells Fargo, but he declined.
Wells Fargo’s stock traded down about 2% early Friday morning, at $48.83 in a 52-week range of $43.02 to $59.53. The 12-month consensus price target on the stock is $57.08.