Atop Wells Fargo, an Outsider CEO Known to Shake Up Leadership

(Bloomberg) -- After a six-month leadership search that captivated the financial industry, Wells Fargo & Co. named Charlie Scharf its new CEO and set up a conference call for analysts, who cut to the chase: Can you estimate, one asked, when you will unveil a new strategy?

“No,” Scharf replied, so curtly that the bank’s chair, Betsy Duke, let out a laugh. “I mean seriously.”

Financial industry denizens who predicted Wells Fargo might recruit a larger-than-life personality to sweet talk critics including regulators, lawmakers and even its own workforce were disproved on Friday. Scharf, the former leader of Visa Inc. and more recently Bank of New York Mellon Corp., is best known in financial circles as direct and willing to clean house.

He’s also quiet-ish -- at least relative to many chief executive officers -- preferring to focus on numbers, rather than tell stories. That’s played well with some regulators who see him as a serious listener to their concerns. But just as important to Wells Fargo, he’s unwilling to tolerate lapses or let problems go unaddressed. Subordinates who can’t meet his expectations have a tendency to be replaced.

“He has a knack for going right to the heart of the matter, asking the right questions, and he’s laser-focused on execution,” said Stephen Cutler, who spent almost a decade as JPMorgan Chase & Co.’s general counsel, part of it alongside Scharf. “He’s one of the smartest people I’ve worked with.”

Recruiting Outsider

Wells Fargo’s decision to hire an outsider is a rare moment for the U.S. financial industry that makes his track record particularly interesting. None of the nation’s four largest commercial banks has brought someone in as CEO since the lenders were created in a wave of mergers in the 1990s. More often, they promote someone who adjusts strategy incrementally.

Scharf, a former protege of JPMorgan CEO Jamie Dimon, ran businesses at the nation’s largest bank including its retail division. Then, starting in 2012, he spent almost half a decade in the San Francisco Bay Area atop Visa before stepping down to return to the East Coast. He has led BNY Mellon since mid-2017.

At Visa, he is credited for confronting a series of existential challenges, opening up its network to potentially disruptive technologies and finding ways to continue growing revenue after the U.S. imposed limits on debit-card swipe fees paid by merchants.

But at BNY, he was still in the middle of a broad revamp. His decision to leave after just two years there to run a more complicated San Francisco-based bank beset with scandals surprised some of his longtime acquaintances. He was initially reluctant to entertain moving to Wells Fargo, according to people with knowledge of the matter, who asked not to be named discussing confidential talks. Ultimately, the board offered him a significant raise while letting him continue to work from New York.

Stock Jump

Scharf’s appointment thrilled shareholders, who sent Wells Fargo’s stock up 3.8% on Friday, the most since December. But it probably won’t calm the firm’s senior executives.

Many on the bank’s current management team have spent years struggling to resolve scandals and rebuild relations with watchdogs such as the Federal Reserve, which placed limits on the bank’s growth. In recent months, executives privately worried an outsider might install new leaders. Scharf has a track record of doing so, Barclays Plc’s Jason Goldberg told clients in a note on Friday, pointing to at least a dozen hires at BNY Mellon over the past year who either reported to Scharf or his deputies.

“If you look at what happened at Bank of New York, he changed the organizational structure to what he wanted it to be,” said Brian Kleinhanzl, an analyst at KBW. “He brought a lot of new people into the organization. We’ll expect something similar to happen at Wells.”

To be sure, Scharf, who starts on Oct. 21., didn’t signal plans to clean house during Friday’s conference call.

“I’m looking forward to spending time with the management team and getting to meet people,” he said. He plans to work with them to figure out what his priorities should be. “That will take a little bit of time.”

--With assistance from Michelle F. Davis.

To contact the reporter on this story: Hannah Levitt in New York at hlevitt@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, David Scheer, Dan Reichl

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