NEXT STEPS AT WELLS – CORPORATE

Charles Scharf has recently been hired as the new CEO at Wells Fargo and will remain in New York, overseeing the headquarters in San Francisco and the large presence in Charlotte.

Since the six month anniversary of the bank’s search for a new CEO was coming up, analysts and investors were beginning to get concerned that the “worst job in banking,” as they call the Wells job, wasn’t going to be filled anytime soon.  However, Scharf is an outstanding candidate for the job, having a resume that lists having run the Bank of New York Mellon; led a payments technology business (Visa), and steered JP Morgan Chanse through the financial crisis of 2009 and beyond.  Somehow, Scharf’s job now seems relatively simple.  For one thing, he must satisfy Washington that Wells has competed the work of rebuilding the bank’s compliance and governance which has been an expensive process that has involved hiring new people and creating new offices (ref WSJ).  And, he must also lay out to investors how those new costs will either eventually roll off or be offset by instituting processes or technology improvements.  His history as veteran banker and as a cost cutter will undoubtedly come in to play in the near future.  He had launched a big technology cycle at BNY Mellon to drive efficiency, and it’s believed that he will look at similar cost-cutting and savings efforts at Wells.  And, once he’s been successful at some of these things, his next challenge will be how to expand the business, which, despite all its recent travails still trades at 1.28 times book value, second only to JPMorgan (ref. WSJ).  Analysts believe that “some multiple expansion is feasible, but growing the book will be key to improving returns.”  Wells has plenty of excess liquidity to put to work, when that is allowed (the Federal Reserve put a cap on the bank’s total assets).  CEO Scharf will be in the position, ultimately, of deciding how to put that to work to the bank’s best benefit..

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