By Imani Moise
(Reuters) - Wells Fargo & Co (N:WFC) on Friday named banking veteran Charles Scharf its next chief executive officer, ending a six-month search for a new leader to turn around the fortunes of the scandal-plagued bank, sending its shares up more than 4%. Scharf, who joins the fourth-largest U.S. bank effective next month after a 2-year stint leading Bank of New York Mellon (N:BK), will become Wells Fargo's third CEO in as many years.
Former CEOs Tim Sloan and John Stumpf resigned amid sales practices scandals that have plagued the bank since 2016.
Some analysts said Scharf's departure from Bank of New York Mellon after a relatively short stint would hurt the bank, and its shares fell 4.5%. Bank of New York Mellon named finance head Thomas Gibbons as its CEO on an interim basis.
At Wells Fargo, Scharf is taking over a bank that is still operating under a regulatory microscope, trying to rebuild its reputation with customers, investors and politicians. He struck an upbeat tone on a call with analysts.
"The first priority is to make sure we get the regulatory issues behind us,” he said.
One source familiar with Scharf’s leadership style said he focuses on making operations more efficient rather than bringing a charismatic vision to the organization. Although Scharf, 54, said he had imagined that BNY would be his last job, he has always had aspirations to be a big bank CEO, the source said.
Prior to joining the custodian bank, Scharf held the top job at Visa Inc (N:V), the world's largest payment network. He started his career in 1987 at Commercial Credit Corp, a consumer finance company run by Jamie Dimon and Sandy Weill - executives who went on to lead two of America's biggest banks.
HEAVY LIFT
Wall Street analysts cheered the conclusion of the six-month search and applauded the board's pick of a banking veteran who has experience leading a diverse array of businesses.
Uncertainty about management has been cited as a top concern for analysts since Sloan's departure in March. Wells Fargo's stock edged up 1% during that period while the KBW Bank Index rallied 7%.
Bank analysts said clearing regulatory hurdles will still be a tough task, as Wells Fargo is currently operating under more than a dozen regulatory consent orders.
The appointment got a non-objection from the Office of the Comptroller of the Currency, one of Wells Fargo's main regulators. "The appointment of Mr. Scharf removes a major overhang," Saul Martinez of UBS wrote in a note to clients. "We think getting past the heavy lift of the consent order is necessary for Wells to be able to reduce its cost base."
KBW analyst Brian Kleinhanzl said he was unsure what to expect from Scharf as Wells' CEO since his tenure at Bank of New York Mellon lasted only for two years.
"Scharf's first task will be appeasing regulators and making the changes necessary to remove the asset cap currently in place," Kleinhanzl said.
"He moves from a bank with far less retail business than Wells Fargo, so he will face a steep learning curve," said Erik Gordon, a professor at the University of Michigan's Ross School of Business.
Separately, BNY Mellon said Scharf had forfeited all of his equity and incentive awards, which were unvested as of Thursday. Wells Fargo's board had considered keeping its interim CEO, Allen Parker, on a permanent basis even after saying it would seek an outsider to fill the role, sources had told Reuters in June. Parker will stay with the company to help the transition and as general counsel.
Wells said Scharf's base salary at the bank would be $2.5 million - nearly the same as Sloan's base pay in 2018.
Regulatory filings showed Scharf's total compensation for 2018 at BNY was $9.4 million. Sloan's total compensation for the year was $18.4 million.
Shares of Wells Fargo were up 4.15% at $50.90 in midday trading.