Wells Fargo Chairman and CEO John Stumpf has announced his retirement, effective immediately, over the recent controversy surrounding his bank.
Timothy J. Sloan, who has been President and Chief Operating Officer with Wells Fargo since November 2015, has been named by the bank’s Board of Directors as the new CEO effective immediately. He will retain his title of President. In addition to being named the new CEO, Sloan was also elected to the Board.
Stephen Sanger, the Board’s Lead Director, has been chosen as the Board’s non-executive Chairman. Independent Director Elizabeth Duke has been named by the Board to serve as Vice Chair.
“John Stumpf has dedicated his professional life to banking, successfully leading Wells Fargo through the financial crisis and the largest merger in banking history, and helping to create one of the strongest and most well-known financial services companies in the world. However, he believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges and take the Company forward,” Sanger said. “The Board of Directors has great confidence in Tim Sloan. He is a proven leader who knows Wells Fargo’s operations deeply, holds the respect of its stakeholders, and is ready to lead the Company into the future.”
Stumpf joined Wells Fargo in 1982 and became the bank’s CEO in 2007. He was named Chairman in January 2010. In September, the bank was penalized a combined $185 million by regulators, including the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, over the opening of approximately 1.5 million unauthorized deposit accounts and 565,000 unauthorized credit card accounts. In the last five years, 5,300 Wells Fargo employees were fired. Stumpf has appeared before Congress twice in the last month to answer questions about the controversy.
“I am grateful for the opportunity to have led Wells Fargo,” Stumpf said. “I am also very optimistic about its future, because of our talented and caring team members and the goodwill the stagecoach continues to enjoy with tens of millions of customers. While I have been deeply committed and focused on managing the Company through this period, I have decided it is best for the Company that I step aside. I know no better individual to lead this company forward than Tim Sloan.”
NBC news quoted a Wells Fargo spokesperson as saying the Stumpf would not receive any severance pay upon his departure. “There are some retirement benefits that are detailed in our proxy statement. They are not accessible for the next 6 months. That is a normal lag time.”
The New Leadership
Sloan has been with Wells Fargo for 29 years and has served in various leadership roles across the bank’s wholesale and commercial banking operations. His previous positions include head of Commercial Banking, Real Estate, and Specialized Financial Services. He assumed leadership over the bank’s four main business groups (Community Banking, Consumer Lending, Wealth and Business Management, and Wholesale Banking) upon becoming President and COO in November 2015.
“It’s a great privilege to have the opportunity to lead one of America’s most storied companies at a critical juncture in its history,” Sloan said. “My immediate and highest priority is to restore trust in Wells Fargo. It’s a tremendous responsibility, one which I look forward to taking on, because of the incredible caliber of our people, and the opportunity we have to impact the lives of our millions of customers around the world. We will work tirelessly to build a stronger and better Wells Fargo for generations to come.”
“I am confident that Tim will take the reins and restore trust in an organization that has been instrumental to the American housing market,” said Ed Delgado, Five Star Institute President and CEO and a past executive with Wells Fargo for nearly a decade. “I am certain that Wells Fargo will enact the policies necessary to regain the support of their consumer base.”
Sanger joined the Wells Fargo Board in 2003 and has served as its Lead Director since 2012. He also serves as Chair of the Governance and Nominating Committee and is a member of the Human Resources Committee and Risk Committee. He previously served as CEO of General Mills from 1995 to 2007 and as Chairman from 1995 to 2008.
Duke was named to the Wells Fargo Board in 2015. She was a member of the Board of Governors of the Federal Reserve from 2008 to 2013, serving as Chair of the Fed’s Committee on Consumer and Community Affairs and as a member of the Fed’s Committee on Bank Supervision, the Committee on Bank Affairs, and the Committee on Board Affairs. Before joining the Fed, Duke held senior management positions with Wachovia and SunTrust banks.
Wells Fargo will release its third quarter earnings statement on Friday, October 14. Wells Fargo reported a slight decline in net income year-over-year in Q2 (from $5.7 billion down to $5.6 billion, of $1.01 per share) but did report an uptick in net income from Q1 ($5.5 billion) and a 4 percent increase in revenue up to $22.2 billion. Though overall mortgage banking revenue was down, residential mortgage loan originations increased by 43 percent over-the-quarter, up to $63 billion. Residential mortgage applications shot up over-the-quarter from $77 billion up to $95 billion in Q2, and total loans were up by 1 percent over-the-quarter to $957.2 billion, partially driven by the growth in single-family first mortgage loans.
Stumpf’s abrupt retirement was met with some surprise. Carl Tobias, a professor at University of Richmond School of Law, noted that other CEOs particularly those in the financial industry, have weathered crises of a similar scale. According to the Washington Post, Tobias said: “We rarely see people stepping down. It is quite extraordinary. But the executive likely felt he didn’t have a choice. His retirement spares Wells Fargo’s board a painful decision.”
Stumpf’s sudden departure from the bank also left some questions. U.S. Rep. Keith Ellison (D-Minnesota) tweeted on Wednesday, “Ok, but does this ensure real reform?” U.S. Sen. Sherrod Brown (D-Ohio) released a statement saying “There must be accountability to fix the culture within Wells Fargo that encouraged cheating and left senior executives either unwilling or unable to stop it for far too long. Unfortunately, Mr. Stumpf’s retirement does nothing to answer the many questions that remain. We are still waiting for answers as to how Wells Fargo plans to right its wrongs against customers and the low-paid employees who weren’t given the benefit of a retirement package when they were fired for refusing to cheat.”
U.S. Sen. Elizabeth Warren (D-Massachusetts), a prominent critic of Wall Street, tweeted, “As I said: @WellsFargo CEO Stumpf should resign, return every nickel he made during the scam, & face DOJ/SEC investigation. He’s 1 for 3.”