Wells Fargo has named the boss of Bank of New York Mellon as its new chief executive, ending a six-month search prompted by the bank’s fake accounts scandal. Charles Scharf, who has led BNY since 2017, will join Wells next month.
Markets reacted positively to the choice, sending Wells Fargo shares up 4 per cent in early trading on Friday. BNY shares fell 5 per cent.
Analysts noted Mr Scharf’s wide experience. Before leading BNY, the 54-year-old was chief executive of Visa, ran the private investment arm of JPMorgan Chase and led its retail banking operations, as well as serving as chief financial officer of both Citigroup’s corporate investment bank and Salomon Smith Barney.
“I’ve been lucky enough to touch so many different parts of the financial services business,” Mr Scharf said on Friday on a call with analysts.
His appointment further demonstrates the influence of JPMorgan and its chief executive, Jamie Dimon, on global finance. Former JPMorgan executives serve as the CEOs of Barclays, Standard Chartered and First Data (Jes Staley, Bill Winters and Frank Bisignano, respectively), and presidents of Cerberus Capital Management and Visa (Matt Zames and Ryan McInerney).
“There was a time when many expected him to be a successor to Jamie Dimon at JPMorgan. He was in that ilk of ‘can do no wrong’ . . . [and] he’s an outsider, which will help with regulators,” said Scott Siefers, analyst at Sandler O’Neill.
Unusually, Mr Scharf will continue to be based in New York, where he lives — 2,900 miles from Wells’ San Francisco headquarters and in a different timezone.
The arrangement raised eyebrows among some BNY bankers on Friday, given that the New York-based lender attempted to tighten its policy on employees working from home in November, triggering widespread complaints. The bank eventually agreed to “pause” its plans in March following the outcry.
Allen Parker, interim chief executive, will continue to lead Wells until Mr Scharf starts. Mr Parker had been seen as a contender for the permanent job.
Mr Scharf dismissed the notion that Wells needed a change in structure or strategy. “The fact that [several] businesses are all under the same roof is a great thing and has worked for Wells Fargo for a long time . . . the business model is fundamentally sound,” he said.
The appointment comes six months after Tim Sloan, the bank’s previous chief executive, resigned after a bruising hearing at the US House of Representatives, where he was grilled over the bank’s scandals. US regulators issued a rare public statement of dissatisfaction with the lender’s progress following the congressional hearing.
Wells continues to operate under an asset cap imposed by regulators, preventing expansion of its balance sheet.
The search for a new chief executive was complicated by the regulatory pressure, the possibility of a lower than average pay package and the location of the bank’s headquarters on the US west coast.
The board appears to have overcome the geographical problem by allowing Mr Scharf to run the bank from New York. He left Visa in December 2016, citing family reasons that made it “difficult” for him to spend enough time at the payments company’s California headquarters.
Mr Scharf’s total pay package at BNY Mellon was $9m in 2018 and $17m the year before. He will receive $26m, paid in Wells Fargo share rights, over five years to compensate him for the loss of the portion of his BNY pay that was deferred.
At Wells, he will receive a base salary of $2.5m and a cash bonus of between $5m and $7.5m in 2019, according to a filing to the Securities and Exchange Commission. The Wells board has also approved a grant of $15.5m in performance shares for February 2020, subject to certain conditions.
Other big bank chiefs were paid between $23m (David Solomon at Goldman Sachs) and $31m (Mr Dimon) last year.
Additional reporting by Philip Stafford in London and Laura Noonan and Pan Kwan Yuk in New York
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