“We made some terrible mistakes, and have not effectively addressed our shortcomings.”
Those were the words of Wells Fargo’s new CEO, Charlie Scharf, on Tuesday in his first quarterly earnings call as head of the storied bank. Years after the bank’s fake account scandal, it was a stark demonstration of how little has changed even bank executives say has happened at the San Francisco-based institution.
“We still have much more work to do to put these issues behind us,” Scharf said, adding that he has spent almost all of his time as CEO trying to start to fix the bank’s tarnished image in the eyes of the public and address regulators’ concerns. “We will take whatever actions are necessary. Our future success depends on resolving these issues, so we will act accordingly.
“The management team will be judged and held accountable for resolving these issues.”
Scharf’s task is not limited to repairing the bank’s reputation. He also has to navigate an industry-wide digital transformation and crack down on inefficiency.
Those challenges manifested in a quarterly earnings report for Wells Fargo that disappointed Wall Street, in part due to a $1.5 billion charge for legal costs in part related to the fake account scandal; shares fell about 5% Tuesday.
The results aren’t likely to affect Scharf’s standing among investors – he’s only been in the role for a few months, and is in the midst of a wide-ranging review of the company. Those reforms, as well as how he handles the bank’s regulators, will determine if he lasts longer than his impermanent predecessors.
Those executives promised swift action to fix the sprawling bank’s myriad woes, which begin with the yearslong wake of a fake account scandal and spread to far-flung corners of the bank, like an ailing rail-car business. They are all out of a job, and most of those woes still remain.
Waiting for answers
Scharf chose a different tack on Tuesday, preaching caution and asking investors to be patient. He even said that he wasn’t sure if any of the bank’s “public issues” would be resolved this year.
And those looking for how Scharf were resolve those issues were out of luck.
Despite Wall Street analysts’ prodding for clarity and specifics, Scharf declined to give much detail about Wells Fargo’s future on the earnings call.
The 27,000 Wells Fargo employees based in Charlotte – the most of any city – will likely have to wait for clarity on the future of the bank.
On the call, he said that there are parts of the company that are “extraordinarily inefficient,” but declined to offer specifics about where cuts may be made, and on what scale. There may be “pruning” of lines of business that aren’t central to the bank, but detail on what that may look like was sparse.
In his few months, Scharf has already made some changes.
He touted two new executives, both based in New York, and is in the process of hiring a new general counsel. In the process, he’s started to shift the decentralized bank’s power center away from its headquarters in San Francisco and towards New York where Scharf is based.