WFC Wells Fargo and Company

By Rachel Louise Ensign and Justin Baer 

Wells Fargo & Co. named Bank of New York Mellon Corp. Chief Executive Charles Scharf as its new CEO, ending a six-month search for a leader capable of restoring the bank's battered reputation and improving its standing with regulators.

Wells Fargo said Mr. Scharf will join the bank as president and CEO on Oct. 21. He succeeds C. Allen Parker, Wells Fargo's general counsel, who has been serving as interim chief since Timothy Sloan resigned in late March.

Mr. Scharf, 54 years old, spent four years as the CEO of Visa Inc. before taking the top job at BNY Mellon in July 2017. Before joining Visa, he ran JPMorgan Chase & Co.'s sprawling consumer operation.

Wells Fargo's primary regulator, the Office of the Comptroller of the Currency, has approved Mr. Scharf's appointment. The bank's shares were trading up about 4% midday Friday. BNY Mellon's stock was down about 5%.

Mr. Scharf has a tough job ahead of him at Wells Fargo, which has been struggling to right itself since a fake-account scandal erupted at the bank three years ago. Atop his agenda is getting the bank back in the good graces of regulators unsatisfied with its response to problems exposed by the sales scandal. The bank's operations also have suffered, and falling interest rates threaten to further cut into profit.

He will tackle the challenge from afar. Mr. Scharf will remain in New York but told investors on a call Friday morning that he will make frequent trips to San Francisco, where Wells Fargo is based, and Charlotte, N.C., where many of its employees work.

The arrangement is unusual but not unprecedented. Bank of America Corp. chief Brian Moynihan lives near Boston, though the bank is based in Charlotte and has a trading hub in New York.

Mr. Scharf has experience with turnarounds. He was tasked with overhauling BNY Mellon, a bank that handles much of Wall Street's boring but vital back-end work, such as tracking the value of securities. He slashed expenses but has been reluctant to set concrete targets for the revamp. Revenue growth has been muted, and the stock was down 10% in the past year before Friday's CEO announcement.

At BNY Mellon, Mr. Scharf installed trusted lieutenants in top roles, including chief financial officer and head of human resources. He declined to say if he would replace any of Wells Fargo's senior executives.

Some of Mr. Scharf's measures were unpopular with BNY Mellon employees, people familiar with the bank said. He removed all private offices, including those reserved for members of the bank's executive committee, and pushed to restrict staff from working from home. Following a companywide backlash, Mr. Scharf earlier this year clarified to employees that the new policy didn't completely ban remote work.

Mr. Scharf had assured colleagues this year he wouldn't leave New York -- or BNY Mellon -- for another job, and members of his executive team didn't find out about his imminent departure until Thursday when he came to the bank's headquarters to deliver the news, the people said.

"This was a surprise," said Todd Gibbons, the longtime BNY executive tapped to replace Mr. Scharf.

Wells Fargo first reached out to Mr. Scharf after Mr. Sloan's departure was announced, people familiar with the matter said. Mr. Scharf didn't pursue the job because he wasn't willing to leave New York, the people said.

In recent weeks, Wells Fargo director Charles Noski, a retired Bank of America executive, reached out to Mr. Scharf, the people said. The two men serve together on the board of Microsoft Corp. Mr. Noski persuaded Mr. Scharf to give the CEO job more thought, and Wells Fargo assured him a move to San Francisco wasn't required, the people said.

"I thought that's where I would be for the rest of my career," Mr. Scharf said of BNY Mellon on the investor call Friday. "I certainly didn't anticipate this opportunity coming along."

Mr. Gibbons said he planned to keep BNY on the path set by Mr. Scharf. "If people expect me to slow the change agenda, I think they'll be mistaken," Mr. Gibbons said. "There's an energy here that wasn't here a few years ago."

At Wells Fargo, Mr. Scharf will inherit an overhaul heading into its fourth year.

Until September 2016, when the sales scandal erupted, Wells Fargo enjoyed a sterling reputation as a bank that dodged the worst abuses of the financial crisis. Mr. Sloan, a Wells Fargo veteran, took over as CEO at the height of the scandal, following John Stumpf's resignation. By that point, the bank's folksy image was in tatters.

In the years since, the bank has replaced a number of top executives, reorganized entire divisions and revamped its pay structure to prevent the kind of abuses that cropped up in its branches, but problems have continued to pop up throughout the bank.

The setbacks have frustrated regulators. In February 2018, the Federal Reserve took the unprecedented step of capping the bank's growth, citing risk-management deficiencies. A few months later, the Consumer Financial Protection Bureau and the OCC imposed a $1 billion fine on the bank for misconduct in its auto- and mortgage-lending business. The OCC said it found risk-management deficiencies that "constituted reckless, unsafe or unsound practices," leading to improper charges to hundreds of thousands of consumers.

Regulators stepped up their pressure on the bank earlier this year. Mr. Sloan resigned, and the bank's board began looking for an outsider to replace him.

The search was the subject of intense speculation in the banking business and beyond. Warren Buffett, whose Berkshire Hathaway Inc. is Wells Fargo's largest shareholder, said the bank should avoid hiring someone with Wall Street roots, complicating the search.

Wells Fargo's board focused on a small group of top executives at the biggest banks and the CEOs of large regional lenders. In the first months of the search, several top candidates told Wells Fargo they weren't interested in the job.

Mr. Scharf's annual target pay is $23 million, according to a regulatory filing. Wells Fargo will pay him about $26 million for his forfeited BNY Mellon stock, the filing said.

David Benoit contributed to this article.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com and Justin Baer at justin.baer@wsj.com

(END) Dow Jones Newswires

September 27, 2019 14:55 ET (18:55 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.