Scharf Puts Stamp on Wells Fargo With Overhaul of Reporting Lines--Update
February 11 2020 - 2:27PM
Dow Jones News
By Ben Eisen
Wells Fargo & Co. is overhauling its reporting lines, Chief
Executive Charles Scharf's first move to stamp out the corporate
structure implicated in its fake-account scandal.
The bank said on Tuesday that it plans to split its three
business units into five. What had been known as the wholesale bank
will be split into a commercial bank that provides back-end
services for companies, as well as a separate investment bank that
focuses on capital markets.
The lender also will split its consumer bank into two units: one
that focuses on branches and small businesses and another that
focuses on consumer lending. The two units had been run separately
prior to 2017.
While the reorganization will result in more units, it is
designed to provide more oversight, with the heads of each unit
reporting directly to Mr. Scharf.
This is the first major structural change under Mr. Scharf, an
outsider brought to run the bank in October. He has prioritized
appeasing regulators and repairing the bank's reputation, which was
sullied after the company in 2016 revealed that branch employees
had opened perhaps millions of accounts without customer
consent.
"I am confident that this organizational model and our
strengthened risk and control foundation will bring greater focus
and accountability to the company," Mr. Scharf said in a
statement.
Regulators and Wells Fargo's board have said the company's
decentralized structure -- which gave considerable power to the
leaders of the bank's business lines -- was among the chief causes
of the 2016 scandal. Inside the consumer bank, the
run-it-like-you-own-it approach fostered an aggressive sales
culture that pushed low-level employees to open fake accounts to
hit their targets, the bank's board concluded in a 2017
investigation.
The new structure echoes that of JPMorgan Chase & Co., which
emerged from the financial crisis as a leader among U.S. banks. Mr.
Scharf, a former JPMorgan executive, once served as chief of staff
to CEO James Dimon.
Mr. Scharf has brought in a number of outside executives, many
of whom are former JPMorgan colleagues. They include Scott Powell,
who joined as chief operating officer at the end of last year.
Mike Weinbach, formerly the head of JPMorgan's mortgage
business, will join Wells Fargo to run its new consumer-lending
unit. Mary Mack, who had overseen the unit that included lending
and the community bank, will narrow her oversight to the community
bank.
Perry Pelos, who supervised the wholesale bank, will lead the
commercial-banking unit. Jon Weiss, who ran wealth and investment
management, will manage the corporate and investment bank. The
company will search for a new head of wealth and investment
management.
Wells Fargo's businesses have been under pressure in the years
since the fake-account scandal, with earnings in each of the three
former units trending downward.
Mr. Powell said that integrating operations across the company
will allow Wells Fargo to better serve customers. The moves are
"laying the foundation for future success," he said in an
interview.
Mr. Powell's responsibilities also include oversight of sales
practices across the organization. He has brought in another
executive, Michael Cleary, to manage those efforts.
Wells Fargo also will create a new group to focus on strategy,
digital platforms and innovation, encompassing some of the former
responsibilities of Avid Modjtabai, an executive who announced her
retirement last fall.
David Benoit contributed to this article.
Write to Ben Eisen at ben.eisen@wsj.com
(END) Dow Jones Newswires
February 11, 2020 14:12 ET (19:12 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Aug 2024 to Sep 2024
JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Sep 2023 to Sep 2024