Wells Fargo & Co. (WFC) said Chairman Richard Kovacevich will retire at the end of this year and will be succeeded by the San Francisco bank's current chief executive, John Stumpf.

Stumpf, 56 years old, succeeded Kovacevich two years ago when Kovacevich was CEO. Under Stumpf's watch, Wells Fargo has become the third-largest U.S. bank in stock-market value, behind JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC). Wells Fargo purchased its teetering rival Wachovia Corp. last year for $12.7 billion.

Kovacevich, 65, will officially retire early next year after 23 years with the company. He agreed last year to continue as chairman for an interim period to focus on the Wells Fargo-Wachovia merger and to help steer the bank through the housing crisis and economic recession.

Kovacevich has recently been a vocal defender of Wells Fargo and even tangled with government regulators over the U.S. Treasury's Troubled Asset Relief Program, which the government used to invest directly in banks last October. When then-Treasury Secretary Hank Paulson told Kovacevich in Washington that Wells Fargo had little choice but to accept $25 billion in taxpayer support, Kovacevich pounded his fist on the table in frustration, according to people familiar with the situation.

Later, Kovacevich turned the government's push to sell ailing Wachovia into high drama, first by backing out of takeover talks and then blowing up the Charlotte, N.C., bank's agreement to be bought by Citigroup Inc. (C)

Wells Fargo bought Wachovia without any financial assistance from the U.S. government. The bank has since raised capital to support its Wachovia purchase and to satisfy demands from regulators, who told the bank to raise nearly $14 billion after government's stress tests of banks earlier this year.

Kovacevich is a widely respected bank manager and is also known as a highly skilled acquirer of other institutions. He purchased 77 banks while in charge at Norwest Corp., a Minneapolis bank that merged with Wells Fargo in 1998. At the time, the $35 billion deal was the third-largest in U.S. banking history. Kovacevich became CEO of the combined company.

Kovacevich grew up in a lumber town called Enumclaw, Wash., where his father worked in a sawmill. He never wanted to be a banker, initially dismissing it as boring. Recruited as a pitcher by the New York Yankees, his prospects disappeared when the 6-foot-3 Kovacevich tore his rotator cuff.

After getting degrees from Stanford University, Kovacevich went to work for Minneapolis-based cereal maker General Mills Corp. General Mills director Walter Wriston, then the chief executive of Citicorp, lured Kovacevich to New York, where he was eventually put in charge of the bank's local branch network.

During 11 years at Citicorp, Kovacevich pushed the cross-selling of mortgages and credit cards that made him famous in the banking industry. He also displayed his trademark bluntness. When Citicorp CEO John Reed chose someone else as head of consumer banking, Kovacevich said he disagreed, then quit to take a job at Norwest, which was struggling at the time.

Wells Fargo Lead Director Phil Quigley praised Kovacevich for overseeing the acquisition of more than 300 financial institutions, including Norwest Corp.'s acquisition of Wells Fargo in 1998, and for pushing for federal laws that made banking more competitive.

Wells Fargo's shares closed at $29.39, up 3.9%. The stock is down 16% in the past year.

-By Marshall Eckblad and Kathy Schwiff, Dow Jones Newswires; 212-416-2156; marshall.eckblad@dowjones.com