John Stumpf’s decision to step down as chairman and chief executive officer of Wells Fargo won praise from analysts as way for the bank to put its cross-selling scandal behind it, even as lawmakers demanded more.
“The decision is good news in the short term because it removes a dark cloud of uncertainty that was hanging over the bank,” Ian Katz, an analyst at Capital Alpha Partners, said in a note Wednesday after the company announced Stumpf’s retirement.
Jeb Hensarling, the Republican chairman of the House Financial Services Committee, and Republican Richard Shelby, chairman of the Senate Banking Committee, vowed to continue their investigations into the company. Sen. Elizabeth Warren, the Massachusetts Democrat who called on Stumpf to step down last month, said he still needs to give back “every nickel he made while this scam was going on.”
Wells Fargo shares, which had lost 9 percent since word of the scandal became public last month, dropped 1.4 percent to $44.67 at 3:23 p.m. in New York. That’s still a better performance than the 1.7 percent decline in the 24-company KBW Bank Index on Thursday.
Tim Sloan, 56, the chief operating officer long viewed as Stumpf’s most likely successor, was named CEO Wednesday, and the San Francisco-based company named a new non-executive chairman and vice chair. Wells Fargo had already refunded $2.6 million to affected customers and said it’s ending sales incentives that have been blamed for the abuses. Stumpf previously agreed to forgo $41 million in unvested stock that had been granted for performance, as well as some of his salary.
The announcement Wednesday “signals the board’s acknowledgment of the severity of the sales practice issue and its commitment to addressing the required changes,” analysts led by John Pancari at Evercore ISI wrote in a note to clients late Wednesday. They also will preserve the bank’s “still-solid culture and formidable banking presence throughout other areas of the company,” according to Evercore.