Wells Fargo chair denies Gary Cohn rumors amid pressure on CEO
Wells Fargo Chairwoman Betsy Duke took the rare step of denying the bank is looking to replace its CEO, saying the entire board backs him, following weeks of whispering on Wall Street that it had contacted former Goldman Sachs executive Gary Cohn.
“Rumors that Wells Fargo’s board of directors reached out to potential CEO candidates are completely false,” Duke said in a statement. “CEO Tim Sloan has the unanimous support of the board, and this support has never wavered.”
The speculation spilled into public view when the New York Post reported directors had approached Cohn, who earlier this year finished a stint as a White House adviser. He bluntly denied in the report that he’s currently in talks with the bank.
“Absolutely not. Absolutely not — and you can put that on the record,” the newspaper quoted him as saying.
Yet Wall Street’s latest parlor game says a lot about the state of Wells Fargo. On Oct. 12, Sloan will reach the two-year mark in a tenure spent trying to resolve the company’s scandals. He’s overhauled management and internal controls, and traveled the country espousing a commitment to treating customers right. Still, by a number of classic market yardsticks the bank hasn’t yet convinced investors it’s on the rebound.
The stock is a laggard, analysts keep cutting profit estimates and every few months, the firm’s cleanup campaign unearths more abuses, rattling the public.
Analysts say that puts at least some pressure on the board to consider taking action — fueling chatter about scenarios such as enlisting Cohn. Duke’s statement Wednesday indicated the board is satisfied with the progress its CEO is making.
“Tim has driven significant transformational change at Wells Fargo, which is benefiting all stakeholders,” she said.
Turning to an outsider could give Wells Fargo a fresh start with the public as it makes the case it’s reformed. Sloan was promoted to CEO in an emergency shakeup, but his status as a three-decade veteran of the company has become a talking point in lashings by lawmakers.
Democratic Senator Elizabeth Warren has repeatedly called for his ouster.
While the stock has climbed 22% since Sloan became CEO, it’s trailing the 51% advance of the broader KBW Bank Index. Rivals JPMorgan Chase and Bank of America have gained 73% and 93%, respectively.
Analysts began this year predicting Wells Fargo would produce a record $24 billion annual profit. But they’ve cut estimates again and again after the Federal Reserve punished the bank with an unprecedented cap on growing assets. The average estimate is now for less than $21 billion, the weakest since 2012.
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“At the end of the day if he can’t grow earnings the pressure is going to build even more,” said Charles Peabody, an analyst at Portales Partners, who predicts Sloan has until the next annual meeting, typically in April, to show progress.
The big caveat is that Sloan inherited a mess. He rose up through the firm’s operations serving corporations, while most of Wells Fargo’s scandals simmered in its vast retail network. The problems erupted in 2016 when regulators said the bank had opened millions of accounts without customers’ permission.
Some of the additional abuses that since came to light surfaced as Sloan’s team bolstered internal oversight and examined old complaints. He’s enjoyed support from both the board and the bank’s largest investors, such as Berkshire Hathaway’s Warren Buffett. Early this year, directors boosted his annual pay package 36% to $17.4 million.
In recent interviews, several analysts credited him with taking the steps needed to overhaul the company, even if it’s taking longer than investors hoped.
“When you have a culture that has been so bad, so pervasive, for so long, whether it was Tim Sloan or Spider-Man, I don’t know how fast you could clean it up,” Erik Gordon, a professor at the University of Michigan’s Ross School of Business, said.
Even those whispering about Cohn were quick to add that he’s an improbable pick. He doesn’t have much experience with retail banking. He spent a decade as the second-highest executive at Goldman Sachs, which focuses on Wall Street businesses, where Wells Fargo has less presence.