An endorsement from one of the greatest value investors of our generation, and a big owner of shares in Wells Fargo, usually is worth its weight in gold.
However, despite a ringing endorsement from Warren Buffett, Tim Sloan — a longtime Wells Fargo executive who replaced beleaguered CEO John Stumpf back in 2016, amid a furor over thousands of fake accounts created by salespeople to meet quotas — announced his retirement on Thursday, the bank said.
The unexpected retirement announcement came just minutes after Buffett, during a Thursday afternoon interview at the Gatehouse’s Hands Up for Success luncheon in Grapevine, Texas, affirmed his support of the bank chief: “Yes, 100%,” Buffett told CNBC’s Becky Quick. Less than two hours later, Sloan had stepped down.
Buffett’s Berkshire Hathaway BRK.A, +0.50% BRK.B, +0.73% is the largest shareholder in Wells Fargo WFC, +0.66% holding about 8.7% of the bank’s shares outstanding, according to WhaleWisdom.
Read: Wells Fargo announces plan to cut tens of thousands of jobs
News of Sloan’s retirement sent shock waves through Wall Street, given that the CEO hadn’t just scored the imprimatur of investors like Buffett but had also received the backing of the San Francisco bank’s board numerous times. He will be replaced on an interim basis by the bank’s general counsel, C. Allen Parker.
Sloan had been charged with the task of repairing the 167-year-old bank’s badly tarnished reputation, but regulators and lawmakers say his efforts to rectify cultural problems at the bank, including its improper sales practices, weren’t coming fast enough.
Wells Fargo agreed to pay $575 million to all 50 states and the District of Columbia for its fake-account scandal.
Sen. Elizabeth Warren, the Massachusetts Democrat who is running for president, has been one of Sloan’s most vocal critics, charging that the he, as CFO and COO, “helped enable” its fake-account scandal.
On Thursday, Warren tweeted that it was “about damn time“ that the Wells CEO stepped down: “Tim Sloan should have been fired a long time ago. He enabled Wells Fargo’s massive fake accounts scam, got rich off it, & then helped cover it up. Now—let’s make sure all the people hurt by Wells Fargo’s scams get the relief they’re owed.” She had repeatedly called for his ouster.
Shares of Wells Fargo jumped 2.6% in after-hours trading after news of Sloan’s retirement.
Wells Fargo has lagged behind its peers in recent years. Last year, Wells Fargo’s shares declined 24%, while the broader large-cap bank Invesco KBW Bank ETF KBWB, +1.24% declined 20%, as bank bellwether JPMorgan Chase & Co. JPM, +1.13% fell by 8.7% over the same period.
So far this year, Wells shares are up 6.5%, while the Invesco KBW has climbed 9.4%. By comparison, the S&P 500 SPX, +0.36% is up 12.3% thus far in 2019, the Dow Jones Industrial Average DJIA, +0.36% is up 10.3%, while the Nasdaq Composite Index COMP, +0.34% has gained 15.6% over the period.
Put another way, since Sloan took over in October 2016, Wells has gained 8.3%, while J.P. Morgan’s stock has climbed 48%, shares of Citigroup Inc. C, +2.06% have gained 27% and Bank of America BAC, +1.11% has rallied by 70.5%.
Experts and industry observers say Sloan came under immediate pressure when he took over as CEO from Stumpf because critics believed that the institution should have looked outside of the company for a new CEO.
“We have gone above and beyond what is required in disclosing these issues in our public filings, we have worked to remedy these issues, and, most importantly, we have worked to address root causes that allowed them to occur in the first place,” Sloan said in his written testimony to the House Financial Services Committee, earlier in March.
“As a result, Wells Fargo is a better bank than it was three years ago, and we are working every day to become even better.”
A number of candidates have been floated as possible replacements for Sloan. Even before he announced he was stepping down, the New York Post said Gary Cohn, a former Goldman Sachs COO and official in the Trump administration, was courted by the Wells Fargo board.
Other reports suggested that a short list of CEO candidates for Wells might include Harvey Schwartz, former CFO at Goldman, and Gary Fleming, a former Morgan Stanley and Merrill Lynch C-suite executive. Matt Zames, a former top dog at JPMorgan, also is on that list.