NEW YORK — Wells Fargo’s CEO Tim Sloan stepped down Thursday, saying he’d become too much of a political target after a rocky tenure during which the deeply troubled bank dealt with a seemingly unending wave of scandals.
Sloan said in a statement he will give up his roles as CEO and president as well as his seat on the board, effective immediately. He will fully retire from the bank on June 30.
Sloan led the banking giant for less than three years. A longtime insider, Sloan was chosen to replace outgoing CEO John Stumpf, who resigned in October 2016 after Wells Fargo employees were found to have fraudulently opened millions of bank accounts in order to meet the company’s unrealistic sales goals.
While Sloan sought to clean up Wells’ reputation following the accounts scandal, new improprieties repeatedly came to light. The bank was found to have tacked unnecessary auto insurance onto the accounts of car loan customers. Tens of thousands of customers were unable to afford the payments and, in many cases, got their cars repossessed. The bank also foreclosed on the homes of hundreds of customers accidentally.
Those are just two examples in what became a game of scandal “whack-a-mole” at the nation’s second-largest bank.
Sloan has faced considerable criticism from Congress during his time as CEO. Just two weeks ago, he was grilled by Democrats — and some Republicans — on the House Financial Services Committee, who questioned Wells Fargo’s commitment to compensating all the victims of the various scandals at the bank over the past few years.
Sloan told investors Thursday on a conference call that the target on his back from politicians was one of the reasons he decided to step down.
“There’s too much focus on me,” Sloan said. “I could not keep myself in that position as I was becoming a distraction. It’s a hard decision step down; I can assure you of that.”
Wells Fargo’s board of directors said it chose Allen Parker, who is currently the bank’s general counsel, as interim CEO and president. The bank also said in a statement that it will be looking at external candidates for its next CEO. Sloan was the bank’s chief operating officer and was also chief financial officer under Stumpf, and was not a popular choice as CEO with the public. While Sloan said he had no knowledge of the bank’s bad practices, many experts felt Wells needed someone from the outside to help clean up its act.
Federal regulators lost patience with Wells Fargo’s continued bad behaviour and inflicted harsh punishments. Wells had to pay a $1 billion fine last year to the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. But more importantly, the Federal Reserve stepped in and handcuffed Wells’ ability to grow its business until the bank could prove that it had gotten its house in order.
Federal Reserve Chairman Jerome Powell told reporters earlier this month that he did not believe Wells Fargo had made enough progress to warrant less scrutiny.
“We will not lift (our restraints) until Wells Fargo gets their arms around this, comes forward with plans, implements those plans, and we’re satisfied with what they’ve done. And that’s not where we are right now.”
Among politicians, Sloan was a favourite target of Senator Elizabeth Warren, who crusaded against Wall Street and the big banks as a Senator from Massachusetts and continues to do so in her campaign for the presidency in 2020. Sloan testified in front of Congress earlier this month, where he continued to face heated questions about himself and Wells’ business practices.
“About damn time. Tim Sloan should have been fired a long time ago,” Warren said on Twitter.
Republicans are just as angry, if a bit more constrained.
“The bottom line is that we’ve not seen the type of cultural or institutional change so desperately needed at Wells Fargo,” said Patrick McHenry, who is the top Republican sitting on the House Financial Services Committee.
Due to the harsh political climate facing Wells Fargo, and considering it could get worse as the 2020 election approaches, it was maybe the right time for Sloan to step down, analysts said.
“(Wells Fargo) was going be a punching bag through 2020 if he didn’t step down,” said Kyle Sanders, a bank analyst with Edward Jones who covers Wells Fargo.
Regardless of his legacy, Sloan is retiring a very rich man after being with the company more than 30 years. The compensation analysis firm Equilar estimates Sloan’s total compensation — salary, stock and benefits — from 2011 to 2018 was roughly $150 million.
Also, Sloan will receive a standard retirement package and has stock grants the Equilar estimates are worth about $24.5 million, based on Wells’ closing price Thursday of $49.09.
Wells Fargo shares rose 2.3 per cent to $50.20 in after-hours trading.
Ken Sweet covers banks and consumer financial issues for The Associated Press. Follow him on Twitter at @kensweet.
Ken Sweet, The Associated Press