Tim Sloan is stepping down as CEO of Wells Fargo, a move one analyst says is “a positive step” for the company. Raymond James upgraded the bank’s stock to market perform, saying that a new CEO could help improve the company’s reputation.
However, not everyone welcomed the news of Sloan’s resignation. Deutsche Bank actually downgraded the bank from buy to hold. Analysts at the firm cited uncertainty over the transition as the reason for the downgrade.
And many wonder if a change in leadership will be enough to help Wells Fargo change their image with the public.
Wells Fargo’s history of customer scandals
At one time, Wells Fargo was one of the most respected financial institutions in the country. Then in 2016, it came out that Wells Fargo employees had created thousands of fake customer accounts.
In October 2016, Sloan stepped into the role of CEO and was expected to turn things around for Wells Fargo. However, the bank has had further scandals come out since Sloan stepped into leadership.
They incorrectly charged tens of thousands of customers for auto insurance and wrongly foreclosed on more than 500 homeowners. All in all, the scandals cost Wells Fargo an estimated $4 billion in fines and settlements.
The scandals also damaged the bank’s credibility with consumers and investors. And the Federal Reserve actually restricted Wells Fargo’s growth to its 2017 levels until the company fixes its many internal problems.
Will new leadership be enough?
The bank will likely continue to struggle to repair its image and may continue to come under close regulatory scrutiny. Their revenue is expected to go down in 2019 and their profits will likely fall short of peers like JPMorgan Chase and Bank of America.
But Sloan’s exit could be a positive change for the bank over the long-term. Wells Fargo’s stock immediately rallied 2.5 percent after the announcement that Sloan would be stepping down.
And the bank is taking steps to find a replacement from outside the company to replace Sloan. This could help Wells Fargo begin to change their tainted corporate culture and start rebuilding trust with consumers.
Not to mention, Wells Fargo is still a key player in the mortgage industry and the small business lending side of their business has grown well. If the new CEO can lead Wells Fargo out of Fed’s restriction on its assets, this would be a positive direction for the bank.