The new CEO of Wells Fargo reassured Wall Street, but no one else

In the spotlight.
In the spotlight.
Image: Reuters/Brendan McDermid
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Anyone dialing into Wells Fargo’s earnings call today (Oct. 14) hoping to hear about a bold new vision or transformational change was likely disappointed.

Instead they heard newly appointed CEO Tim Sloan deliver a carefully calibrated description about reforms being made by the scandal-ridden bank and how they would affect the business. Sloan’s message was tailored for his audience—Wall Street analysts and investors—but on his second full day on the job, at the center of the maelstrom over the more than 2 million fake accounts created for retail customers without their knowledge, he surely knew he’d have a broader audience.

Sloan said he has three major priorities: Working with the board as it conducts an investigation, being transparent about the financial impact of the scandal, and “making things right” for customers affected by the fraudulent account openings.

He reiterated that the bank will no longer judge employees by how many accounts they can coax customers into opening, but rather on a broader measure of service. But on the bigger question as to whether Wells Fargo’s culture was broken, he demurred. “There was clearly something wrong and we’ll make the necessary changes to fix it,” he said.

The scandal was a “headwind,” he said, a problem to be managed. The Wall Street analysts on the call seemed just as interested in compartmentalizing what had happened. Many seemed embarrassed to be asking Sloan about it, and some apologized when they did.

Questioned about whether the company might not be better served by bringing in new leaders from outside, Sloan explained that the bank had hired a fresh crop of senior executives in the aftermath of the financial crisis. If analysts were puzzled by this explanation—given that many of those executives have now been at Wells for years, and would be the ones who managed the bank as the account fraud unfolded—none pressed him on it.

Sloan showed annoyance when one analyst criticized the trickle of information coming from the bank in regard to the scandal. Wells Fargo wouldn’t say who knew about the fake accounts or when they knew it, couldn’t say how many of the affected customers were abandoning the bank, and didn’t make its new chairman, Stephen Sanger, available for questions.

Sloan ticked off a list of what information the bank did provide, including details about the decline in new accounts after the scandal broke Sept. 8, then huffed, “If that doesn’t satisfy you, I’m sorry.”

It was only when he was asked about the impact on the bank’s employees that Sloan veered off script. One analyst noted that the branch staff had been “through the wringer” and might be entitled to a bonus or a raise.

“Saying we put our team members through the wringer is an understatement,” Sloan said, adding that the bank needed to “re-recruit” its best workers. But he didn’t commit to paying them more.