Maybe my expectations were too high, but finding the job I was looking for on the careers web page of Wells Fargo & Co. proved frustrating.
Searching for “CEO” turned up only two jobs, a relationship manager in equipment finance and an engagement marketing manager. Putting “chief executive” into the search box produced a much longer list, 166 jobs, but none were the job I have been thinking about seeking.
Wells needs a new CEO. Why not me? I have only a little industry experience, but I have a spotless regulatory record. And besides, nobody else seems to want this job.
Tim Sloan told the Wells Fargo board of directors he was done as CEO in late March, and Wells general counsel C. Allen Parker was appointed to take over as the interim CEO. So the search has been underway more than four months.
No offense to headhunters, who would object to any hint that a CEO search ever goes this way, but the round-up-the-usual-suspects approach didn’t seem to turn up anyone eager to take on the problems of Wells Fargo.
Since the story broke in September 2016 of a $185 million settlement for creating dummy consumer accounts — and the stunning news Wells had also fired 5,300 employees — the Dow Jones industrial average is up about 50%, shares of Minneapolis-based U.S. Bancorp are up better than 30% and the shares of Wells Fargo have gone mostly sideways.
The consensus view — and the ratings of 19 of the securities analysts who follow Wells — is “hold.” That means the analysts get on phone calls with their institutional clients and try to steer the conversation to other companies they follow.
These analysts were on the line this month for Wells’ June quarter conference call. RBC’s analysts later summed it up in a note under the heading of “Still unable to find a light at the end of the tunnel.”
It’s important to point out that San Francisco-based Wells Fargo isn’t in any sort of life-threatening condition, like struggling to dig out of a hole caused by bad loans. By the usual measures of loan-loss problems, the quality of the Wells loan portfolio got better in the second quarter.
In the last quarter, Wells was once again nicely profitable, earning about 1.3% on average assets. Yet the Wells results had plenty of little nuggets of information that reveal just how hard progress has been.
Primary checking deposit growth has been lackluster, for example, while the closely watched measure of how much Wells has to pay in interest to attract deposits, the so-called deposits beta, increased again. It looks like Wells has had to use promotional pricing to bring in customers.
There was also back-and-forth with analysts on the conference call about efforts to pare back expenses. Parker and his finance executive acknowledged that they are working hard to keep expenses from exceeding a previously forecast range.
That they were even talking about expense reduction as much as they were is by itself remarkable, because for years the story of Wells Fargo was its focus on revenue growth. At the old Wells they were happy to let the more conventional thinkers in banking fret about trying to run things more cheaply. They knew how to grow earnings by doing more business with their customers.
The current executive team highlighted some of its efforts to be more efficient, explaining how the company has eliminated the equivalent of 18,000 full-time jobs since early 2018 through what it called “attrition and displacement.” On the other hand, the company over that time added about the same number of positions in risk management, regulatory compliance and technology, meaning the total number of jobs barely budged.
My search on the careers site turned over a lot of open jobs in a category called “risk/compliance.” Some of the job titles sounded downright baffling to an outsider, such as “conduct enablement leader” and a “crimes risk approvals manager” that Wells wants to hire in Minneapolis. Yet these unusual job titles do hint at the complexity of regulatory compliance and oversight.
Another little head scratcher from the recent quarterly call was a matter-of-fact question from a stock analyst about any status updates on the Department of Justice, Department of Labor and Securities and Exchange Commission investigations, sort of like all companies have these things. Not much new, Wells responded.
What didn’t seem to come up at all was the biggest regulatory headache Wells Fargo has, a cease-and-desist order from early 2018 put in place by the Federal Reserve, pointing to “widespread consumer abuses.” Among other things, the Fed action capped the size of Wells Fargo’s balance sheet.
At one point Wells hoped this cap would be lifted at the end of last year, then later the expectation was the first half of 2019. Then in January management said maybe by the end of this year. The analysts who follow Wells seem to think Wells will have to operate under this cap well into next year.
To his credit, Parker sure didn’t sound like a caretaker on that conference call. He came to the company after the fake-accounts scandal erupted, having stepped down from the lead partner role at Cravath, Swaine & Moore LLP, a perennial contender for title of most prestigious law firm in the country.
But one roadblock to another insider like Parker holding the top job might also be what pushes my own long-shot candidacy into the ditch. That’s the Office of the Comptroller of the Currency, another principal regulator.
The OCC plans to vet any new CEO in advance, a process that reportedly could take up to three months.
That’s not exactly a normal thing for banking companies. Just one more indication that Wells Fargo has a very long way to go for a full recovery.