By Rachel Louise Ensign
Wells Fargo & Co.'s board is on the hunt for a new chief executive who can appease Washington while repairing the bank's battered operations. It won't be easy.
There is no clear successor to Timothy Sloan, a 31-year Wells Fargo veteran who stepped down from the top job Thursday. The board said it plans to hire a leader from the outside, reversing its tradition of choosing long-serving employees for the top job. (The bank's general counsel, former Cravath, Swaine & Moore LLP partner C. Allen Parker, will do the job in the meantime.)
Hiring an external candidate is "the most effective way to complete the transformation at Wells Fargo," Chairman Elizabeth Duke said on a call with investors late Thursday.
Boards, especially the ones running companies in heavily regulated industries, often have succession plans in place. Yet Wells Fargo's directors appear to be starting from scratch. Ms. Duke said Thursday that the board hadn't yet reached out to any potential candidates. "I don't think it's appropriate to run a search for a CEO when you have a CEO sitting in the seat," she said.
As the search kicks off, the board is likely to look for a candidate who can do two things: get the company on the right side of banking regulators and steer it through a number of business challenges.
As Mr. Sloan learned during his two and a half years in the role, it won't be easy. A sham-account scandal that began in Wells Fargo's branches has rippled throughout the business, spurring a number of government investigations and regulatory headaches including unprecedented growth restrictions from the Federal Reserve.
At the same time, the bank is trying to pare its branch network, cut billions of dollars in costs, divest unneeded businesses and reinvigorate deposit growth after the sales scandal.
Wells Fargo's next CEO faces a set of "herculean tasks," RBC Capital Markets analyst Gerard Cassidy wrote in a research note late Thursday.
The chance to run one of the biggest U.S. banks doesn't come along often. When it does, it almost never goes to an outsider. Whoever gets the Wells Fargo job has the potential to earn professional glory, as well as millions of dollars. It also comes with great risk: failing to fix the battered bank could mar an otherwise successful career.
"It's one of the biggest gigs in banking. Anybody who's a really really good risk player recognizes that going into an enterprise when it's got some bumps and bruises is the best time to join," said Peter Crist, chairman of recruiting firm Crist|Kolder Associates. "The upside is high."
For months, as Mr. Sloan's hold on the job grew more tenuous, the world of finance has buzzed about who might replace him. There are a handful of executives who industry insiders think could make the short list, yet there is no obvious top candidate.
The board could look to the stable of executives groomed by James Dimon, the CEO of JPMorgan Chase & Co. Potential candidates in this group include Gordon Smith, JPMorgan's co-president and chief operating officer and the leader of its consumer-banking unit; and Matt Zames, who's currently president of private-equity giant Cerberus Capital Management LP.
Wells Fargo, with its sprawling retail network and tiny trading business, looks more like a massive regional bank than a Wall Street giant. That could make regional-bank executives such as PNC Financial Services Group Inc. CEO Bill Demchak or former U.S. Bancorp CEO Richard Davis attractive candidates.
Still, Wall Street executives with more experience under the Washington spotlight may get a look. The New York Post has reported that former Goldman Sachs Group Inc. executives Gary Cohn and Harvey Schwartz have been approached about the job, but the bank has denied the reports.
Wells Fargo also could look beyond the banking industry for Mr. Sloan's replacement. Potential candidates in that group include Ruth Porat, the CFO of Alphabet Inc. and Google Inc. and former finance chief at Morgan Stanley.
"Somewhere there is a highly accomplished leader out there who is going to look at the challenge and opportunity and say 'I'm a really good fit for Wells Fargo' and we're going to say, 'Yeah, we believe that,'" Ms. Duke told investors Thursday.
Write to Rachel Louise Ensign at email@example.com