Wells Fargo has its share of skeptics, as Chief Executive Officer Tim Sloan well knows.
He was promoted to his current role after the abrupt departure of his predecessor, John Stumpf, amid a 2016 scandal involving the creation of more than 3 million phony bank accounts by employees struggling to meet ambitious sales targets. The San Francisco-based lender has encountered more problems since.
It’s working hard to resolve them, Sloan assured stockholders Thursday during the bank’s annual investor day, and its entire workforce is committed to regaining the trust of its customers, regulators and owners.
“We are making progress,” the CEO said. “Our fundamental business model is still intact, and we can generate strong returns while becoming more efficient.”
He’s already convinced the bank’s largest shareholder, Warren Buffett, whose Berkshire Hathaway holds 9.4 percent of Wells Fargo’s stock.
“I like it as an investment,” Buffett told his own investors at a meeting in Omaha, Neb. “I like Tim Sloan as a manager. He is correcting mistakes made by other people.”
Indeed, this year alone, Wells Fargo agreed to a $1 billion settlement with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency over its auto- and mortgage-lending practices. The government said the bank sold some auto borrowers insurance they didn’t need under the pretense they might not qualify for loans otherwise, and charged fees to mortgage customers that it was supposed to be absorbing.
Sloan characterizes such agreements as evidence that the bank is cleaning up its past problems, though at least one lawmaker, Sen. Elizabeth Warren, has sharply disagreed. Sloan should be dismissed, the Massachusetts Democrat has said, and new leadership brought in.
Buffett, on the other hand, says problems at large companies and organizations are nothing new.
“All the big banks have had trouble of one sort or another,” he said. “I see no reason why Wells Fargo as a company, from both an investor and a moral standpoint, going forward is in any way inferior to other big banks with which it competes.”
Indeed, Sloan argues that the bank can continue to grow profit within the constraints established by the Federal Reserve, which earlier this year capped its size at the $2 trillion in assets held at the end of last year. At that time, it was the nation’s third-largest bank, behind New York-based JPMorgan Chase and Charlotte, N.C.-based Bank of America.
While Wells Fargo stock has rebounded from initial declines related to the fake accounts, its 8.9 percent growth since then is a fraction of the gains at rivals like Bank of America and Citigroup as well as the broader S&P 500. The bank’s stock rose 0.5 percent to $54.02 in New York trading on Thursday.
