A less defensive posture from Wells Fargo's interim CEO
During his nearly two-and-a-half-year tenure as Wells Fargo's CEO, Tim Sloan often seemed so eager to turn the page on the bank's past misdeeds that he failed to acknowledge that regulators still had reason to be concerned.
His interim successor, C. Allen Parker, took a less defensive posture Thursday, acknowledging the validity of criticism the banks has received from its government overseers.
In his most extensive public comments since being named interim CEO, Parker said that he continues to work on "enhancing" the bank's relationship with all of its regulators. "Part of that is conveying to them that we understand, and we frankly accept their criticism, and we’re turning to try to deal with it in an even more effective way," he said at an investor conference.
Parker also suggested that the bank may struggle to achieve meaningful top-line growth until it moves past its regulatory problems.
“I think one of the most important things we can do to ensure revenue growth going forward is to get past the issues of the past, so that we don’t really continue to be in a situation where customers have any kind of hesitation about the brand,” Parker said.
Parker was tabbed in late March to lead the bank following the abrupt departure of Sloan, a Wells Fargo lifer who became CEO in 2016. The company’s board has not established a public timetable for the completion of its external search to find a permanent successor.
Parker is a lawyer who spent most of his career at Cravath, Swaine & Moore LLP before joining Wells as general counsel in 2017. Despite perceptions that Parker is serving in a caretaker role, he indicated Thursday that he has a mandate from the company’s board of directors to implement change.
“As I’ve said, if you’re looking for someone who’s going to tread water, you’ve got the wrong person,” he said.
Parker said that his top priorities are to provide the best possible customer service, satisfy regulatory priorities and continue Wells Fargo’s transformation, a process that includes major operational overhauls.
He was not asked Thursday about whether he is interested in having the interim tag removed from his title. Bloomberg reported earlier this month that some senior insiders at the company want Parker to remain in the CEO job.
Arguably the biggest challenge that Parker faces is how to appease the bank’s regulators, whose public expression of dissatisfaction in March seemed to be at odds with Sloan’s assurances that the relationship was constructive.
Last month, Wells said that it will no longer provide guidance on when the asset cap imposed by the Federal Reserve Board in February 2018 is likely to be lifted. Wall Street interpreted that pronouncement as an acknowledgment that the restrictions are unlikely to be removed prior to 2020.
Parker declined to promise Thursday that no new scandals will emerge at Wells, echoing comments that Sloan made during his tenure about the progress the company has made in ferreting out bad practices. Revelations in September 2016 that millions of accounts were set up without the customers’ permission led to a slew of other scandals.
“I feel that we’re way, way, way down the road in terms of discovering whatever issues were out there,” Parker said.
Earlier this month, Wells announced the creation of an operations unit that is designed to focus exclusively on meeting the demands of regulators. The group is being led by Derek Flowers, who previously served as the bank’s chief credit and market risk officer.
Parker indicated Thursday that the change was made to ensure that the work that needs to be done in response to regulators’ concerns actually gets completed.
He also highlighted the contributions of several high-level new hires from outside the bank, including the bank’s head of technology, Saul Van Beurden, who was hired away from JPMorgan Chase in January, and human resources head David Galloreese, a former Walmart executive who joined Wells Fargo last year.
“A lot of people have felt that the company was too insular, especially at the most senior levels. And I think that that is something that’s evolved significantly over time,” Parker said.
In addition, he acknowledged the struggles that Wells Fargo’s retail banking unit — and, to a lesser extent, its wealth management unit — have experienced as a result of the various scandals.
In the first quarter, revenue at Wells Fargo fell by 1.3% to $21.6 billion year over year. Parker, who had never worked in the revenue-generating parts of a bank before becoming interim CEO, was asked Thursday about how the bank can grow revenue.
“I think we have had, it’s fair to say, some headwinds in terms of bringing on new customers,” Parker said. “I feel like we’re making headway, we just have to continue to make headway. And I think we’ll see the growth we really want once we move past the regulatory issues.”