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Jamie Dimon protégé takes on US banking’s biggest clean-up

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Via Financial Times

Wells Fargo chief executive Charlie Scharf made a name for himself as Jamie Dimon’s protégé at several Citigroup predecessor companies — Mr Dimon’s “go-to guy” for advice, problem solving and getting things done.

The 55-year-old will need all of those skills and then some as he turns his attention to Wells Fargo, the world’s fourth-largest bank by market capitalisation, where he was named chief executive in September. It is almost as big as Mr Dimon’s JPMorgan Chase, but faces far bigger challenges, which were laid bare in its fourth-quarter results this week.

As JPMorgan set yet another earnings record, Well Fargo’s profits dropped 53 per cent in the fourth quarter, when Mr Scharf’s began his tenure. The bank was dragged down by higher expenses and yet more fallout from its 2016 fake accounts scandal.

Now Mr Scharf, who lives in New York despite the fact that this means commuting to the bank’s San Francisco headquarters, is charged with improving Wells Fargo’s reputation with investors, regulators, politicians and customers.

The job is formidable. Wells has almost $2tn in assets and 260,000 employees, and the scandal has already claimed the jobs of Mr Scharf’s two predecessors.

Mr Scharf brings a wide breadth of experience to the task. He began his career as Mr Dimon’s assistant at Commercial Credit in the mid-1980s, when he was still a senior at Johns Hopkins University. He stuck by his mentor’s side through a series of deals that would ultimately bring them into the Citigroup fold and then — after Mr Dimon’s departure from Citi — to Chicago’s Bank One.

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“People originally thought he was a young guy who had been over-promoted,” recalled one former colleague. He said Mr Scharf quickly proved himself by displaying the analytical skills and the ability to “get stuff done” that Mr Dimon is famed for.

After Bank One was acquired by JPMorgan in 2004, Mr Scharf would rise alongside Mr Dimon to run JPMorgan’s retail bank before moving to San Francisco to take the helm of payments giant Visa in 2012. Mr Scharf abruptly left Visa in 2016, saying that its California headquarters was too far away from his family in New York. He returned to his base there and in 2017 was named chief executive of BNY Mellon, the world’s largest custodian bank. 

Mr Scharf has built a reputation for being plain-spoken and low-key to the point of aloofness. Unlike Mr Dimon, he is “a quiet leader” who listens more than he talks, said Tom Brown, founder of hedge fund Second Curve Capital, who first met Mr Scharf two decades ago. “When you talk to Charlie, you have his undivided attention,” he added.

When Mr Scharf listens, he wants to hear the unvarnished truth, according to Ed Garden, chief investment officer of activist fund Trian Partners and a former board member at BNY Mellon, where he led the chief executive search that ended with Mr Scharf. “He will eliminate rhetoric and spin and he will get everyone [at Wells] grounded in reality,” said Mr Garden.

That directness was on display this week during Mr Scharf’s first call with analysts as Wells chief executive. Avoiding the jargon typical of such events, he argued in plain terms that while repairing the damage from the scandal remained the top priority — the bank has made “terrible mistakes”, he said — Wells was also falling short on costs and culture.

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There are “big parts of the company where we are extraordinarily inefficient”, he said.

Mr Scharf is pushing change at Wells, in part by placing former JPMorgan colleagues in senior roles. Scott Powell was named chief operating officer, Ray Fisher has been appointed to run the cards business and Bill Daley, the former White House chief of staff, is running public affairs.

Mr Daley said Mr Scharf’s bracing statements on the analyst call were a good reflection of the man himself — unsurprisingly, as he wrote them himself rather than leaving the job to his communications team, as chief executives often do.

“He’s not a backslapper like some investment bankers,” he said. His approach “fits with the companies [he has led] — BNY, Wells. Solid companies, solid guy.”

Ryan McInerney, Visa president, who has worked with Mr Scharf at both JPMorgan and Visa, said one of Mr Scharf’s key skills was clear communication: “One challenge in large organisations is that you say something and five people hear five different things; you’re not going to get that with Charlie.”

A key question is how much time long-suffering Wells investors will allow the new boss before becoming restless. “He’s still in that honeymoon period — but while [he] is new, investors have been dealing with the degradation in Wells Fargo’s profits for a long time,” said Scott Siefers, bank analyst at Piper Sandler. “There will be some push and pull.” 

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