The embattled CEO of Wells Fargo is stepping down.
Tim Sloan, who took over as chief executive of the bank in October 2016, will retire, the bank said in a press release Thursday. The bank’s general counsel, Allen Parker, will take over as interim CEO and president.
The news that Wells Fargo’s numerous issues claimed its second CEO — Sloan, after all, was supposed to clean up the mess that had claimed his predecessor — came suddenly. Earlier this month, the bank said that Sloan had earned a 5 percent raise to $18.4 million for his work in 2018. And when there were news reports that the bank was considering a former Goldman Sachs executive as a potential CEO, the bank issued strong statements that Sloan had the full confidence of its board.
Just two weeks ago, Sloan testified before Congress about his efforts to clean up the various messes he had inherited. Before the four-hour hearings began, CNBC’s Ylan Mui asked Sloan how long he expected to remain CEO, and he replied that he, his board and all of his 260,000 employees thought he was doing a great job.
But in the end, the pressure was just too great.
During his tenure, Sloan had struggled to satisfy regulators’ demands to overhaul the sprawling institution. Problems at the fourth biggest U.S. bank by assets first came to light in 2016 with the news that employees had created millions of fake accounts to meet sales quotas.
Since then, issues have emerged across the bank’s business lines, including its mortgage, auto lending and wealth management operations. Last year, the Federal Reserve took the extremely rare step of capping the bank’s asset growth after the bank found more problems with customer dealings.
When pressed by lawmakers this month about whether there was more to come, Sloan replied that he couldn’t control the media.
Wells Fargo shares jumped 2.6 percent in extended trading Thursday following the announcement.
Shares of the bank have struggled amid the fallout from the sales practices scandal and scrutiny from political leaders. Over the last five years, the stock is flat, compared to a near 70 percent jump in J.P. Morgan Chase shares and a 40 percent move higher for the whole S&P financial sector.
Sloan’s departure follows repeated calls from lawmakers for the CEO to step down. In October, Sen. Elizabeth Warren sent a letter to Federal Reserve Chairman Jerome Powell calling on the Fed to maintain its growth cap on Wells Fargo until the bank replaces Sloan. Sloan blew past his initial estimate for when the bank could grow again, saying that the Fed restriction will remain in place until the end of 2019 in Wells Fargo’s most recent earnings report.
When asked Thursday whether he supported Sloan, Berkshire Hathaway CEO Warren Buffett told CNBC’s Becky Quick “yes, 100 percent.” Buffett says that’s because he doesn’t want the job. Berkshire Hathaway is Wells Fargo’s biggest shareholder, with more than 9 percent of shares according to FactSet.
More than two decades ago, Buffett stepped in to help temporarily lead a beleaguered Salomon Brothers after a scandal. Sloan was named CEO shortly after Wells Fargo’s sales practices scandal came to light in 2016.
“I’m very empathetic when he walks into a big problem at a very very large and politically sensitive institution,” Buffett said.