In the wake of public and political outrage concerning the sales scam, Wells Fargo & Company’s (WFC - Free Report) Chief Executive Officer John Stumpf has decided to step down, effective immediately. Tim Sloan, the company’s President and Chief Operating Officer will be succeeding Stumpf.
In a statement released on Wednesday, the company’s Lead Director, Stephen Sanger said that Stumpf “believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges and take the Company forward.”
Stumpf, who joined Wells Fargo in 1982, became CEO of the San Francisco-based banking giant in Jun 2007 and chairman in Jan 2010. Under his leadership, the company earned admiration for steering well through the onslaughts of the 2008 financial meltdown. However, Stumpf has been facing harsh criticism following the bank’s $190-million settlement for illegally opening millions of unauthorized accounts.
Stumpf mentioned that he is “very optimistic” about the future of Wells Fargo, adding, “While I have been deeply committed and focused on managing the Company through this period, I have decided it is best for the Company that I step aside.”
Stumpf, who has already agreed to forfeit all of his outstanding unvested stock awards valued at around $41 million, would not receive any severance package. According to a Mar 2016 filing by the company, Stumpf is eligible for a $24 million “supplemental cash balance plan.” However, the proceeds from this benefit are usually paid six months post retirement.
Meanwhile, Stumpf had testified before the U.S. Senate Banking Committee last month. He apologized for the unethical sales practices and mentioned that there was “no orchestrated effort or scheme” by the bank to promote such fraudulent practices. However, Stumpf was thoroughly grilled at the hearing, where committee members, including Democrat Elizabeth Warren, demanded his resignation. Stumpf also appeared at the U.S. House Financial Services Committee hearing.
Sloan, a 29-year veteran at Wells Fargo who had taken up the position of president and COO in Nov 2015, undoubtedly inherits the task of reinforcing the once largest bank of the nation.
Sloan stated, “It’s a great privilege to have the opportunity to lead one of America’s most storied companies at a critical juncture in its history. My immediate and highest priority is to restore trust in Wells Fargo. “
Since the announcement of the settlement on Sep 8, shares of Wells Fargo, whose troubles continue to deepen with probes and lawsuits, lost over 9%. Nevertheless, following the latest announcement, shares gained nearly 2% in the after-hours trading.
Notably, Wells Fargo, JPMorgan Chase & Co. (JPM - Free Report) , Citigroup Inc. (C - Free Report) and The PNC Financial Services Group, Inc. (PNC - Free Report) kick-start the Q3 earnings season on Oct 14.
Wells Fargo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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