Three years into his tenure as Wells Fargo's CEO, Charlie Scharf provided an unusually detailed look Tuesday at the bank's strategic plans, focusing more on ways to increase revenue than on opportunities to cut costs.
Scharf, who joined the bank near the height of its continuing regulatory troubles, also acknowledged that he still spends more than half of his time on compliance matters, even as he reflected on changes in the firm's executive culture.
Before Wells Fargo's unauthorized-accounts scandal exploded in 2016, the company had a decentralized business model, with leaders of specific units exercising a lot of autonomy. That model started to change as early as 2017 , and Scharf said Tuesday that it is now gone.
"We run the company as one," he said during remarks at Goldman Sachs' annual financial services conference in New York City. "Those of you that followed Wells Fargo might have known that we used to talk about the federalist model, which basically meant that certain businesses could do whatever they want as long as they were performing well."
Scharf said the decentralized model may have once worked well, but it ignored the benefits of working together as a single company. As one example, he noted that Wells Fargo's consumer bank used to be run totally separately from its wealth management unit.
"When you look at the affluent customers that exist in the consumer branch," Scharf said, "we were treating them the same way as we were treating every other customer, not leveraging the strengths that we had in our wealth management business."
In October, the $1.9 trillion-asset bank launched Wells Fargo Premier, which offers banking, lending and investing services to wealthy clients.
As another example of how the bank's business units have become more integrated, Scharf said that Wells Fargo's commercial banking unit previously sold a very small volume of products from the company's corporate and investment banking unit. "That's changed dramatically, and that's a significant opportunity," he said.
Something else that's changed since Scharf's arrival at Wells Fargo in 2019, he said, is its boardroom culture. Scharf, a former Jamie Dimon protégé, said that company executives now speak to each other in frank terms, which was not the case when he arrived.
"We were a very polite place. No one was ever expected to push each other in meetings. It was always done a little more privately," Scharf said. "I don't say confrontation, but there is a candor which we expect from the entire company that didn't exist in this company before."
In his remarks Tuesday, Scharf noted that Wells continues to work on extricating itself from various regulatory consent orders. He did not offer a time frame for when the Federal Reserve Board will end the asset cap that has hampered the bank's ability to grow for nearly five years.
Last month, Bloomberg reported that Wells was facing pressure from the Consumer Financial Protection Bureau to pay $1 billion to settle various investigations into the mistreatment of consumers.
Scharf said when he first arrived at Wells — he was previously the chief executive at Bank of New York Mellon — he spent roughly two-thirds of his time on compliance issues. "It's less today, but not significantly less. I'd probably say it's 50% to two-thirds of the time," he said.
For several years as Wells was engulfed by scandal, company executives put more emphasis on cutting costs than increasing revenues. Though Scharf struck a somewhat different balance on Tuesday, he reemphasized that the company is far less efficient than it should be. In particular, he pointed to the bank's branch network and its mortgage business as places where pruning is expected to continue.
"We're probably several years behind what others have done in terms of just looking at the efficiency of their branch network — not just in terms of number of branches, but staffing inside those branches," Scharf said.
The Charlie Scharf era began with the company's lowest quarterly net income in more than nine years. Culprits included falling revenue, rising salaries and yet more financial fallout from the bank's sales scandal.
Wells Fargo has laid off employees in its mortgage unit this year as rising interest rates have crimped loan demand. In July, Scharf said that the bank was shifting its emphasis in the mortgage business , making existing customers the main focus, rather than seeking out new ones.
His remarks Tuesday struck a similar note. "The home lending products are important to our customer base, but it is a very, very difficult business to run really well over a cycle," Scharf said. "So we're committed to it, but it won't look like what it looked like."
But Scharf's central message was about growth opportunities that he said were not the focus of Wells Fargo executives four or five years ago. "We were focused on our financial results, but it was really less about the growth of the company. Today, when we look at it, we look at all the different lines of business, every one of them has opportunities to grow."