The doc, Charlie Scharf remembers, was 3,162 pages. It included 6,000 duties; 28,000 individuals labored on it. This staggeringly lengthy quantity was the plan to save lots of Wells Fargo, solid by Scharf and his crew shortly after he took over as CEO in October 2019.
On the time, Wells had been laboring underneath a regulatory crackdown unleashed by the cataclysm that blackened the previously burnished Wells identify, the closely publicized scandal revealing that the financial institution had bilked tens of millions of shoppers by creating pretend and unneeded accounts at its branches. That culminated in a draconian penalty imposed by the Federal Reserve: a tough restrict on its whole property that basically blocked Wells from elevating the deposits that type the lifeblood of banking.
The method was grueling. Scharf remembers that each Monday morning, he would lead a two-hour assembly of the 15-member working committee wherein they laboriously labored by means of the place their departments stood on reaching their targets. “Charlie would go across the desk asking, ‘Why are you lacking these dates? Why are we falling behind?’” relates one of many mind belief topic to the grillings. He’d relentlessly demand that executives who had been lagging come again subsequent week with a system to course appropriate, and catch up. Those that couldn’t sustain didn’t final lengthy.
Within the early going, Scharf would get harshly worded emails from the regulators demanding extra progress. “I simply lived all of it week, and on Friday afternoons I’d typically get this official correspondence from regulators,” he remembers. “The language was jarring. I didn’t wish to work on Friday night time until I needed to. I needed to take time with my household and decompress. So I’d say, I’m not going to open this stuff till Saturday or typically Sunday.”
The duty of saving the establishment seemed past daunting. Traders massive and small took a dim view of its prospects. Warren Buffett, whose Berkshire Hathaway had been an enormous Wells investor for twenty years, slammed the prior prime administration for “ignoring [the sales fiasco] after they came upon about it,” and dumped his whole stake. From February 2018 to December 2020, its share worth dropped by two-thirds, shaving its market cap from $322 billion to $88 billion. Calls in Congress for a breakup had been rising; Sen. Elizabeth Warren (D-Mass.) demanded that the financial institution cut up into models that would extra readily adjust to banking norms, and Sen. Sherrod Brown (D-Ohio) trashed Wells as “too massive to handle.”
Scharf admits that as a banker, he’d by no means confronted something remotely as powerful because the mission at Wells. “I keep in mind figuring out what I used to be getting myself into, however it was a lot worse directionally than I believed … The regulatory strain was past something I’ve skilled, and so was the political strain,” the CEO avows. Certainly, introduced in to enact a turnaround, Scharf was going through rising odds that regulators may dismantle certainly one of America’s most legendary monetary establishments.
Scharf had been coaching for this job his complete life
Scharf is perched on a sofa in his workplace, framed by floor-to-ceiling home windows overlooking the southward sweep of the Wall Avenue district the place he labored as a teen, the Statue of Liberty a copper-green miniature within the distance. He’s attired in denims and tan sneakers, his quick white hair completely coiffed, sans his typical, just about trademark owl-lens glasses.
The Wells Fargo rescue job suited Scharf for a primary cause: He’d been coaching for a process similar to this one all his working life. He virtually grew up within the Wall Avenue engine room. Scharf’s dad was a stockbroker who finally labored for Sandy Weill at Smith Barney, and was nonetheless there when his son turned the agency’s CFO in 1995. Beginning at age 13, Charlie throughout the summers would commute along with his father from the household residence in Westfield, N.J., a tony suburb 20 minutes west of Newark Airport, to the elder Scharf’s brokerage home. “We’d get off the prepare on the World Commerce Middle, and he’d go to his constructing and I’d go to mine,” he remembers. The younger Scharf’s numerous posts included such back-office positions as inputting information and dealing within the securities vault.
As a senior at Johns Hopkins College in Baltimore, Scharf began interviewing at prestigious monetary companies in Manhattan when his father beneficial an oddball alternative that set his skilled trajectory. “He stated, ‘This wonderful man named Sandy Weill has constructed an amazing administration crew at this tiny firm known as Industrial Credit score in Baltimore, and I don’t know what it’s, however they’re going to do nice issues, and you need to be with nice individuals.’” His father had a cousin who knew Jamie Dimon’s dad and managed to get Charlie’s résumé to Dimon, the buyer finance purveyor’s CFO.
Sooner or later in March 1987, Scharf spent a day at Industrial Credit score, interviewing with Dimon and a number of other different executives. “Earlier than I left, Jamie involves the ready room and tells me, ‘We’re going to give you a job.’ I later realized that by hiring me on the spot, he needed to show some extent, that Industrial Credit score was now not a slow-moving firm that hadn’t employed younger individuals for years.” For his half, Dimon remembers that Scharf whilst a teenager wasn’t simple to please. “I saved sending him round to totally different jobs, and nearly in every single place he went he’d come again, and I’d say, ‘How are you doing?’ and he’d say, ‘This space is screwed up, this space is horrible,’ he was at all times fairly crucial. So I stated, ‘Okay, child, you’re going to work for me as my assistant. I wish to see what you’ve obtained.’”
The frat home vibe at Industrial Credit score surprised the inexperienced recruit. “Neither the places of work nor Jamie seemed like something out of company America,” marvels Scharf. The workers lounged on worn purple velour couches, the fax machine was at all times on the blink, and the AC system was so outdated it hissed loudly, when it cooled in any respect. “Individuals had been strolling round smoking, it was the period,” says Scott Powell, Wells’ COO and a fellow teenager on the agency in these days. Nicknamed “the Child,” Dimon sported an unruly head of hair that matched his fireball persona. Remembers Scharf, Dimon would bark instructions into “a large, outdated squawk field just like the one in Charlie’s Angels.” The Dimon and Weill technique of communication, says Scharf, was to scream at one another till they reached consensus.
A sequence of roles with extra obligations adopted—together with following Dimon to Financial institution One in Chicago after his well-known falling out with Weill. Lastly in 2012 Visa got here calling and made Scharf its CEO, a job he excelled at earlier than leaving out of the blue to, as he says, to assist an in depth member of the family navigate a tough life journey, including that “When CEOs say they left ‘for private causes,’ it often means they had been fired or playing around. However for me, it actually was private causes,” he says. “And I’ll by no means remorse it.”
Scharf realized big-time from Dimon’s intensive, super-detailed, hands-on-all-the-levers administration type, however it’s his ex-boss’s private qualities that almost all impressed and influenced him. “What I got here to understand by means of the years is that there’s an enormous distinction between being a great supervisor and a great chief,” he avows. “Being a great chief means you encourage individuals by what you’re doing and the way you do it, the way you carry your self, that they wish to comply with you into extraordinarily powerful jobs just because they consider in you. That’s Jamie.”
Whereas Dimon is very theatrical, Scharf seldom raises his voice in conferences, even when he’s sad. “What he’s actually good at is decreasing the temperature to search out options,” says somebody who’s labored with Scharf.
Nonetheless, Scharf’s simply as powerful and blunt as Dimon. “He doesn’t waste time attempting to make individuals really feel good when he makes a tricky choice. He moved individuals out rapidly, with no anguish,” says somebody who is aware of him nicely. A well-known chorus is that he won’t draw back from “calling individuals on their BS.” Don’t search for flexibility when you’re not hitting revenue and efficiency targets, say managers in his orbit. “Charlie may be very measured,” says Fernando Rivas, head of company and funding banking at Wells, “however he’s uncompromising on outcomes and values.”
Observes an individual who’s labored with Scharf: “The unusual factor about him is, lots of people are type and good on the floor however colder beneath. Charlie is simply the other. On the floor he may be intimidating, however go a tiny bit beneath and also you discover a candy, caring individual.”
How Wells Fargo misplaced its manner
The Wells Fargo he inherited, nonetheless, was a basket case. Having skirted the International Monetary Disaster with its mixture of “Most important Avenue, not Wall Avenue” fundamentals for on a regular basis Individuals and their companies—the truth is, Wells enormously benefited from the meltdown through its emergency buy of failing Wachovia—the financial institution by the shut of 2012 boasted the best market cap of any U.S. megabank.
Then the troubles started.
Submit GFC, regulators needed all banks to tighten up compliance. Prior Wells administration proved completely incapable of instituting the broad infrastructure required to tightly handle danger. “It most likely was hubris from avoiding the issues within the GFC,” says COO Powell. A Home Monetary Providers Committee Workers Report from early 2020 reached the identical conclusion, quoting an emergency rent helicoptered in from J.P. Morgan who stated she discovered the controls “immature and insufficient,” and regulators skewered the managers in cost for exhibiting “no sense of urgency” in fixing them. Wells had traditionally been a extremely decentralized complicated assembled from sundry mergers and acquisitions—administration used the adage “80 horses pulling the stagecoach.”
The chief danger officer was unable to impose unified requirements throughout the fiefdoms. “They had been farming out all danger administration to particular person companies,” and utilizing handbook processes that had been a decade outdated, says Wells lead director Steve Black. “They usually had been in quicksand attempting to repair it.” The Home report refers back to the then chief danger officer as vainly “making an attempt to persuade and persuade” the buyer chief to stick to general guidelines, and getting nowhere.
The “pretend accounts” catastrophe—wherein congressional investigations discovered that Wells deployed a high-pressure tradition of “cross-selling” that rewarded department bankers for opening a number of accounts that clients knew nothing about—price Wells over $8 billion in fines. In its press launch, the Justice Division skewered previous administration for “full failure of management at a number of ranges” and the “staggering dimension, scope and period of Wells Fargo’s illicit conduct”; 5,000 alleged abusers had been fired from 2011 to 2016. In 2017, regulators compelled the CEO and head of the buyer financial institution to resign, and clawed again a complete of $69 million of their compensation.
Scharf gained the arrogance of regulators, partly, by making himself the level individual at Wells. “We had a proper assembly with all three regulators as soon as a month, however I’d personally name the officers accountable for all three virtually each week, typically a number of instances. I needed them to see how significantly we had been taking this, which was not the case earlier than I arrived. I additionally needed to set an instance for the opposite executives, that I’m not going to ask them to spend extra time with regulators until I did it myself.”
To implement the adjustments, Scharf recruited a crack new crew who’d put in and labored underneath the sorts of controls Wells wanted. All however two of the working committee’s 15 members are Scharf hires, a lot of whom gained his belief earlier in his profession, and the pair on the highest crew who labored at Wells when Scharf arrived now fill new roles. A key addition was COO Powell, whom Scharf labored with at Financial institution One and J.P. Morgan, and who’s a seasoned professional at putting in simply the form of self-discipline Wells wanted. Surprisingly, Scharf named as chief danger officer not an outsider, however a Wells veteran. Derek Flowers caught the CEO’s eye for his professional work as a credit score danger supervisor in numerous divisions, and he’s confirmed a whiz, says Scharf, on the company CRO job that additionally encompasses operations and compliance. Flowers reviews on to Scharf and the board’s audit committee. “The perfect executives at Wells weren’t on the prime however the mid and upper-mid degree, and we promoted a lot of them, together with Derek,” says Scharf. “And that builds confidence with the troops, as a result of they know who the great persons are.” Scharf additionally lavished assets on creating the intricate, intensive structure required to fulfill the consent orders, and preserve the brand new superstructure. Right this moment, Wells spends $2.5 billion extra a 12 months on danger administration than when Scharf took cost (that’s about 3% of whole bills). Scharf has raised the variety of danger managers stationed in enterprise models by 10,000, an addition that doubled the overall workforce monitoring credit score, operations, and compliance.
For seven years, the ceiling that restricted holdings of deposits and securities to $1.95 trillion compelled Wells to reject gigantic quantities of buyer money. “I’d estimate that we left $600 billion on the desk,” reckons Scharf. In that span, J.P. Morgan, Bank of America, and Citi have respectively grown their steadiness sheets 58%, 40%, and 34%. Because of this, web curiosity earnings at Wells, an enormous income line for banks, just about treaded water whereas that metric jumped for its opponents.
However Scharf didn’t stand nonetheless. He developed an overarching technique to develop promising franchises the place Wells had manner underinvested. The concept: Elevate charge earnings—a class that wasn’t restricted—to offset the decline or flattening in curiosity revenues in massive swaths of the financial institution necessitated by the asset restrict.
Holding property mounted per the caps required some unwelcome maneuvers, explains Rivas, the company and funding banking chief at Wells who lengthy served as Scharf’s prime M&A advisor, and whom the CEO recruited from a prime job at J.P. Morgan. “Asking clients, ‘Will you please take your deposits elsewhere?’ is an unnatural factor for a financial institution to do,” declares Rivas.
Although Wells had lengthy boasted that “we’re kitchen desk, not league tables,” Scharf educated a highlight on funding banking. Shifting the C-suite from San Francisco to Manhattan helped. Most of all, the business financial institution—just about tied for largest within the nation with J.P. Morgan—was serving scores of firms that wanted recommendation in buying different household firms, for instance, or in elevating recent fairness or debt financing.
Then Scharf educated his sights on bank cards. “Pre-pandemic, Wells was manner off base within the essential premium bank card house; they weren’t exhibiting any pulse,” says Brian Kelly, founding father of the Factors Man journey website. One downside was that Wells had poor fraud detection fashions, so it was often turning down transactions it ought to have safely accepted, enormously annoying particularly rich purchasers, Scharf included. “I used to be at dinner in London with my spouse and associates, and I’m going to pay, and my card will get rejected,” he remembers. As well as, Wells lacked the experience to grant the high-net-worth crowd sufficiently beneficiant traces of credit score.
Scharf channeled massive investments into the beforehand undernourished division, even green-lighting the comedic advert sequence that includes Steve Martin and Martin Brief, and funding the IT upgrades that solved the credit score traces downside, in addition to discovering the analytical candy spot for accepting or declining expenses. Although there have been stumbles—comparable to a Bilt cobranded card to pay for lease that flopped—even that gave Wells much-needed publicity to Gen Z. From 2020 to 2024 general buy volumes and card balances excellent have each doubled. “Some individuals would say they’re loopy to compete with Amex and Chase, which have enormous know-how and interplay,” says Dimon. “However Wells has a aggressive benefit, they’ve an enormous consumer base of over 40 million clients, what I name a ‘heat market,’ so they need to.”
In the meantime, Scharf was concentrating on deep cuts in spending—looking for out from his earlier expertise locations the place “two layers,” one superfluous and bureaucratic, had been allowed to coexist inside a large company. “We noticed it at Citigroup, on the former J.P. Morgan, at Travelers. At Wells, we had further layers, the identical work being completed in two companies that would have been centralized, together with HR, authorized, IT, and different areas,” he says.
Scharf demanded that every one high-ranking executives have at the very least seven direct reviews, double the earlier quantity. Wells was swimming in unused actual property. In Minneapolis, Des Moines, and a number of other different cities, its workforce was typically unfold throughout a number of small and infrequently growing older services. From 2019 to the shut of 2024, the financial institution lowered its world footprint from 87 million sq. ft to 60.3 million, and shrank the workplace constructing depend from 650 to 400, by concentrating workers in larger, newer areas. When Scharf arrived, Wells had three-quarters of J.P. Morgan’s revenues however 6% extra workers. Underneath Scharf, Wells’ headcount has declined by nearly 25% to 210,000. He consciously downshifted in areas comparable to residence loans, which turned much less worthwhile given greater capital necessities following the GFC, and held “reputational danger” he didn’t need ought to foreclosures spike.
Going ahead, Scharf’s holy grail is return on tangible widespread fairness or ROTCE, basically the cents an enterprise provides shareholders for each greenback they make investments. Final 12 months, Wells hit 13.4%. That determine waxed Citigroup (7%), just about tied BofA, and fell nicely in need of J.P. Morgan’s 20%. A number of years in the past, Scharf set a aim of 15% that then seemed extremely aspirational. However he’s nearly there, hitting 14.4% on common for the primary two quarters of 2025. For Scharf, getting to fifteen% is only a manner station. He’s aiming to cost towards the industry-topping, J.P. Morgan–type summit.
The magnitude of the adjustments Scharf made turned evident in Could of this 12 months, when he obtained one of the crucial essential telephone calls of his life. It was a congratulatory overture from a prime Fed official whom he declines to call who delivered the information that the central financial institution would quickly be lifting the restrict on property, successfully restoring full freedom of motion to an establishment shackled for years. When the official announcement got here on June 3, the CEO and a number of other lieutenants gathered exterior his workplace to sip Champagne and cheer the information. The air was thick with celebration, but additionally aid.
That’s to not say the job is finished. John McDonald, an analyst at Truist Securities, likens Wells’ subsequent act to this: “Wells needed to shed pounds, and Charlie obtained them on a eating regimen. Now they’re on the gymnasium and have to construct muscle.”
Scharf has taken the inventory from $52 when he began to $81 as of early October. Together with robust dividends, Wells generated a 11.1% annual return since he took cost six years in the past, nicely beneath J.P. Morgan’s 198.7% however virtually matching BofA (11.2%) and beating Citi (9.2%), and a beat on the KBW Financial institution Index at 10.0%.
“In case you take a look at the place Wells was when he arrived and the place it’s now, not many individuals may have completed what he did,” says Frank Bisignano, a colleague from J.P. Morgan and former CEO of funds colossus Fiserv who’s now commissioner of the Social Safety Administration and chief govt officer of the IRS. “He was courageous to take the job. You take a look at nice coaches, they bring about their teaching staffs with them. That’s what Charlie did at Wells, and it’s an indication of nice management.”
Free of the worst days of the Wells saga, Scharf is palpably grateful for the moments he has along with his household, his daughter’s upcoming wedding ceremony, the weekends on Lengthy Island in Remsenburg, a bayfront village nicely west of the Hamptons glamour zone, the place he seldom runs into opponents and workers on the hotspots. He unwinds by training woodworking in his store on the property, an exercise he finds “soothing.” He prides himself on fashioning raised moldings and customized bookshelves. Dimon jokes that Scharf’s most likely the one company chieftain who unwinds in a woodshop.
However his outdated mentor Dimon has excessive reward for the job Scharf has completed. “The world is his oyster now that the asset cap is lifted and Wells can as soon as once more deal with development. Charlie did a superb job,” says this famend truth-teller. However Dimon can’t resist including one ultimate little bit of roasting for his buddy and protégé of 30-plus years. “Although,” he says with a smile, “I most likely would have needed to do it sooner.” Six thousand duties later, Charlie Scharf did it on his personal timeline. And the stagecoach is rolling once more.
