Fortune - USA (2021-02 & 2021-03)

pany’s goal of doubling Black representation in its senior

ranks over the next five years, as well as its plan (announced

in his June memo) to tie some of executives’ compensation

to the diversity of their business lines. He also seems acutely

aware that the hire-who-you-know approach that he has re-

lied on for years has also perpetuated inequities. “When you

look at the representation inside this company—and this

is true of most financial institutions—there’s a tremendous

need to do things differently,” he says.

January 15 at first glance seemed like just another

dreary day for Wells Fargo. Disclosing earnings for the

fourth quarter of 2020, the bank reported revenues that

missed analysts’ estimates, and shares fell nearly 8% on

the day. The general gloom obscured the fact that Wells

Fargo also revealed substantial details about its future—as

a leaner institution doubling down on what it does well.

Recapping some moves and unveiling others, Scharf ’s

team listed a series of asset sales that would extract the

bank from “noncore” businesses. On their way out are

Wells Fargo’s $10 billion student loan portfolio and its

Canadian equipment-financing business. The bank is

also looking to off-load its asset management arm, which

oversees more than $600 billion for institutional clients.

“The businesses that we’re exiting are perfectly good busi-

nesses,” Scharf said on the earnings call. “The question is,

WHAT COMES NEXT : CAN ANYONE FIX WELLS FARGO?

Fargo proved more threatening to Scharf ’s reputation than

comments he made in a June memo announcing new diver-

sity initiatives, in which he cast doubt on the depth of talent

available for top jobs at the bank. “The unfortunate reality

is that there is a very limited pool of Black talent to recruit

from with this specific experience,” he wrote.

With nationwide awareness of structural racism honed to

a sharp edge by the killing of George Floyd just a few weeks

earlier, the comments were particularly tone-deaf. They

upset many employees and drew widespread condemna-

tion from critics outside the bank. They also highlighted the

whiteness and maleness of the ranks of former colleagues

from which Scharf had recruited many of his lieutenants.

While his nine hires on the leaders’ committee include a

woman and two Black men, the highest-ranking ones,

including the COO and CFO, are white men. “What we’ve

seen is that he’s replaced one insular group with another,”

says Nick Weiner of the financial industry labor group

Committee for Better Banks.

Scharf quickly apologized for the “limited pool” com-

ments, saying they reflected “my own unconscious bias.”

Wells has since created a diversity, representation, and

inclusion group: Its chief, Kleber Santos, who joined the

company in November from Capital One, sits on the senior

leadership committee. Months later, Scharf is solemn and

cautious as he discusses the gaffe. He points to the com-

CONSUMER AND

SMALL-BUSINESS

BANKING

AND LENDING

2020 REVENUE

$34 BILLION

HEADS

MARY MACK AND

MICHAEL WEINBACH

Wells Fargo has one of the

largest home mortgage

businesses in the U.S.,

and this division is Wells’

biggest business segment

by far. Falling interest rates

have hurt the division’s

revenue as of late. But the

bank’s $400-billion-plus

consumer loan portfolio

also includes strong auto-

financing and credit card

businesses that command

higher interest rates and

should perk up as the

economy improves.

WEALTH AND

INVESTMENT

MANAGEMENT

2020 REVENUE

$14.5 BILLION

HEAD

BARRY SOMMERS

Wells Fargo managed

$2 trillion in total assets at

the end of 2020—though it

plans to sell its $600 billion

institutional asset manage-

ment business, the better

to focus on individuals.

Wells’ wealth manage-

ment team has historically

served “mass affluent”

and middle-class custom-

ers as well as richer ones.

Scharf sees the division

synergizing with consumer

lending: “Huge numbers of

customers who come into

our branches have money

to invest,” he says.

CORPORATE

AND INVESTMENT

BANKING

2020 REVENUE

$13.8 BILLION

HEAD

JON WEISS

This division includes a

$110 billion commercial

real estate portfolio and

a big stake in “C&I” loans

(financing for businesses

buying equipment and ma-

chinery). Overall, the bank’s

loans are split nearly 50/50

between commercial and

consumer lending. While

it’s not a household name

in the field, Wells Fargo

is still the ninth-biggest

investment bank in the U.S.,

according to Dealogic, and

Scharf’s team sees that as

a business in which it could

win market share.

DIGGING

SMALLER,

DEEPER

WELLS

REORGANIZATION

TO SURVIVE ITS CURRENT

WOES AND KEEP

SHAREHOLDERS HAPPY,

A BIG BANK PLANS TO

DOWNSIZE.

WITH REGULATORY sanc-

tions limiting its ability

to grow, Wells Fargo has

been shedding “noncore”

units to focus on its most

promising businesses.

Here are the units that

CEO Charlie Scharf hopes

will help the bank thrive

again in better times.