The EconomistOctober 26th 2019 63
1
W
ells fargo has reinvented itself be-
fore. In a vault beneath the bank’s
headquarters in San Francisco is an archive
of papers and objects from the 1860s, when
the company’s stagecoaches criss-crossed
America delivering packages. Advertising
posters tout the security of their wagons,
thanks to the sharp-shooting skills of the
marksmen that accompanied them. As first
the railroads, then the telegram and later a
government-run delivery service threat-
ened the survival of the firm its bosses
adapted, using customers’ trust in their
brand to expand their banking business.
Charlie Scharf, who took over as the
bank’s chief executive on October 21st,
must transform Wells once again. He
comes from bny Mellon, a smaller bank
based in New York. It is rare for a giant
lender to pick an outsider to run it. The
bosses of America’s other largest banks—
JPMorgan Chase, Bank of America, Citi-
group, Morgan Stanley and Goldman
Sachs—are seasoned insiders.
But these are unusual times for Wells.
The bank has spent three years trying to
cleanse itself of scandal. In 2016 it was re-
vealed that millions of spoof accounts had
been opened by more than 5,000 employ-
ees. Further infractions involving home
and auto loans have since come to light.
Regulators have slapped penalties on the
bank, the most onerous of which was cap-
ping its assets at $1.95trn, their level in
- Perry Pelos, Wells’s head of commer-
cial banking, says the cap has not crimped
growth so far because the bank has scaled
back unprofitable lines of business. But, he
admits, it will eventually begin to bite.
Mr Scharf has much to do. Investors say
working with regulators to lift the consent
order is their priority. But the harder task is
working out what comes after that.
In 2016 America’s largest banks could
mostly be split into two groups. The full-
service banks—Bank of America (boa),
JPMorgan and Citigroup—did everything,
from underwriting initial public offerings
to lending to corporate and retail clients.
The specialists, Goldman Sachs and Mor-
gan Stanley, offered investment banking
and wealth- or asset-management ser-
vices. Wells, with its giant retail bank and
limited exposure to risky investment bank-
ing, was the odd one out. That helped it sail
through the financial crisis and become
the world’s most valuable bank.
But Wells has been firefighting since.
Meanwhile JPMorgan, its biggest rival, has
bounded ahead. Its balance-sheet has
grown by nearly 10% since the end of 2017
(see chart 1), while Wells has gone nowhere.
As big banks are barred by regulators from
acquiring smaller ones, growth has been
organic. JPMorgan expanded its branch
network, gaining market share in places
that Wells has traditionally dominated,
Wells Fargo
A journey of self-discovery
SAN FRANCISCO
America’s banks are adopting new personalities: Goldman is wooing consumers,
JPMorgan Chase is loading up on branches. Who does Wells Fargo want to be?
Off the wagon
Q4 2017-Q3 2019, % change
Sources: Bloomberg; company reports
Revenue Assets
20151050-5
Wells Fargo
Citigroup
Bank of
America
JPMorgan
Chase
1
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