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All businesses on the table as new Wells Fargo CEO conducts review


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All businesses on the table as new Wells Fargo CEO conducts review

New Wells Fargo & Co. President and CEO Charles Scharf is still in the early phases of his review of the bank's businesses and strategy, but "everything is on the table" in terms of possible exits and divestitures, according to CFO John Shrewsberry.

"Charlie is going to want take a good look at every business as it exists today," Shrewsberry said during an investor presentation on Dec. 10. "He's certainly not beholden to decisions that we made previously."

Scharf was named Wells Fargo's CEO in late September and officially started the job in late October. In his public debut in the role when the appointment was announced, he lauded the bank's expansive business franchises and called them a strong "base to build from."

Wells Fargo has made some relatively modest business line exits and reductions recently, including the sales of its commercial real estate brokerage, a retirement and trust business and a group of branches in the Midwest. It has also been selling off a portfolio of option adjustable-rate mortgages that it acquired when it bought Wachovia Corp. "We finally found the right market to move them off of our books," Shrewsberry said.

Shrewsberry declined to provide a specific update on Wells Fargo's expense outlook, saying the company's year-end planning process is underway. The bank's spending has been elevated as it works to beef up its compliance and risk infrastructure and recover from a series of consumer scandals that have impacted it since 2016. Over the long term, the company's efficiency ratio should move back in line with peers because of the similarity across their businesses, Shrewsberry said.

"There's no reason why we should be less efficient than banks of our size," he said. "We should be more efficient."

Overall, Shrewsberry said, "Charlie is very new and just underway with his review of all of our businesses and activities," and Scharf's first priority remains risk and controls.

Shrewsberry sketched out the "process by process and risk by risk" remediation process Wells Fargo is carrying out under its consent order the with Federal Reserve, saying that once the bank reaches a "certain point," it will ask a third party to check its work and report to the Fed for its verdict.

"That isn't scheduled at the moment," he said. "It'll be in the relatively near future."

Shrewsberry said Wells Fargo has about $40 billion left under an element of the consent order that caps its asset size. He said the bank can reduce wholesale funding as deposits grow and trim assets "that don't really work that hard for us" to accommodate loan growth. "It's relatively easy to manage" day to day, Shrewsberry said, adding that there is enough room to maneuver to meet customer needs "for some period of time."

But "it is a constraint on the business," Shrewsberry said.