Argus Research analyst Stephen Biggar has a positive view on Charles Scharf's appointment as the president and CEO of Wells Fargo & Co.
"In Scharf, we believe the bank has found a strong talent to navigate an array of regulatory issues and implement new risk management practices, while restoring confidence in the sales culture to improve financial metrics," Biggar wrote in a research note.
Biggar expects Scharf to initially focus on the banking giant's myriad of regulatory issues, which include an asset cap by the Federal Reserve to end-2017 levels. He also expects Scharf to focus on restoring confidence in Wells Fargo's sales culture, where incentives have been cut following the fake accounts scandal.
Biggar expects lower interest income in the second half of 2019 and into 2020 due to reduced interest rates, with subsequent net interest margin contraction and a flatter yield curve. However, he sees revenue growth in the second half of 2020 "as regulatory burdens lessen, benefits accrue from a new sales culture, and the Fed's limited rate hike campaign is mostly lapped."
The analyst upgraded Wells Fargo's stock to "buy," primarily due to the hiring of Scharf. The price target is $60.
