Long-Term Unknowns Still Remain For Wells Fargo

Wells Fargo & Co (NYSE: WFC) announced the departure of Chairman and CEO John Stumpf with immediate effective. Current president and COO Tim Sloan is to take over as CEO and Stephen Sanger would take over as the board's non-executive chairman.

“Sloan will now inherit the challenging task of navigating the company through the sales-practice scandal,” Keefe, Bruyette & Woods’ Brian Kleinhanzl said in a report. He maintained an Outperform rating on Wells Fargo, with a price target of $57, highlighting that there continued to be long-term uncertainties.

CEO Change

Sloan has extensive industry and company experience and his transition to the CEO position should be “somewhat smooth,” Kleinhanzl mentioned. He added, however, that the uncertainties surrounding the ultimate impact of the sales practice scandal had not abated.

“Senator Brown and Representative Hensarling have already issued statements noting that questions remain unanswered and the investigations will continue despite the CEO change. In addition, the CEO change will not end any of the additional investigations that are ongoing (DoJ, State AGs, etc.),” the analyst wrote.

Now that both Tolstedt and Stumpf have left Wells Fargo, there may not be additional executive departures. Kleinhanzl noted, however, that upside to the company’s shares would be limited in the absence of visibility into the ultimate impact of any business practice changes and potential settlements.

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