Raymond James Upgrades Wells Fargo, Says Tim Sloan's Retirement 'Removes A Headwind'

The bearish case for Wells Fargo & Co WFC can no longer be justified after CEO Tim Sloan announced his retirement, according to Raymond James.

The Analyst

Raymond James' David Long upgraded Wells Fargo from Underperform to Market Perform with no price target.

The Thesis

Sloan's retirement "removes a headwind" and marks a "positive step" forward for investor sentiment, Long said in the note. His retirement wasn't a major surprise after receiving criticism from the U.S. House Financial Services Committee in early March. His continued leadership likely negatively impacted the bank's recovery efforts so his move to step down should be applauded.

Wells Fargo's decision to find an external candidate to serve as CEO is the "most effective way" for the bank to fully move past the fake account opening scandal, Long said. However, the company needs to show more than just a competent CEO replacement before it can "fully return to playing offense."

Wells Fargo's 2019 should show another year of declines and profit metrics will fall short of its peers. In fact, the bank will likely find it difficult to match 2013's EPS of $1.00 per quarter. Also important to consider is what impact a new CEO could make changes to current initiatives that are showing signs of improving profitability.