Wall Street analysts were divided on Wells Fargo's late Wednesday announcement that John Stumpf will retire from his position as chairman and CEO, effective immediately.
Some saw positives in the appointment of a generally well-liked Tim Sloan, president and chief operating officer, as CEO. Other analyses, however, said Wells Fargo will need to do more to generate confidence as it seeks to move beyond a community banking scandal that resulted in Wells paying $185 million in penalties. The bank still faces a series of inquiries on state and federal levels.
Stumpf's departure was generally expected, though it came earlier than anticipated, especially as Wells is scheduled to report earnings Friday morning. Lead director Stephen Sanger will serve as the nonexecutive chairman of the company's board of directors.
Here's a roundup of what Wall Street is saying about the change.
"Stumpf stepping aside could begin (a) healing process for (the) stock," Bank of America Merrill Lynch said in a note. The report said his retirement "may be a necessary step" for Wells to move beyond the scandal, and that Sloan is "well-known" and "well-liked" by the Street.
Stumpf's retirement "is a big first step in removing the 'uncertainty overhang' in the stock and putting this scandal in the past, and as such, we expect shares of WFC will react positively to the announcement," said FBR, which reiterated its outperform rating and $50 price target. FBR also said news that Stumpf will not receive any severance "will be taken as a positive."
Shares of Wells Fargo were down more than 2 percent Thursday, at around $44.40.
The announcement "is a positive in that it signals the board's acknowledgement of the severity of the sales practice issue and its commitment to addressing the required changes, while preserving Wells' still-solid culture and formidable banking presence throughout other areas of the company," Evercore said in a report. The note added that "Tim Sloan is also well-respected amid investors and analysts."
"Tim Sloan is highly qualified, and we believe will be an excellent CEO. ... In November 2015, Mr. Sloan was named the president and COO and has all of the major lines reporting directly to him, so it is a very natural CEO progression and should have very minimal disruption," Citi said in a note. The late Wednesday news did not affect Citi's outlook for Wells Fargo's earnings.
Credit Suisse said the management change "ought to be viewed positively" as an opportunity for a fresh start. The shares "are now discounting a significant amount of the risk related to additional penalties, including litigation charges and franchise costs," the note said.
On the other hand, Piper Jaffray said: "The retirement of John Stumpf is a clear loss for Wells Fargo, in our view. He worked his way up through the ranks over several decades before taking over as CEO in 2007 where he led Wells Fargo through the financial crisis and the rushed acquisition of Wachovia in the midst of a financial collapse." Piper remains underweight, with a $43 price target.
Macquarie cited three items as near-term positives for the stock: Investor perception that the news sets a turning point for the stock to now move higher; the fact that Sloan is "well-liked" by Wall Street; and the idea that the bank "improved its governance" by separating the CEO and chairman roles.
However, KBW said in a note that the extended-hours gains in the shares Wednesday evening were likely "a near-term pop and not the start of a revaluation given ongoing unknowns regarding the scandal," which include details on potential settlements, impact to long-term business prospects and the "need to be able to quantify the ultimate impact of any business practice changes."
Raymond James said it wasn't surprised by the news, as "Wells seems to have sequestered Sloan from most discussions regarding the unauthorized account opening issues since Stumpf's Senate testimony a few weeks ago." The firm downgraded the stock to underperform from market perform on Oct. 4, and it expects "the cloud to remain over the stock despite Stumpf's departure while regulators continue investigations and it loses business from municipalities."
The challenges of recovering from such a scandal will not disappear quickly. "Sloan will now need to deal with both questions from investors and the numerous investigations," which will likely result in more fines and expenses, JPMorgan Chase said in a report. While Stumpf's retirement "may temper some of the headline risk," the move could "represent an acknowledgement of the mistakes," the note said.
"We do not believe that the leadership transition signals a change in strategy for the bank, as Mr. Sloan is a longstanding member of the leadership team," according to a Goldman Sachs note. The firm's note said it expects investors to focus on the level of reserves to pay for legal and regulatory fees, trends in new customer accounts, and other costs "related to improved compliance and oversight in the consumer bank."
— CNBC's Michael Bloom contributed to this report.