Wells Fargo (WFC 0.03%) has issues. Its brand reputation was marred from the fake accounts scandal in 2016 thus starting a contentious relationship with regulators. For the last seven months they've been without a CEO. The long-term future was looking bleak until October 21, when Charles Scharf was named CEO. 

Mr. Scharf's tenures at Bank of New York Mellon, Visa, and J.P. Morgan Chase bodes well for Wells Fargo's future. He's not wasting any time turning around America's fourth largest bank. 

Two businessmen shaking hands.

Image Source: Getty Images.

Rebuilding brand trust  

Wells Fargo once stood proudly as a bank that had its customer's back. They managed to navigate through the financial crisis better than other banks.It was a strong addition to any portfolio. Then news came out in 2016 that employees were creating duplicate accounts to enrich themselves. 160 years of brand trust collapsed that day and they've been trying to rebuild ever since.

Wells Fargo vs. other big banks 

The "Big Four" refers to the four American banks that hold roughly 45% of customer deposits in the United States. When Wells Fargo stock is compared to the three others, J.P. Morgan Chase, Bank of America, Citigroup, it doesn't look great, with all of them up between 25% to 35% year-to-date. Wells Fargo is up a mere 10%. However, it's still one of America's most profitable companies, in 2018 it reported $22.4 billion in profits. Its PE ratio sits around 11.22, thus making it an interesting stock if management can turn the bank around. 

To stay ahead of the competition, the bank said in their Q3 2019 earnings call they're focusing on several technology initiatives. The first is their accelerator program that invests in start-ups -- 25 so far. Another is Wells Fargo Digital Cash, a step into the blockchain world, and a data exchange agreement with Plaid, a banking API that improves customer experience with mobile banking. 

But as he told his staff in a recent memo, Scharf's focus right now is the Fed. "It's our job to run the company such that we fulfill their expectations -- and those of the public in the U.S. and in other countries where we operate," he said in a statement acquired by the Charlotte Business Journal.

Focusing on technology 

The road ahead may seem daunting, but Scharf seems up to the challenge. This isn't his first time turning around a Fortune 500 company. In 2017, Scharf joined BNY Mellon as Chief Executive tasked to overhaul the bank that was viewed as the oldest dinosaur in an antiquated industry. Layoffs, executive pay reductions, office space consolidation and revamping the stuffy dress code were effective actions taken right away. More importantly Scharf led the charge against one of the financial industry's biggest issues -- the digitization of money. Scharf invested around $250 million into BNY's technology and employees to efficiently use its profusion of data wisely. BNY has relatively positive momentum from his tenure there and is now enjoying better operating margins than its competitor State Street. 

Wells Fargo is already getting a similar treatment. Just two days after Scharf became CEO, it was announced that new hires tasked to the Investment Banking division would lead the bank with a technology-first approach and offer user-friendly solutions to keep the brand relevant among its younger fintech competitors. And Wells Fargo's release of Greenhouse, their mobile-banking app geared toward students and gig economy workers who don't receive steady paychecks, underscores the bank's commitment to advancing its technology and pushing it out to a younger audience. The app aims at simplifying how customers manage their money. 

Wells Fargo has to please the Fed first

Wells Fargo's biggest challenge will be winning the support of regulators. In early 2018 the Federal Reserve froze Well Fargo's assets at $2 trillion, which capped growth. The decree will remain until Wells Fargo fixes what the Fed called "widespread abuses and other compliance breakdowns." Scharf's eyes are on the target. In his introductory conference call, Scharf stated that regulatory issues is the number one priority. 

Buying Wells Fargo stock before Scharf's actions take full effect would be a wise choice for investors seeking to add an underdog bank to their portfolio. Wells Fargo has a long road ahead which makes it a buy and hold opportunity right now. Shares rose 2% when it was announced that he took the position; it'll be exciting to watch Wells Fargo shares as Scharf rolls up his sleeves and gets to work.