The Wells Fargo board does not really meet in San Francisco or Charlotte, thinks Warren Buffett. In an FT interview, the Oracle of Omaha and owner of $22bn worth of Wells shares, said Congresspeople in Washington DC essentially pull the strings. The beleaguered bank, still recovering from scandal, seeks a chief executive to replace Tim Sloan. Mr Buffett advised the bank to avoid anyone with Goldman Sachs or JPMorgan on their CV, given their toxic reputations with populist politicians.

But Mr Buffett’s most perceptive comment was on the potential for recovery at Wells. The Federal Reserve has prevented Wells from growing its near $2tn asset base while it works through its problems. Mr Buffett provocatively noted that he did not care if Wells expanded revenue only that it grew “earnings per share over time”. This is theoretically defensible. But achieving it will be tricky.

Prior to the 2017 revelation about its aggressive sales practices, Wells was the envy of the US big bank universe. It had steadily increased its consumer lending book as the economy grew and avoided risky sales and trading in securities. Wells’ return on equity was consistently in double-digits and shares traded well above book value, unlike many Wall Street peers.

Times have changed. In its most recent quarter, return on equity was just under 13 per cent — nothing special in the era of lower US taxes. In 2018, its revenue fell by just over two per cent. Non interest expense fell more, highlighting Mr Buffett’s point that profits can rise when revenues do not.

But banking depends on both scale and customers. In an expanding market, Wells risks ceding market share as its reputation suffers. Regulators have placed it in a vice. Wells’ current price to book ratio of 1.3 times is not cheap, but the premium to market it once enjoyed is gone. Worse yet its de facto board — in Washington DC — will not care to prioritise its shareholders’ needs.

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