Wells Fargo prepares for new CEO

NEW YORK: Wells Fargo reported third-quarter earnings slightly below expectations but shares rose steadily during trading morning, as investors appeared to welcome the bank's restructuring plan. Shares of Wells Fargo rose 1.6% to close at $50.11 a share. The stock is up nearly 9% for this year.

"A few small things plus two big picture items are helping the stock," Charlie Smith, CIO of Fort Pitt Capital Group, told CNBC. "The big picture is that Charles Scharf is a great guy for helping with cost cutting ... and the mortgage market is absolutely booming."

But a key measure of Wells Fargo's profitability slid further this year as the troubled company restructures. The bank reported net income of $4.6 billion in the quarter, down 23% from a year earlier. Wells Fargo's net interest income, a critical part of bank profits, was just below estimates at $11.63 billion. Net interest margin dropped to 2.66%, down from 2.94% for the quarter a year ago.

In total, the lack of any new obstacles for Wells Fargo may be helping drive shareholder optimism.

"So many skeletons have come out of their closet that you would have anticipated a new CEO would say 'let's clean this closet as well as we can.' I can see how the market would take that as a positive," Smith said. Last month, the bank's board of directors named Charles Scharf as CEO and president. Scharf, formerly the chairman and CEO of BNY Mellon, will take over for Tim Sloan at Wells Fargo on Monday.

The nation's fourth-largest bank, Wells Fargo has been mired in restructuring and regulatory scrutiny since 2016. Under former CEO John Stumpf, Wells Fargo employees had created millions of fake bank accounts to meet sales quotas. With the bank's reputation damaged, Sloan had taken the reins from Stumpf. But Sloan resigned abruptly in March.