SAN FRANCISCO, California (Christine Wang, CNBC) -- Wells Fargo said on Wednesday that Chairman and CEO John Stumpf is retiring as chairman and CEO of the bank, effective immediately.
The stock was last up more than 1 percent in extended trading.
The news comes after it was revealed that employees in Wells Fargo's community banking division opened about 2 million accounts without customer authorization, which resulted in the bank paying $185 million in penalties. Stumpf was grilled on Capitol Hill as he defended the bank's sales practices.
Stumpf said that he was "grateful for the opportunity to have led Wells Fargo" and is optimistic about the bank's future.
"While I have been deeply committed and focused on managing the Company through this period, I have decided it is best for the Company that I step aside," he said in a statement.
The company's board of directors elected Wells Fargo President and Chief Operating Officer Tim Sloan to succeed as CEO, while Lead Director Stephen Sanger will serve as the board's non-executive chairman.
Sanger said in a statement that while the retiring CEO helped create "create one of the strongest and most well-known financial services companies in the world," Stumpf "believes new leadership at this time is appropriate to guide Wells Fargo through its current challenges."
The board also said that Sloan was elected to the board and that independent director Elizabeth Duke will serve as its vice chair.