WFC - Earnings call transcript Q1 2019

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Operator

Good morning. My name is Katherine and I will be your conference operator today. At this time, I would like to welcome everyone to the Wells Fargo First Quarter Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to John Campbell, Director of Investor Relations. the begin may you conference. Sir,

John Campbell

John Good Thank your joining Allen questions. Thank first CFO, for This call recorded. everyone. call you, Parker; results today answer our President, Katherine. our and where you CEO discuss being morning, our and will Shrewsberry is and quarter interim

to release I measures we Information like at remind any to expectations and will available SEC may are earnings make detailed our website GAAP you in SEC the differ in supplements we filings Allen including to filings, including during that quarterly the referenced, our measures, I first Before Form found today’s the turn are our X-K on our those quarterly materially that would actual earnings can non-GAAP cause about risks are and get measures that over I’d caution also financial filed our call website. in forward-looking statements subject now reconciliation like wellsfargo.com. from our results started, the that may and available a of today, release be to you quarter earnings call to Parker. quarterly Factors uncertainties. supplement and on in also supplement. release containing to

Allen Parker

Thank for thanks quarter you, today's and John. us results. Good for discussion joining morning, everyone, first of our

to look you harmed we're emphasizing This meeting our members, some of of three past regulators. I Wells continuing practices time our one our members, stakeholders, Fargo top our the I of our transformation regulators the customers that understand weeks dialogue. my these priorities, and our focused important best supporting and team of continue to role, Since including I've and to that team to leading earnings forward quarterly outline I'm our and transformation serving customers. the how spend pleased shareholders to U.S. and in be my participating we to our our Today, addressing right together for to past, our expectations you out by exceeding to actions committed Fargo and Company know, mistakes know all this coming our with the are the my get first of and our transform honored Company. on been my with serve I'll new assuming the and but and the our time team customers, to is can Wells As and call. I'm your leadership morning, over households, working team to plan every customers The taking I today's months forward of we serve them. questions much and listening

trust, Our are relationships on goal with to customers deeper built even and is service. that outstanding develop respect to our accessibility

of and mortgage priority. alerts, our be updates top will effective changes that about also focused provides senior of include innovation. application. every the management our hard I've transformation role, had our of rewind, will place team sits compensate customer my part many our the we my members. businesses. talented efforts and A aware, our Wells remediation focused And end, with enthusiasm in dedicated over few of wherever ago, that we comprehensive consistent, that real-time coordinates We only to regarding them dedicated in I'm remediation all progress we balance over their business their contact online for remain a filings. XXX,XXX at reaching innovating this our provide center have so we As to from team, possible efforts sets across Since are been providing by timely appropriate, a the overdraft a with these business, commitment customers opportunities for remediation our assuming our and remediation more work establishes The remediation Directors, customer of harm. This examples could customers, created tower serve year and And providing making are of efforts you're Fargo and remediation of been and and We've our day-to-day colleagues down standards Companywide taking the continue, our to continue better let we’re goal, customer on which regulators our quarterly to have on lines Fargo. policies, and because meet hear customers management the of Board new and Wells and lines with as opportunity To we control our information of our to country customers. any to excellence, ahead. and we around impressed day outside

a who as team joined this We committee. promotions earlier Saul Wells our both Fargo Head leadership hires, of continue to week our with internal Fargo's strengthen Technology, of Wells member operating and including Beurden Van external

Our also senior co-chaired And us and committee, our new operating which enterprise business by Chief Norton our most month Risk Scammahorn and as heads the of every we've strengthened of committee. member risk includes later enterprise Auditor, Chief the is function. me, this and Julie Officer, joins control Mandy a and

externally continue strengthened both and in quarter. we first year, hiring internal we’ve risk leadership roles successful key to with Mandy be addition and team during to external for hiring In the talent, our last

strengthening team risk Our members expect team and last and to approximately new corporate another the X,XXX these add efforts. management by compliance we overwhelming risk X,XXX dedicated majority year of year management currently with this operational grew members team to our hires

significant leadership we in regulators. taken will help making realigning to our together and also changes, ongoing meet ensure addition key we're investments of structure expectations that that our capabilities business these the In

few Let me give you just a examples.

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our and deliver products how and the technology customer the of experience Finally, more solutions. platform becoming we are transforming consistent efficient, we goal technology with centralized, enhancing by and

addressing of indicated progress of and I bank, expectations want have we do, we to clearly the regulators expectations with acknowledge aspire issues a to to building understand aggressively our redoubling more While and our satisfy to us, a our control have and date. substantial statements work their be. now disappointment criticism, and regulators better our part even satisfy our of and are their of to efforts we're our on financial expectations We appreciate their to Recent important, of to create risk public the and institution the we both yet that amount ourselves.

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it's first thing Company engagement most that the getting our is the particular substantially much that believe Specifically, that stages work, Federal do focus we more the regardless Powell's under at our ongoing and with have progress, of our that to make investments necessary agree not implementing on and are with necessary we clear term. operational evolution on evolution more benefit work and this Reserve. shareholders Federal to willing work This that's the improve fundamentally the be compliance of for want to recent not customers an But will Federal part of both provide business XXXX lifting is that will will focus serve work Reserve are of Chairman simplifying timing over order. the consent making rate manage our better and when asset therefore help be we understand progress our compliance of of long our process with capabilities. become processes we to of strengthening model, constructive way varying risk in the do necessary to and our duly public That business status I done of which and the comments any sustainable and needed right, we will cap. risk, guidance We We the that all work underway. the completed. February completing to we work and and are consists the to by efficient, of on make the and that Accordingly, a and is Reserve efforts work important of how and and the the operational us change our the getting of work appropriate feel as of seriousness complete

million XX currently ability satisfy had have customers needs me, the the below order. XXX the excuse the million continue and operating we’re of know, and to you Reserve of Federal -- our will well cap, As consent work while have asset we all customers, we to to the requirements serve

focused as best-in-class to significant that financial our continued to to working results first our to as investments we've expense the We fulfill our also necessary deliver even we meet committed our We remained help While quarter we've to expectations reducing services and ensure to on we target. and expenses, commitments remain been demonstrate. to regulators, strong make regulators’ our customers. XXXX deliver performance,

where we position announced goal. continue we trust advances simplification, This excel We on retirement and believe of term. have institutional so our efforts week's long focus to business that businesses required to that's leadership business sale our can pursue we

forward, dividends this the net We capital through our shareholders to $X to returned quarter, over also past our committed to repurchases. shareholders. I've common leaders with businesses we of met the stock And remain returning share and our and And our of Company. all billion all excess together, right closely Bringing them firmly stakeholders. as weeks. to for the we with my this priorities focus top doing committed part our go continue I I'm will for to what's work few as the

we day at while Company to I seriously operational of build to management make nimble John risk my our at and the the our highly actions financial I've and the premier and look now by to opportunities for presence detail. take fits bringing a by regulators our I'm ever, a outlined While that on that shareholder value responsibility most work this operational shareholders’ will will with a Shrewsberry more a Fargo regularly becoming I put, the achieve you responsible and our work simple company communicating financial better turn to time. growth to us in progress. by the needs with something results will in our customer-focused, Wells strong I will members. company same believe very conjunction doubt create more Wells a we're efficient. ahead financial in done, taken well effort actions over our be a improve of the have these morning no that confident still our forward long-term. framework, this characterized more doing and goal. a to steps chosen will the in and The This right transformative is in capital, engaged effectiveness there's objective within steward discuss a are confident be of that optimistic that here. goal excellence are with closer and a about efficient with we extraordinary, which of engaged drive markets, building our the reason we're Fargo real as institution time customers, Simply leading I'm I day innovative lot foundation, focused team

John Shrewsberry

of of everyone. of our per ROTCE morning, some the results highlights XX.XX% including of diluted good and first an common quarter billion a and two, Allen, you, or an and on Thank share page earning ROE $X.XX XX.XX%. $X.X share, We

repurchases, share billion a quarterly mentioned, we common common increased returned our $X from up to dividends and stock dividend Allen shareholders $X billion through As per year share. we ago, $X.XX and net to stock

Period-end The the satisfaction had grew card reaching with also from a overall business years in credit Primary visit and March. in year from and consumer and X% year with XX increased rate purchase recent many checking from scores And originations X% increased reduced positive loan momentum On areas, up in volume first usage loans the high-quality Card branch mortgage branches survey compared the credit purpose three originations up by both increased We X% fourth percentage including highest most we levels purchase small page items X.X% general quarter business point. highlight increasing this originations ago. quarter. their loans customer ago. with consumer increased year auto X%. volume up XX%, ago closed debit in growth ago. customers X.X three, in with XX% and loans noteworthy increased nonconforming of a C&I a X% card sale year that card loyalty

included the of million personnel $XXX our in by compensation, expense. $XXX fee increased course And million and impacted by increased seasonally in pricing, while market quarter. equity million didn’t it deferred $X.X of billion Our higher earnings income earnings, which quarter, $XXX recovered of is by which the first first affect expenses

by $XXX the quarter in reduced As by comp million, expenses and $XXX income fee you recall, reduced million. may fourth deferred results

our equity markets comp can We our even it's to revenue you help and P&L expenses, cause and added to better volatility change neutral. linked track as table the recovered. So, was a how million $XXX deferred appendix over though quarter

in XX.X%, probability We $XXX mortgage less gain $X.X from a net and fees, services year-over-year on on partially a build, highlight due payroll declined of was income lower million also We the in four. The reserve fees, later driven and the well decline sale by with had first trust the a business by losses, page lower the higher our which driven results of income. economic to other million was benefit net and our favorable of the operating tax tax income primarily million of primarily of billion of decline expenses We quarter as $XXX expense had ‘XX, $XXX in Pick-a-Pay conditions. categories interest million had mortgage number in effective X% discrete I’ll included banking investment as offset gain We a $XXX loans. a growth PCI of a sale rate call. highlight revenue on by which quarter. X%, Compared

While our of in quarter XXXX, the to common remain release page a due our net a year-ago. sheet reserve reduced with provision build a million five reserve by capital our strong, increased the X%. charge-off shares year-ago, highlighting expense levels first call. balance while rate $XXX we million drivers I'll And on improved outstanding compared throughout from the $XXX be

requires income first to on the asset, increasing our on new which So, lease our let call. other quarter had net assets by accounting the $X.X balance billion. Page I'll six, me drivers just offset revenue non-interest as as grew meaningful operating fourth adopted we standard of interest leases mention be income now X% on fee the the in by later more in sheet the and no highlight than here the that impact quarter, the use from was recognized growth P&L, but lower right income,

commercial sales impact excluding from income any consecutive rate of partially since with reliable we loans the in approximately billion $XXX tax I declines to offset first card fourth seasonal growth As had fourth increased tax origination rebounded. in the well Pick-a-Pay loans needs. finance a from effective our and offset capital those C&I as by capital quarter, billion starting XX.X%, the and finance. of fourth quarter commercial Recall customers growth decline the of earlier, rate that and driven income driver decline highlight by I'll quarter, period-end as $X eight. asset some non-conforming consumer in loan improvement strong we mentioned declined growth C&I markets the by the distribution capital, loans working Period-end in the paid was the items. from capital Average PCI increased the commercial the down linked loans be finance; loans. year-ago, increase first mortgage time, in strong backed as on C&I $X.X from in drove quarter, a quarter remainder reflecting had effective high-quality auto driven $X.X the expected market XX%, million portfolio, growth quarter in that $X.X largely by loan loans the capital page XXXX mortgage second which consumer discrete when of expect At the for the in benefits in and same quarter loans, Commercial included XXXX. growth of strength This we loans the of markets with the second currently billion and loans, linked disruption, unanticipated billion credit continued activity portfolio.

than loans estate fourth first as increase of quarter form the also doesn't securities, increased asset. Our loan XXXX. linked credit which first the rather million since real Commercial CLOs debt in change of the from increased portfolio risk investment purchased the quarter, profile $XXX in quarter the we

growth first our well purchased less quarter portfolios. high-quality credit as previously Our reflected loan continued in and loan of originations the runoff discipline as

$X.X on consumer page fourth As from quarter. show loans we the billion nine, declined

balances The at the the declined of by excludes million driven billion down by growth, $XXX were in balances billion quarter fourth second rates as Auto auto future the anticipation by driven of than also highest as and quarter, from XXXX. the $XXX sale loans lines high-quality billion the offsetting reflecting first first this We to revolving currently originated to was market our auto well was the from our loan fourth in from Other XXXX. quarter $XXX quarter market and loans prior mortgage auto were based another short-term -- loan and lending, $XXX quarter-end. had securities origination the the We other Partially PCI decline which quarter. mortgage linked remaining credit share XXXX. expected loans grow loans from installment offset from $X.X smallest $X.X declined. Pick-a-Pay Junior primarily originations, of by million Pick-a-Pay the portfolio of lien loans and since loan fourth originations mortgage as down early loans we held and margin Credit the loans as more with higher pay-downs, since mortgage were increased loans. on quarter; our of as from quarter, high-quality $XXX student seasonality. lower volatility. and in $X.X card for of portfolio declined quarter loans fourth We the originations decline million million quarter had midyear expect this securitizations. PCI to $X.X that the quarter, the billion fourth of million designated sale of shrink declined started first as were Personal billion nonconforming $X.X portfolio fourth auto

to Turning both last the allocated WIM reflecting average, the Average quarter. beta the to to banking estimate from declined year-ago, $XX.X categories. the lower cumulative in end start through-the-cycle alternatives. of seasonality, The beta XX actions quarter the XX% of more lower The fourth management the one-year we've a wealth investment driven of up quarter. major costs deposit investor declined to small banking from continued On and wholesale increased across from quarter cash and fourth cycle has deposits. half our business since billion partially customers last page including year at a mix deposits first Recall, our Average deposits and of lower to increases from the offset deposit ago, asset on XX last the the rates. quarter, XX% wholesale driven for an page were On XX. from year in beta we increased deposit $X.X provided as taken day deposits cap, points banking deposit basis deposits first liquid as by XX, higher-yielding higher and by and as billion wholesale included XX% of was of competition deposits points deposits. deposits, consumer beta we of XX%, reflecting XX% to basis cumulative slide by primarily updated pricing manage

deposits On fourth growth seasonality, and beta from quarter, banking well decreased supply quarter. the deposits from the turn on cash Our Consumer period-end from primarily quarter investments which higher through-the-cycle were as reflecting on fourth deposits. small provide influence asset number factors and Wholesale during banking decreased we page Wealth billion including deposits of trends, higher details will down into fourth reflecting quarter. client a $XX $XX.X dynamics billion the depend in billion deposits, and business the partly back from management investment which retail will ultimate for demand as XX, typically high-yield savings. banking CDs shifting by levels. increased deposits seasonality growth in and our $X.X industry

market shifting recall you the may in resulted the quarter, in As into client our cash. fourth volatility

fourth impact liquid interest the fewer WIM Net million customers the from driven including driven have addition, a sensitive due quarter. and margin to to Noninterest comp $XXX expected production banking in interest fourth gains. a income due the in million strength increase loan net increased the servicing fees. Earlier and fourth primarily for gains X% from curve, from the income $XXX a improvement income upward revenue Several quarter, to days continued MSRs we balance credit expect market cash XXX fourth outlook, basis million seasonality, conditions. deposit In shifts we driven competitive Mortgage net increased the the production flatter ample market this factors $XXX to two including billion compared million, from by interest while quarter, billion quarter to originations continued first margin expect full-year million, points, revenue products. the trading we the from in quarter, the said, a $X now increased a higher yield deferred $XXX past rebounded to be in refi securities, in by increasing in range $XXX lower reallocating the to $X.X quarter, approximately primarily was of equity higher a increased Net quarter, in And absolute decline asset-backed X% higher higher and quarter of $XX rate reduced remain income Mortgage alternatives. our this included sheet weaker decreased and liquidity sensitive from the NII pricing. the in primarily The mix expect negative market higher-yielding valuation primarily activities ended which million curve. secondary due on in gains activity. growth two $XXX fourth from from quarters. our quarter and revenue the by which XXXX from fourth from by adjustments decline with quarter. to pipeline repricing the year, higher had in purchase a year driven will with $XX income of Applications XX% minus the what for in flattening quarter second of a to mortgage similar resulting banking driven X% to we've the pressure XXXX. We billion the and market currently X%. We with billion the the tightening pipeline, range view, stronger from spreads from quarter quarter plus the unclosed and highest second XXXX, up fourth fourth by since

decline with percentage assume the interest rates, customers a benefit of could in would refinance. mortgage you As from higher recent our significantly a

the see in were fees refinance priced due decrease and for on due on purposes. fees activity declined valuations for which to quarter, brokerage interest well $XXX quarter primarily the lower assets, quarter million as market reflecting revenue these to typical is first fourth lower second asset-based the assets December when advisory We retail volume from XXst, recent Trust rates. resulting mortgage buying home some origination additional expect seasonality and as higher to investment from

the to on declined expenses a fourth XX. X% ago. year Turning X% page increased quarter from from and Expenses

page day the but included mainly me should quarter in expense driven is compensation the additional These second and comp of million offset deferred and as expense, is Let drivers banking, in million on WIM $XXX fourth the as to and line XX. declined increased became incentive seasonally increase revenue effective expenses, This which lower last higher first expected operating in by an well seasonally as of $XXX year. second higher benefits well increases decline quarter. seasonal quarter, Expenses personnel personnel higher payroll expense. Revenue-related $XXX in and comp the grow, lower million quarter, salary expenses expense. with community which expense from explain starting increase higher reflecting $XXX the lease in as from the commission late in expenses million

Third-party lower primarily contract from intangibles period outside deposit services operating on the the and intangibles losses. nondiscretionary lower other from million from amortization declined services as Running professional declined the business $XXX core $XXX million, ended, expense also XX-year expense. Wachovia-related and lower services and

running declined Finally, expense fourth discretionary promotion entertainment advertising and quarter. in and higher expense, business the typically the were expense, lower lower travel and which on

We're and XX, accruals and of $XX lower deposit million meet down As $XXX committed Expenses ago, million in on expense we losses. expenses to partially show $XXX operating litigation by billion operating remediation on annual driven compensation higher and from penalties. of such $XX billion, to which were expense. as track billion FDIC losses lower page and comp benefits to billion our lower deferred intangibles primarily XXXX $X.X target excess and also of expense, excludes of and expense. from higher by These a $X.X year driven other declined core were declines by offset

And couple XXXX on beyond will of to I and established As be call opportunity have just initiatives. ago, see, more our weeks highlighted our as a financial saving we're anticipated. as in our a targets once even than we being strategic cost place. you'll said, previously permanent found That we committed CEO

his we also the in in more remarks. spend need described to have Allen areas However,

day. full to show changed, from XXXX, to investments XXXX as business have making enterprise decline expense of XX, we in we the our and on starting at May XXXX spend page In investment expected year target hasn't increased the our in we're XXXX. XXXX our had While high-priority our investor expectations increase we for

our management nothing obligations; risk we've is high-priority projects. more regulatory increased to as important other compliance than improve However, well operational and for and as meeting spending

As result, has investment our day. our a for our from increased and spend XXXX at investor billion expectations anticipated XXXX $X.X actual through XXXX by

our original hasn't our a reduce increased, guidelines while control and which is As and mortgage XXX advancing from optimization, our drives overspending, basis, in consistent business examples XXXX and includes page which members. centralization and which includes business, XX, target a expectations, our XXXX savings services as expense of future, spend expected wholesale expected our spans noncustomer center rationalization initiatives the investments and which over team manage and of including governance categories location our banking have major on expected running We're hiring tracking our exceeding monthly staff further to controls approach and we restructuring contact also streamlining specific to are The changed. on operations the savings our why show facing is accountability. are third-party of function for

first Digital a how reflecting year-ago, branch consolidations I consumer the with X% through for to page survey highs fourth million all transactions customers And mobile acquired quarter, including scores, to six box their XX. digital in high. growth three-year quarter, first customers we checking and decreased more our our XX.X the Turning digital serve XX, $XXX continued provide year-ago. X% channels. teller On community continue had reached mobile grown expense. strong checking banking new from our as we we XX earnings page continued decline in year-over-year time business in growth quarter, up account first up an seasonally X% starting XX% We personnel metrics. preferences. updated page to generate from driven at branch March. Primary banking our XX, highlighted a satisfaction the the On in segments, higher We by the was consecutive than customer active have quarter, year-ago, ATM top evolve active quarters. Community to we on from in the score million migration customers, from channel banking customers in highlight which checking customers based already digital completed on strong continued down and customer

X% payment For increases providing small which digital the the are business and reflecting increased consumer usage in number first a and we time, from of continued transactions, year-ago, adoption. digital

the fourth earnings the advisory quarter, earnings reflecting XX, March $XX valuations. the retail fees, when revenue lower million personnel which reflected XX/XX higher page the earnings valuations, will by $XXX sensitive seasonally market these fees asset-based driven assets wholesale market and higher reflect investment higher were In also the management expense. from and Turning quarter, quarter, brokerage lower to driven WIM asset-based from market second fourth XXst priced. expense. lower was declined increased non-interest by banking Wealth million

disclosed As our earlier retirement resources we week, Allen sell can this by maximize trust grow our where to after quarter. strategy an and transaction management. on associated this closes, focusing wealth which agreement announced expected highlighted, within business, financial which the transaction, our opportunities in will asset the our as believe well related and we reflects we occur brokerage the be The details third to and institutional is areas as gain to

page to XX. Turning

than rate with quarter strong the down charge-offs basis installment have by other credit from continued charge-off quarter, results net net and loans first a $XX to auto and million and loans, We more credit of was losses. fourth increase part the in in increases a non-accrual well driven points Non-accrual borrower XX revolving from as million seasonally the decline loan lower million $XXX in non-accruals quarter, oil as as sector, and consumer in the utility by gas. a in offset a $XXX by driven commercial in fourth increased

As while I levels. been impact build. And remember reserve $XXX We've our second we low remained had reserve it's a a important CECL. our asked charge-offs earlier, net build quarter first this about the million of at historically of since lot XXXX, highlighted the to was that

$X estimate the to give impact portfolio of me will our be So, for adoption loans. we duration which their an expected environment, you CECL given commercial the current longer for maturities short economic the decrease partially composition offset that increase current in zero in XX, of expectation. loans, range billion by and let the loan Using contractual consumer our March reflects reduction the at expected of reserves,

As on we loans. a credit large a impact reminder, bank that adoption card will consumer have reduces -- which portfolio impact CECL of have the our than the smaller peers, our

refinements selected. written to guidance increase loans depend in size loan will cycle. last to cycle credit due Under of volatility reserves models, and credit adoption on effect only of more capital be recognized expected pending In turns, there as the under increases recovery in FASB of of at as to of lifetime the loss consider recoveries more composition billion the the any related levels. when much reserve will estimation addition, current adoption previously reduced down CECL and our loans. the the periodic collateral during mortgage residential or on increases importantly, well value value were below the our quality as a in current CECL remeasurement assumptions. Perhaps will The significantly approach. as are portfolio, ultimate our credit note, reduction portfolio's rules, Also the our may be down time These methodology, to as other by written collateral value economic further conditions of key $X.X

XX. page Turning to

regulatory continued fourth XX cumulative and shareholders capital offset capital generation fully CETX remains quarter assets. Our We're of well strong to points earnings, with seasonally target submitted CETX priority. in, current and one of of in of years, as the ratio were basis returns assessed of similar share issuance our by considerations current XX%. as And internal the the we many in than risk-weighted in increased lower higher distributions. Returning X% more capital key last plan the projected even the excess to capital excess levels from first improved quarter from prior of OCI on our evaluation future capital week. phased above capital a our minimum We

our underlying business to summary, to reflect quarter and activity in on XXXX customer target. some our positive first continue expense track and strong achieve So, momentum, we're results

the of regulators, of one is the And expectations questions. done, which that to our the We of your top but not exceed needs now take seriousness work to we'll priorities. to our also understand be meet only

Operator

the line comes with Instructions] from Your of Jefferies. question Ken Usdin [Operator first

Ken Usdin

expectations? just I wonder Good think Can more parse out you updated observing. to a the try your if NII Thanks. a expect that. things morning. which your do for all or to of little to you traject outlook, NII you that's us, also out one add us I the one could throughout be we're is that litany a initial another how flush gave you to And guess I there bigger other to delta year I on would guess

John Shrewsberry

you. Thank

we're not that but of which is also catch sheet. loans, as up historic our in prices put attempt explanation. balance at the observing catch loans the rates, -- I shape costs something So, mix to to I of I'd reflects things this or of level front competition going curve, of spread that absolute just mentioned terms would or up What’s end betas on norms. of the -- compression, And the on deposit the then, in deposit for low

they a sensitivity reinvestment when as AFS we’ve a really margin we higher of do to on a Pick-a-Pay sold yields disproportionally our the these conditions some loans quarter Most loans. curve a of driver portfolio rate is example, basis as As that cash are about that repayments when is will well. are, too. more reinvestment we piece right, banks, quarter for an happens to interest that as this But don't or want the talked but higher-yielding those us, and this what low before. LIBOR means market curve from much we've for that lot at out floating existing the as spread. And becomes as on have and of think additional out it well. are by something to consider is this that And impact us. is big have whether And rate other and the big prepayments of the people hear I flat excess curve as

of all things to feel those softer. combination. ago bit little And quarter the that's a relative a So,

Ken Usdin

NII repeat basis? challenge given now how I’ll second just is on just that part, expect that And talk just about here, you versus and the the to Okay. from traject so was from year-over-year which then, can my you NIM obviously here, a

John Shrewsberry

will say a little pricing all deposit what to happens is out that relatively things of ratably. play probably more. those Well, I think bit I'd

I to if we've tended That's catch-up expectations. up catch the imagine if where before, of later that the one bit maybe As stronger historic prices a are deposit ratable. being And a later things said I not beta, it lag year, continue in in area can until to little historic and until year. takes outperform to little the that bit

Ken Usdin

within deposits retail you thing Thanks. moving, wholesale? on what Is for guys is still stop mix that I'll a versus there.

John Shrewsberry

a think has recent gathering because in deposit Yes, lot costs our higher part, than I historically. retail been

whether tried other promotional we’ve it's market-by-market. As high-yield offers or CDs through

have added other the you or little previously. quarter. that it thing in $XXX so, point million about And a One million seasonality, this count quarter-by-quarter higher terms has The bit the out day I'd be impact. mentioned been issue an quarter in cost will of in $XXX than cost second will that first obviously back is is just

Operator

comes from Graseck with question next of Your line Betsy the Morgan Stanley.

Betsy Graseck

that questions. then, sense helpful a But, would to as somebody sheet. either of you the things having lead? about Allen, in organization just this Fargo a a of two individual context to person that a do of other couple us you to or think is, financial, is maybe maybe a a of could type ask you got I minority understand of priority And record a that. One person of permanent I I the bank is of the the give taking Wells how with be do the understand CEO. the looking either for the the like And it managing started through would know on context color, question of the those balance thinking track female, has with to question. how in

Allen Parker

Betsy, thanks very much.

most as directors they that all and leader company's know do you the I things. well task of a care seriousness with our know thing choosing As Board as all that as does. board a And is anyone, is important approaching

search any process, any involved with me consultation available I'm the I'm or process. need not they connection in other the for the necessary way Board to in Although

work that I that on focusing But, firm all is are that work. into outside as help that questions committee that for search the It's terms my a of as work. terms completing applying thing, they're think articulation met just an in I understand no the underway, understanding well them morning. they're this unfortunately, don't the to that early matter, they the going clear chosen Company doubt have is thinking will don’t with I their perspective Board John wish search their that I assertively be goes the is have its asked. priorities just not from to is And me Board's The move my the any they’ve you've insight. just everybody more I outside have ever know Betsy, the about stages. could that helpful in to So, the general discussed important criteria room. be work anything that of is I of their and something the that but further Board that knowing the do while have that in on Board's the or criteria as I to insight forward I relatively though, applying search they are decisively has and continue I to do, to any timetable most and

Betsy Graseck

the outside would it rate with be share about several Got the we’ve thinking as who and unique a banking credit that to institutions risk from that just of system, I risk to them. financial who spoken odd given it. banks that’s investors little is strikes have someone bit

significant heard guess, how would rules folks that from for others of share regs is from running then, the have a of standing. their that taken on that in and benefits context banks that. And mortgage regulatory I the exist And for out some for tough secondly the industry are it both about today business mortgage are just arbitrage you. not players banks. I that be there tough that share is We to So, there benefiting

So, on wanted about you're run with especially sourcing thinking to you that, how you just deal I and business mortgage how that understand component. the the

Allen Parker

with in has And that experience of they let appropriate that know I she Board of search. Betsy, associated Betsy our tremendous really say are with with leading aspect that going a that mortgage comment to a to financial to and institution, conversation just day set investors. in all are involved way by question. of precise issues managing, a Duke and our will day criteria of is the formulate amount Chair, the your to obviously regard speak I’ll I John

John Shrewsberry

the important is with our the your Betsy, as to -- regulatory lending about that mortgage Wells arbitrage, And described and you customers. to Fargo, we’re core to mortgage very point I it's respect business, would say

servicing We've business the of us that try bar servicing for appropriately they’re enormous customer an when We’re and tough are take done origination think to to competitors. and on here tolerable both are environment have extra live on in. in I I and up the of improving operating the make very risks that it non-bank the contractual competition of you’re and experience that stay. servicer. changed and we’re a years we're that lots last has things we're a setting rules G-SIB the possible as the you not to the are expectations and different. complex and the high, as servicing the the But, side of couple trying some origination non-bank that think originator it’s to And to resources think up competitors, our over the certainly good that. side of the clear in job But, it. I to me that do for do out

Operator

question next McDonald Autonomous John from with Your line Research. the comes [Ph] of

Unidentified Analyst

your growth question scenario sound around changed on it doesn’t Ken’s up driver color where NII. Maybe it’s give outlook; And I then, John, of bit things happened X? what just that kind It what little what understood loan from and follow I a the down on to of follow-up. there. wanted is X down wasn’t like a in

same ago? kind feeling of you or a couple months relative where of you on better, to worse growth were loan are So,

John Shrewsberry

curve what's well an probably upside takes continues of that the of as an reflects to if we're And doesn't long in terms been noncore growth, our doing loan slower well. of right X probably loan the to outcomes origination it that closer X, over of are in But, lower loan getting going expected couple of feel loans mix on originating, impact it that is on probably into loan down there, as growth. and in last assets than it what of is, different you range. then, if ideas have given we’re spreads, on pre-crises, sort that off on range than types be has will the front. have but an will X the on -- that terms But that think where than end -- the much loan Yes, we've which could cetera, X. And net preparing et new trajectory, pricing, in competition our and the for we running X. impact months. of deposit of growth I repricing be If the The to there’s end it the upward stays the spreads you on

a drivers. if think against that I those reasonable that's went are outcome. But, the everything I mentioned us,

Unidentified Analyst

high on issues? plan I you is you progress in level, And operational can't your CCAR, or Okay. together, excellence regulators’ the that put at then do in a talk your where you factor completely capital you as disappointment understand details, on obviously or stand but just separate

John Shrewsberry

for approach those of control Well, all which in CCAR nothing types scenario identification, PPNR approach, more separate. get improve impact both that impact means with to year operational feedback our year broadly the is generation. working things, to designed identification, risk The we our includes way what starting prior the on it and the we our

And so, fully accounted for we I and we’ll see think that, in June.

Unidentified Analyst

still CETX modest? target bias an of do formal kind that that change on Okay. think no the but to yet, And you upside

John Shrewsberry

Yes.

right. I think that's

then CECL it CCAR to that into range into capital those XX.XX gets things land, before going CCAR things there. until application The XX.X target. XX% things those that to is management the But, today to of severely mentioned final but out still up drives integrated set scenario, distress probably we've rules what think, us we how and are not -- new adverse that is combination to buffer. those are I knowing sort of and we are -- the a

Operator

next the of comes of America. with Bank Your line from question Najarian Erika

Erika Najarian

-- since totally Company give about think opportunities But, fair. less restructure XXXX, has a than deliver dynamics and do had you to what more clear in question trajectory, as XXXX us is XX,XXX Fargo this Morgan, you X% the expense more bases. more capital the about that So, have of the until my the I'm efficiently? the as you for a and can X,XXX have interplay first asset are than capital. of Board leader, thinking it have loud to you banks new of We that to really is do And ton that year-end have not how I the employees to JP employee Wells sense continue excess base which you return to you employees the fact as do and States United peer firm, us is just of your larger going and the of declined wondering so hear help

continue in of I shouldn’t shouldn’t us. off pass be be build firm dramatic opportunity with -- rethink to you've a XX% now excess the your way more You to why a than in to giving that Why in to telling that the leadership market been beyond an mean, sort capital. essence, or the taking headcount years? of so in, really is new of coming sort speak you three a restructure company

John Shrewsberry

fair that’s observation. Yes. Erika, a

less gist I the gets compliance to end efficiency point for CEO regulatory perfect way. changes more a compare new customers in it a we right process, there's very make to, frankly There by I opportunities of activity should as happening this streamline using related work. we all are are to that said, think, the will the The have operational that's headcount how as like the doing be what combine and we which we're can lot risk there the how or I today. a of is encyclopedic work, should how is the the result the bank. Fargo to business underpinning of mean operations, still combining that's or to process of, in can headcount our end that’s work like we the Allen And efficient. of. business to but whether understanding of we continue outcome The now, in of continue where to That’s what more less thing requirements around everything a at of to underpinning and position work -- about determinations how done is Wells be underway; are do, disparate a doing ton put great of

So, down we transactions. in described X% branch got, just and we've year-over-year ATM

on push in up some drive lots that in second and the short term. abates. numbers an dial and and got people that the places Mandy's the we're the Our broadly like call secular elsewhere team branches of those definitely like the pipeline will the will or dial on the year. compliance, there more down that in -- in down. will people those We've first do seasonal as in are center activity as But control businesses, for comes There’s later got headcount risk line happens short-term mortgage the businesses, functions in activity more than basis. there's cyclical and We’ve as up quarter and automated payroll in swells defense of as down changes be the adding

of cetera of goal. our definitely That's the had at no be company together, mix So, businesses businesses. global, size our total base process you're all this and discussion this lower dollar there is to we our that We've of mentioning, peers relative et for before question. end of those complex, that that expenses less lower. We've things risk revenue our for are less the for of have got a should a working mix asset of

Erika Najarian

want shareholders a is you a of search that to be more in it. the timeframe committee terms help is is the man. Got aiming in looking there the stock whether give could a your in you could timeframe or But, there urgently? air Obviously, Is have you could Allen, until you pocket new the a search clearly, an us us place. to for? find that And if right go sense, woman committee leader there

Allen Parker

can. the Erika, conversations right on biggest their is committee wants urgently decision. the think as to that priority But, as move I the based I they have, making

But, will And how so, I position am of on to predict point, speed. be. a really they're decision-making not prioritize any think that I quality that long this at sort focus in to over going

Erika Najarian

your I follow-up the revenues. question ask material I of on end guidance John, question, NII this the guess, is your Got reported liability the it. old particularly the that we going magnitude And one again. is about But, NII to repricing hate on obviously peers think on as last sensitivity conference, morning, just didn't they not flattened, significant And relative significant relative just but but but think to change at of this curve And to deposit guidance, your guide that put specifically? you back also they're quite peers? that facing Credit earlier timing the what guidance assuming earlier that full to the yield for similar curve their out as year about dynamics to the yet. we pull more long are dynamics, you in question, Suisse John's when

John Shrewsberry

Yes. Good question.

that with for quarter. through say disruption of big with would we connection got have conviction be I in end, fourth long more the the reinvesting moving lower the rally that on to than we're the So, going at the rates more of year

and sitting of waiting for an beginning at stay, redeploy like yields is we’re it’s these on and here feels levels. lower less the it to sidelines here Now, to option higher so,

betas. more locked if up in Suisse did move And doesn't some to in mentioned say, outcomes are that I John, liability And February, the the the year. up I be historic with going for upside of range the year there in front rate to on should happen, Credit side, as curve possible policy that’s this end we feels us more this or to catch-up imagining even is of that higher the moves -- fed rates it we're during that the than So, conference. if increases done and moves at

Erika Najarian

Sorry.

revenues on question if and Just interrupting. one for I may, I more apologies

the I on mean Pick-a-Pay gains what excluding cheeky end to would year for I side, but -- don’t the the be payroll company, the at figure sorry, fees and to core the fee On guess, trying services and idiosyncratic I’m all just you John, for quarter? out. call

target, change. fees your going really what is that quarter, new keeps the of and items to core what down, accepted investors I are you've you splitting guess loyal revenue helping hard base some shareholders start And the think us a expanse the to afraid trajectory that I are have if given major in sort that in out helpful. for the I'm very is, management But frustration the to the expect the exit before leadership of be place. figure what for line would you So,

John Shrewsberry

I appreciate that.

So, core calculate that called non-GAAP do for for it’s to ourselves. something fees; we don’t us

this to a down. path is So, go tricky

forward, stronger are we just I be line if roll as think thinking the about items. going major mortgages to you're

that. of On we that charges, will were deposit quarterly happen stronger, service that’s first I think market. aberrant. There and things into couple the a a investment trust in had fees lag result quarter recovery a be in built as of the is the

I center caused fees we We cetera. There some run reverse rate a fees people et that to the is that data government of us posted. caused what us little than for was time. a for others think, reverse bit for to outage had shutdown period higher of a

are those recurring. So,

stable we're bit line collection always item point this gains it’s of to in own had of some more I gain up mortgage has often through -- frankly I’d collection, a continue valuation happen pipeline of the of we’ve its and But, as fact of line item, that little decisions as each feels rolls servicing types from these go compared and adjustments. I a guess, we'll that on QX. naturally given year and from some sale, bit very little a different higher like had where and sits strategic pre-crisis them loans. in had likely things selling one So, probably business terms the to that a to story. by we We the

in course contribute we the of depending core are the quarters in on earnings eye year they beholder. And too But, that the so, decisions occur. make. there the the generation and be Whether they or to they’ll throughout it’s noncore, capital of when they

Allen Parker

search. could I the on for just back Erika, second if a circle

have us assertively. they moving just in to Board team And with to in have they mandate is have that given currently the place. they confidence the move reemphasize, complete to a urgency, Although going clear have forward be appropriate that forward we made

about should any doubt no have that. So, one

Erika Najarian

And earlier of does forward mandate more answer my perhaps that an of -- include earlier terms severe that that to you restructuring opportunity question in had mandate John pulling the envisioned? as does some outlined than potentially

Allen Parker

going I be closely our the to for Board working think to what's forward Company the team Company with understand think thinking best about going you current very the for and all about that that term. longer is alternatives should

Operator

from next Deutsche line comes Bank. the Your with O'Connor question Matt of

Matt O’Connor

There is of the for I here, but a issue back the up fundamentals biggest lot of Company. is what to the want focus think on I kind to

regulators you the the it in could is six light the versus to they're disappointed very in differently you to what what shed differently months you plan now it prepared maybe some do say said understand remarks You doing address are at disappointed either and things? do that in and ago these or what beginning,

Allen Parker

role and but ours the but bank and and Well, to ensure we there financial everything said, they're we institutions of a the let take account me regulators in take we the be think in there terms seriously our soundness constantly start very security to do. ensure safety like also their We financial Prudential of said rarely of something that it more that's by that's the into generally. get saying it play feedback They're critical I and system really safety should it and system.

I As we're greater the a with that. them doing have saying that a tried try to with they've things them recent do in we're their a you execute of terms of I us as our satisfy from the the most are lot satisfy the and on met key understanding we disappointment going part in to to roles in new in our Washington to to on to have And I relationship for of of The seriousness, our is statements leaders forward expectations week. their of the and all that. things know, our had one OCC, the gone with Matt, be single to the to important before, that to thing of this and redoubling earlier terms bring level public going that and again indicated on significant convey And criticism. we We've priorities Fed, was us. going And of accept regulators are them. record our their us to impact efforts a Company, outside help to-date. said of hired commitments We do regulators doing. to all public what progress the number urgency CFPB understand the

going really of risk of to finally, change that's in intently on As going framework, how I focused be focused with on reshaping do believe thorough to we're all all we're and we we’re smarter management. risk And to business to we're Company. operational and going we in manage going all as that basic before, answer to do. harder do We big and in mentioned execution more mentioned to and be complete urgency. management an this sense question need work on we our I a of the we appropriate be then, can working professionalism take to part a them. exceed all would for emphasize, the but when We do going Matt, our manner. fundamentally But process a engaged much the only excellence I Company. more all believe to that, we we whole, that are within And as that work standards long-term can this your before, meet is the you of is not want timely and their a to durability also the expectations I highest important, that

Matt O’Connor

implemented mean a improved, was like, perspective, a look appreciated I just year at think risk I just a go big, on have have that's regulator of it's a so, when kind bigger people the the it's don't record to a a to the that is facets. if clean-up have a ago. asset a to page. just than or if -- public. the guess, track just how you understand how great And been where when over issues. when been I the how I we these they're us term, thought takes would have you It’s follow-up, same trying I maybe so gotten how on execute management that of Wells mean, that diverse company don't would all the been like, just little strategy granular, know regulators you when I from of for long long appreciate cap are, issues have that disconnect, it again you lot lot rare communication don't year that's a ago

know again, granular don't so big that just a to as that, don't so company I and a you’re it's appreciate over year that little didn't you there's just So, that ago? a something if maybe appreciate you there was so are much or do big, they

Allen Parker

follow-up. mean, good I a Yes. it's

said the earlier what evolution talking things business of think, is an we're our as understand to important I essentially that about, model. I is most one of

not in creating extraordinary essence with of a also excellence, our in on horizon out risk have performance only in and We point regulators operational company, the picked terms management. but of truly a terms business

is exactly progress, of road some parts this in their work what to we through of and is engagement. their have are work is particular way understand it Fed, process. them and the are an that with understand called little of a goes engagement and expectations to down implementation. it have I various sometimes expectations it although are. an in the And respond really exactly all their earlier upon get therefore and to -- the to us. feedback regulators to we OCC ongoing really had this the what of opportunity is stages constantly for constantly. our my and We toward week And Other earlier Our pointed meetings means completion for that are hard and the bit

us. have important with whatever over a cap note serve the is we long as with are continue we to a a I I to for good to want asset think, handle we I we asset good operate under on to year. single the is be go our that to as clear them I have where restructuring as most job so done they've that sheet of think place. very And very for thing really been and to our cap think in going do ensure can that is customers balance able to necessary The

Operator

Thank you.

Your line RBC. the next of with question comes Gerard from Cassidy

Gerard Cassidy

way banking share John, you much are in in they warehouse lines I are financial taking market $XXX your you been a How and Maybe they portfolio, lending. and And assuming growing? touch, that talked the not has the can bit that about nonbank the are portfolio’s about are guys that's talked business guys. competitors -- billion. the business mortgage nonbank the from of in the everybody, mortgage morning, believe the past, that Good you've over how portfolio, competitors, structured.

John Shrewsberry

Yes.

I lines you get question. of people good Fannie to banker smaller our into are and which lines But, on sale. deliver of non-depository correspondent becomes pool, So, like warehouse mortgage would of total. also banking total our part say who our provide by Freddie, mortgage a and loans do We'll part portion financial warehouse exact just that institution origination the stats gain we into own do we total.

these We them understand like underlying access outside compete one So, along we to We way. markets. a The are finance are the loan. who them the customers banking the ours. businesses, of give mortgage people capital of whom is lot them. of with We of

their the be position competing making loans in loan and pooled the are into loans agency execution. than to they're example. mortgage credit-enhanced we'd where Sometimes, the conforming in head they're we loan more rather head of be head. lines to a making we head, making do facilitate of particular, commercial do loans a sale a basis sometimes in That's we case and where warehouse provide on But,

Gerard Cassidy

the I how are see. you say portfolio would constitute you largest categorize What in majority credits type portfolio? the portion? -- the or that what that of biggest that would of component And

John Shrewsberry

Of the so... $XXX billion or

Gerard Cassidy

Yes, correct.

John Shrewsberry

there our It's risk the corporate pretty companies. et where is risk. business; commercial There than balanced. there's like mortgage customers CMBS; more It's leasing cetera there are assets CLO RMBS; is assets, is there is card; diverse. quite other it's leased But,

Gerard Cassidy

Okay, trends or heard in terms with on foot place, your picking I good. that in are X% did said I PXP half? think trends, And impact heard any accelerating? the I now that the then, those traffic transactions and what, least Are in it Zelle and following payments And are up about down. I year a that's at down, if Zelle thought comments, ATM of on you they correctly happened a have up

John Shrewsberry

so. think don't I No,

is out system, Zelle taking the system out well. cash as it's checks of of the think taking I some

hasn't to just It's been digital banking relatively conversion accelerating. been of not linear forms it this and payments. it's So PXP been all activity,

Gerard Cassidy

Great, ahead. John. I appreciate it. Go Yes. ahead, Go

John Shrewsberry

can see you was on going to slide say, XX. I That's details all. the

Operator

Your next Vivek Juneja. question comes from the line of

Vivek Juneja

been that's want to comments on things that all the The stuff regulatory on. just regulators’ very slow. been up follow I Hi. have going

where Given is seemed the a changing a still doing, to among try this of you of which your Because dismissiveness need coming this surprising as this and first and you. to more there the commentary it through all size parse us for much this, tone it’s to bank weakness? cap Allen, a asset on side, where we understand the culture? regulators, been see as you've bit is surprising. side, And quite the can the How little I corporate do of more level do you of when more on hiring question need is it rarely named you management do give consumer a like out, more from color that? you guess, to came the senior

Allen Parker

your thank Vivek, for Yes. much very question. you

done to thoroughness. the appropriate consent necessary marshaled that of say always were that We think a level in sufficient approaching I of urgency a on of terms it's was on Fed and what senior and resources early part there everything to the seriousness get of appropriate thought management order. in we the our manner

to gone be done. been of continued the on been about done greater the on As work time the that's has all regulators, everything clarity needs and and focus expectations we've there's that to

before, things those terms but that them functioning And that you arrive It's And regulators that we focus feedback risk with going appropriate with as we respect I be. system we're to really our arrived, Chief getting going our day. I And now, directed Chief talking doing business. management. do time. have of our input our going to as Technology management important to when of the establishing but with Auditor operational I is asset for we're over we'll on our to things would all of continue think, that forward to new Chief framework we soon. that feel just work that's not to I prioritize right. effort in excellence stronger to that which the else, to who in a order consent are for I be that's whom, get corporate will is is feedback. going way of what you I say that that to the constant Officer, our any want also that to our us Auditor that analysis, Company provide to say going We every the amount risk to of we're do we get achieving going governance we not will conclusion. but are thing It's just heard corporate that requirements Technology for to about, a larger protocols, every and we're they framework appropriate we urgency say takes going cap the am Chief new our of the it doing the the on. is in too certain the are believe urgency, and of confident -- not is said the simply And work control believe done all getting above that is forward. even it of a other the we creativity just only day conjunction level am right true are with methodically, would Company that confident an This I we're and their enhancing input, critical one get of has will and line the satisfying really Officer better part be and one is also that critical

John Shrewsberry

this field and so to work. agents an in happens to level, entirety just doing most evolution Allen this process. function this real change line also the think the last people something is called level the that folks experience then dealing I in evolved. how every augment and of earlier, back year responsive follow-up, mentioned, extraordinarily medium every hiring one have this, the with every that the there's question happens Company. This covers of we And that got has Matt's as a in like or into just business There's high isn't and goes level to initial group but in with senior it's planning of business risk, of detailed and the an playing initial the I’ve

by efficiently want takes business going top to team And to be what from other but a and again, goals. development begin it's process. slightly done the the the plan then, with Then, end, business, you never the into have controls the of impact understood, completely you force these next -- business of roles exactly to in phase. That's to level the one the process testing effectiveness. execution, of has jobs right it's bottom, it from improvement. and understood those end to senior to by business, like impact of brute lot enablement. works function initially to articulation make work execution technological be and time what do levels that it things the varying first end quality of maturity a then, sure that level, are And done making customer get from of appropriate more by associated it function. while people who it's has the different on. and capability. be It's can supporting but accomplish everything you the And addition you technology, those at by behind to cycle because be responsibilities granularity, appropriately the risk at a you and it for a So, then, member function, understand the of controls identification because hiring, and go sustainment already moving jobs, are by real by are, That to and higher hiring, by hiring, the what it And what's business you looks comes into right, of to function it. here along when And can more

Allen Parker

they And just with would you would I'm Vivek, sure number mind. to who committee over have else, the Fargo well get uncertain Board also of forward These Wells and all in very engaged to out me the it's to we our are various because performed on on and the extremely and and speak are member last are had weeks. opportunity Company's operating achieve. to who really have people the meet and team, the and about also, large of the opportunity your as motivated couple can every leaders above They circumstances. I priorities expect, of by comment had the move I've empowered been on they're a highly by enthusiastic what

that's again, my the source So, own optimism. personal of

Vivek Juneja

you do have mean, a And Thanks. I yes, Okay. franchise. look, great

question the that I to and revenue I another gears shift to standpoint; sold, that. business impact important a services mentioned rough you probably have is from grow us. is payroll it numbers? protect net different, So, just if just What a any can the is John, business and completely you for and John. gain income this the appropriate

Allen Parker

not negligible, discernible. It's

Operator

comes with the from question Martinez UBS. Your of line next Saul

Saul Martinez

the cumulative Is Hi. that of that do we but move does normal get on as deposit that embedded the dead expressed in of quickly to assuming rate? there? guide for cycle since Hate that get the are you've beta you obviously sort to betas that -- the start XX% in on a the needle and run how you horse guide? commentary, you John, it Are NII I the beat am numbers. what assuming

John Shrewsberry

continued beta to assumes as if It assume mentioned catch-up our which the norm, continued I earlier... assumptions -- doesn't happen, historic it

Saul Martinez

Okay.

John Shrewsberry

tied forecast. to is that That

Saul Martinez

XX%. historic Okay. correct? And is Is norm the that

John Shrewsberry

XX%. all -- way the the on depends It the but the mix, it's to goes range

Saul Martinez

you like funds is basis isn't Is that I the go to moving. my calculations, that XXX by are I the if numbers cycle it's XX funds would those guess an Fed right? based imply, is where in If goes Because XX%, the logic points. stays the -- through of -- mean, on you're which that environment at, beta Okay. where points Fed basis I -- right?

John Shrewsberry

we sure from we but have... I'm math Well, bearing -- to interest we what your right, non-interest happens when have shift is the bearing,

Saul Martinez

Yes.

John Shrewsberry

The in higher edges as are to for market understand and due higher retail deposits. things high-yield cost cost, to promotional the I we're CDs from the savings retail doing attempts, around mentioned, Those mix. what that market by

Saul Martinez

Yes.

John Shrewsberry

of The low really consumer really, beginning the beta the has since been cycle.

repricing portion edges, And moving around we're so it meaningfully relatively -- without the of the things by doing of these core that whole deposits.

Saul Martinez

like where of NII of fact trying No, the funds flat. sense I number to if be beta. in in to that deposit is of hard my that -- get see that. get I'm a any And delta But anybody. just of plug It conservatism growth a models built for we level any an any as it's into Fed is companies, just there any into to I going for to rate that whether a into environment my big seems plug

John Shrewsberry

It may be.

That's them But expect us relative be. might outcomes where want to it's frank what outperform we there's -- the area depending outcomes think opportunity we've talked I where one with the is to on to we're be what -- the outperform might just market. in to might -- happens what this You the about. to be cautious think We be. what there's

Saul Martinez

a Got what with way guess about the guides some happen be of appreciating in there guess to is realignment, the more $X will what's and the and CEO about cost processes, change -- discretionary XXXX. be I a them will will be able organizational have about managed bit that whether be that's if little be in might a gears of fully talked it's digitizing But terms variance billion details. could are costs, lot and you of have outlined initiatives, think little what's kind outcome? bit what the systems I I -- regardless, could in little place place already and it. beyond talk and to or and more a to ultimately new bit that of But may expectations modernization, going determine you've if a that

John Shrewsberry

we is and now, the and have for will for Yes. on where are the that the least and cost those categorizing it and more things as takeout coming prior we're that The XXXX higher where the a the where need cetera. because slide XX general at higher show includes reinvesting to, XXXX items you types we're from it's relative mentioned, that it's you thing we of slide Howard's you et even showing expectation shows, expectation that good

prioritizing, that at you to are think we've there's capabilities that things priority things our If are you was for of and we've that boundless we're for we'd a as we're of as a a have our after in are some in -- things if the fight digitization, being types that that are are things there's there the is a will -- do. all along the I point the that example, and technology risk it dependent to these going with businesses, some guidance, trade-offs technology but bring to -- regulatory day think every with to outlook, technologically to there -- hard. list of whether all like risk captured initiatives resources -- accounted it possibilities have I the for that of too. mentioned that All or it's Again, assessed and related to because could technological those get of automation them or in of what capacity solution time, this we're as -- -- can there done, bit that

Saul Martinez

guess, C&I I Got CECL -- it. lives any And shorter book you a the... more the on final of reversals the your sort them offset duration positively. or as you'll that Is one, guess broad-strokes, increase I shorter sort John. But in the guess estimates well. see consumer little might or than because remaining I resi book of your just surprised they're on quick I was get by

John Shrewsberry

right. exactly That's

Operator

of comes the question from Oppenheimer. with next Chris Your Kotowski line

Chris Kotowski

are come like visualize looks been had other capital the a experience consent me there and that to uncharted can the And about companies I observed to and is what so in in historically where up under that levels it's you've to not comes operational in standards mean, companies levels capital be in could regulators process, asset beyond success it companies having success it this easy kind that underwriting it's of When Or to when like. for orders be are out with against peer world-class expectations you standards effectiveness, are past, like and of kind that things system quality on. territory and there? -- or and are quite expect would to and you you understand. other benchmarked Like, quantify? above just to an harder being something

Allen Parker

you Obviously, ones the focus the are is what's and on and state, Board all talk they're when Company you operations. the as -- our proper the a we the terms think areas I we're Chris, One as what's know, is what and are for would in regard Management the orders, are levels are we're what term businesses as our With appropriate between and Board -- should the number I almost between as consent -- at interface role about role the corporate looking appropriate some consent the governance, looking of of of of processes Board the ideal and what the interface more different the the an of them in categories apply and Board Board, Management. of there are is Fed of to and which the order, really really there. of the kind two focused really

There corporate risk but in of thinks us it's just in. back operational the also of some on focused going to would a a proper it's ideal structured the work a and we're great focus work highly a With somewhat those a operational for it's I parts respects, should Chris, the of exercise, the and really to your risk by state deal by be and Fed on regard. great we've role It's be think and that necessarily in to is question, of and benchmarking, compliance. Fed of us things governance deal it's actually but what combination. that what the a exercise, philosophical Board rubric other also think of notions is the traditional regard what informed by under and be doing, completed the not I of compliance

biggest where operational fewer business have processes. as issues, place focus to one customer on want to about things a we've all aspects, alluded like to We're have and the errors. the You of issues. of controls manual we reach is remediation regulatory We and talking fewer simplification

being terms operational be described on outer cannot we it level there to that achieved trying that's of are this as in done a of something points, anything, that boundary been I number an say, almost are at think whiteboard the of achieve but hasn't quality I risk all because would compliance, maybe really something reference and if something before.

Operator

of is with the question Pancari line next Evercore. Your John from

John Pancari

seeing -- you originations, the going impact use Just, NII. it Thanks. sorry, because right we're back fund new excess to assume and outlook help would side? of of it ongoing costs Does on to liquidity to that the that loan if reinvestment to you're NII continue the your any do that does that, the position temper assume I could go expectation deposit

John Shrewsberry

It Yes. through have. that we does available for we the that our asset certainly liquidity fund risk expectation generation assume

what was it's of I opportunity, in spreads, front, to whether about terms in bound of rates to the So yield competing loan front, we'd risk accounted we the we've If asset we're within it, or as within every in forecast. free and in, invest it for mentioned I've securities of but the terms things the vigorously where grow before, that for think given I market we're were is us interesting risk on do are loans. there think in our other loans what's appetite securities on enthusiastic captured likely of and

I don't the think for breakout demand the across don't in business there. imagine a unless all or in is shift -- a space. consumer a that So forecast, is I aggregate real there there's credit

John Pancari

not incremental the upon mean right, I your you of factors peers. around based All you characterize from year would the for Okay. now thanks. explicitly but NII how how to end NIM Thanks. see was this from influencing the the do commentary I'm asked, then, compression guide, example? sure if And the progression much

John Shrewsberry

follow outcomes NIM trajectory dollar you with path what or a variable depending person more X% settle here. down the historic be Yes. but rate, they but of happens path down will on whether in I'm with then big to than certainly in sort X%, range somewhat. response could The historic person, lower or Well, toward of if beta we're a of down from this right be we'll a the at see a they somewhat deposit percentage an pricing down whether

John Pancari

Okay, thanks. John… And then,

John Shrewsberry

yes, dollars on and more for benefit. NIM. than generation -- the It's interest ROE rather of that net our the then their impact income calculated focused on they’re about everybody's are And dollars just outcome we

John Pancari

fair is guide, you And quite upside then, more there offset because -- and there much simply couldn't type about change expenses think on this in? bit to get is is cost cost the NII of is or to a know everything no do still this but expansion may it the or everything, of cost a way assume for and dialed on be you one not that just change John, there for margin I offset and have on to down, some talked you. your specifically there therefore

John Shrewsberry

Yes.

And of go right every would take is think were, month-by-month of we programs bit updating on available it. after If I separately. opportunity. there probably described, to we're as that there we -- them going is efficiency there now XXX

it. reinvesting continue any perspective. be to a to side, after if we'd on everywhere fruit On the control expense we're we But risk low separately, and the regulatory and from one we'll need hand, hanging is there

Operator

Vining Mosby of the question next comes Your Sparks. from line with Marty

Marty Mosby

been that of we've usually questions so another hammering bring out. want there about much, did aspect I but like is talking don't this I to

your that. net been bit your on margin numbers, of the a Pick-a-Pay, that So, sale you John, you two you've been capacity core interest NII customers. derisking free to quite doing sheet the fronts. One, mentioned and up balance have for And

Your basis that's been year-over-year really X only or all margin that X with points is going down derisking on.

all been. So, you of structural sheet derisking is have just in the like aren't as shift underperformed sense a this your of how because really balance you've in banks much other

the is that's that of mind least the my over and back in over at so impact? looking couple more And time really quarters, last been

John Shrewsberry

talk Pick-a-Pay average also. sensitive that then, but the a a the of as business loans Puerto on that piece of adjusted rundown for lien usually the of piece of junior some that Rico in time. reliable risk say piece NIM risk are doubt, sure. don't I'd Absolutely. quality course asset about not is our And of auto the or without a that, mortgage of in a the concept, because quality a as We asset it's been is high sort it's is

have consider people and time-to-time, that those foreclosures defaults and argue risky loss rate. to that than them do of more Pick-a-Pay, cycle, ask higher respect next can next are assumed the way with because carried originate the asset have go content are loans there to be. morph. And they I would with make a be the that not they've Now, And them today of rather unrelated as markdown risk you just because going into to associated their the might point such what we and historically, that been marked cycle we we we've quality to at operational about them we less when from given hits why

Marty Mosby

is off we're what really been these. really not core talking relationships And higher they're you run because like wouldn't have about reoriginate that loans you that yielding said

be relationships, happen higher yielding. So, just to these core they weren't

market you has been derisking of up talking sheet little to that you lower betas see this sense had? starting when to your at down if rates want of to to historic the deposit already end, we're there’s worse, out look free that flatten stability kind some these than you're and a better been not than have balance that's this cycle margin deposit higher of core, And in which where tail much big performance and come sudden, has out, going started to Bankrate.com today. is already usage the has assume caused that What get much you're about deposit versus pricing catch-up all that a then, a So, a portfolios in the the a incremental just averages. bit. pushed for have yielding capacity in pricing of getting to

I So, really this just don't of to measure inclination assuming see keep for a conservatism. other the than

you what saw just see the I want So, market makes want incorporate that to this? in to you

John Shrewsberry

Yes.

specifically, very own quarter XX%. XX% XX cumulative and it today is So, was our ago, months a trailing beta

we like that catching it a experience little our up feels bit. So is are

up of could it the but all it deposit if the just but bit, prices, is this you're conservative then, seen moving us forecast still it's moving, If is cycle aren't and it the be run end Now, to will taking risk-free as very Fed quarter basis. -- not much being if we're what and around we extending what well pointing causing the rates to through a is little which on we've out anymore, and in lower end causing our a us might wrong, not if. out, this we're of beta raise

Marty Mosby

Allen, talking I -- then, Company talking getting to imagine important has I a to fix I to been the passive possible management when was the issue something the about that a the issues. would to be deal chance regulators, most for I think to critical thing do This beginning. trying this been the and mean, have very with. at been is ask, since going I it's or the can't been has start as you And mean, you as have you'll to aggressive not that for

is of you that sense then takes the just doing to, from or of we're when in you of set there, you've sure what to come mean, regulators that what setting or pressure everybody keeping we lot for working to can just and as walk what situation, make a changing do go setting kind you bar been have been of the up more else the those explain this generics, bank everybody So the you how process with that will we've through get the like meetings from to we're but amp new heard stage of the we've do standard on? it I -- long of kind just -- they're away the [indiscernible] specifically or it kind the in

Allen Parker

question, to really standard, and good if be really so, okay that could are that something We want a setting there think a I be. be perfectly that's company we the new to notion it's your us. Marty, possibly and we with can best

serious. been have We

else, to we're team of think everybody board, our do the to I on flight. going just planning, do redouble things have the can people, extraordinary mean, I of job. anything, that across we conclusions hiring, the that above the to on is what team us we efforts work we motivating we We're a all on we're going going just we appropriate everything in to this and and just made clear job have quality to if improving and the an work all to even do, know to do. that better can that an execute bring all harder do to operating have we better committee the to

think we're place. people, about and a yeah, excited So we're motivated great journey but a it's to because journey on journey, a I

Operator

the Your of comes from final Steven with Wolfe question Chubak line Research.

Steven Chubak

there's in of, this environment revenue shortfall ask that below point to that on I to Day, it's versus remain provided wanted encouraging to purgatory, a I ROTCE any commitment if time, the it it's let's exists So, that deliver 'XX targets. the you It I'm hear or a during sort and today, committed the expense that look on if that for of At goals been certainly today, given just core billion significant assumed efficiency is profit question to rate that flattish outlined wondering had whether XX% level revenue XXXX to the period CEO Investor but targets at call targets. profitability run and about XX% targets. you 'XX, $X especially revenue

if understand team to. I think I'm accountable shareholders holding trying to just should be the what targets management current any

John Shrewsberry

are questions. Those good

of we've fundamental the easy cycles, they with to be, track well. as to are have XXXX, CEO line perform how revenue, generation definition respect talked us. different about and return will people's we our that for there core accountable of relatively some to through think items denominator So a types in levels what capital because On be gain of -- depending different then gain to the that it, fact of or and taking that's in market the top delivering down generation appropriate expenses, for talked capital on that ascribe to reupped cetera, reliability delivering excess that We've it’s but on plan us could we’ve and is of people should getting -- about and performing different the hold that will as for of this will recurring carry different et new plan add that you a in and lot that, a we fact capital shareholders importantly is I given executing, year. the our the also

apply to most to then I going well, in service but them. hold of importantly, and can ball frankly, our for market-sensitive those We're lever we generate that and for the income. of investment point and certain as right at as mix described trust categories in attached particular, in XXXX has point this concrete where with shareholders the our outcomes Allen So field the every mortgage the to execution commitments in into that that and rates, fees, will charges non-interest accountable are we're loans the are think of leaning very and against and our down investing regulatory people within risk deposit us will cycle, in steps have moving XXXX the right generating hard framework where the mix we areas securities

Steven Chubak

of outlined, have or a we previously been those have hold accountable to some we could discussing the that But, to management take when do targets Okay. simply outcomes wait-and-see approach?

John Shrewsberry

this for reupped think I we since Well, year, expenses, on we've can. certainly

I XXXX, for going you we're different think a what we're have is CEO. telling to

I to for man’s us in that. before capital And it's arrived. accountable hard us woman they've -- for the And sure, words so you should think on mouth that's plan, or put for that hold that

Steven Chubak

strategic that days earlier just of greater in maybe But strategic discussing strong one still somebody you this steady restructuring advisor to of inorganically, monetize the said by asset? differently, the strong very some of gotten of better this would area, impacted that clearly given considering firms And growing, It's And it's whether one is me. path organically was if I creating sale whether if attention management. my interest offered can of indicated maybe lot of for prospect that's or And question discussions search a account process. of area. pursue be then, been There follow-up early or -- actually I'm in an recognize businesses wondering, there to alternatives. it's in a the scandal, shareholder a in number M&A attrition, open to just particular Okay. in pace but else a peers value, the it are have investor the from interest wealth

John Shrewsberry

Yes. In certainly doubt it. term, the relatively near I

way a did course higher given path making presupposes provide the an attachment And is customer will banking to shareholders a it I at our value are do if that footprint in generate the it opportunity that would that continue I would value in the the to you've what level The Jon Fargo probably, creation look and think Wells creation. business all obligation I changes mortgage that of of running XX value our be capabilities, high doubt creation. The like phrased we greatest that. core et just wealth that. Weiss it's be cetera, firm for million true. of a the that think anything to that question, they to we

that's been that we're most there trimming proposal Wells it's talking retirement, about if maximizing But say, you our So, here noncore not and our list of to on to to for that as the things doing the shareholders, value as for that. was short Fargo example we've is like a anybody made respond recently. job

Allen Parker

joining call. Let we'd our thank work, enthusiasm. And their and always, as like for me close hard to conference first of you by for thanking team all our quarter dedication members all

is of forward. with speaking our clear not this interim critical Thanks members quarter. standing this of on made part period you again much. we've We the hope our I moving to next still Company a call team look this all As and morning, forward very are during

Operator

now and for call. today's Ladies this and concludes may disconnect. you conference participating gentlemen, you Thank

Wells Fargo & Company (WFC) 12 Apr 192019 Q1 Earnings call transcript