WFC - Earnings call transcript Q1 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

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 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session [Operator Instructions].

you. Thank like Investor call Relations. now Campbell, to turn of Director to would over the John I Sir, may you begin the conference.

John Campbell

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

like Before our available release also earnings supplements and are caution first on wellsfargo.com. we Web to and during get at that are started, I we forward-looking would like subject that quarter to remind to you site our may risks that you statements call quarterly uncertainties. I'd make today's

our Factors any differ on SEC earnings materially of quarterly that and supplement. financial in non-GAAP be to Form also our the in actual measures, filings referenced, a detailed may measures the including results in measures from quarterly including Web expectations containing earnings X-K release to GAAP Information filings can cause those and available about our are our in the today release site. SEC found reconciliation filed supplement

the over now turn call will to Charlie I Scharf.

Charlie Scharf

business John Good and transform on the going to our comments work results your with the ongoing the environment, will before Then provide I'm quarter the more we're the first taking, call company. current to actions take questions. morning, on open performance details we

about environment. thoughts first I remarks current want by the COVID-XX. with those with are our some directly saying start Let that me impacted start to by

ensure provide the impacted to the all function. on frontlines directly the have services and continues This are to includes who helping those those virus, healthcare country contracted who workers who of those essential

and company, those that to proud and role economy government, front more the system And much entire the efforts response lines. the of there We been As on stability while do, broadly. particularly an important in difficult as I'm plays Fargo still the extraordinary. by financial individuals across to is companies the Wells has the providing is, this understand incredibly

by done. Wells me Fargo discussing Let has start what

our First, I'll also ensure start with can we our prioritizing in serve while customer customers. best been and safety. employee actions to aggressive We've customers

temporarily approximately about one our and branch of locations based is access, to on fourth the X,XXX would closed branches, historical the each close on choosing nationwide, physical allow traffic First, we've that network branch social appropriate design of distancing. which

limits employees Consumer rapidly other US to ensure serve and in open to times expanding all are deferment and tools, customers. and been these distancing higher. mobile measures our in deploying sites safety XX% small our air access social e-signature increase The contact We've new including wires, new adopting for support. March XXXX centers versus business expanded March and digital volume XXXX. as we've And demonstrated Customers all by in mortgage deposits safe. a tools remain are deployed wait mobile in and keep we locations dollar new deposits of tools, digital

exceeding deferring by evictions over deferred sales, and payments We foreclosure of residential interest we payments and helped In providing billion property We're commitments, X.X and payments auto customers business month fee utilized Through small clients almost April billion accommodations and and representing more waiving providing customers our over $X.X consumers X commercial loan XXX,XXX than March for in our XX, million alone, principal credit their waivers of to significant involuntary suspended million. $XX repossessions. and fees. of provided We've clients. over $XX need. we're million the

to the as government to others to to continue GSCs, the wrapping well for challenges current respond We're we we've the the up customers. our financial capacity trade program and our quickly in customers facing environment. ways seen. revive We've not-for-profits industry, processing relief and hope expanded to the business in significant identify our And other officials significant PPP HUD, participation demand as to our small with in work groups, assist

working customers. impact we've our payments received as groups than quickly interest as to with Americans of US preparation economic XX, April possible. indications from XXX,XXX more Through and industry distribute of in the to We're millions Treasury

mobile implemented those to we've options that more changes depository For to instead going checks, our receive make ATMs to app branch. a of into and those use it convenient

Now have remotely. company XXX,XXX and how turning we to to approximately we're employees, operating work our the enabled employees

including branch cannot that staggering and distancing measures, to home, we've modifying implementing to done ensure jobs program. For significant enhanced an formats, addition and staff from shifts safety, in actions enhancing taken cleaning be social

employees onetime XXX,XXX We who continue cash make a to made $XXX,XXX. We to than award all less approximately pay employees.

unique Additionally, recognizing to as we're that the making frontline, on of work a payments employees employees. those the way contributions our of additional

our to also are employees up for providing to virus. to through to support five being need changes those paid networks. financial We're those find the who tested own our who employees employees those eligible we or plan benefit who days care, their made We've personal can assist To support granted seeking child they childcare. off, childcare so have eligible business

we Foundation help those COVID-XX. And to to in which as to limited WE to employees food, made with contain fighting available public Relief million stability, housing providing the Care Fund, communities address spread Employee resources small we're our to supporting from affected by and them get basic help organizations health donations shelter, help Fargo grant $XXX to charitable And feet $XX business on a the by well the their as directing necessities. Wells of back is million with Coronavirus, especially

our as providing the severe the their have continued banks last we've other swift what markets, are impact strong health in job while employees service many you done unable the a and over on they've to had industries great a Turning seen But including to month of many have Wells has markets. know, access all been the financially the in Fargo financial as offices. and crisis

and versus the prior credit navigated classes spreads volatility XXX%, levels have daily saw for increased in liquidity several most XXX% ask also disruptions we bid crisis. to HQLA to in spreads, We weeks. huge asset normalized

transmission HQLA, volatility widening smooth asks loss, and order but selling, meaningfully. credit other other market corporate Fed remote functioning markets programs issuance, high bid reasonably high forced effective to and most and support balance improved sheet designed assets saw of scale primary asset in volatility lower remain Activity in and quality intraday pricing, market MBS, in improved Large and dealer immediately purchases decreased sensitive credit lagged trading agency recovery. capacity, monetary the treasuries HQLA policy costs. increased while transaction risk secondary flows assets

impacted as as our this, the shutdown economy All of results. the directly of effect well

see the materially by Turning you securities. to quarter, impairment redemption deferred loss of reserves, results impacted that and loan of securities were can

branch securities, to equity securities of for impairment a securities related of XXX to included a the traffic results a billion slowed negative Preferred ago. bank, half Stock. We've compared same as K the $X.X redemption would year predominantly be as our of March had reserve Series Our progressed. Within volume build at million teller impact and period of significantly approximately with our expected related March the community and $X.XX loans debt the end

down XX% ATM transactions year approximately a significantly, also to ago. March compared were in down

in from volume On in more March. a quarter refinancing. XX% by originations from ago. in billion is more X% a mortgage with Credit in down strong and than the of March. year early purchase slowdown we originated declines quarter offset $XX fourth the fourth was down the for lending side, A volume Card quarter quarter early by X% offset strong residential Auto the declined loans, the from than originations XX%

market the period despite client investment prior and by and the wealth brokerage driven sweeps, transaction XX% declines from reflecting Fargo Management balances strong still the higher Within quarter X% XX% higher allocations. during And Retail quarter. deposit money Asset inflows quarter increased AUM by market increased broker management, grew funds. retail into during cash driven revenue Wells

I'll wholesale increased the turn due mixed in quarter, nicely well in in but first performance businesses strong We as in In were now. months the macro up of to two to volatility and as markets equities March. our flows. had year-over-year trading, performance businesses trading was

offerings issuers in the our capital US performance were suffered due overall a debt grade high compared or from XX% fourth volumes spread quarter, year to billion driven $XX was However, and loans the activity global ago. dislocation. markets by market whose Commercial record from to on the strongest grew XX% up products

debt based with quarter. capital third Fargo's markets table lead to improved fee fourth grade share the from Wells during X.X% market high rankings

our While around focused efforts COVID. on

We the company. inside changes make continue significant to

to leadership Patterson continue senior several regulatory amount to change Ellen COVID the we being and devoted the Counsel additions reducing joined General add efforts our with as we're talent on and move get team of Even our and team. to expect coming commitments, to the cultural our we continue on done. improving the significant ago work quarter. us We structure the necessary several not processes time to more our weeks response, in forward to the

our agendas structure changed organizational stressed to new had a I've reporting during reviews business the me. the lines spoken issues also in announced operating have are we quarter, environment. of towards As five in put of current business place; oriented related those to directly now reminder, we've and with

we into the As and recovery. this of sight some settle have environment line to

work cap with reengage will to I quarter, last now. the discussed We return asset and the

we're this we for and on highlights. we on balance but more We're allocation. some here this, day doing John decisions provide will focused are all requirements given managing sheet details to our on the while can satisfying in clients, how each environment make constraints, the do

those $X.XXX the be first basis evolve, both a lending trillion slow As is below of was downs began deposits measured a increases in the the two-quarter at of crisis facilities accelerated saw trillion. XX, estimated and deepens. reminder, on in the we mid-March as quarter. as committed On March must In the asset cap calculation draw that an to crisis and average and end $X.XXX daily

of taking position, this X.XXX the a ensure XX.X%. We in the quarter discuss we had below the detail, cap. in including trillion CETX more will ratio with but of capital a number strong stay assets. of At end we're the we started to John a actions quarter,

of growth wider well quarter, ratio of CETX XX%. above strong the the our internal as current spreads, to in our target and as still minimum the earnings declined XX.X% assets materially regulatory lower during X% With

in get by still helping Board earlier challenging month, we plan our these submitted XXXX Reserve the will you know, plans June. our forward. want published capital sure As capital you our suspended results this we Federal to going know, through and our I'm buyback be times. you as focused we share the will discuss you as on But customers

think economy I are week spend about down and we food Consumer XX% world over is and into significantly. the before. haven't year-over-year holds, Much other of a essentially here As increasing seen few spend thoughts. We've is a down past future entered drug this what closed. the with

global manufacturing demand. beyond downward cut businesses as in XX%, with are back month New on auto Unemployment February are sales quickly has of commodity in we've will growing while at orders, recover a down ISM that down bound by know March is these when XX.X% economy the borders what to this XX%, orders, reading is were prices the modeled. lifted. the And in turned is hope the in or speaking time don't what shelter March timeframe traditionally weakness place there how we is

in contraction other in and significant important we banks do quickly. fast, be size. response credit Federal real, beginning the seen. of provide will made Reserve deferred beyond we safe, also Congress just fees, have the to The amounts equally been but liquidity, are can been their from What as implode accommodations response loans ensure is comprehensive support response what Banks we've and of significant as necessary we we actions waived equally to to the the provided has our recover know historically have must many, help and numerous need. on It's And to for scope do in customers to the and part note, is impressive, has is for all quickly possible. do payments

position virus our can is should government economy what The controlling We're our actions, that support reopen. needed relief question liquidity the support the the the we strong customers levels spread broader severity. so of us notice capital those our of will ultimately hopeful others length of means remains shutdown What's provide this determine economy. But this do future. US reach But for difficult enable help of many the especially the to and the customers and period. and our important and

regarding assumptions forward. our losses We driven losses incur lasts, we will the of how as of the we government be and level actual and move by long closely our support will industry. credit this period evaluating in effectiveness for allowance the And private be

we crisis. the remain through said, to this improvements the and get and quite unknowns, And expected many times. are last there beyond today, here and Sitting our we will different look we get committed discussed financial year unprecedented these time we're on But spoke. communities performance delivering as we as to focused for than we've customers I the

Thanks again been it I'll working Fargo. on john. They've all and at Wells tirelessly, my to pass partners to

John Shrewsberry

morning Thanks, pages taking related of actions in support initial employees good the covered communities Charlie and provided Charlie the pandemic. we're the our the supplement information and everyone. to customers, the to during

on to start So I'm X. Page going

As number in we a had of highlight on significant this our quarter page, that the we first results. impacted items

for provision creditworthiness. have times We impact to could We credit reflecting million losses, the our had equity these $X valuations. of unprecedented customer's expected securities expense had predominantly of securities impairment, related billion on lower market $XXX reflecting

plan not $XXX securities impact equity million expense by $XXX losses from meaningfully line, reduced the by million. While results they did compensation increased benefits deferred investment employee and bottom net

a fourth quarter as of had included $XXX gain $XXX residential mortgage million sale. losses for had held which litigation sale had the of We previously $X.X which been loans million the We were on from designated accruals. that elevated down billion operating

income by updates held banking fourth asset higher the quarter prepayment losses estimates. Mortgage valuation primarily result on $XXX mark-to-market MSR sale a for million from and declined of losses assumption driven as loans

Finally, by per EPS result reduced $X.XX the these redeemed our discount accounting of Wachovia recorded Stock, the acquisition. of at the purchase on K a elimination as the shares with which time we Preferred Series share

the factoring XXX X, as related basis the LCR regulatory first the minimum experienced we ratio ratio in and regulatory above above highlight minimum. our the quarter, Page COVID-XX on after XX% our points Even was during CETX remained impacts

are the regulatory market they're end severely based to conditions. established maintain withstand These economic to ensure financial institutions minimums upon resources noteworthy given sufficient surpluses adverse are

tax Turning to expense highlight tax first $XXX in be statement was to income throughout Page rate drivers included income the the X, I'll I discrete income XX.X% and of call, quarter, our but covering wanted million. the effective that net

due I the note expand balance COVID-XX to demand balance throughout that most significantly and in drivers here loan as increased I'll will economic quarter. the customers facing first be to Page of but environment caused on our our the the X highlighting sheet call, are inflows deposit sheet late

loan total we while place demand been cap XX, billion that's highlight under by grew year since early loan end to Page $XX.X XXXX. – On growth strong $X.XXX helping how customers from the in in Driven our our assets managing asset trillion. we're March,

end asset the at measured to cap $X.XXX operate Charlie in we with As compliance based growth, highlighted trillion, on even two-quarter average. compliance with as this continue of is the daily each quarter

XX, the two-quarter average March of $X.XXX our for was assets daily As trillion.

of load times, reopened. credit our provide high During the commercial have but of in these cannot challenging we continue, to expect is worth actively level balance and deposit growth on line It's our that customers. growth working rate create noting clients could markets and help capacity backed we're since the growth to guidance off by utilization sheet

forthcoming We Lending make program. and Federal the that will appreciate to last program of Street Main took which the the targeted Paycheck us action for week additional small Reserve loans as part flexibility business Protection provide Business

size will our and to sheet. take actions the balance have continue manage of to We

which And exited originations we've to of low financial XXXX, And securities mortgage particularly better also footprint. non-conforming from ability took example, correspondent to reduced liquidity we other deposits deposits, institutions. the us our gives our For similar the we're finance value early actions existing in the needs financing meet we've reducing customers. mortgage

had we XX. in the fourth sheet billion Average at starting commercial the balance drivers with by the with growth $X.X quarter loans look from on average driven loans. Page quarter Let's increased the first loans

in by going Page the period I'm time to spend that late quarter XX. COVID-XX the borrowing growth trends describing a significant related caused more starting to the behavior on end occurred change Given in pandemic.

a loans or $XX.X the strong quarter. billion in X% from the or in from were X% and XX% loans $XX Period-end quarter. declines $XX.X the Commercial balance billion year or as first offset sheet by than billion more grew quarter ago, growth quarter from fourth fourth earlier increased the late

than Revolving draw March, on up in XXX seen $XX first borrower we've the was loans. corporate month included March banking wholesale weeks from as these the loans and activity quarter loan during April, and first I two in slow. of mentioned, utilization investment commercial December. in banking basis The XX.X% draws commercial growth And in more the in billion points of banking

X% and as in Consumer of fourth card or the down loans XX. billion, on in real other in loans trends linked revolving loans, more the Page quarter starting $X.X offset auto credit detail quarter were highlight from loans. I were estate partially declines the consumer loans drivers by growth

loan mortgage mortgage billion million for $XX.X more first portfolio lead loan decreased The held from refinancing quarter downs offset investment originations. prior of $XXX the than pay as

quarter down was pay which than the were million offset new billion of lien $X.X late loans mortgage meaningfully lines, Junior quarter. fourth existing more $XXX originations first in continued downs on and the from as up draws

quarter declined from openings. $X.X and account loans by fewer card the Credit seasonality driven billion fourth new

Our auto portfolio $XXX the quarter. from discipline credit our fourth with continued to grow, balances while million we of maintained

Charlie as – declined with to quarter in first than pandemic. quarter due slowdown the early in from strong a the more highlighted, the However, in by the quarter originations fourth X% originations March first offset

to lines, loans economic draws with were to of the Page lines growth XX, driven quarter commercial business from C&I reacting with the slowdown broad a fourth clients $XX.X of on Turning revolving pandemic. loans by associated billion largely based across up

from and construction the real loans CRE fourth loans. Commercial X.X both estate were growth quarter, in up billion with mortgage

as loan on certain more Page starting to draws of providing industry Given been the exposure on result exposures hit industries we're XX. commercial that pandemic, a have focus and on details hard the particularly our of

industry the exercisable all unfunded total note the disclose in borrowers. on of loan breakdown lease SEC are commitments I'd our slide. unilaterally by quarterly that our financing providing portfolio also We but this breakdown C&I typically commitments are not industry and filings, of our

customer require revolvers additional to commitment. collateral post certain features the to access that amount example, contain of the the full in order For

portfolio slides While impacted industries are the gas XX, with on many monitoring. Starting pandemic, areas had provide the details economy escalated by of Page loans next of few as oil prices as which on being far when the of and also billion we and were quarter XX, to the oil industry. with size from billion oil our was outstanding XXXX, $XX.X The was low. $XX.X first the of XX% gas in down

and of end call. XX% portfolio sector, the the loans on later provide I'll the were exploration of services. of our first to of quarter, performance As production XX% to portfolio the this to and detail more midstream on the XX%

We $XX.X loans outstanding the typically included with retail This $X.X to limited to been limited as the service across $X.X with of restaurants referred had quarter, to which includes pickup. which the billion have at restaurants. other remained impacted more commonly country formats have of delivery end fast while billion restaurants, first billion a drive-through, largely or to food restaurant service open

a Turning included loans of industry the total X% cruise Slide recreation to outstanding March and billion $XX.X XX, with XX, billion the entertainment industry end billion had loans transportation at of had of air of the $X.X outstanding first to We $XX.X which we the as transportation. on quarter, than to of lines. less to

We're real centers, XX. retail outstanding Slide our shopping of closely to of the quarter, commercial At we portfolio, on $XX.X had which billion the billion first we excluding real mortgage in hotel, estate outstanding loans construction billion the for in Within end had within $XX.X of motel apartments. monitoring our loans $XX.X highlight and estate $X.X we industry. outstanding portfolio commercial portfolio, billion the loans

X% of on quarter. and ago our average the to Turning businesses, banking from deposit quarter seasonal Typically the in in and first quarter. deposits deposits declines grew increased all gathering in linked our average wholesale experienced Page but we a XX, X% WIM the deposits fourth from businesses year

business with emergence across quarter and impacts flight of growth the deposits of quality commercial the late corporate the This associated COVID-XX as loan to of lines included following inflow as well all deposits draws.

lines across XX average business. the of fourth declined basis quarter with Our to from of our deposit costs points all declines

impacted a in while had continue of WIM promotional the from to begin lower and to banking wholesale were largely and declined second most slower declines in deposit in quarter. at pricing which banking will early XXXX, be since our We retail expire they with pace, costs

the real or we details Page reflect deposits lower the banking deposits driven $XX.X quarter, On the $XX.X quarter deposits, period-end Also, were manage taken institutions with billion, up provide XX, to end. offset had line total cap. fourth the the which by end X% at on better growth from deposits, by strong revolving draws, estate asset reflecting from banking billion first commercial of year we partially financial up commercial actions and

the deposits $XX.X yield including and investment Consumer deposits business deposit increased by clients. from by growth and savings growth was interest cash checking. in small high bearing largely billion, driven driven Wealth management higher retail higher X% quarter, from fourth balances banking banking or brokerage and

our fourth Net the accounting swaps our interest quarter, million lower hedging million in MBS prepays sheet $XXX as faster of assets rate rates by partially higher offset income in reflecting of day million increased than lower results realized quarter. to and down the from and and market hedge $XXX resulting impact one the liabilities ineffectiveness environment long of level premium re-priced basis re-pricing, balance from $XX fewer attributable the of from our differences debt. notional amortization including interest term lower

interest as to income, rate The exposure the net impact environment continue to our could our but we're on much managing pressure low possible. interest minimize rate put as

uncertainty, Given guidance. and interest volatility XXXX the withdrawing net prior we're market income current our

not we're regarding interest year. we guidance for While, throughout this currently on expectations for year, developments net insights the more income our providing provide will

$X.X equity income in fourth declines income. by net noninterest of securities, billion from XX, million decline billion and Page $XXX mortgage to a driven banking the quarter, from $X.X lower Turning gains

on widening million in and conditions for more held million these loans, of me unrealized illiquid loans starting explain detail on credit a of reflected income with banking commercial spreads. approximately due sale banking. losses $XX Let residential to and Lower mortgage declines $XXX mortgage market

on impact, impact have exceeded demand margin million we on the the Absent would first originations loan increased capacity residential recorded during originations. as held is for quarter. $XXX net origination gain and in sale our report This this margin loss reduced production mortgage production the

on ended banking up $XXX of a losses that estimates. the primarily prepayment our pipeline mortgage from the million $XX updates valuation which the $XX a quarter. assumption also results Mortgage quarter result or higher MSR billion we loan first note would application billion of asset reflected XX% as was fourth with of I

net We Page million We billion from had plan of in equity largely which XX. losses securities on losses. $X.X included securities net from P&L the investment provide comp of details losses quarter, equity on $XXX neutral the

equity Net losses $XXX impairments, the subject The carrying businesses’ private million valuation. of impairment included these values reflecting lower also market portfolio to from and equity of certain securities impairments represented on XX% venture capital, businesses investments of wholesale assessment. the

billion to the our quarter. from Turning $X.X which billion expenses litigation included expenses losses Page $X.X on fourth elevated quarter, declined declined accruals. Operating fourth XX, from

Personnel offset declined higher expense, expense, is deferred the of quarter driven by expense. comp from driven $XXX lower in million quarter, benefits $XXX benefits seasonally partially payroll the first seasonally The expenses. by lower which was and which decline of matching elevated is taxes $XXX by typically million employee employee fourth and million expense XXX(k)

We also a incentive of in expect, expenses travel had you services, comp, equipment technology and and lower professional commission and entertainment. including outside other areas would variety as and

and we in first in this remainder did through of and greater not a they provided benefits COVID-XX second the to we the quarter expect will part March, our But quarter. as impact response our that expenses impact of have beginning in year. enhanced payments employees to The the currently meaningfully

were right add to base, thing to took we do for While employees. these to the the expense actions our costs support will

our the announced managed our of segments Page when starting business are business I in discussing five we be with a the new that accordance to structure will want segment updating Before in and February, on as XX, organizational operating new segments, that complete result the we flatter transition was note structure.

primary our earnings net reflecting are start provide banking securities. fourth reported as declined provision month and noting customers Page expense quarter on $XXX lag. from as losses higher checking a banking digital, mobile community well On always, by I'll million XX, as our equity Community that metrics. the one consumer from we

behavior So change the for quarter COVID-XX. first numbers March not reported we do customer in the capture here to due experienced in

our For deposited volume mobile to depositing of example, and dollar over our checks XX% in March shifted February. compared customers the through have checks mobile app with increased

XX, COVID-XX, decline Page when reported of which our and during of is final weeks one ATM resulted the ago. teller and in in as volume closed temporarily through approximately which the a to with XX% compared are hours transactions reduced branches March teller we first a approximate year our Turning in branch result fourth quarter

Our use late first meaningfully the reading due spending customers also in the pandemic. impacts quarter the their to of card

year, the card purchase year from while two credit volumes XXXX, months resulting volumes from up of credit a from During X% in approximately the down XX% volumes a first year were March ago. ago XXXX March declined quarter being first card

ago. all were down from We also year other with had meaningful increasing while shifts in customer spending in a March grocery and spending pharmacy categories

started but were debit year-over-year to month. a with credit category and the the change slow of growth to the and card year-over-year in last in to trends in was February this similarly growth Similar spend in X% week in less impacted, volumes but spending March, spending March. significantly in the card Card January Debit in significant grocery shifted decline

quarter. fourth XX, the billion capital loan deposit from to raised in provision strong commercial $X.X wholesale Turning first Page customers for billion quarter, And and billion debt a clients. the declined reflecting already banking of increase also from expense. in growth we highlighted our earnings our $X.X I've the $XX

and investment earnings the from million increased $XXX management quarter. fourth Wealth

over Wells balances the and reflecting inflows our Period-end by experienced into Asset $XX WIM business market funds. liquid allocation first products. under clients from increased strong and for higher driven demand Fargo quarter, from XX% money During fourth Management cash assets significantly management grew and quarter, the deposit billion brokerage our of assets client

and business advisory Despite volatility basis remain quarter. increased assets brokerage retail on the bank consumer positive into linked closed and from the investment partnership into first WIM a flows year-over-year the in market quarter referred our

As a are quarter. reminder, priced the beginning retail brokerage of advisory assets at the

reflect April So as reflected market January results quarter X will of valuations as second valuations of X. market results and first quarter

our up primarily to was reflecting our higher basis had increase fourth losses card consumer rate significant fourth quarter included portfolio. Turning seasonality. in to in in losses the of and predominantly points C&I by driven oil quarter net all portfolios net and points, and charge-off declines in losses commercial Page auto six XX higher in recoveries to basis prices. gas portfolio, We related XX, lower our from credit from real the our losses estate The oil

of from the a $XXX basis XX points points pandemic. the Consumer increased nonaccrual to economic portfolio basis loans from X-X non-accruing ago. increased fourth by total basis Commercial in quarter implementation down year nonaccruals first based increased the performance. $XXX be from driven the higher required mortgage was up million family loans million driven million which Nonaccrual as five $XXX loan predominantly, to on quarter nonaccruals real of points PCI estate, XX CECL loans, of the predominantly impact classified by the fourth and as

Page net particularly in early oil quarter weaker A oil reflecting portfolio. signs $XXX in prices driven we a to from offs loans million. detail quarter in quarter increased commitments year the Total X% gas of decline Oil Total the rates, of the a On first the X% and outstanding and utilization deterioration, declined gas in impact provide ago, resulted and the XX, E&P and increased of million credit prices. in decline performance linked our by oil sector. on and COVID-XX credit gas increased oil reflecting in first significant environment. $XXX the charge

increased were from due during of new well declined the the Criticized increases higher quarter. fourth from quarter charge-offs pay first $XX predominantly as net on nonaccrual downs, downgrades partially loans to million quarter. in loans sector. reflecting by as E&P the offset to XX% fourth current XX% quarter, payments Approximately in the status nonaccrual Nonaccruals the

of CECL. and losses CECL Page for of allowance We credit billion. ratio loans X.XX% adoption was we the At to highlight On loans allowance XX, and of and $XX.X our our billion commitments added the our the unfunded $X.X since first of on allowance quarter billion of January coverage end securities this loans. was for the for was allowance $XX X. adoption debt

were commitments growth, a loan million securities quarter, pandemic, COVID-XX debt reserve sensitivity on for of economic draws adversely of driver build our the to factors increase estimated the industry, the $XXX reflecting driven conditions. due during by exposure industries and the loan commercial the pandemic, impact the oil economic to This most number was primary gas and affected including by which to market a and

Turning of our capital of to the on return multiyear Page target above a the X% our minimum XX%. which of the even after at XX, first shareholders, end to program to CETX ratio excess to XX.X% and current be was continued regulatory capital internal quarter,

forum, quarter. XX Our XX, we On along the common of financial second end members share were the March other from million period-end fourth the the suspended outstanding quarter. the shares with shares services down of through repurchases

by market were our first summary, capital. and we the and the quarter impacted economic liquidity strong maintain caused pandemic, results in In while the uncertainty by

to our Our to priority to is continue use donating communities. supporting customers, and economy to help US strength our our by employees the financial serving our

for questions. want open your to And it Charlie Operator, and up questions. will now do you I take

Operator

[Operator Instructions]

John Shrewsberry

are Operator, any there questions.

Operator

Instructions] [Operator

Charlie Scharf

The queue understand. is filling I

John Shrewsberry

Yeah.

Charlie Scharf

we are doing? how Operator,

Operator

question line Ken first with comes of Your the Jefferies. Usdin from

Charlie Scharf

Hi, Ken.

Ken Usdin

good that on more dial perspective? the demand magnitude you income how all are able customers provide that back Fed your clients bit the And on you in have of statement I with ask was little guys. to you on behalf truly deck asking can giving for that you in you Thanks from the participate more to of a programs you the some the effects today. a the the just you, can balancing see have elaborate for? color John, the Hi, on good in a terms might it flexibility an to little company lending, to Can help Thanks. are morning, lot that function but and – bit are that elaborate –

John Shrewsberry

Thank you. Sure.

to front, So program, this the Fed which the approaches on everybody the to as PPP tradeoffs, There, constraints at I position a extra a of that having other no places flexibility. funding little sufficient the was describe us us mentioned, Wells in first With targeted where from respect subject who would perspective, but to the the course, help unconstrained action a Fargo. legislative and as I gave value to types continue principally financial substitutable deposits deposits it's to capacity low easily cap balance area, those customers runoff are to there's to going sheet because of of a of and institutions non-operational to and where help those of use on we're types dollars to high be in tens deposits, work of of reduce factor relatively a able there down. billions more create the are

can source And create the some our then securities that originally when and We was and is we spot cap cap that us footprint the right whether put choices needs. back, of then making some what and securities of for repo room to dialed we've and utilization that but starts to other meet XXXX I that secondly, or will plus the financing us provide with make different And about basis, room in financing amount our now. would down as focused how repo gets the funding. those first customers that but help in financing some wholesale existing describe that's of and it did sure our on their is as activities create customers on this a to we of then foremost financing and below more external of own place, we're sources

Charlie Scharf

is adjust existing is to could difficult sure Fed know, in go balance having did you – participate that it just without period so Hi, know other do is no just of which, way time. this to everyone I we cap, make us shorter allowed is I for items, sheet more a as participating Ken, the the to What it's I these they a restrictions mean in holistic didn't to in above we way. clear want And that else Charlie. on that have you this programs.

than we So more ourselves the to far do based it our to had provided upon chosen us capacity. flexibility do

Ken Usdin

question, away second, can from the thank how were to us and from help in all the And given on a understanding pulling you'd quarter's this exactly, to front, just John, Charlie. changes you at the Yeah, NII expect Thanks. fully there year go that first least the understand you, results? second is guidance, trajectory full way giving the moving parts

John Shrewsberry

or fair LIBOR reacts of points How basis it be and that came What the growth. and versus long-end. stick Yeah, think will course had driver, some I'm where amount. get the But hopefully – the but like question, deposit We've between back quarter time, those with it's recent some in big by so for it'll sure down rapidly call a depending position second quarter, precise at we down be just dial the balances this by forecasting pricing something we freeing a to end be little more driver. in or that we'll got about I yet. number we end will on mid the a then think in XXX to big not these declarative and the either all booked we're over moves front and time – – of down zero and it to anticipate quite any I the at that year be a the of not NII a the bit the XX looking that. over the more it we're of how not remainder down it coming be

Ken Usdin

I that. Yeah, guys. appreciate Thanks,

John Shrewsberry

Thank you.

Operator

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

Charlie Scharf

Hi, Betsy

Betsy Graseck

for trajectory that A from we we just I morning. but you think detail from charges, know on good CECL see mean, builds you're Hi, to quarter, understand recent morning. here. about differently questions, reserve what to did couple level you just so of trying went if in one, in assuming just outlook kind good your the most this how a what and through assumptions, CECL Hi, of unemployment obviously

John Shrewsberry

stimulus then business personal at Yeah, the long of and the same from and with to but the are that's an obviously, credit things GDP, so means at how impact whether things matter effective what and level on level consumer the going are combination to unemployment, it's then level including and a for to unemployment. other offset that this what

helpful. that's as purposes. of shape. So we our down of digits, recoveries them few little unemployment update on spikes go U it to different quite next over the we and of basically less a relying have really take high so sustained in for XXXX, terms are sort and XXXX, couple Hopefully we're sustained while GDP that get I but sharp we'll we're and this a little more the sharp is of back scenarios there's bit years slow in long, much growth, where management flat And thinking about along, not elongated on we and a burn weights and single a risk each relying through really on GDP

Betsy Graseck

was down I are you around drill through brought then or oil that, give several on like and ago, side, I then. workouts the event mean, down us went it exposure oil had And oil could Got just Maybe you we obviously, years if the gas an since XXXX. can the price exposure some bit sense us maybe but your how dealing thinking how color obviously your if there? this the that you go lower, you're portfolio little a about as some round. with what a and bit, expectations book a to has I that on you're changed mean, give is I'm thinking

John Shrewsberry

Thanks look and different. the book does

senior. of the because on imagining on lowering We're it's the it's had worse capital – the bigger structure it's wait a more the substantially of going levels given hand, losses hand smaller, default one the bit the other little this XXXX into We on downturn. that XXXX, So price are before time a resource activity through.

to the board, of credit full non-performing, downgrade default the basically loss probability. migration of own type – own in terms we're In I'd in of assuming of our say performing notch estimation our analysis, across

in it continue we think to I disclosure and we qualitative think we're pretty on in specifically our did basis. XXXX XXXX, through a it And we'll approaching reserve. good it I work our a as got that. number like around up both now, through We've sober

Betsy Graseck

CECL already. embedded that's your but Okay, today within estimate

asset it specific on pans out if as see expected any So class. more that reserve expect build wouldn't we to

John Shrewsberry

more up reserving off. Yeah. end up Well, than so We end we yes always charging and no.

seems just number. any So than It a cumulative have when different than my way. it on allocated little sense perform. expect of work is, I'm not how sight when CECLs do. reasons we and surprised thinking out charge-off prior about we And that were it losses the methodology, less But line number cycle of to to a the I'm out but lean turns through for that we the hard in we

Betsy Graseck

right, All thanks.

Operator

with Your McDonnell Research. comes next Autonomous from John question

John McDonnell

add of John to scenario be what case baked quarter build like, more given in into about base to any credit give Hey, thoughts of that would just you you. or to are cycle career he economic some your quarter? the first this quarter think of what first provision added John, that the sees on could or scenario on kind play the maybe you What great and and Charlie, differences how you've relative similar for financial out a this the to have materialize if then than might macro kind you relative you Thank similarities was the more Charlie wondering have paths sized some in trolley. scenarios? seen could And adding for in test you've potential to color the reserve stress second crisis

John Shrewsberry

right? go Anonymous Not Research. I'll So still it’s Research, first. Autonomous John, And

John McDonnell

Yeah. Thank you.

John Shrewsberry

Sure. Yeah, get make right. sure we that

been flattening long next already kind perhaps high go longer may being digits the quarter to we're year have but about this And after this of single unemployment year. view year taking approach growth a we're quarter. the Betsy, plays as quick really than vary sustained V in to mentioned rather through then that year out range. not and beyond window mid growing and the but I even negative next thinking as that, rest high about a So a out thinking there quick single in or digit it and of They spikes – into

X.X%, loss X.X%. and annualized of crisis So two the compared about our interventions we're produce about adverse as thinking scenarios. stimulus – At in an adverse a own in GDP types as of waiting climb case, got severely anticipate other importantly, this severely it's to as about on And quarterly both in of drop just we of expressed with severely in two scenarios average losses rates percent no peak scenarios. three financial basis we an point steeper into and our and doesn't quarter nine steeper of quarter already CCAR total, and in dimension loss performance That's unemployment seen that the it that this adverse well and and not the we've it's credit see about if CCAR X.XX% own to baked materialize. see our level it generating a

than respect crisis be to for financial of worse. for single was at were may well. the different particularly Wells quality on as importantly, benchmark, other a the true loans, it with And as But banks side very least Fargo, portfolios family the loan

was auto portfolio our too. worse think I than

because higher guess own I to now currently produce call rate – somewhat loss content what of I imagining And rates, today we're we would – halfish describe test. different, it than we be so did but CCAR of there stress own our our severely an I'll version of the in rates annualized the analysis adverse higher higher loss the do even loss is portfolio of

that comparability? the both, the the end if with approach more substantially then things into it and up may or we worse, our you coming And there's that in March possibility on governance feel out certainly the experiencing our comments developing about scenarios around good taken we've quarter Charlie, so play but end. And or charge-offs have more we building

Charlie Scharf

unemployment we smart GDP XX very different for when will think who unemployment, with as Same clear points range outcomes thing ofXX, to with points said it's can of people's GDP before, differences what or we I anything people do differences. – know, think path in be. mean, listen, estimates, you this and across Yeah, my I think I X, I a this see a – I narrow there's living. like all seen XX no with remarks, haven't for mean, we any about

know. again many actually long at out which none than we making the analogy And question other that, a I this The will think there. have so they of is Having doing. be real very this said shutdown as like an environments. we I of us downturns just banks other stronger environment have that in how ultimately continues, time I think to feel they are hard what are were certainly portfolios

But continues, help things doing plans very of huge we individuals our in see be the or corporations fee whether have, addition personally able we earnings clients things larger to to the that they'll to that to environment amount the surprised size that, small start and in. to by of And the we're will how our to actually that surprised people government the numbers, as ultimately actions, I I cycle and that those even continue we're reserves But whether and intervention, it's waivers, as be it as different. industry the the actively what potentially will businesses again, surprise bridge be to and things of And though to have wouldn't volatility these side impact, other those live the able forbearance big about like. to growth to strong we strong is know as to add I what handle in this. looks be create And numbers, the me and is them. it's talking wouldn't economic that additional we and confidence think continue said, are to this.

John McDonnell

up pros the idea you've folks overall. about and and keeping the as in about you thirds for as talk dividends of the for of And majority dividends yourself a And banks again quick importance dividend the is and buybacks. of cons Can banks, it been signaling. for Great just the other maintaining has talk payments a of the the the distributions, now, cut of industry? two big you a right industry follow that. Charlie, not but to Fargo, Wells debate

Charlie Scharf

all in whether one those holdings, the from Yeah. for that or things the important stock own that. it's Well, plans stock listen, certainly and way whether individuals up I that are ownership or pension wind those dividends or direct benefiting and think ultimately certainly another, for it's like

that companies rely come important, has be pay. I be people able to to to underlying especially think ability at an income stream for but to there times is so the like this And on

it's said. to that certainly to do just right they have for ability to so think I the And the extent pay, I thing that reasons that the

these strong have environments. to ability the and John stress to ratios. whatnot capital return We determine capital in We all our tests stressed do referred severely that and

slightly than different that cap. sheet the balance of because for you us, are we others remind Also

our balance So capital sheet cap to our deploy internally. does ability limit

sense. why as that future know we've like what we look on and that's at don't we my so And – the in sit paying, certainly we're makes based the I that prior that the based the upon alluded to say everyone of and and comments, timing do we think looks that be environments. determine but here is But dividends, for pace these stressed about the out assumptions it, We the going to laid ultimately capacity in very the to able dividends. support recovery earnings of continue good feel to level

John McDonnell

Thanks.

Operator

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

Charlie Scharf

Good morning, Erica.

Erika Najarian

morning. John's the are Good about wanted a question question that to because Wells ask lot dividend a investors a just on asking I it specifically. question clarifying is on Hi. Fargo

X% the right your minimum the restriction, CETX. the would is on given the peers, that continue reported market earnings are bright you of And distributions We look capital for are really through year balance the to would you of versus at the consensus just that to I to monitor XXX. taking that wanted RWA line before that your sheet less XXX to because relative some is I'm message through levels at and payout. And instead So think to eat going away capital this growth, sure where capital make about dividends the be dividend right shouldn't way the able forward? and unlike breaking

John Shrewsberry

forward looks our should what that's to like, we the what forward I for what like. looks long like go though in and context view, dividend how we path going steady out figure that state we're use that as economic the trajectory this unfold, and that's look and quarters right. to interpret and understanding think Charlie's the an earnings estimate also be I'd add the that state

like year's terms a dividend this germane. or looks So of of stress this in like year's consensus versus during earnings is time estimated less

of that point start helpful, that loan that. the reflect way light out ample is go that's and that position others we're the not B, what in making incremental intentionally. origination right and fact is if A, of we state what may are balance their the versus in about was an generate rate through are substantial than really yes, the steady capital but with Tell to important think dividend doing we think Charlie RWA a outside out and earnings expanding this on who I fact run more and that a distinguishing be sheet one now the one and

Erika Najarian

XX clarify us updates for it – what question the forbearance. you XX on said mortgage, day if which adverse, just said if potentially be period, quarters April the and the the my cumulative said Got like? like in give us I of billion. you of could so by on you it XX a could and or also auto question or nine also losses, how possible, payment something day you how this forbearance you XX% some would X, clarification And was second your cycle is behavior to And clients by severely John, that many that think was give just losses, John,

John Shrewsberry

that in that adverse was are you're scenario of year. half we're talking that the looking our said I of at probably through neighborhood in What rates last are loss if current the the and severely current

generated point the to cumulative as where cycle are we've three by question In that loss through I'm not level that two But that goes we're of stress go like on and nine and just test than over predicting in own like what credit these bad to look lasts now, more really that instance, I'm quarter and benchmark et percent cycle I'm is a making terms a And in context, calculated rates making quarters, like. call benchmark. roughly losses, our we a response going And lower not adverse aggregate contextually, than are providing half. nine that a quarters the of for deep, half, for severely for a just answer so that loss. that John's cetera,

I'm for With $X when two call we're own distinguish point, billion and Fargo. worth think in of a million the deferrals, including both think as I loans requests service deferring well as at I because it's others loans respect payments, we Wells our we've to don't they that on for deferrals, P&I. this about customers books now over – And had

for what me think that, but bigger there relates mortgage, of about of in books that I XX% it the that's loans P&I serviced it the to dollars on amounts others. mortgage than loans it because auto and I specifics our beyond on have XX% don't the disproportionately of front the is of and an is to. course, is auto It's loan. own

in going worth probably the at of for with recognition our our be the amount. but on own large difference We'll on it's least basis, then and doesn't some point income interest we an to future this And this at to we updates interest that as that recognizing deferring just It's recalculate period year. some a effective the amount. interest amount point. respect And be all maker seem by into that it's the out would give revenue income P&I current not number a at of huge flattens would mentioning which of the reduce books interest for the interest yield, terms on and don't loans in I think – be effective

Erika Najarian

thank it, you. Got

John Shrewsberry

Thanks, Erica.

Operator

from as Scott Your next Sandler. comes Siefers Piper with question line

Scott Siefers

there question. what Good in abating you've if stands talk the little one indeed think to back wonder behave? thanks Or seeing I and are the I be it those quarter you dressing line you that And actually would credit ending been there draws. just trending? how for can would and draws, into you the of seeing with for to balances morning but mentioned is that reason John, just point need be since used? phenomenon guys, credit guess line what some window are your actually perhaps you pace of the doing taking at of I bank, a re-deposited the a that customers during call, getting has expect the quarter work cash may been an Is it there? how bit of less of the

John Shrewsberry

Yeah.

customer, flattened have last out. et really been they daily happening negligible more draws And those daily industry, to they by customer by week. the those for by several have And monitor just understand what's a type, cetera. – So than days

and they me back And down. March and then third so the then at peaked probably – April came of in right end the pardon week in

So not growing at anything like that pace.

So a or a stick of on little it on are bit reason the good into with market guess had by appointment, I the for the depends for high depending been related open, – less yield And for more which which window was and more market, to to go long people draw market it question high was they of credit grade do some But story. obviously. who it's which how the the wide some loan is markets, access syndicated begin of closed, open or need to a one. need it whether dressing, whether their

that they people their when on just preference, liquidity were because external hardcore And of access cash and means what to of their back economy drew may to that the wanted borrower, is for a the of know up. the preference There nature sending have the regardless to for open it have they stakeholders. And going depending who to to forecast. sales liquidity the messaging people until quick were continue they

will on not, seen the they're downs mentioned they're or sticking, currently question other. the we've quarter I they're balances growing. pay response And to outstanding as way NII or about in guidance, this really And don't remain so I not impact yet. but one whether have an not And any meaningful think those but

Scott Siefers

you. financials Okay, perfect. bucket. the banks if a – second by loans except you you about talk a Thank in Then where through I XX can Slide C&I the little the question, go bit just ask on in maybe about we the all areas of know some should color just turmoil, past, portfolio? I the it there's discussed that? and but a little be in that been you've what sort non-bank given the thinking of Can

John Shrewsberry

mortgage, partners against providing activity, stress there's the of asset sure system. where there's see there's we're so so CLO bit the Yeah, a alternative there's to leverage to the of managers mortgage, managers, in commitments credit little cetera. there's I'm buckets we'll the there's related leasing, their limited there, when commercial more et fund finance activity auto, subscription card, called, there's

As enhanced to it form large balances, we'd or ratings by to quality collateralized a they highest balances of highest have loan relates generally because receivables basis among one the the credit quality and another. be pools on of the cross or tend loan they're that

to stressed of loans said goes in dollar function, huge that loss capital us the compared ongoing or home to they're an often customers And their that's originator Having in benefit have where portfolio average types their if the in if you stress first loan. a of bad something a manager, servicing will have if in residential origination mortgage to life's for them little these of bit way. of our there that side as oriented, that managing servicing, those servicing things be accumulation this like pop their that on asset an so default can and the they're advances be we're servicing, up, a harder, presumably going are

we're we in billion AAA, but is what's overlap, complete varying exposure defaults an securities levels Fargo CLO that of is of which And cumulative disproportionately have of that – loss distinguishing XX% Wells little also top and worth can plus. structure, very withstand rated was the a externally I AA default. CLO given a to think with still of portfolio front, a big On portfolio, XX-ish comfortable with is for here addition, of which a that AAA, level of portfolio bit in dollars’ extraordinary our capital almost the

haven't been meaningful there So stress here. signs of

are will borrower we allowance We managed so If actively calculations. as our I it talk relationships, it. mentioned. about very manage it becomes actively And in these

Scott Siefers

taking Okay, that's all perfect. the color, I so the for question. you thank appreciate

John Shrewsberry

Yeah.

bet. You

Operator

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

John Shrewsberry

Saul. Hi,

Saul Martinez

Thanks I a things wanted guys? Hey, tackle really my taking for of quickly. couple how you questions. are to

is up than it's on of even X. under all tooth is roughly of you're ACL you you over at of is one estimate any what oversimplifying way other think to and obviously probably January about time. bank that what but CECL, XXX it an First, your any for the trued – log as in given interplay – number ratio the it, this point the for going loan in that CECL think ratio is credit And the life points. to so entirety you of of about lower your up lose is basis book And reserves, large your

to get you other kind were past that that. think you've want a positions marked risk loans, how seem idiosyncratic lower that more loans your I have as a guys of of is much to profile just the in I better like a of and some of So perspective loss maybe reflection on that in content – recovery you things stuff to it, opposed some as recall do

asking investors you're undeserved I don't which case, So this. and the but your to perspective get is to I question kind occasionally if do on that relative your I ask also because I get of peers, just wanted from think

John Shrewsberry

Yeah, think I a question. it's good

with loan to mix loans has think which with negative the to most one historically those was a number. of about marks day of The but adoption of I portion our marked lot source would a adoption question of do true, been reversed, the it. have be CECL, had

to So used that we don't on have although to. rely we

times balance wish what's we is size through the for to I have outstanding Wells versus saving the be from is what like card heads card jumbo probably sheet. we our is if expected well little true loss as bit in a was other both conditions they're And allowance well come of a up peers. the think outstanding manageable more we portfolio, of And as as most in the on bigger under a that grace as difference basis credit capability versus expected Fargo might both mortgage that's a this undrawn content biggest to the of credit we on serve both have that in undrawn. wait which because waits in our

higher has because cycle, of will loss exposure in borrower still on really LTVs, or the much that the changed loss front et unsecured between consumer unemployment it's cetera. you'd Even quite higher portfolio driver estimations It's on expect in a any for are be But and business as this the rate content, big cycle repay to losses so because in first stress lean reserves, loss low. that mortgage capacity our

card have there you as of lowest or so the various and categories we And and biggest on wait the the commercial or and highest C&I first is mortgage the credit probably run on consumer card. categories, lean estate real lowest different wait down mortgage is

Saul Martinez

peers XXs, category, you loss in Okay so we presume can and and be given Y by I you'll right? in to segment, allowance your compare lending queue loan your by

John Shrewsberry

Yeah.

Saul Martinez

you've and on categories. gas you and do of for one, of you you've in final how in or have to one those a you level much XX, entertainment and much get disclosed just Slide all you of reserved? And stand XX a actually sense sense for where Or higher all the risk that just sense to terms oil reserved a sectors how would reserve have actually have disclose or

John Shrewsberry

most downgrade are categories get the qualitative because that We haven't yet those – are is which attached levels to hardest portfolio. the haven't because had through or that industries certain we've of of by a lead result, qualitative for allocated being top all mentioned I that basis reserve the a grade big – is went the build way, where the of still in It ones loan this This part a and estimation yet the it's not is specifically of it's and leaned as down. mentioned the still on the this Those up buy there. them, that reserve, process higher will assumed factor that it and how I run to but we downgrades. which hasn't quarter

start things to will not these provide in categories for as actually the queue, sure certainly C&I cycle we appear graded be to particular. reserve in I'm start information. will the calculated, in and unfolds So more but if it the

Saul Martinez

thanks a Got it, lot.

John Shrewsberry

thank you. Yeah,

Operator

of question John Pancari ISI. comes line next Our with Evercore from

John Shrewsberry

Hi, John.

John Pancari

number, make estate Back just real up by that morning. commercial that would that example, for through know number, loss indicated you two what cycle numbers I are Do net Good and you quarter through card the have highest cards C&I X.XX? cycle assumption. and the three have those your bucket and you to be the

John Shrewsberry

cycle, the cumulative so the through adverse loss X.XX is Right, the severely CCAR level.

level. to don't anybody – cycle it's I that I'm what want walk clear So experiencing we not know through And sure that's away loss not the whether I through anticipate the I average wasn't thinking cycle.

it'll I on haven't about disclosure look that come laid last all gone commercial but side haven't from from you category not come those loss X.X% I about category out. But the out. it in retail the individual on if of stress would Wells our percent you test, of laid it's by and run loan of Fargo's, to and the – we the that get categories last have we through – to Fed guess We We that with it's can and I the components, side, X%. tell terms folks. the with

John Pancari

– stands ongoing we this loss current loss – it. what answers an of the reserve quarter a and builds one incremental book or reserve assumption level Is that you given your previous that point, got at could [ph] this where Okay, Charlie, the recast bank's we're from et the loan terms then indicated could the at see borrowers you the cetera, of Got that put have it your in and loan regarding in your do expectation this for adequate on I here, the believe, here. given reserve given fair incremental think at you on point. builds you of from stress

Charlie Scharf

let I economist. guess. – I – I'm guess Yeah, an me not just

my surprise will up having that seen GDP anything upside else which the least point, any deteriorate pretend time is difficult this just don't that point. this think than what I about in unemployment impact future position. of don't – We to than And and know trying think not to would figure a never of probably who's longer, there, more then trajectory I given I seen. out to are me for the based I it's the more on there's my economists was anyone I clear that go uncertainty I know so what we've all it's And this our there's wouldn't there said own I out me at from say possible, fair – the in in the continue that it it Again, that adding numbers. that be just portfolios to the will be. But future. What the in will to saying was wouldn't in seen suggest was downside anything We've if be the surprised we surprise programs not people which by confidence before. is the downside shelter the But – like in place at just today. we've mind, orders in it loss to environment are stay of estimates it's something on have does

John Pancari

that commercial have they've from as stability just ask that's I seeing that little drawdown a current thought Got implied would bit draws. the one you're have the drawdown some Or of Have can know point, the trended the had they had on helpful. leveling where expected? off? term near on If you you could it, showed I there more, level side, exceeded you

John Shrewsberry

So they came out experienced furious of actually fast the before and gate borrowers stress. meaningful

So was have I we than probably would little say faster would that imagined. a

possible still about question of of and closed was the on high wanted grade inaccessible grade terms things it. being market and off, expensive a high balances for many on their dressing leveled those how being the for window are things certainly better that quarter or well, bit it. going was The a cash CP borrowers are now to users these functioning through market where that contributed both part little and our maintained. balance to – sheet, In Two, have certainly of there whether the have prior

How business early is a they're quickly was to said, the drives, made the to feels results fast. a business, and to So to understand contributor affected it's our Charlie going perspective. respect clear like think it's their that not they're place meaningfully many seemed make trying a in liquidity the folks flattened relatively I out. long change crystal of like nature leaders their it's, determinations that going own the are – it are it The fact determination mentioned – that many whether to with shelter sales from long It if as people, how little that along it, to but I they're but way. in

Charlie Scharf

over it not this is over we've before. as something at isn't again and that the time. This say is we Building seen

thought down and would have the levels Absolutely. the the and – at And increase we which same be Does so number shut did quickly at time? that as industries speed draw No. they would of draw? businesses that

some in So we're stabilize they in the need they has well stability terms when actions, where that that the people the and taken confidence seeing but about says Fed lot the the are those to access to function will fact give numbers markets reductions the and awful of that an certainly markets them.

John Pancari

guys. it. Got thanks Alright,

Operator

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

John Shrewsberry

Matt. Hi,

Matt O'Connor

deferred seems in for on that any we like even if It adjust noise, came morning. lower expenses the quarter a in first outlook could expected bit the Good than year? provide the for comp you cost

John Shrewsberry

Not meaningful, throughout little of first in we much course that the in instituted will didn't quarter a the contribute probably cost year. few employees programs for first a the the that our extra quarter

the conditions place. and costs incentive level travelling or probably depending be pretty T&E in range course sheltering down that business On revenue of a comp not performance. of with much – zero other on people hand, the related ongoing of is lower to are our commissions, because types things there's will if of

will little different in. expensive We probably got to as we've XXX,XXX we've course, then in stock this And in price to costs the of it a will have environment to beyond levered cheaper that. has that a anything not certain that but people public or technology where the get home, year types from this bit all enabled And is crisis factored work more during that are health moment cetera. than et get probably ago, expense be that of was targeted meaningful

Charlie Scharf

and And on I able the future that to savings. that not this And views is thing our about in we of we we're what to we're the given is very as think efficiency the would do. our where work environment kind had the add environment clear were last call we the realize only the any on meaningful is about

right just we which to still to the the there, point. completely sight past to take at do order that of continue is down more to to going that back have doable thing. work a So we It's in line we this little to see time drive need to believe this get crisis number and

Matt O'Connor

which terms of kind in business small regulatory you've customers, help there that regulatory obviously, issues on doesn't seem just made there of then surprising, are any but are a addressing since on? of down. to And understood. shut deadlines some you But to media, Okay, of comment you some is things missing and comments able some the And from the flexibility in broader headlines issues? were kind lot want add a perspective to the anything that regulatory update are you

Charlie Scharf

specific. anything do. talk right not the reiterate. to going not about thing just It's to I'm I'll

work do. been lot consistently. to that very, a We have I've of saying very

necessary some Our regulatory upon properly. a to doing what even actions ability We're these this crisis. point. towards work our at to of it. is could the continuing And all There resources based it, get during beyond really say the bunch I of that's devote is this

Matt O'Connor

you. Okay, understood. Thank

Operator

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

Steven Chubak

Hi, good morning.

in to guys long managing ask to you're the you that other recognize but mitigate wanted frame I us some classes, curve, outside agency of those understand where treasuries just maybe reinvest about given bigger book, I you how asset John just again ins, of could today your maybe reinvesting a to and So securities reinvestment help you're trying this end appetite of yield roughly question to was securities versus and pressures? just to MBS X.X% book. NII significant on I'm dive the decline picture the hoping what's pulled the

John Shrewsberry

good Yeah, it's a question.

So $X I month – prepayment to today $X that get investing we've where redeployed. maturity we're billion of to expected think needs billion and and a we're got

continue investment There March, LA. they're to redeploy interesting use into our weighted our really opportunities likely in interesting for but were more credit cetera. certainly to it more sensitive et value, likely powder dry We have are for in But we're today. still and liquidity securities, They customers. will of risk HQ been interesting types low

that we securities the though front, on to the for would portion both. loan asset is cap. existence done a than have even growth, rather So historically of the related of And

of be redeploy $X G&A's still it's we billion year. and month to the likely treasuries, So per billion agency the to for mortgages that$X as rest

Steven Chubak

year. a to outlook this I all run near we up, was X.X we pricing, fee pieces spend fee wanted core the you I charges, I cited contracting, adjust I try to wealth lag it like moving frame about look should wondering remainder about maybe volume thinking in of the you'll try lower of looked for guess I'm it there's if around a my XQ in the and pressures just given on specials, from the income just for just $X.X the for and be just how somewhere as billion an right have quarter, speak just just given follow and suggesting lot jumping for maybe outlook drag And term rate of know off quarter we the the wanted billion. income. offset ahead, service point your core for to fees mortgage. gauge a key some

John Shrewsberry

the be for managements. we've describing. I That right wealth about and stepping you're be off the that's that for expect will to say would So complicated lower. reasons that stronger. I mortgage all been investment point

a a have We basis. on billion $XX on a and pipeline stronger pound gain per sale

good charges where are a QX. but And –give basis So the lower right grade is going in fees well of service targeted to on that those a transactional quieter, Deposit Card the taking will fees and be should number, in non-investment probably influences are is although into my never grade are sense going quarter or much businesses up respect. banking fee to The really it's give on lower it isn't actions but be because starting quite should second all issuance. equity appropriate. investment markets open, a high actually volumes as in add there doing lower. we're now, because on reverse be works that it core bigger income

Steven Chubak

great, That's questions. for and taking very helpful my color thanks

John Shrewsberry

Yeah.

welcome. you You're Thank

Operator

comes next with of Charles Portales. from Peabody line the question Your

John Shrewsberry

Hello, Charles,

Charles Peabody

economic not guess that Hi. are over It's cycle. my risk this tail events for

relate could sensitivity two your tail was address interest your as rate they wondering on P&L. I the risks managing and you if different to impact So

curve, and The that basis are you take the twos banking rates, impacting and a as of can of then XXX come steepening actions what first multi-quarter you and or vigilantes the to period manage into And go P&L second between got securities? your it if is impact we relates how do negative on your NII, if And does to is points back, a see that the have P&L? we bond yield equity that? XXs. spread What do mortgage debt securities ever

John Shrewsberry

like second better the I'd than Sure, the one. one first

Charles Peabody

would, those questions. March into risk second going to also quarter? in you month three interest you are rate know any the did So take actions of your I but Yeah, material hedge separate the

Sorry.

John Shrewsberry

getting Yeah, against we'll and to defend would much month the this longer replace activity in is so in In of go March in longer, I lower visible reverse rates duration continuing going in most add to any the investment but and order. duration to size. say not portfolio

OCI because to that the On value, have there's deposits hit cetera. the loses get we et if second steepen, we they about happens to our reinvest but what are with bond question happens a obviously, to portfolio capital at that levels from with when regularly amount that

to – putting number to increasing drivers it's and for in income are We it, as of the on that true the, the point sensitive XX interest it call year a well. the we're seven terms reverse without it's net biggest the way and probably specific positioned is among

I LIBOR negative side, But there's why environment respect of on of make at Europe are terrific think floors loans a based in LIBOR that of the looking obviously, with examples looking I rates things. of handful our then Japan, that based a at C&I to there's them. that's plenty looking the to at it's or And not point be all have substantially lending for I'd in banking. mean,

place through an attractive ourselves but about we're that protected to still So we've worried margin, that not be, eating way. in

deposit there range institute we think to related that begin a would cash. are activities for I of where we have holding charging

the value liquidity be Given existence business low overpay be deposits can't didn't an have to in to to managing deposits, that for the we an we were sending because we that that of deposits alike, our so – asset and quick the back cap, – we incremental didn't have we customers pay of for. for influx what would so we appetite probably pretty we bank

adding to mentioned, suggesting portfolio zero. on I or rates long the a the as negative investment go as then of is rate abate you're fixed there's maintaining a earning – higher I way And duration probability rate below a duration that. a don't posture posture think

has been and clear, have playbook it where around with it's don't I been bills technical front end. the a instances the policy of negative think part least started I went to decision world the occurred think other because curve, out then do and the it pretty it Fed's the of just currently at factors, but where some at jurisdictions for Fed the

negative the questions. I better than the your So curve among rates steeper like

Charles Peabody

Thank you.

Operator

from Your the of Kleinhanzl with next line KBW. Brian comes question

Brian Kleinhanzl

good Hey, morning.

walked rates maybe decision Just to kind expecting correspondent. question first non-conforming a loss I and that can quick the through banking mean, you heard on I the residential below of mortgage mortgage. exit the

broadly. the or with credit issue the So just more risk cap asset

John Shrewsberry

customers the to It's levers one at Fed we're not our own using the asset under retail putting in as front cap, risk space of living manage shelf really and the that particular. line

Brian Kleinhanzl

off quarter or a markets there a end the lot to then quarter and in that question were of Okay. more spreads of just where separate were at And the was and in were, kind hedging equity the where items due one to rates the securities, an it impairments markets was for at where are, time point has activity. then and debt for reverse another often was effectiveness given reserve expected the are this or of

John Shrewsberry

of to that quarter. of it for gave sort a to events hedging the I confluence wouldn't expect persist. or It's reverse On rise effectiveness, that to

debt probably that up a expectation depending for to goes or other in and of can what LIBOR OIS happens back zero a or the basis net it down call expectation So drift on it reasons. some

a to In there terms of There lots are but we recession, in [indiscernible] that's different of get if happen written were the alternative one? equity of while few and are measurement what a when I but actually that expect that of to the over to last the quarters. take situation stages a was early wouldn't next investments, back in ways do it, it'll there earn And some examples. that impairments, are life that back up the activities couple those itself. where warrants reveal the for Obviously, those

Brian Kleinhanzl

for debt reserve The securities.

John Shrewsberry

anticipate it and – maturity are relates – security. both will don't that I Yeah. – AFS to to that those held for held

back. it are So presumably that, I right of of OTTI. just nature some might don't think securities some release that there or mature comes but the AFS That's get sold that

Brian Kleinhanzl

thanks. Okay,

Operator

Your the JPMorgan. question Vivek next line of Juneja from with comes

Vivek Juneja

thanks for questions and my taking of Charlie things. Hi, couple John,

capital and quarter? – book know at concern? as the four commercial criticized have in Firstly, seen commercial oil do And your any categories? you of where the outstandings drawdown's in any and commercial banking, impact how into loan you of the broke look we CRE, total I Have firstly those CIB, how down and you and did on any gas. those those also color in we criticized breakdown any of the mentioned industries seen any there's did other loans numbers

John Shrewsberry

about – billion $X in in for March. that we increased example. mentioned big quarter for balances here. it the loan I'm to those of that are trying of airlines in A the industries are do math all earlier, almost criticized piece So the it

have see gradings, You'll approach. much mean, it's see in already more qualitative in of build itself the driven that It's really from which it's size realizing There the it come allowance QX, real loan et drive so to that based math, part – occurred not late – early in through. in energy so perspective. commercial probably but has there's by cetera, of quantitative is our a which why I is mid it's because some for in sure. been but in this just March, estate we'll – all

will So specifics that we’ll model the file through update coming We'll second a we'll see and basis and of QX. and in financials I loans think quantitative in it we usual see places. behavior more will receive have the the it XX-Q the actual– you'll on course, loan-by-loan then when in administer the the quarter disclosures from

Vivek Juneja

in CIB, a And how book are does Really, down color your commercial banking, commercial that? between biggest there's of on categories CRE three C&I, I your Included guess loan break those any and little bit capital? commercial

John Shrewsberry

those today we will is have outstandings superset commitments C&I total in businesses. What the we of a shows that publish be deck when There those segments. the and

see can between the what Where the in draw lines total. it you segment. So we is which

haven't disclosed it way, see QX. added in it but that that begin We up haven't, way will and it to you

Vivek Juneja

yield Another question high consumer deposits savings. you mentioned that in through the on deposits grew you on page

deposits, you're why on you grow behind color -- trying high any growing to that? yield savings what's really didn't Given not [either] I trying color think any you're were

John Shrewsberry

it was a yield high well, Yeah, the year isn't as today ago. same

where something different. the put this grow means preference money is they're of yield we choosing going Some high customer the their of of where to in label savings

for throughout down As to costs we're I our preference our deposit reflecting of said suggesting, in deposits the what through are bit customers liquidity with the earlier, remainder the by overpaying rolling as substantially a we XXXX, come not which forecasting are and a is you're them. flight-to-quality little door a timeframe

back You the QX, deposit and will forecasted, see all --call roll from timeframe substantially so currently we in last heading be to the four think it of three going to as expensive then more finally through incentives I XXXX, off slightly deposits we're at a era. we XXXX building of QX as were and to year costs

Vivek Juneja

Okay, thank you.

Operator

question gentlemen, RBC. time that have And more last comes And we from and Cassidy Gerard with one do for ladies question.

Gerard Cassidy

it categories John, on is the can XXXX? had end outstanding those was biggest commitments. the total fourth to think of you of the within you drawdowns? the with share Thank gave outstandings the XX, about that Slide number What I gave us you. XX% And and commitments, total us, at us gentlemen. Good you quarter morning, who

John Shrewsberry

specific of utilization front XX tell deck, on this right me Well, you so jumped you. our I in category a answer have to X% Slide information very same as to XX%. me. don't that asking was rate the can a almost That's in I question that up you're and

IR we had I'm and going been high that of me. have follow high should in we're have universe the might we right by front utilization, XXs whole tracking industry the have or I do in for be been to but XXs the I it because and draw – commitments, requests say wholesale don't of you we of useful, now up with our folks So in utilization.

Gerard Cassidy

very that retail, the on for out you good, thank gas, was as helpful. And someone you. complimented break entertainment else oil portfolios guys transportation, that's the and No,

One If you think except time technical it's banks, could be the the suggestion a you, for provide would next a helpful. that for financial last question I for question.

net to assumptions correct your the up the economy being correct? quarter. offs provision way quarter, primarily build use are that that correct, Is reserve guys are more at If CECL second up? do in the growth see covered in and and CECL CECL If loan look reserve it? on should that we build we the they charge Is the this the in you no

John Shrewsberry

had the discourage would you to bank that have worse. perfect if the in imagining this it be to a the the bit timeframe, that view be time of allowance you'd about future point one it'll also the sure to the kind next. from quarter how theory, better know at But loan at clairvoyance growth in I'm capturing any perfect anyone has minimum, gets little In foresight, whether but it same for and got what different. from you portfolio a change holds, gets in I because

Gerard Cassidy

Thank I candor. appreciate for the that. doubt. No you

John Shrewsberry

terrific, we're call. forward that quarter. to to your you stop this in thank step going and look to we much. now very Thank into this saying you Terrific, the cycle with is late understand saying of journey cycle. the help where working because that some you we we'll next answer go can early in or that our as and be questions you, each talking we was to We've And we're We're been last on for well, the our everybody, cycle. first time

Charlie Scharf

Thanks, everyone.

Operator

conference you today's concludes Thank your participation. call. that gentlemen, and for Ladies

may You now disconnect.

Wells Fargo & Company (WFC) 14 Apr 202020 Q1 Earnings call transcript