WFC - Earnings call transcript Q2 2020

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Operator

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wells Fargo Second Quarter 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]. call recorded. today’s that note is being Please I to Relations. John like to call over turn the Campbell, would now Director of Investor you conference. the may Sir, begin

John Campbell

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

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

Charlie Scharf

to dividend us. review then poor make for to for the the going results, second more intended reduction. by Good about and results quarter is review of I'm to a over Thank turn in open the the environment detail. call quarter morning very John. I'll rationale comments call you, everyone. reviewing what the the John some clearly discuss our I'll drivers

due to COVID, related to the accruals $X.X to issues the banking certain This remediate matters. matters the we our community $XXX Revenues comp due deferred made billion for ongoing accrual COVID customers, right the offset do look will right was thing historical we do to $XXX about by as leadership possible. be for to of waivers million and remediation took fee primarily and an resolving employees with expect most fee credit our of quarter thing billion impacted we about these us the which this of from to interest the million the $XXX constraints the from primarily decisions for to of substantially downturn losses. from approximately COVID impacts the from quarter limit at limited first well Net growth the growth, our Our $X.X length which considerably to severity XX% quarter, prior-quarter added results end included down as with The our prior-quarter loan and was $X.X as Charge-offs view knock-on took the operating increased to during lower under of the income actually rates lower deteriorated and the allowance our we actions rates. will billion. assumptions customer safety of lower permanent, but do sheet the while by for outstanding losses to million driven balance offset as John interest and highlight. to asset another $XXX and work cap improve ability million at in related for deposit not we under has of Expenses facilities, this quickly to were operating and enable of related as new revenue, to products. our

our CETX this and regulatory faster defaults last production $XXX the Bank. Even while from strong offset well our of increased of it's in XX.X% with partially the a record quarter, to we quarter, higher it's our by have did X%. a prepayment XX.X% Corporate rights company, revenues ratio part above million Investment mortgage loss projected mortgage was quarter to and minimum this servicing of quarter revenue smaller And assumptions. asset due write-down of In our addition, a &

reminder, a capital minimum X.X% buffer of stress possible. expected the reflects minimum regulatory As our our

Wells loans. know, Fargo makes you takes a is As predominantly deposits U.S. bank that and

loans businesses, suffer, our we portfolio XX% middle in and investment and Our well. consumers, corporate small companies balance sheet market do is composition cash as

As the customers impacts our filter credit compressed interest on will by form primarily through clients, and economic it brought negatively losses, to and environment net COVID the outsized results in our margins. of

opportunity both operate sheet an like us in we balance balance and capacity, are with prioritize certainly a sheet and assets given environment cap, this. an must we cost there deposits, Additionally, for

for position we’re exists oversee is the of sheet didn't because in, both the failed if leadership the said that, the we appropriate where and because below we In uncertainty another build manage level or deposit we're cap, base. sheet cap difficult decisions a of and infrastructure loan company the drawdowns and recovery, addition, balance our the necessary. period upward given the upward even there's asset to remain pressure can responsible must leadership Having the our underperformance the material balance financial on make to

the and meaningful view more the company. we the risk quarter, to will provide what been take too all stand and taking focused corporate company. these. our In the point, We’re regulatory greater We improve comprehensive first to of activities. It of those oversight priority. foundation, and build expect much risk foundation way activities and But across increase begin to in do to will our the recognize changes have margins. the which both risk to regulators control also decisive a To of and to announced a none extremely our continue second highest is risk impact structure to of can nothing still right of inefficient of on is that we we organizational long the actions, for which make or we've risk our work will

complement risk Our of Chief leaders the new risk model to will teams have five and business by Risk type. Officers line

a Officer we Executive. a Officer, for Risk the Consumer Chief Chief Operational new quarter, the and During Chief Control new Lending hired Risk

two-thirds announced to the Fargo to since experience, talent all coming company of months committee, Fargo and additional over leadership outside from add strong with committee six the our senior ago, members the joined joined to operating since have Wells I continue of Wells relevant XXXX. new We operating team I’ve industry nine

line for of Sommers Mike in joined now Investment and joined a Lester newly will Head business in Consumer XX operations Barry June are track of approach experience Lester us record industry Weinbach in to proven Wells Operations. than Owens a substantial more a the role more financial roles. All same responsible while joining He Lending a senior who of has place, week customer and of operations time. delivering as Fargo at experience the years next created in end and May, be has He Wells building integrated as Wealth will our at CEOs business functions. better who CEO including in CEO as of Management. efficiencies Fargo's driving be services of the

new significant roles of Relations, responsibility including operating a our Administrative new Officer businesses. of as a Head hires and Communications made from Corporate our and Home corporate Lending Head and committee rundown also We Government as well Chief

more back when continue We the into employees environment. over have home But we work so cautious and continue we too a early we determine return who office. exactly will about least have until employees to at is working to XXX,XXX be plan September. traditional will ultimately from It to working currently do bringing home people are to from to

of move and when we in are benefits interest, people comfortable and health representing the Where million. we this decisions do $X of million While physically forward including $X.X done $X geography, million customers since consumer and This working will the the business precautions we the for have make over helped exceeding by our are a accommodations facility. there through service together, serve meaningful we’re small the of payment communities. believe there deferrals fees. We've for for customers that appropriate will small more customers We've consumer do we’ll specific and these principal manageable. more and safety X.X do June, so billion and so by mortgage loans we includes provided approximately by in made I waiving crisis, X.X deferring others. is customers in with end fee need, significant will and waivers billion our business We place. $XXX to risks million than And payments beginning than continue

of our For XXX,XXX representing than billion deferrals $X.X payments. more approximately interest and we principal processed clients, commercial

maturity areas In loans loan of June, of addition income for last XX% extensions representing for companies finance principal census at $X,XXX, XX% the $X.X customers, in open of of than companies those billion less size than were tracts. annual date an week in less approximately had end XX PPP that are for amounts commercial business we and average have were and employees, announced billion with fewer to of outstanding $XX,XXX, XX% least were distribution funds. and than funded XX% provided for we And $X low moderate and million XXX,XXX totaling $XX.X XX% the loan auto Through revenues, minority we of interest. have those for

serving the small provide onset almost We Debit we customers in those have Credit an government the the spending quarter. cap, actions paid reflecting approximately the which digital quarter of in same spend week we our of the of a usage year-ago. down with stages up segments, capital, to deposit nation help processing in to work pandemic emphasis the May stimulus the Trends were reflecting $XXX to to protection goes continued returned turbulence were $XX over COVID-XX the and Consumer resiliency manage logins to businesses. businesses full Customer market Card June. In commitments from programs of will XX% loan and while Commercial million and declines week will during of describe in mid-April, the from detail. at the to were payroll quarter, cash by levels spend was March, XX% committed and consumer pre-COVID in organizations in from with started businesses down earned significantly in loans their the with XX% commercial starting a donating fees plan through into was to quarter across gross year-ago pandemic we all support second approximately industry impacted week same as strong, billion the the June non-profit and improved year-ago. programs, to with the was to the of minority and converting In John but up various from second to increase last XX% long-term reopening. customers have investments week down lower on our June the under deposits increase steadily asset declined, second more still spending over digital in technical approximately support April in unprecedented took card customer are utilized as remained still of up over commercial deposits the continue spend end last the volume throughout lower compared card and of year-ago the XXX% second full and mobile in year-ago. compared a commercial trends monitor owned dollar

reduce now. amount an previously bank's to from the quarters. me the announced quarter of the Let the income net dividend Federal to to these our that share. we turn our stock that of has announced $X.XX that share. expects instructions, the reduce dividend the us a $X.XX equal limitation this preceding to Based dividend exceed on Today per common would The for for cause the level four to average current calendar pay not Reserve authorized board we banks dividends to do third

In the addition, the the limitations right evaluating stated from to which dividend and board while this, level third extend requirement the the discussed more we learns it I approach to would forward way the event. about level. the go Reserve reviewing quarter, currently the our of this reserves COVID Separately of right has been applies the evolution and Federal in

First we position. our at look capital

our said, capital strong. As quite I position remains

But level capital not of to our that we is in others. strength have of do path recovery current forward, driving of look the assumptions, not the economic and CCAR minimum our results capital decision. just our the position. as confirm capital factor a note we assumptions Having above our to our So understanding that levels than pretend believe the said we the our prudent deeper it's remain that. Using our are required

evaluating and So current capital environment. in to appropriate this we our into considered level After our we it around level. the earnings dividend factor uncertainty felt appropriate this expected was our position, thinking

expenses we to as until economically We trend continue revenues the levels continued unforeseen and COVID potentially impact see negatively earnings and expect in improvements certain to fee GDP. operate will environment. to as well of unemployment This our result of clear a in in of sensitive impact meaningful NII lower this

impact all reflects this of is losses economic addition, to continued our reevaluate our of actions we're that regulatory have assuming conditions in capacity, uncertain this on are to dividend position these capital fact while actively assumptions, that our to critical it too mindful current more. to current we'd in will assumptions protects together, I these the results. expenses expected take is some economic see a discuss earnings the high, our and our And difficult In guidance stock evolving time need were the Putting uncertainty address common intended to further continually. and deteriorate. operating while our But our environment, it ACL if the cover times significantly based will begun

will to to the economic to combined improvement. broad it's future. on we believe increase understand this, until dividend that clear actions a our that extremely prudent this eventual of be to see we this cautious path our and margins with stream this confident We're to improvement our economic franchise disappointed extremely action Given in wonderful higher many income. We're take allow support do rely a

repeat, that we’re from building roadmaps acknowledged we our structurally as environment. To in are the from past improve our and being However, nothing we're prevent I far prudent about that be too our Fargo to in us high, as efficiency but must it. different that expenses this Wells large peers, efficient have ratio. there's

expenses. we will us to $XX to level over close of bring of tell our efficiency billion For you peers, our the eliminate to math need

this. is now of a size to commit series base for line our multi-year work year specific half year complete will second to of not to expenses to to reduce of beginning timeframes, expect see in yet take but our next expenses bring actions and effort reduction we like and and to would our sure a the in our begin in the have and we be numbers expense While accelerated This with composition businesses. the a to is I not uncertain a deeply the us sense centralized expenses. business exercise across that dedicated extremely the our It’s of that environment our operating and against areas and functional and outlook efficient work making not company, just effort did the urgency. note believe a This few lines But have of about important reducing more has team better this about enterprise driving the challenging in last stacked and start months. resources

We have too spans management that narrow. controls layers, cannot are of And This continue. too for today. dedicated have managers resources are we many activities to not a priority

we the We lessons also have to have onset company. the opportunity since drive learned the to the pandemic, across apply of efficiency

Over increasing applying expense, opportunity and to commercial field corporate spend, consolidating retail and adoption the the sites offices reduce and have materially we third-party including including for locations reducing term, digital technology our differently. medium branches, clients,

In is the addition, our to platforms opportunity operational consolidate still meaningful.

growing also To must we financial to be serve G-SIB, too to our action a margins we our thatsource but of a support ensure provide employees communities, and while our strong, specifically to and balance are strong is and for customers to our opportunities improve narrow. sheet we’re strength take results. need our to begin As company financially our

As this about continue costs. protect will I've control will develop our about the opportunity I'll quarter. do organization underway I'll exists we work our more we work again, build more we elsewhere efficient they that share be to said, risk it will out impact to and next more will and The anything and we say and this become talking have not environment. specifics in at as to all the plans

to of basis now continue since trends the has pre-crisis as levels, widening. their still treasury pre-crisis pre-crisis much peak programs transfer support levels. Fed the to remains swap effectively the valuations cost Liquidity markets, have smooth measure stabilized many volatility improve of while purchase the returned capital interest have wide to open market uncertainty, of markets to and to while liquidity, pre-crisis the below and measures XX% of strong dislocation market mid-March While to has continued liquidity and risk program are are and to there HQLA spreads functioning rate bid-ask, economic market improve and levels of the mortgage a XX% retraced levels Fed’s retraced

However, are beginning still economy closed to just not the of of restrictions of recovery many the and the being Much is implemented essentially economic smooth. continues spread to will world. or additional virus be open increase in as the the areas

of still restaurants. And quarter, at provided first a down is they’re a net has travel, takes there Having on end consumer it the of and reopen many, from said progress possibility and stimulus While businesses entertainment with levels scheduled from to year-ago it programs and people vaccines cities, what ahead. for all safety learning areas while in the communities, spending the safely, hardship this all economic run-off significant increased the and government is declines therapeutics. raising more like are of to

We in we support injustice. will do gross important by what crisis to want necessary. moment can we conclude fees of possible, representation facts. their we've upon watershed frustration see past in diversity we be the to months, have will contribute to our groups the of but announced lack and PPP mandate topic that my until pain the comments it inclusion both just and In this an also be making meaningfully on operating this estimated cautious over fastest year-end of outlook to recovery new their We'll beginning we the broad is business. diverse discussing to today the both I racial with conversations the is I've needed outlined progress I for with part but the workplace, different has committee a my our the and outcomes, $XXX a creating change donation and responsibility of has inclusion diversity, Fargo's impact And a been country decisions. direct approximately race must This these in and compensation clearly be and work consistently driving area exposed is different. around enough continue. But will evaluating inequality progress role of processing including of we’re taking not and to will this or Wells not a clear, of Wells a inclusive that and discrimination actions within Fargo in time which been million. our based the number will address the effective environment. creating and have and change the improving members believe sure be to is

Finally, I employees want customers Wells continue John. our over who turn to and priorities. to call serve to thank at the on of successfully all our execute now work I will Fargo to the tirelessly

John Shrewsberry

Good allowance covered largest including $X.X most increase driver losses X supplement Charlie's information of Page reported in quarter. the the second Charlie. of on for morning, our comments which Thanks, everyone. the was in the loss, credit the the of billion

things me just let couple a highlight So here.

our reflected our primarily credits income in taxes tax tax impact First, of by loss. the driven reported benefits annual the quarter pretax second income

we and for net rate items. deferred As tax from the to compensation year results $XXX Also, by remainder by equity investment be gains excluding income the expense of of a personnel currently impact the result, million. securities increased discrete effective our million expect increased $XXX XX%, any plan approximately

transition revenue total hedges from As expense swings these the late swaps. economic in May, times, securities trends. can arrangements P&L hedges we large reported highlighted in that while we've In and to of equity entered to are many in into derivatives return neutral, form our result these largely

this hedges of comp item since expense. in this the personnel be impact reporting our most a deferred in for accounting will reported of will quarter, change, result volatile the As less be third starting from

gross our But that and support will Turning X, in donation Fund the efforts customers revenue. approximately we last to pandemic. week Charlie recognized through highlight For business Open be just the Page to let small fees we’re are communities me $XXX donated announced new Business million for when the recovery the during providing covered

impacted X, Page were our significantly economic to the second by Turning in the while quarter environment. earnings

increasing Our from ratio strong CETX continued and LCR liquidity the to both first quarter. capital be and with our

points X%. ratio our above CETX increased minimum of regulatory XXX Our current to basis XX.X%,

stress possible the the regulatory ratio our two capital was X.X% regulatory in minimum. framework CETX the remaining minimum new allowance X%. the our to at our CETX the Even $XX.X buffer expect is large which with would past We for level over increases be billion lowest under in quarters, the above and our result

increased Our approximately minimum our points regulatory XXX%, and percentage $XXX are XX to sources primary our liquidity LCR of unencumbered above billion.

provide X, late were commercial commercial balances Page first or I'll balances in consumer period-end card loans in quarter, Turning This includes industry of in more the detail the our was manage originations declined second explain first period-end spending reflecting economic but X% starting installment slowdown outstanding balances to and from $XX.X quarter. and COVID-XX down balances. reclassification loans held-for-sale reduced X. the on the average increases loan first on reflected asset similar from billion in in lower other to grew of consumer and outstanding credit auto of $XX.X revolving loan and trends, to loans the balances, to conforming mortgage flexibility the The Consumer lower quarter. drivers under consumer Page billion to decline cap. loans status and sheet with balance consumer

including applications. and taken begin originations. mitigate In That to future loan and highest said These included to quarter line later spending new credit through credit tighten the improved constraints no States our quarter, increased took exposure to their loans current the personal demand second originations mortgage and higher loan and auto Home of Equity card jumbo actions accepting of cap. mortgage longer environment we've in on actions we economic since the credit not the auto manage correspondent given reopen the the higher we loss and purchasing standards XXXX. asset saw addition, during spreads business, to In levels to to actions business our

the Page the in the turbulence first during onset loans loan XX% on Turning of quarter at the loans declined downs first following of commercial draws quarter revolving or the driven market pay to C&I pandemic. from increased X, loans billion by $XX.X

revenues $XX paid partially the pay markets of These the highlighted, of Charlie drive capital during almost As quarter all second billion mortgage estate increased with in strengthen loans quarter. $X.X the our in loan bank. growth in in quarter record corporate draws and investment Commercial both loans. by from March real construction help real in down second driven the billion and estate and first were commercial downs were

to of Page has industry strong worked to X, cap but constraint, certain deposits growth our liquidity value to Turning on experienced lower manage the growth very we've due asset deposit categories.

deferrals actions across Average took deposits, spending. non-operational an bearing of However billion even strong certain X%. quarter. after deposit $XX.X payment small consumer XX were This the declines and reflected these to which actions, Wholesale reducing loan tax down $XX.X points first otherwise under from deposits growth impacts related and X% from first of including average deposits bearing quarter reflecting preference linked including interest deposits quarter manage costs business deposits and billion deposits declined asset a on The declined our would points customers from driven grew the stimulus emphasis first we with while deposits. COVID-XX quarter. banking grew year-ago non-interest for basis have up Period-end X% to and reduced lines was by XX business. banking from all growth the which declined basis lower the cap XX% consumer checks liquidity,

active impact from we declined the interest sheet year banking or will retail and environment, banking costs and to first due this of declined. due deposit also XX% the most prepayment have higher digit both income banking lows wholesale in million driven by and half ineffectiveness costs $XXX balance second expect deposit million interest of no currently interest rate lower promotions to And premium accounting higher hedge We by changes, higher While driven repricing on $XXX first less the these to the continue income XX% deposit in billion partially single and currently declined $X.X which as rates. I Net rate cost amortization MBS favorable costs Net decline quarter asset XXXX. the places as This our of results betas retail reflecting range grow mix in down WIM to realized by declines reach and deposit be XXXX the June, our decline the lower ability of we the to billion remainder for balance of for for of the to shift the would the reflects XXXX year. interest the and higher XX% full-year in were half interest the environment lower expect well to was $XX a the we amortization, from offset be net discussed year interest size a premium sheet down the billion income of expect the XX% full-year $XX to the MBS persist constraints to as XXXX. rate cap of which funding. large

securities net impairment income non-interest compensation plan Page deferred higher or XX, lower $X.X equity the to reflecting by Turning increased from billion investment billion securities in and increase gains driven results. from XX% first quarter, a $X.X

with Total levels quarter of mortgage in when linked assets in revenue. were offset fees market million in customers in impacts pricing loan as and higher decline stable balances for declined relatively of growth declines lower detail. drivers well million strong by million originations have the advisory at banking the more lower brokerage $XXX priced Mortgage offset COVID-XX transactional or second beginning banking were than more quarter was explaining servicing fees second these investment driven waivers. card explain both $XXX transactions first capital charges Deposit from advisory will a more XX% lower revenue residential from the increased by driven the interest to quarter quarter Investment origination first had which We with by billion debt estimated the growth including brokerage revenue for the from volume, market quarter. rates Trusted service as in the strong interest the first quarter related largest some markets. increasing sale and XXXX. was as drove $XXX This XX% industry lower deposit held retail driven third debit reduced mortgage than quarter were quarter originations be and rates. by Lower by fee since strong to down $XX increased income. overdrafts strength primarily equity of

assumptions, we points handle on our basis in be the to production our basis pipeline In demand, margins was the costs Servicing lower assumptions rates MSR low, of and increase our As capacity projected our and add strong margins originations levels. also margin the higher from and result to was $XXX remain customers from pandemic. as sale decline in fee We've to prepayment driven quarter second to third a the of application fees mortgage servicing asset to would held Servicing an quarter, to we to points if relatively a XXX higher continued stable for valuation in with waivers payment million first expect to including our expected due the loans XXX quarter. due But the in expect increase quarter residential increased. provided revenue were deferrals managed declined and second up by lower quarter. first response defaults. updated

offer from Finally, substantial to increased spread higher bid many capital in a and gains net and markets. products, improvement leading volumes from wider certain $XXX trading spreads across activities trading increased volatility price million

and increase our we're our is as million million beginning XX, remediation matters of well losses was Charlie well customer efficiency. Turning variety quarter Charlie losses deferred included comp expense the accruals. and described litigation COVID-XX high. of which have personnel the the in expenses operating million as higher the backup $XXX increase P&L our the employee to driven $XXX The expenses who in a to action billion expense. expenses now related operating a compensation to higher in of Most for for higher highlighted, $X.X as come billion first into expenses in pay are further by expired. as as take for deferred on from payments reflecting childcare. including office increase $X.X to employee of included accruals And increase had related premium of improve COVID-XX Page those personnel expense The $XXX $XXX neutral, which million expenses too

and the costs including COVID-XX will pandemic of We cleaning, expenses customers, of to supplies for had and property including also related our occupancy $XXX impact and remain likely and higher The safer employees our of ends. and expense until promotion some workstation COVID-XX advertising modifications. our million travel expense. enhanced entertainment make reduced additional also elevated These

banking reported X% of we $XXX our quarter. third segments in year-ago. had as will Community transition customers digital leadership we five million our Charlie And a active reporting XX.X in structure the in the with business in Page Page by have net XX, XX community segments, to expense. provision provide metrics. the accordance business to We loss On place. highlighted, banking up from our Turning starting an starting for our driven million on a we increase now segments

from the checks these a While ATM high were from the in number to transactions still of doing remained device approximately are the fewer the the record customers a we number temporarily usage logins branches using quarter, customers day. quarter. And COVID-XX down XX% digital every of first quarter, however, with X stable from occurring quarter, deposited business teller approximately are a increased first our teller from the XX% transactions first up due XX% and the second opened digitally XX% as of closed quarter, a result branches at have XX% our million year-ago, reaching digital and first and more up being branches mobile of from

in Our for for customers cash a by compared in year-ago. decrease lower reflected branches. approximately was XX% our has to cash This decreased demand demand

cards Charlie at debit later withdrawal the being card second a credit resulted debit during first year-ago. we we with total implemented higher the transaction higher in part the highlighted spend levels flat down, While compared trends of cash higher quarter amount in quarter reflecting and limits spend in withdrawal the volume in for our the second was the of cash quarter. experienced increased driven spend, has improving ATM by ATMs per quarter ATM withdrawn

transaction However, XX% from with a volume was transaction. customer more down spending per year-ago

debit As on card dollar reminder, are a volume, volume. not transaction based fees

second and losses. growth banking reported I've markets Turning share We based billion during number an to interest in Wells leadership second the beginning had to quarter increases important record market environment net the increasing losses, quarter, for in XX%. Corporate issuance. the customers and time. credit and driven providing the primarily Investment other our of increase business loans trading record year-to-date market discussed the to Finance investment so Page lower revenue a from our XX, and XX% more in of increase an drivers in $X.X runner market liquidity the an with offset Wealth loss Fargo was lower loans the by grade maintained earned of already few position by the deposits, Banking me Capital highlight valuations credit I debt book described quarter. this one in challenging asset of for a allowance the revenue very wholesale source rate driven drivers. let at a the investment capital million earlier revenue and $XXX first management quarter was as provision the than by down by

under strong record with our experience Asset to asset funds and business. first Fargo by driven growth in market the high in demand inflows. from and achieved continued net $XXX valuations continue up money income market money for assets We billion market management from management Wells in second momentum the in XX% and liquidity fixed a deposits quarter, products business, clients Management the quarter higher

market in business at the they're we assets fees brokerage These brokerage advisory quarter XX% priced retail the benefit since quarter. at markets beginning lower third the fees had from increased of were advisory of quarter, our the when beginning the will valuations lower. during While the stronger

on for Page XX. to results the company Turning credit

amount historically mind basis accommodations customer particularly that in was significant rate environment. an XX quarter charge-off level, low net extremely is points first points of basis Keep from Our the eight which challenging up consumer non-accrual and to still our recognition in start who during since or status. otherwise delay delinquencies moved charge-off and due for the past net for the non-accrual economic the customers of status commercial pandemic would into provided of those customers we've have will

dynamic quarter. the loans Page from XX. and with driven However, Non-accrual our second I for billion. Commercial up that credit loans commercial quarter CRE on up billion detail more end considered would of principal XX% assets loans that first $X.X allowance $X.X increased or the will losses. $XX.X non-accrual the non-accrual C&I, XX% non-accruals. growth was of We in quarter current first as C&I point on from criticized billion out note on billion in commercial by this increased provide were interest of the our I $X.X

total construction and non-depository credit and estate commitments facilities declined includes from increased quarter, driven outstanding loans criticized loans REITs details drove XX% recreation. quarter, industries increase in second retail, we C&I industries non-accrual and the monitoring gas other escalated provided loans, first those largely and including C&I the While and by with in the institutions. financial quarter, assets to real and more oil and which on Last entertainment

type both are in portfolio real Turning to largest the is diversified estate and portfolio our commercial real property XX, geography. our we Slide commercial lender estate by nation's well and

Our to rigorous underwriting estate standards and commercial loans are subjected real well are structured.

the portfolio assets overall levels we've with Before we've Since a performing customer strict last problems highest to began, minimal proactively was case of in identifying capitalized in of strong retail a the base and reduced of exposure land credit where COVID-XX, goal losses historically the worked our leverage. mix with low assist case and cycle. process have customers were to continued a exposure this our early. monitoring basis, and routine levels geography, had on pandemic good or condos well by to We

has experienced times team distress ramp-up an backgrounds has quickly. with enabled workout perspective bench and in CRE to of which Our us

XX% the up the XX% buildings. motels shopping with first given office assets $X.X quarter times and the increase accounted is of not been up the accounted are non-accruals sectors and billion, XXX% centers, hotels, on from or of were non-accrual loans first going were for unprecedented same in the the and for $XXX from first addition the driven by or XX% the what's from second retail Criticized surprising the However, quarter, quarter. of in these increase the non-accruals economy million quarter that drove in

credit economic the XX. highlight in stress, included our first basis fourth forecast net Criticized allowance, second charge-offs for to from declining mortgage million our of second on and commitments $X.X over quarter, economic of the for Non-accrual increased the On programs included for we consumer Page this levels quarter addition current from page, gas XX% loans, of the allowance quarter, which provide significantly and We from the the total unemployment provided oil quarter loans XXXX loans, XX% was losses outstanding, credit details from billion the expectations increase the largest of for on of XXXX. loans XXX accounted approximately prior outstanding fiscal environment, second approximately conditions with assumes detail still publicly end first X% numerous accommodations as for as sector. case we credit net increased redetermination in million on XX, our reached loans. down worsened and $X.X commercial the of junior billion of customer base billion credit scenario as the portfolio management, the X% first Turning which to first XX.X% quarter, On stimulus oil down end economic in billion XX, current and basis, borrowing on billion with and card loans E&P for quarter. loans increased support portfolio increases our Total the levels Spring in rated the payments. well key credit lien Page to X.XX% with coverage volatility downward near-term first for We of $XX.X our at the changes considered with and for loans loans $X downgrades provide weaker reflecting XX% gas the across resulting from from total migration commodity $X.X quarter near-term well late quarter on drivers increase from compared including quarter by unemployment the the recovering of impact were in as $XXX the charge-offs reflecting commercial non-accruals from XX% quarter trillion quarter price $X.X points as the $XXX the losses, of the first credit our companies. allowance Page borrowers. allowance loans on proactive

forecasted mid-teens are to and further. estate to prices are stable, hotel, real relatively remain to forecasted by decline retail commercial decline restaurant expected much low with housing sectors Our prices to

to the given uncertainty property we in considered in a downside and scenario, case placed the to uncertain collateral large addition, sales. limited scenario deferral performance weighting expectations loan of activities other majority COVID-XX as highly the I economic customer In to previously forbearance weights By portfolio prices response some the forecast. our remain provided reflect on forecast. And apply loss mentioned, in base were and

variety factors as However, please that as conditions. volumes, for mind general by well of changes portfolio in credit a quality including keep influenced loan is economic losses credit allowance our in

economic the the our eventual path that While expected the captures loss of unclear, in allowance as of believe of the and portfolio pandemic end to the end our quarter. we remain recovery content the the timing of second

Turning on to XX. Page capital

basis of our the to As regulatory billion $X.X CETX was I to increase we elected to modified ratio CETX CECL increased XX.X% and the in quarter, transition selection provision a our apply impact earlier, capital to XX this in increase highlighted in ratio. our capital. second of The point

company, a required increased a and of quarter our In Charlie conditions of summary, second as minimum and your ratio And buffer our our improve in second were the including questions. while our to XX.X%, now Additionally, we're the RWA, meeting on TLAC doing I focused will take our capacity which the regulatory but expenses decline quarter significant and in debt uncertain, result the XX%. disappointing work the senior remain a economic provides commitments. results reducing our to issuance of to necessary during earnings

Operator

from Instructions] go of ahead. come [Operator will Erika question Najarian Our Bank first line with of America. the Please

Erika Najarian

with billion to that peers? is peers line need you noted equivalent an to question you prepared than saying were or to expenses where remarks, $XX larger is you My efficiency. question be for on about this in be goal expenses good your for Are be off long-term your in their Yes, to billion lopping greater Charlie, first peers clarification your Charlie. eventual morning. $XX during company that a

Charlie Scharf

Well, math, billion what that you their least there's than at occur. expenses reason $XX ours, do you look I the mean, versus says was when And efficiency ratios higher is the no it math, that our what I that be. said why at if should are should they

play which create timeframe will the for and a have you will team, out. we But And do. we do that think, don't the management the math rest. roadmap can to efficient. future information doing more And work to more where as can Exactly ultimately reason the be we when itself ability there's we company as on is get to is the no provide what so why significantly same I we as a efficient are a the

Erika Najarian

the wondering, expenses clear. should Fed my extend you about to so I'm to third Got dividend. as it. for start That's And the with do has And the potential think question in the income quarter follow-up test mentioned coming that we beyond XXXX. down

the your think you is As But that build and the future the going to are $X.XX question restructuring Fed they're behind I'm confident do here I don't I is think quarter, if should consensus relate example future initiatives that of consensus for the your efficiency with supportable I third dividend power, is be against you. about expecting the how that that capacity, in earnings would think income majority formulating consensus costs extends looking according asking at is forward? to how really test that feel that beyond reserve

John Shrewsberry

way the the accounting up to ability likely John. of is the is the even we're we do to we're going seems going the next going to Charlie's the going work CCAR, GAAP, set do, what's follow we're do we're get plenty and the not be given the this is framework. as us in be outcome we I set greater lines to few it the where we're to We or point part, have the certainly where path going for necessary current it did. the resubmission eventual going we extend to setting Sure, think frankly, it chart And And dividend to consequences to is buy of and we process don't efficient quarters consideration propose primary be. in kicks just think on which right is, to while influence operate in going outcome, profitability. can, that then so accounting to current to will would have the But to you can they that of get the regime our through Fed a the because what's to will we keeping it expect, might I as tolerate charges that a we to economically, place, off one-time result what consequences, current next an as room current dividend number has in wasn't are, that the as capacity the they if extent efficient as get dividend calendar that.

Charlie Scharf

at I we around determination. The of each the didn't an think boards I would thing quarter think when of the idea this only and work didn't making a we our with is conversation we that approach dividend add did, that

rule the And our that, the how to impact go does capital, so our as series return through ability do this sustainable period this which they become of as capital is $X ultimately with look is our of you roll some reflect forward, we power in next numbers, and a that we quarters, negative our of in treat return Fed hope level billion doesn't billion, as that will is decides our Justice, at with have a round capital over this uncertainty numbers, a the of that a number. to actually items when and which capital that something our is We out share right. had $X Department historical like settlement $X.XX already it going earnings want

the these the don't earnings the to we the future So that when look even dynamics have out capacity relate quarter as set XXXX. level that board company, the we thought dividend for we into about of

Erika Najarian

answers. you Thank clear it. for the Got

Operator

Research. Your next with of question Autonomous McDonnell comes John from line the

John McDonnell

you Good you cap loan it measured? some where under on and to today in each morning, could you're be to you are gets what flexibility operate John hi. and flexibility, with have us asset kind needs coming that Yes, deposits quarter just done now what and the on of the Thanks. remind where demand way

John Shrewsberry

sure. Sure,

and items taking quarter wholesale the to the early very first maintain So we And assets we're with footprint down external shrinking had funding did and the deposits compliance that trading our amount and categories of a liquidity were the forward. this second we the that of don't on compliance, ones more in late focused and our it's value. It's make really have that second retain point low repo liabilities. end way by that really we're liability it that quarter. during on liquidity to do other of at we much that And non-operational in we value financing exercise too of is focus low from other the the certain sure this thoughtful of we management deposits, about

the the right so we balance it to on flexibility now having On cash there's plenty side, loans. of what to do that much sheet gets need do asset with

the deposits our is that XXX% nicely. have saw for You and LCR grown quarter

less and deposits, inflow more CDs work have the maturities how that they in institutional on cautious rely on up funding and thoughtful non-deposit that's and notes or very path the and deposits, that about next that value. price of we're about liquidity have That's those thoughtful the because we can with and the we doing things. low we've two. been So we that We're for come as about other it's quarter

John McDonnell

we should the in income puts net the and jumping point are model? we year, for next factor go the what reiterated interest you of net takes interest kind should some and as outlook we income quarter, and Okay, that into the margin for think interest of net half about the how

John Shrewsberry

to sort flat where it's in that We're think going of it I relatively from be we're is today. zone.

the billion feels year As $XX I like said, the number. $XX for billion still to right

right interest for we're managing NIM But where in think much carefully not from dollars as the So net now. it'll I we're too it shouldn't looking deviate be, really the income. we’re

John McDonnell

And terms progress, done being is Fed? work you in cap progress and the doing you in what do can terms there say it. too got and Okay, to need of anything satisfy Charlie asset know I the to much, can't comment, but of

Charlie Scharf

to we're determine be everyone done we're other that John, focused limitations the it. asking doing it's given going along is biggest the to have, which the the on single of appreciate their every It and the actions, priority And we response is is same No, our it with the will question, the Fed work enforcement being satisfaction. when work. quarter, interested I

John McDonnell

Thanks. Understood.

Charlie Scharf

Thanks, John.

Operator

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

Charlie Scharf

Hi, Scott.

Scott Siefers

guess hoping was and to treating is embedded taking. John, I your through losses sort how able additionally, Good might of guess any thoughts or just you things morning. sort request like thoughts build evolve, you period, implies be about of for in the of refresh deferral Hey, thanks that of sort losses how update of that, when are you on sort updated but may what you please? can I reserve the reups just kind share, cumulative think updated might

John Shrewsberry

so Yes, would, well captured they to definitely out, the into fact charge-offs buckets relates actual will provided deferrals otherwise The speaking are side the house. it themselves that generally allowance. pushes as charge-offs the or is probably come through believe in rolls that delinquency we which consumer later and fully that we we've of the than deferring

the I the even into the charge-off first start flatten that loss things sort of I also today and move in before later. bit right of I end rates there little but credit pick-up different we be charge-offs the to asset at through quarters next way the by we would taken on just of is after through roll, things to even think somewhat do the saw progress the end come charge and couple commercial category that if year, also we've up guess the seeing, based of in year, slowly think out charge-offs they the and We're they'll recognition. So a expect one quarter then take

Scott Siefers

already drove those alluded the fresh thinking? And perfect. a Charlie to to of accrual. little, look was we've could I the, additional past at additional maybe of go new or couple switch customer a curious sort the know sort things the management. you the of charges and sort taking Okay, then under just years John, gears you seen given I through new of what accruals mediation over But

John Shrewsberry

we new his was in it lending remediation. said, in at the that Charlie organization leadership center the and have running consumer As the customer top of capability

crystal item in the clear. the about But much that. of things aren't gone, for be little they've speed friendly, they've we've by to many effort as always were accomplish of order a items more always little expansive really by that item bit these to, think topics a what and and but applies bit as more new There how you're more They And gone a said and bit move little large, thought a things it last and relate in expansive, over consumer Charlie been to out of I a timeframe to, couple that it that making up who judgment an should and how apply, to it bigger think come But are talking to to same the in it's years. covering we've it's while. same bucket. dollars through. about been the for that

Charlie Scharf

And these customers us. those It's what John the as about most do overhang. valid, us. lot going value is, the emphasize to relate there's getting to of And there's to the would behind it's think do work, only in things a thing It's said are our dollars I items. the of

going And to right to financial of so move people do on company. properly we and to But we want what's treat we're to for the position want the obviously and future. move the

decisions made willing certainly what balanced lens. around we we were do so And that to with

Scott Siefers

perfect. Okay, much. very you Thank

Operator

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

Charlie Scharf

Betsy. Hi,

Betsy Graseck

a Hey, morning. good questions. Hi, couple of

you're unit make from. business the like I you've to as is, to to places. are new Charlie expense got get a come improvements not about, heads I'm the investments, know that want Typically side. going So be you're folks going touch the in reviews, regulatory unit the middle business we thinking of just several want to first should where reason to off, And asking in where sense

So room you where should anticipate ahead regulatory start to have down we expenses bringing changes? framework of

Charlie Scharf

the the we the can very makes the company at until strong I seen and at why we well a actually believe and to priorities. being which back beyond reality clear the things When have in ultimately are to us we but all to the company. across When important the take that one, is reduce expenses making point regulators going careful a clear, actively just know very think forward to things we and but is broad work it the would spans the the company, generated, Yes inefficient that start places of and don't I've satisfy done to and what are exactly at is be work that. ourselves work are look it's we've change fairly done, think that, what reason it prepared two it your other is words and going want team look part the management that and said in because It that very, been, those resources to just, about us have we our elsewhere decked mentioned, that distinct. use we're of a the I that's the remarks trying satisfy. we actions very I we that which what being to very corner layers are infrastructure that a into is like foundational It's company are we we is against as is of which and the of you Having important. do work work build risk the to we

really done to So has clear of has what done. get that and bunch stop work get being to on we're that a

processes platforms, across We duplicative duplicative have the company.

the a about think these these we they of exist because every as are things, extremely about part of series significant company. things So just

In point addition, that want to were I any out reductions just just we environment. going that given have stopped also the place to take

that And to take. ready so is a there of we’re actions series

away, some crisis. stages who've their to we have but of we of will employees we series were fact, ultimately told got In time passes the been let go a initial through going that jobs COVID the

do And we more next will So start the we base. the see clear expense an the round an do, the to a clear on more become. it's like making impact path onion,

Betsy Graseck

I anticipate But half, of you XXXX? XXXX The here thing some start with mentioned benefits in would XX. start the that we half this second below second will see should could in in that know that expenses you

Charlie Scharf

take and all it We accounting half the the year. the obviously, depending of second in that sure of year, in on economics it, not quite the whether are see clearly to actions this next what is you'll of going and

Betsy Graseck

Got it.

And I the a So mortgage? understandable. then question yes. Okay, that's here, question switch gears on to just could

Charlie Scharf

I at is is higher, We the going quarter I've in on. to is company prepared thing just which some which work a is. that know one I just margins our don't look inside we got talked add didn't because is what think say narrow. remarks. this I Losses this this are about the certainly But are okay, say, we've want which important, just like and it

eventually it. And we'll so get to around

to these relative While and where it's things work getting on done, under get we to done, us, knew had lost was performance we be should our the earning. not

so going it performance, sense of what is existed a before sense I urgency was both is there urgency relative regulatory while think improving and to be the our done, to And small towards whatever getting forward. of work going

Betsy Graseck

also get a say that fair the known today than I I maybe risk your year-ago? around those and Is that. Yes, costs. that No, were they commentary are more to the regulatory costs in get hearing it I am in and the

Charlie Scharf

Yes, I think absolutely.

and clear, of of to takes broad easier again, that understanding in very on reason to time do and be just us takes. we're become expense they when our processes work. is And of not part take any of to in that a base the us we time clear to has a clearly we it place ensure impact what period this happened. we a It's properly As whatever what do going goes reductions why have to formal that put for go on

that be be we not do And will everyone were for just and that'll be a formal would properly. that to very informal, it because so very, terrible terrible, mistake if

So issue. beyond that consciousness on heightened

Betsy Graseck

right. All Okay.

the base sense what's XQ. as XQ, been for mean Just And and have buyouts high part wanted just speeds with And just outlook John, or get understand I not? your NII prepayment here to switching assumptions your the reason you follow-up first case to also did impacts Thanks. for through refi it Ginnie this on just mortgage, I question the quick of that incredibly is the refinancing Banker your that, then wanted the morning is on agency. speeds, have asking quarter. of servicing, to American second impacts highlighted many to it that I a the in

John Shrewsberry

question. good Yes,

I on our speeds, forum. assumptions loans MSR, portfolio, up book in The and our in And think income, various XX vintage in pools for debt borrower. shows borrower as the portfolio, to on up things gotten. aware it So held of on in depending of the how refinance ability vary loan runoff But we're the seeing fast and that loans. investment we're as LTV anyone in coupon, shows et it speed up investment by of of are cetera the have and shows mortgage handle the the CPR the

in on $XXX essentially quarter deeply particular, And as remain in we securities, this of because to consequence mortgage year. to they're amortization them happening because of servicer, of in in so part we've million of them owning it delinquent that gone are have per which to MSR call the as as to bought for captured And for that out money buyouts, them. while we our buy is updated the whether there is the likely deemed we're have what's or loans have of COVID. into accounting deemed think it level we premium does option of $XXX so not, the estimates them said million there purchase Ginnie the rest is the the I On which feed

redelivered not carrying go these And buy credit buy huge not cash out worked have from asset, asset. out to either And so that to twice, or are ahead the a perspective, asset, our calculus and but of guaranteed period a sold essentially asset giant the just cash or was that way. loans, either asset a consolidated some time consequences our that pile to or before the have them of that and and in for gets it use

And them that our respect books on and up why was buyer same we remain then will that to double if deemed it they sheet option buy is we the tension in after to end have of balance the levels that's we apply were whether go facts the besides consideration. the to a continues big on, are, asset then if because our we an cap don't it with and we're and the do them, where extra have quarter. so cash we So just may ahead that of really and may then circumstances,

Betsy Graseck

of Yes, ton forbearance more from a that makes driver? in so of a here. that function Is sense. the it's But

John Shrewsberry

More right. ongoing. we're or That's not, servicer right. but the And whether that's

Betsy Graseck

that's Yes, right.

Okay, thanks John.

John Shrewsberry

Yes.

Operator

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

Charlie Scharf

morning, Good Ken.

Ken Usdin

Coast. afternoon at now East Good morning. good Hi,

to a yields there here points on offset? XX, XX. some follow-up the through asset NII a can mid-zone understand from cost like as the to and just just you seems half, partial to of from how outlook, second side how reinvesting on the of pluses Just question be much earlier needs here get roll the minuses can deposit to or what on us But it more help both happen your securities your in and then yields also you're

Charlie Scharf

Yes, interest in That's average deposit or quarter, of the that anticipation growth by third where reduction so trajectory is cost between the that were the continuity or points our side, bearing bearing we on. the fourth in deposits I in the that for XXXX. is cost deposit our single basis on pricing deposits think XXXX, back the non-interest that's we're and digit

higher, side, hence of asset with to happens it's the some of some could it. where LIBOR you've On a spread depending true but will that replaced in is lending heard we're be firm categories the on in that's loan lower C&I, probably in be are spreads about there that what autos, piece particular product there holding there some, that

issue, haven't product. much in NIM yields sort where so I But long we mentioned. we're a the related points we the that On Betsy prepayments I things front mentioned, referred end securities portfolio $XX front, to trying in we could security and is change. think of outlook these the bumping want end, about mean, feels how the at with for of this separate securities just stay likely we've I much along But the be. to is of duration John the year, range level I to invested think and the things by I bound but credit down been to, what been quarter zero relatively the could basis almost our add in through we're adding XX, rest in to more low at that obviously bottom the billion XX think like be the as

Ken Usdin

just or still earning Right this a it really, does $XX the asset and in just end hold so high year NII it so next then But year, I growth depend next get it off be mix you cap kind really from number? assets on then of of starting the year. this does type or on NII probably depend guess billion-ish of order the in to that point

Charlie Scharf

certainly that sheet, be And could matter it's offering, balance be I opportunity where side comes the it's because asset is not demand to that, loan if then Yes, will if it. a exposed a have But we're accounting that that the good we It's and difference Slope so get on long-end. on would from, make helpful what question. little steeper lot. an the so curve, we're what obviously there's of a a bigger budgeting market we're the both maker. things choices think to

Ken Usdin

hedging, of mortgage then And how there's prepays. the banking quick servicing the what's production, can the on help core how tougher mortgage just given results. line the the understand because you just here and contracting side of from in one follow-up, are the that then both projects servicing best especially the model and all servicing John out Okay, fees side? item the you way that uncertainty There's great a us

John Shrewsberry

we've be Yes, I it's and to so what be But tricky. side little relatively is margins we constant. higher think volumes expect a said on the production to bit

great speed model. two cetera. faster servicing we've on in think the captured those hold for servicing, servicing, now default environment things higher side, true, et mortgage So should third costs great, if and for We the quarter expectations production be servicing have modification the a relatively the we

revenue will if that because Although fees take the long benefit on hopefully produce quarter were as servicing assets big -- those things captured, we servicing a reflects we're are on that. ago said book the downside. the I'll we the origination writedowns But we lower if itself and that that the smaller side, of or surprised on then taking But we're quarter both third generating are we've offsetting getting not as the smaller. is two, to

Ken Usdin

it. Okay, John. got Thanks

John Shrewsberry

Yes.

Operator

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

John Shrewsberry

Hi Saul.

Saul Martinez

thanks questions. guys. taking Hi Hello, for my

verify First for is fourth first net that public on clarified? you cap. of given that I and that's just related think make all, Can that the income guidance stock preferred from it's not does based to obviously wanted I the before so of really, point quarter the that see just Fed the net that is and because to question income matter really on figure you dividend size that why based specific John the that guys sure stock dividends, dividends

John Shrewsberry

Yes, which to not stock it's aftertax the preferred to calculating you NII available gets but common. we're before way dividends

Saul Martinez

Okay, got it.

preferred just before calculating you're so correct. to for Okay, dividends be stock

John Shrewsberry

Yes.

Saul Martinez

going is And are of much demands, that obviously others and you of I really And Wells Okay, do stakeholders well guess though, to are in demands, the got then about work that simultaneously things and regulators multiple on a trade-offs your about you're I of than you some maybe and make and does me on. some your there idea who do think it's I guys driven in. genuinely of guess, the kudos their donation high dynamic more efficiency them broader argued to, concerned good they size cost can question right that A certain clear those that past, think you lot is all and think those act shareholder pretty the management were true, element have goals. communities And meet super going strictly focus the balancing I capital think of on the different employees, I a it. talk and about of on most tapped. that, do being have degree, teams have already ratios do point that and that and very some to ROTCEs think that competing but work. a the much, though, like CDFIs lot how I that you maybe think structures how to I And much, your

how just about So And I curious, philosophically I more do think of guess, maybe total how guess in you that. Charlie, think about that shareholder value I'm you ultimately, pool goals?

Charlie Scharf

clear agenda. a broader the Yes, shareholders to a won't of to filter fact we that significant much is ability other it supportive which set do includes communities. our don't the think is that that they're have don't in And think considering legislators we for local and about companies companies, institution I or not, it guess be stakeholders, regulatory company financial a for about will It'll likely customers, a broadly I very, if us consumers through ultimately I us you're issues be our to different are whether whether as want the versus of as trade-off. think something or our as don't successful I very it

I something we no PPP very why was more that broader they certainly and much a the reason So negatives. should They very be that related unique. stakeholders. doing be things set of thoughtful should it Ultimately, financial think that a much to we fees are of there's of The were be that that. think beyond set aren't something very

fair this middle ultimately we in the we helpful operate. if businesses as in right as in with what horrific for We’re And significant us thought of for businesses. can just a in in helpful that thing to PPP country the this a small also especially difference we the was us for can as participate the It's us to that company order make program. looked we also relative The time to small is then and that for community. we minority at really owned communities be

all that long-term. way think don't And it alignment. those things over so I will there the think, is that you together likely suffer and put And about those

Saul Martinez

that's thanks Appreciate right, for thoughtful answer. All the it.

Operator

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

Steven Chubak

afternoon. Hi, good

stay that cap, investors talked and question this balance theoretical wanted that's focusing steps start-off growth the at Charlie below, negatively since you the juncture on to asset about most a cycle the proactive taking normalized I on So were expectations. to manage NII the to you just with revenue are sheet through impacted NII, how

I Fed on of around the sheet balance the least us to frame some pent-up the the based could hoping things if So context it'd growth NII in you were today, on you idea amount volume tomorrow, or asset helpful at where growth stand give was can to cap lift cap asset the if I of potential think be that? impact or the

John Shrewsberry

just expanded are do to by was point rough data sheet as question about it it’s been had XX% that our whether if areas, have asset to NII was timeframe classes reduce have several these If would call billion, like approximations. a drawdown So, there something COVID opportunity there XX%. is a that using average or on our John. during The math in this certain but us on about and impact balance ample it around $XXX NIM. was would certainly by But and that the

were I cap bigger for were there's The more That's and would drawing things by particular in way Corporate we and where at balance to certainly to funded financing in probably less is more And to the in a little have facilities. an the balance we knows immediate think as think of have a customers real bit business there's businesses component probably companies it's have under been a securities But best a down down piece and but a book say that markets be that our of March, asset you with So a in to sheet. expansion the constant less from more rate to generates the bigger But on institutions its the in and up suffered big today in producing and that little assets it's maintains being more terms of increased of support covered a funded drawn would in have to everybody down to that rate deposit rate saw liabilities, new funded portfolio a LIBOR that that also would it in LIBOR of benefits opportunities and realm. piece cost with Investment managing able I have that part loans we half with Bank do of high down least as environment. scenario violent about closed, of being bigger facilities funded worsened including sheet, capital it's benefit securities how that. that of it. environment, financing serve a times, substantially in on were bit bit handful asymmetric their that, LIBOR the put the available in there that were in one end we to If requests with. in outcome begin little low very margin it of a the

So that have you Charlie, would may benefit other thoughts. have been also. a

Charlie Scharf

think I that's okay.

Steven Chubak

helpful it’s color, John. Okay,

So thanks that. for

around asked half. Just quarters the or get the wanted over one, some had This I of we level point about I context jumping-off guess for to fee but income back last question. the core should the one more couple think

You said also be us given can right you fees activity. some for for give from some point trading just tail as hoping was jumping-off the benefit might Trust sense of mortgage winds you but moving the pieces, the production. normalization higher to all And XQ? what should some I different of markets, have

John Shrewsberry

it put pieces Yes, we it component call about talk don't the of a number rather on core it. and but

feel, while, spending big for people They're on least it is are going charges deposits, service differently. my cash a is today, assumption us, higher so that one a which it's level. at at to balances like And does for maintaining a

space, balances had cetera there right the line high record probably second as fees high banking, on half et or the in should may pressure my what's whether other I it's hopefully really that at quarter, first customers which somewhat. sense normalizes for a what my Investment brokerage advisory, that have activity in up Card this prepared reflected debit card remarks that into least puts little going that our market that is year. in so the environment, grade we is And higher which balances faster for terms haven't back nothing quickly. we've a speeds year. the Trading, other fees Mortgage, up and number a should impact about strong and think don't you anytime strong. items But I caught has less there's or last going be that, have bit, pick or on softer. as credit card very pop of we've to so accounted production been the absence fees of of be the bit servicing. And mentioned are because it card up item mentioned overdraft material got while I in a so mentioned in you the side of And waivers little should them costs be noteworthy. equal lower stronger do in are dollar it's flows really and transactions probably negative gets in to improving, said

that's think would the So categories. about how I

Steven Chubak

so much You for covered again, that, John. thanks

John Shrewsberry

You sure. bet,

Operator

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

John Shrewsberry

Hi, Matt.

Matt O'Connor

of back an necessarily kind question a want on it's efficiency view revenue your both? guess versus And to I it longer-term combination I of is, of circle do you Hi, the is peers? why closer first expense Or to getting the issue? a think issue

John Shrewsberry

be expense helpful, we particularly recession combination interest what expense we sheet what rate and of environment a about do both, think assess it. about we're company we balance more and can in doesn't low where revenue would very constrained a about in trying can today which do do environment. the a definitely And can I is revenue in than is a of load income, carry It's a lot to

but idea that to it's I with in sure different But contribute the won’t billion it. that put reasonable would revenue we a think they I'm management the cap be, be. that, least a categories by to Wells large go doubt, factored peers. all amount So certain things amount after ways a is level sort said on of without $XX field normalization a on equal the it at playing would being we've of team, having actionable and Fargo of about some think to of of But variety today,

Charlie Scharf

the but of a And said this to upon so the $XX to get see know. mathematical team, belief in only what we billion, from clear gets what the from disagreement inefficiencies would all to away where billion room, the And exist about room, is or $XX John the been there but in to make add and related doing is, a the is the management we the dent thing significant the we there plans absolutely not, I bottom certainly we've the is that committee risk the activities. have work is company operating can we isn't, inside a not that's what that these build the no that's about When a up the that that based full of we’ll calculation exercise. math, identify whether

Matt O'Connor

you is gets take you And quarters the just process? that kind can $XX the of $XX point, as should of $XX gets you you a reference just we base this cost billion, I to thought longer-term annualize around billion clear billion. be, you billion out when $XX what use think costs the about mean kind be that

John Shrewsberry

the the I that think of items quarter loaded expenses normalized this we for that XX-ish starting more are without the excess point is into of mentioned.

Matt O'Connor

$XX billion? of billion the $XX take So

John Shrewsberry

Yes.

Matt O'Connor

there think invest you'll whenever saves are about just I areas inflation I like of Okay. want like And cost there in, is to guess natural to relate kind that just that, creep.

I kind bit up little guys opened worms billion. of $XX you on the a So mean of can of

at things are years. looking a predict that few tough to So I like these are know

John Shrewsberry

we can are at didn't open don't we that of of acknowledging But at like math are, we're it with that of investing the worms, are think can compete a which worms following. facts I says look at, look you I investments, is tremendously. set with open like we other And the a we is the those companies what facts the because look

place I And in the makes are think a to get an said, our so point going we important reductions not to timing our work we exists, figure our what's investments. working a what standpoint that like doing we to because that investing knowing the be to having in what just certain out business. acknowledge that expenses the we’re is from should by versus looks gap reduce both which But we're with sense, proactively that but time we’ve been efficiency purposely

Matt O'Connor

Okay, all right.

like we'll more the Sounds or so. details in quarter get third some

I all look think we forward that. to

John Shrewsberry

Thanks.

Charlie Scharf

Thanks Matt.

Operator

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

John Pancari

good morning. Hi,

John Shrewsberry

Hi, John.

John Pancari

XX% can it, through billion. is run your see loss to if $XX.X Is cycle would you want about just side, around and way credit the the your know around substantial a additional updated to I a about is that now XXXX want Thanks. estimates get you additions a likelihood and fair addition then expect get your from that pretty also Do to thoughts your quarter you that think DFAST. good for thoughts DFAST there's reserve, I On company your reserve of this took think here? reserve XXXX about

John Shrewsberry

question. for thanks the Thanks,

informed them about do better math of the we the we're, necessarily and our our own loans don't to our our our but and to cetera. So and compare estimations portfolios DFAST profile think et activity, risk as outcomes, collection we

judge and So we our that live we people scenarios point. we that it's the one that more in. likely think can the own against, data a the about in useful but external experience It's are ones an believe world

so that's focused And we how it.

coverage and With the X.X% allowance, that like of we think portfolio made of build every for the by almost at course, the I loan other it it's very bank. we're loan outstanding different in is category

that bottoms portfolio I think up will work that that modeled things portfolio really portfolio the be the way loss this assumed a unfolds content have as end we've both for would modeled and our in got estimations, if in and and in result direction of loss of that we would it those by world the the accounted in we the our quarter, believe the captured, less this have losses. as lag worse a in

John Pancari

if to it, crisis is on in but commercial related clearly, see then commercial by the of trends that that Thanks. commercial to a structures us forbearance credit the estate wanted thanks to you Got forbear even bit efforts, at what of a beyond is somewhat seeing and given real know seeing? are that can in are to you and just greater And in delinquencies the give you're the you're level industry really seeing side, estate. for spiked discuss financial that it I levels. And around forbearance that estate the banks off seeing the staved real just could granularity in borrowers CMBS real being John. portfolio your you little the pressure pressure

John Shrewsberry

know loans. point, Yes, is and the non-recourse you that first but structures this for everybody's know I benefit I distinguishing would are make CMBS

and hope actual I variation recourse different. And the in think are and speaking you'd we begin other stable there's I types have flow so things real try leverage lower than a realizing current. of how somebody LTV as a than numbers lower which about with the the we they're in obligated that to think with, might a is do June as a bank's I've for and there's alternative the CMBS leverage up. collateral, XX% helps are we quite property types, seen in but recently, downdraft. to loans least then, balance lot and contractually this so are that performance from And a unless there's go an too, enter extra talked does the on no, no quarter our about is with not to shore stable have sheet, of most And CMBS most something no have Conversely, generally mechanism into we'll cash not structure to last deep sponsorship higher perspective LTV loans property we'd more on

hotels about non-accrual everything And loans is below office, of billion of hotels that non-accruals round $X.X retail centers outstanding is loans, everything pieces, is have shopping numbers and else among are centers quarter. excluding biggest $XXX is is worth quarter commercial centers billion shopping and is roughly XX% XX% property at apartments, centers estate the type. X% There's another overall. Actually volatile is shopping The we and XX%. below else and X%, of is of of retail in is XX% So then shopping XX% which that a is end then the X%. industrial, about XX%, real excluding the a XX%

like, by the borrower, working sometimes covenant that concessions that's just what these we're borrower are things making it through feels related. So we're

in allow real been a lot struggling already and are the to the time hotel and projects, we little they lower retail were then with take constructive. and cycle, loans problem also pay It's owners our borrowers of this more towards forbearance many generally have panic. of point skewed to Sometimes have people which calm At not capitalization. bit a the

hope I that's helpful. So

John Pancari

it. is that Got helpful. No,

you So say your the much really, commercial portfolio. or stance well? there reserving within that other that In for real building reserves as would you're finished estate pretty similar words, overall you're represents

John Shrewsberry

where how we add teams For and realistic. we think I where we quarter, and and yes the and by understand think of we think things in loan of think we second the that assessment we our gone real also world loan, made should have estate the are borrower borrower going. relatively, end commercial by that's very are at an it's elsewhere

just of property a not set it's real a of their expectations, review So every borrower, circumstances. real, but model careful and every

John Pancari

right. John. all it, Got Thanks,

John Shrewsberry

Yes.

Operator

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

John Shrewsberry

Brian. Hey

Brian Kleinhanzl

guys. more thanks clarification. quick Hi, of a That's One question.

that XX, current the if a did current to that interest separate to total billion set they're Or were principal? You on in of the principal. Slide that on $X.X was in increase? Was non-accrual that's I referring and why referring guess on interest mention non-accruals

John Shrewsberry

Total, the total amount.

Brian Kleinhanzl

Okay. where losses separately is your you exception you versus modeling coming this guess, than results, with how then do may stress when And you how you the I take Fed about them kind through see better of results, DFAST those the perform think cycle?

John Shrewsberry

in like changing if be helpful. not the will by approaches. if But Yes, up and take our bottoms start than to comparing where since underwriting based saying really that the that up, close it and draw they rate with, draw outcomes borrowers as we that's general, said changing our we very statistically response the other lenders, Fargo have with cetera end I'm I work historical it's for portfolio, loan the have whatever composition that's general from Fed that et I variety the categories our to lower access way, a a portfolios. numbers some not lot following they don't universally And Wells I Fed’s being from models But in the of we're think it own, don't, of don't note modeled results of because composition different and up exception outcomes, inside more something goes we a driven a compared from to. in of I happy applies of with we that into a the model on or the forgive loss properties, of numbers true me own different have it's lot for standards, we we to end with knowledge to

Brian Kleinhanzl

Okay, thanks.

Operator

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

Chris Kotowski

mean I roughly billion. from your billion And went I question. core one things, operating Two it. just morning. kind good revenue to $XX today, Matt’s to at say your to follow-up from Yes, XX-ish on XX-ish mean of stayed have let's just runway flattish expenses XXXX

when So is billion problem. that it's mean And that you kind optionality $XX Are in $XX expense to that's assume gone? I like outside, a you out the put lost capturing I of not billion? the that worried primarily like should an Or sitting revenue looks number a it mean, that here on revenues? like, problem, we back on going forego

John Shrewsberry

about five the we're XX I about process meaningful look I to for should the do that recognize about which we comes have and go the been the how to one talking rely a we like day should ability you see what we on big difference yourself, an in we're our what have that higher thinking with will think then I back people, is of It's the is, that is beyond we substantial efficiency on but here are there's to should working And seen. describe that is looks where Listen, in theirs. when efficiency continue years. back and believe versus to that the being companies help generate And it's things compete we the to it opportunities going people it, third-party on between expense is at No not I've it inside, you is should, back identify from others is, as which the to it is exactly this. ever to is. that outside if what The billion we're go and this and a question we're that the we improve listen used what out. revenues our think there management we're others, future. because no were minds and go the that to through team the $XX check company And where is we anything that on it you very and factual words again, question organization outside, you spend this base extraordinary. What telling in to you there the day a just as the ratio.

is Our facilities reduce ability to substantial.

I And $XX actively more, we're like so on. be whether environment it that in But less, important see things clearly for the it to efficiencies as of gets objective to we look whether for wound a plans. what today's think company. up we'll billion, to develop gets there's gets we working before the very in this it's us Whether as this to going exist and long company, will list just more we be to that those management team share at things

Chris Kotowski

Equity of not applications. realized a thought are just credit that have declining mean, categories And Home that then longer I I and those and you're they Okay, that the John no accepting thing and kind small I key line they and not are say I personal take even still been send And sort kind that but great in a doesn’t lines banks the of products wrong crisis today that, it product of message big those consumer all before applications? but of were Arsenal? the to financial heard

Charlie Scharf

I'll offer personal piece, first I all, have think card we credit Well, do it me the lines about let we I a of guess about a about company the talk because a his, talk can is in John I way guess business.

a right us, front in question for so making product it's the the got customer. And sure of we've that of

was determination rightfully make Equity to to the terms product, we to have that. The in declined you what do And environment Home have production along uncertain us taking to thing do a of that to they But as the their as participate has in certainly for ability a place. amount as we smart of we the consumers add mentioned so is in with risk sheet. balance think

As estate environment and about well. could time change those feel real values, goes about on, as the decisions if differently we

Chris Kotowski

enough. Thank fair Okay, you.

Operator

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

Vivek Juneja

questions, of couple Hi, for John. Charlie, A thanks taking hi, them.

still you that we of year of timing in How end you or giving cost review of some things? think quarter? on to are plan third to give Charlie, be two with track the the towards the us going us expect should of details strategic in Firstly, terms strategic the the kind or that are

Charlie Scharf

I with the think or quarter, share to getting as we we're complete set both thoughts of third the looking between done fourth and at you. complete

Vivek Juneja

Okay, do you'll them. so

see can simultaneously So the you give will we it to that so together? us how two fit

Charlie Scharf

plays think targeting have work that's we what progresses. out how see but I will Again, our and we're to it

Vivek Juneja

on you're thinking thoughts business there? side? that about exits? thinking have dollar you expense exit not In businesses? way the thinking relative this that? all revenue scale Charlie, about Are to of this, of you as businesses where about much thinking having much Okay. too don't just you more vein, What same of peers. it's you How find to you talk Any you're an your of on Are some going those you because are enough

Charlie Scharf

good Vivek. a question, that's Yes,

couple to on the small to market an relationships I think it forward to There business absolutely scale bit about talked we've clear have we not have and which don't it's big we or banking fulfill things corporate. the to just the over from us last that little to might the that company not we and this middle quarters. a able either in primary of the are some do impact enough it's consumer think that and going I be integral have the up being

the should things. company as look looking we think are at think we what absolutely I So those about like,

that key of that there's The five things that, we as would some been business our to might we of future I But continuing we've company determined say so exist think meet some lines we we've used would activities below differently. inside think to I not you prune the expect go of in of certainly word be for do about them the to, which criteria the that continue here. doing. certainly believe terms And these, John has when the don't these company. of are some

Vivek Juneja

give sort to how of us with Okay. you spend when areas reviews, that that us need we've more behind And give numbers some on business dovetails combined business too? what need where will you sense then some to us also, will them, about your do stands give technology these the and you been, and that you're of you heard by we've sense

Charlie Scharf

when detail doing that want our But with still contemplates we stand work certainly to you. that the through businesses. see the go get We'll closer of level we don't that we in fact we're

Vivek Juneja

Thank you.

Operator

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

Charles Peabody

it the What level? that a you going is that a core the your didn't function afternoon. that on forward? what again, I the to of went was level late to variables were Citigroup already apologize of I you. mean, if Good covered power but you Two more it is have transitioned desire variables that dividend? Or into were to from what quick, worry was you over this the about Thank do is thinking capital build it call. questions, it think a the touched was level one earnings you've I this, your

Charlie Scharf

on though that expectation medium not COVID terms around is hang company of gives and term and a power may, as things, that sources they course the believe the upside it's for the constraints cetera. becomes of et something dividend the us of ability up, calculation of that clears A likely even the earnings may happening more of of with in level revenue of both allowable we known, more the environment as found while, we expense, a what's but certainly with handful that they

of the we're wouldn't or changes to in an end So we repeated a likelihood low making where environment dividend. that have up up ending

top are about gone you much fine, so have a billion levels our of building billion excess after that's on $XX regulatory it's have up, even our not observed, requirements. So capital And $XX we capital allowance. feel of we as and may

So the the thinking could now, others we future although turn but right differently really not capital resulting sufficiency, out so upward when than and and about are the right. trajectory about much planning more power earnings core time is

John Shrewsberry

encourage would thinking. at that I today appreciate to the the on we just are busy and so the add, I remarks walk for go a through and you did would we multiple all, you And I it's back because look day calls prepared going know, certainly

Charles Peabody

Minutia addressed And you. of in XX Congressman XX it's crisis so a the XX thank a letter, warn follow-up XX, or there's as of in aisle, they Good, letter and bipartisan, June looming question, on the from think both CRE actions Powell. sides or to And this the CMBS support market, take? I they from they and was you would said, curious actions and help be the what particularly them might asked taking the market, Treasury for the about and thinking you like what to see and CMBS

John Shrewsberry

have we servicers and like see the borrowers to transactions end-up I that would we'd first a to of that my that recovery know participants decision hands risk on actions don't changes don't the I top a careful making review those take. going think those between I through lot have that maximize I don't how to is people be thoughtful contracts. This and know why contracts power that proposed. other do of good should opinion know them in have on some regime is as downturn been isn't pretty what market But CMBS to, and and it expectation are the that looking But an don't be servicers value. the of thoughtful. that, I a idea and special to being impose of what's owners

Charles Peabody

Thank you.

Operator

Gerard Our with Cassidy question line the of RBC. will from final come

John Shrewsberry

Hello, Gerard.

Gerard Cassidy

very downwards. second, deferrals? have applications terms And on heavy you've deferrals? they come I that fees. of X and payments guys asked on how the customers assume I then and John. many some this faded us sorry trend in Hi, number in The for second touched But you Can were renewal up on Slide for early then Slide of a you've X. already. deferring give the customers for you. if Thank for this helped I'm the the apologize waiving these gave when with of color have you actually or extension

John Shrewsberry

asking loan we by true different yes, was initially that category. point peaked. high it's that it's a and sort And Well, people of the

about in I on were week almost dropped who April, Our peak average, accounts was the second XX,XXX to think we've we per asking, had XX,XXX day, entirely.

I late at week June. a we're X,XXX day the think of for

yes to to and people helpful, in was and comfortable that, more the question a then the who out that But base with in of good are would deferral have course getting is begin So of related initial if still say deferral. side. that's are coming how the with, folks we general, extension other long I

Gerard Cassidy

And that? these loans color be of to gotten put supportive the without yourselves going the in then they're granting how guys from having Fed deferrals you long reclassify on and John, to any included second, have more capital against industry, the

John Shrewsberry

on we've think got a don't conclusion I that. specific

a do other to different performing on Fed longer to some might something as is that category, go these cause accounting not convention by there's that. but consider assume and which, different it regulator, we greater after Although point by loan only whether going than we the be time or regulators us the might be risk in of the the it's have going to the be to

Gerard Cassidy

you again as loan noticed the you given the in Great, great million construction commercial non-depository from versus different much the was million color estate increase How your that on Page guess it portfolio, loans prior-quarter. construction non-accruals to and you you was in mentioned the or XX non-accruals the I and the lastly for on give real detail $XXX the thank some us financial? can and industrial and $XX I guys categories,

John Shrewsberry

I team you. I breakout the don't IR have think can I front in of that me the with follow-up have

Gerard Cassidy

I great. it, John. you. Thank appreciate Okay,

John Shrewsberry

You bet.

Charlie Scharf

Well it very talk time. the guys. appreciate right We All you we for listen, Take care. you and much to soon. thank will

Operator

gentlemen, conclude call. joining all you and this disconnect. may does you for and Ladies Thank today’s now

Wells Fargo & Company (WFC) 14 Jul 202020 Q2 Earnings call transcript