WFC - Earnings call transcript Q1 2022

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Operator

Welcome and thank you for joining the Wells Fargo First Quarter 2022 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] Please note that today’s call is being recorded. I would now like to turn the call over to John Campbell, Director of Investor Relations. the begin may you conference. Sir,

John Campbell

first morning, Thanks, is our CFO, being you answer discuss joining recorded. Thank today Brad. Mike questions. where call will our Good call and our for Scharf; and everyone. CEO, This results quarter Santomassimo, your Charlie

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

Charlie Scharf

results call and the our over morning, brief I’ll to you more update John, to the before in make operating and detail, your turn comments questions. I’ll Mike first the some Thanks, good everyone. about environment results, we priorities. quarter first quarter on then take review our

We common in or per start off share earned quarter with quarter. $X.X first me some billion highlights. Let first the $X.XX

the share decrease per $X.XX a included in results allowance losses. for credit from Our impact

of the down and income It with growing grew expectations from growth than for will portfolios the quarter, the growth year from days driven anticipated the at fourth a with along X% should our loan broad-based quarter, details beginning call. was growth regarding view the income continued in the while in from we fewer commercial higher by net have provide current net more on Higher ago. our quarter. interest fourth interest both, loan consumer year. rates, interest modestly our We later drive Mike

However, of market quarterly reduce I remained negatively our time it to largest rates incredibly will mortgage performance declines mortgage one can ratio to experienced declined basis in the for banking impacted the origination and its remember, The Credit points. that business. excess increase and our strong, net charge-off take XX capacity. industry

conflict we’re Russia be exposure certain While to we Ukraine, concerns. industries sanctions, but or thus don’t far minimal impacted by have and direct the monitoring potential to economic have the that have

income uncertainty. far consumers allowed wages eighth and remained consumer said, quarter, of of addition, The our these common prices. shareholders and businesses returned made significant in rising which in have Company was we’ve impacted lower repurchasing In weather continues. common us in of our stock our income energy outpaced straight rising deposit headwinds. a $X.XX has billion our so inflation amount month the per increase strong, The we the a health stock being dividend and and first balances including the food March changes entering position far we’re a have to to of across thus significant period consumers the with put share. higher though most by to and That increasing capital dividend $X work to

first strong spending X% quarter fuel debit the spend credit above to XX% XX% levels, remained XXXX We fuel deposit with pre-pandemic energy in XXXX. from up a the remained spending Loan ago. a from compared see Consumer prices down Discretionary increase balances and card from strong reflected was to highs year up strong, demand our a in increase median in observed driven to entertainment, in The quality borrowing portfolio. but strong continued the in up commercial card capital in XXXX. up growth increased customers All growth in the increasing spending XX% and categories customers’ payments, up spending. by increased expansion. highest working After entertainment were with growth XX% in XXXX, year first of recoveries with fund travel, of stimulus in remained dining. both travel from outstanding ago. with loans net commitments Credit our XX% quarter are needs and commercial as approximately

he’s an making on our and me Chief extensive has significant retirement announcement. priority, let to in risk our for candidate risk progress Flowers, years background the on Fargo organization. risk following risk Wells quarter, Officer, him who done believe infrastructure work I’d made that risk the of the you managing continue his in make we the build-out Company she to Early Fargo’s and for Now, like Wells Building we’re Derek Derek XX progress. appropriate over including ideal control Mandy the named over first and has strategic update made last new top succeed of several Risk experience framework. Derek progress managing the I we’ve the priorities. transforming control his thank familiarity and with and been remains to with Mandy, our Norton’s the tremendous years

news the progress products customers the before banking sold make order consent that legacy that resolving had We Company also regulatory a retail January to OCC with continue in to terminated XXXX. add-on regarding in issues

across have close to ability to mobile our setbacks, to and added increase a one of from our will We more digital customers experiences confident the continued have our our next both, ago. I’m requirements, our rolling first We new to adoption, that is X% up digital In expect has the active remain Providing the critical several the in for we remaining simple, cost likely reducing fast use gaps focused customers strategic to active businesses, our mobile on priorities. seamless our our most We in important Digital and XXX,XXX improving quarter, much serve new out drive customers performance easy investing we delivering quarter feedback satisfy banking continue but our with do experiences customers mobile over work began years. consumer to the to with businesses. and financial regulatory approximately growth is very and our first experience positive. year to been has which alone. in customers while to

continue We planned year. capabilities improve enhancements to invest our with digital additional to for this

ago. increasing a increase We’re made in have These Zelle and usage, to growth also on helped limits. send expand friction changes and send year in to from volume sending customer in drive changes continued XX% reducing money. invest focused moving and including customers We’ve XX% to active a

card on with of with customers. portfolio investment that origination, partnership and Banking Rewards card our to the within management builds year our pay small offerings our kind business selected This with allows we co-brand earn announced apartment a to lending our with We experience customers at for to collaboration MasterCard. businesses. our first Bilt and payments banking This accelerate any to existing nCino and no continued underwriting expected streamline Commercial and corporate our and credit our rent rent provide the fees we in transformation to U.S. enhance relationship In last first transaction points its on is more our streamlined quarter, members digital

turn before over some make to summary Mike. it I comments Let just me

it actions Reserve strength we our of to reduce towards take has but this As internal indicators clear and Federal reduce that it our customers’ here economic continue the financial made will inflation sit will today, growth. to the certainly necessary position point

in the clients to war the slowing a In provide our downside. risk additional addition, positioned is in support adds for well Ukraine to Wells Fargo economy.

be a we extending target basis margins While lower capital as XX% other same creates likely which will on and losses see rate will in remain lows, run focusing in subject greater also on beneficiary we Company net have at this the as invest. we to we’ve increase from We to sustainable the a the some remain benefit within point to managing year. well. rising in ROTCE, past types credit achieve we from a on assumptions discussed credit a strong We expense diligent are risk an the from rates, and our base should position, historical

We continue our broad to in focus of on set actions. a decisions and stakeholders

to serve other. better call gain our last unbanked one we U.S. is will of thank It’s are focused the the support back images support of branches never week, across our to again, select as of that donations million military. the of Mike. and financial to our nonprofits customers, close we employees more together we services want plans As aid to of mainstream increase well great to for that education barriers $X announced our support the pandemic the helping is reports to inclusion way access can products. affordable turn I back XXX,XXX office. to refugees and Earlier we part in people we month, order to Ukraine three also to are together banking Since all In concerning. in been financial banking I impacted, all rest seen, important initiative, began, most centers the Inside left with announced humanitarian HOPE on have to as they and this as which and as Ukraine the be Ukrainian workplace. introduce deeply And welcome over work those Operation to in to guidance. Working employees remove communities each our who now access HOPE to out started coming inclusion and

Mike Santomassimo

morning, reduced Thank common loan and of credit $X.X quarter decrease or around our Net income to the allowance $X.X $X.XX portfolios. uncertainty in included billion the good billion the share, per you, predominantly on economic due for and impact Charlie, everyone. losses, COVID a for our was results

compensation. was due included in tax income tax effective rate to stock-based which Our quarter net XX%, discrete income approximately first benefits the

for our items. expect to XX%, any approximately We discrete tax income effective full be additional rate excluding year the

third the We CETX the our X.X%. other cumulative assets in assets, commitments, our approximately the our had and well total on which comprehensive capital XXXX our points. basis billion, growth total strong wider capital since of in returns. reduction XX.X%, Our balances which counterparty standardized CETX with the quarter for by repurchased risk-weighted billion from interest credit on driven our spreads, is ratio stock declined MBS quarter X. rates continued line Higher by loan ratio reflected we of XX in We the approach to first which $X.X bringing by we reduced capital adopted decrease a billion and of quarter, with in minimal a regulatory income, highlight $X The ratio and $XX.X agency driven in plan. to fourth risk-weighted XXXX risk, still repurchases impact common minimum above higher slide

to expect buffer the disciplined we the plan, significantly approach, under levels capital flexibility have buybacks rate our the in volatility contemplated quarter. and exceed framework we currently given in will repurchases second stress capital our share have to While be the in lower share of current

Finally, capital capital submitted for we’ve quarter, the official our our called XXXX surcharge out buffer possible will while Reserve the Federal increase our as same X.X% the I’ve could stress before, publishes plan. third of GSIB capital when in buffer remain XXXX. our stress that it’s And

to slide Turning X. credit quality on

loans. Our recoveries driven in fourth the in ratio strong was of first performance net fully Commercial charge-off in strong. energy, certain change middle and charge-offs was XX charge quarter, declined net down off in million again were basis delinquent with the a $XX first performance from mortgage to credit quarter also the million recoveries to which $XXX points net to credit by $XX Credit asset-based loan included related lending practice legacy million market. Consumer residential quarter. losses of

increased million, included quarter. quarter fourth losses. million and first this Nonperforming credit Commercial nonaccruals that $XXX levels. again higher loans seasonally residential performance exceeded by exiting COVID-related from have quarter forbearance early card an the accommodation certain $XXX and higher declining decreased $XX Consumer resulting pre-pandemic losses were X% programs. non-accruals, are nonaccruals or have exited below now The million, in down increase our driven auto expectations. Overall, primarily customers from mortgage assets of

highlight fourth thus recovery strong in outlook the slide increasing the loans treasury in partially continued the from asset highlight continued targeted On the third up Corporate the quarter. credit reflecting of less were loans with and growth and and conflict. and declines Period-end and deposits. drivers under a $XX.X quarter and a the that the ago, growth the X% cap. in when results. high Russian-Ukraine grew a we X% Average X% impact end I’ll allowance consumer by consecutive of the inflation for consumer first commercial and loans Investment year year deposits credit Banking Our billion our ago, uncertainty Average reflected both risks losses growth increased for our corporate around quarter or segment business from businesses portfolios. far grew in COVID, performance, in Commercial from manage actions with an from year reflects X, Banking, specific ago discussing the economic offset economic to at

net slide Turning X. interest income to on

rising we as impact by First million year the million $XX $XXX higher which Last and Obviously, at net we quarter has on has quarter potentially from a fourth at were X% If XXXX or up sheet income loans to as could decline growth of prior quarter, loan quarter, rates, from EPBO see for net Loan and from outlook the end. securities demand, quarter. up the X%, days fewer increase in that two the forward XXXX from it’s by stronger earning to possible The forward of interest The driven from from loan as X% earlier balances. drive and Program offset included than from mid-single of fourth income interest lower curve average we continue the balances and other fourth rate loan by year and mix growth been up based loan currently benefit well increased that that in XXXX, also increased in be over as yields fourth year changes is interest past net and lot full higher the $XXX declined three the digits asset approximately income changed which balance was well X% ago will the balances Paycheck driven quarter was anticipated growth increase Protection the in million income highlighted fourth quarter and this our the low a earlier would digits. quarter time. year. average versus mid-single period curve solid to rate months. the the

it’s to we capital higher-yielding management. rates would also not products betas is and and initial rising to lower-yielding on to However, fees a and on benefit and and migration important from likely Banking, the after note have customer market-related accelerate equity potentially increase. deposit that expect venture linear, Higher hikes the rate from deposit businesses private Investment also impact volumes rates and in wealth negative will Corporate mortgage would in

interest timing net XXXX and percentage Given interest higher will recent factors, up rate our including XXXX. income curves, said, mid-teens year be for Fed the from current growth full increases, rate income forward loan for growth. a basis net driven expectations deposit ultimately growth betas loan magnitude by could on of of and That be a variety and

turning ago. a Noninterest expense X. on X% slide declined expenses year Now, from to

divestitures initiatives to We continue efficiency on our expenses make last progress and year. to declined due also

XXX(k) restricted personnel The million retirement included higher expenses, first quarter $XXX including taxes, for of payroll employees approximately stock eligible and seasonally contributions. expense matching

which were matters. historical a operating for We of also expense, driven had million higher losses, of primarily predominantly by remediation variety customer $XXX

be to expected still are expenses approximately XXXX $XX.X year full Our billion.

this we losses update continue and on and our throughout will can be However, year. as the operating expense to hard to quarter, episodic predict, expectations we you experienced

Turning Consumer transactions. starting year and Banking segments, lower fees, Small Banking increase and ago, card to operating XX% primarily lending in on and from due X. to deposit with a Business waivers reflecting Consumer debit fee higher revenue an balances, increased higher primarily deposit-related our slide

channels business the and serve from cost are have reduce to run continue correspondingly continued XX% to transactions underlying pre-pandemic We down and to levels. Customers to migrate the digital teller customers.

announced we that We be number these approximately make this to fees we staffing in the decreased are our funds opportunities changes help overdraft by our changes eliminated of began some this avoid the continue to to March. to year, out of fees. new policies implement protection and improve better branches Over we we XX%, while and and we’ve period, have by customers. transactions overdraft customers XX% and rest we’ll for early making rolling serve enhancements of Earlier We nonsufficient the same to our year. efficiency more branch

a We still million. quarter the didn’t be on these impact So, to annual $XXX have fees the these first decline meaningful results. approximately changes in expect

the year second to revenue will and to to to margins expect most year activity. as year X% removed decline annualized throughout customers lending last was Mortgage balances. declined response the Reflecting capacity of most to levels -- rate by and year fourth higher banking lower will XX% rate lending increased revenue the is quarter, respond up higher from the originations the last ago first of industry. primarily and are quarter and that excess quarter loan features new introduced to environment, revenue a highlighted reduce in mortgage expect we the started in personal and we XX% be is a business the volumes. given loan last of increased the above partially revenue from ago, by this mortgage quarter, by press higher driven pricing and in competitive due XX% expenses to and continue basis latter as decline for lower from in year. from be to capacity margins, activity, observed Auto ago, will reduction under of X% card pressure continue in in volume points and the aligned the for and However, driven levels response up higher we offset and remain an how was originations to estimate may a and the balances and decade. Credit We’ve XXX this to part point-of-sale environment expenses Home rates the decline. excess the observe

key Turning on slide some business drivers to XX.

believe the purchased quarterly Home quarter, by modestly in refinance its quarter offset activity EPBOs. the to lending in consecutive the fourth We third loans securitization from from primarily our due mortgage which portfolio, originations response largest declined mortgage the in grew since XXXX, mortgage from lower pools loan quarter. higher than rates. or more of decline nonconforming market driven fourth to Our growth XX% declines balances experienced

Turning credit competition fourth we tightening in for a but originations. from to auto. XX% higher and new segments from increased was interest Origination solid year returns targeted rose, and ago, to down volume quarter rates as due price risk X% increased

card continued Turning but and ago, fourth travel year a from to quarter point-of-sale up declined seasonality. from due year a It Transactions due from ago was purchase X% growth card. entertainment. volume down seasonality to from X% double-digit in the with strong. were X% Credit to up fourth XX% debit to quarter be and the

rates payment While remain new ago strong to purchase balances products. launch the elevated, a year XX% from grew of volume due and

XX% attracting. credit a New to we’re increased and from year the continue pleased the we of by card accounts over ago, accounts quality be

of Commercial to Turning Middle as a as the year XX. on higher driven impact Market from and revenue Banking deposit Banking loan interest increased X% Slide rates. by balances ago, results higher well

Asset-based impact a ago. are and larger have demand Revolver and well were consecutive grown support of renewable below on and increased by equity driven utilization balances, lending XX% been expense to year, from transportation material inventory to and driven energy borrowing occupancy costs for levels. investments. declining year loan historical clients the leasing lease by from has expense loan last driven from stronger of who are year Loan ago, primarily average growth. quarters and by well half the Noninterest increasing increased After to securities net lower initiatives higher inflation as first still balances ago, higher revenue personnel but declined year X% and efficiency rates have as expense. revenue lower a during due up a from X X% gains due from

expenditures of are also catching projects the demand in new and from up from past capital over some couple years. We’re underinvestment who seeing clients

XX% balances Slide to revenue increased higher and primarily ago loan billion high-yield revenue revenue XX. trading revenue outpaced year a ago, in estate pipelines our higher from business. strong. balances year to ago, increased driven year in ago, year to and and ago XX% in products. investment year industries $XX.X a across and actions by improved Turning of securities interest real and asset in X% driven cap. Banking ago, low-income up Corporate Commercial loan or XX% balances. grew Investment by housing and continue higher expenditures into higher from primarily lower loan from primarily XX% from driven revenue demand year well loan a from a higher and impact up were be and and residential income by higher continued On balances Banking treasury needs. Markets XX, originations year driven capital higher X% were with from manage X% deposit results. capital working due from valuations banking interest by mortgage-backed and loan Investment Wealth slide ago, was corporate activity a a Average fees most from down Average on rates to the the grew year deposits on a Management from down net by growing ago, the were loan market Average a balances asset-based as driven management as higher quarter first the volumes

a reminder, of majority assets the of are the WIM advisory at beginning quarter. priced the As

revenue. Corporate loan Services and our driven first securities-based year revenue of a offset loans they average increase the market in gain higher year April the than were ago by approximately student These lending. more deposits declined reflected sale corporate of $XXX goodwill of loan year quarter X. of higher momentum ago, loan expenses X% compared of and on of on first highlights from in from The Jan results, expenses driven reflect was and decline contributed the compensation, in Slide our our will and with by portfolio. the both Management. student and divestitures businesses up for second by a our quarter million a increased X, from Trust write-down ago business from revenue continued including which a revenue-related X% valuations including and year was ago, $XXX lower Fargo our XXXX, XX portfolio So million as sale X% Asset Average a as valuations market of accounted results sale primarily the ago, Wells expenses the quarter by driven student of portfolio the year in of results

now take will your We questions.

Operator

Scott question Piper [Operator first from comes of Instructions] Siefers Our Sandler.

Scott Siefers

year. appreciate was given of the commentary the Mike, the the then and the hoping, on expenses I lumpiness just guidance sort between I full losses. expense of reiterating the the for operating some account seasonality and

If words, trajectory. more you progressive be things ebb maybe year, how And on and then, a how fine other -- your bit going could will is mind? down to or give little In a flow could of a quarter? of we through much point expect in the to the just second or come in things the should the it decline end we

Mike Santomassimo

Great. Scott. Thanks, Yes.

As expenses had million to in associated said stuff $XXX and seasonal in in stock of comp related the and about I all first remarks, the there quarter. XXX(k) we the

go can was when in So, you I year. our as you and back, those the starting don’t little day But a last that then, mentioned that year step a sort as operating as saw generally as one. you away. we piece that you benefits starts efficiency obviously, execute initiatives, losses, the get well, to other And there all of take be throughout lumpy fall

year. continue more get And impact more to so, the you’ll throughout and

down be the year. expense So, as the throughout go to you we trajectory expect should

just just And billion what achievable quarter said $XX.X remarks, did every NII -- we for about believe on in the we in still down may the January, the in we in a up other fact X%. do linear losses downward. -- be reiterate to nonetheless, the of then I’ll think And as we way, trend NII. reinforce a be operating full we We despite Now, that you’ll the the had said is we the year piece thought gave we not higher but see would quarter. guidance

doubling to So, look the we’re throughout loan the year, both due given in rates. that as seen of the as as substantial mid-teens growth we’ve well kind the -- and move almost to we

Scott Siefers

up. maybe just And Thank follow then you. Perfect. to

talked expectation in as you to guys an about the decline think expenses next I past well. for year

costs pressures do down Just you any in outlook given year be, of seem inflationary how some that lasting to these risk see year? of another to next

Charlie Scharf

It’s things. couple of Charlie. say a would I

the continue think and as the the today. for to still I say, own would as sure, that we it’s experience still it’s but not year. still thinking here inflationary the great for seen today we’ve sit think here we pressures that is and they will year, way -- wage way quarter the our in things as plan early of On were pressures, we still to are I last want evolve, about fourth

So obviously, they And as bring going be said, that slowing. the can but is to they to down. exist, seem to, do still to Fed I they everything going do

by is. we I different next so, a to inflation as get And year, the today, we the be think sit here where we’ll in time to very, very position relative

on place the running result very-focused, that’s reductions better. what so, used in. efficiency, but focused these And And really the we’re we’re actually expense still

Operator

of question from next Research. Chubak Steven comes Wolfe The

Steven Chubak

with So, NII wanted deployment. question to just a and start on excess off liquidity

the what given purchase, speak just you appetite given you on some are to to hoping your widening in to side? Specifically, MBS of could was And currently reinvestment in particular? securities look And guys retain. still excess I you liquidity some of yields that where the spread sensitivities might the deploy duration

Mike Santomassimo

Yes. Look, think right? you liquidity, to first, Thanks, when waterfall. the So, it be if Steve. going to about deploying comes first, It’s Mike. loans it’s

grow see we based And then, it’s where we the decide on preferred more that’s substantial path way. for growth, anyway. assume not so, And what loan there, we say, as the any the NII going portfolio we’re year. throughout that grow does would our the to I we portfolio gave securities -- guidance going to will we if obviously, that’s And the first. go in see

yields additive have where what And perspective. to which how we see based across that so, see And you and a MBS, then, we’ll can see goes from are that treasuries loan growth both, will the -- primary on and think, have higher while, that’s we in classes are the go we’ve at obviously, two forward. in portfolio. than certainly investing rates as we seen now a asset And I we’re

Steven Chubak

follow-up hoping base as cycle, given as been to big deposit one certainly is a case of of tightening pace just the given last your now. asset liability optimization, QT, in number you lower the be just more of deposit given guys versus cycle, your And for there And fact could view years focus that I to stickiness of Got in was relating can deposit Fed aggressive relative executing beta it. your favorable some the well a have speak credible cap of that this specifically, deposit area a remixing? betas under you just

Mike Santomassimo

the you right I Yes. think point. No, highlighted

we’ve pushed do As interest cap, over of you to couple that of time. look some away asset at to the most during had deposits the our manage on what really we’ve rate-sensitive last years

least side And so, the the on we’ve base. retail overall of rate-sensitive seen side consumer the grow deposit and a percentage the as deposits

betas we’ll the so, saw in we definitely cycle. And going help to average lower what last that’s relative the that see to

I slices think, as really sort expectations of our of think of the haven’t much the deposit about different couple last the you months. over base changed

have you’ll on side. and position, lag that. what and to betas given then first the continue given slower last much, to got I a as likely, think our we think going bit are we we pretty is which to go But do around. on similar XXX what little wholesale that I And basis don’t cap the we’ll manage at rates points, higher the think consumer have look we’ve side, to you’ll saw betas pricing deposit the on move to asset

Charlie Scharf

on would And into out also lot this is kind volatility that folks that if than thing The heading I rates a think it are different for is of I consumer the just think there up we’re also depends has we’ll environment market, add Charlie. you other you’re moving and see, -- certainly -- relatively a alternatives the to I that’s of on at stable very are the a side. very that environment when the that what And and in I only just slowly. look

as that I different respect So, it is well. think in

Steven Chubak

particularly on commentary ask just that some the All in for -- didn’t just more a some thinking be we of as That’s Would right. point fee headwinds jumping items squeeze a quarter? right mortgage one. in great. should guys as volatility few you well of those could the be just about of XQ given management, if both, remiss I of lot I off the one highlighted, income, the fee wealth line If how about quick given have income in

Mike Santomassimo

I’ll you couple a there. of points Yes. give

a the X/ as equity markets at and the think, you you down, look at advisory large think of X% modeling the given them terms So, or about are I in happened on not XX that is on fact place in X% being the to bad valuation the in start advisory based chunk that roughly probably value. of assets, advance built income assets, the both a if fixed what’s

capacity a step We pretty lot in in slowdown have to of the given there’s gain spreads mortgage in margins we will still excess market, the the On sale given expect a be down, still particular. will the decent -- volumes impacted system. or abrupt see business, purchase but market, refinance in on will definitely the definitely

keep in the year. the you and that Now, just that the in NII laid as look rest of context backdrop through of out we growth terms the would of I

if you pretty on will the throughout NII well the those year. even of position growth of start items, bit the So, us rest see little in to a pressure line

Charlie Scharf

add Charlie. would only that. And Yes. is And thing the this I just to

to income make And on we’re we on going more and than income. the going mortgage rates mortgage -- much kind because this in we’re environment going will the are in is is I we how stand. in are we I to of going this into decline positioned way about the feel we in quote think decline increase when said and where the up, an banking positive like remarks, about banking and my you very rates think

We’re still they to beyond, on see reducing focus is expenses. good quarter, even everything on go up. and based be at we possibly will one will Credit the exceptionally continuing and though that certainly next point, into

the we’re that while overall doesn’t positioned for so, fact what the And view point that on change environment we’re not well it. of economic sure look will our like,

Mike Santomassimo

reduction quarter reminder, some fees second impact of to script, of see as balance on the in in in I nonsufficient the made, my a that we and fund you’ll the well. Steve, Just impact the the of overdraft said too, start changes

Operator

Pancari ISI. from comes of question Evercore next The John

John Pancari

terms billion in expense the of side, appreciate $XX.X out the On the of helping you the with I reiteration us guide.

billion the to On changes Thanks. feel I in separately, the the I the given billion that billion savings, how then on that saves also side, about quarter? cost in do expectation, on you pressure $X.X and you’re operating net, $X.X $X.X And number expectation? how the see any gross loss to guess, wanted about feeling the

Charlie Scharf

take part I’ll -- second. first I’ll you take So, maybe Mike, just the the

that in On quarter to first things are saw one, the very specific we remediations. first the the

saw nothing to so, quarter in we’ll what what the series with in of first see quarters. do the we next really And has

and And their so, that gets stand built not from those own on something of on there. it’s kind

Mike Santomassimo

of look is not you couple static Yes. got. embedding we’re it we I a hopefully, program, as run the what something evolve, we we to the and we gave, efficiency, it’s executing this about continues I And and in implied place how quarters, efficiency like times the feel in as at last this that. on not that the that it’s well was said the executing a on guidance the DNA over we’ve a good -- and think of program we’re but number And of --

John Pancari

Okay. the And then, points basis decline quarter. the this of capital know I on CETX XX side,

increase. You also surcharge mentioned SCB the could

capital earnings are talk your beyond did things for wonder on thoughts there. Thanks. quarter. buyback You outlook? given you levels the your Maybe just how flag second I thoughts the return you up updated shaping just second lower have expected quarter, about of the and can if

Charlie Scharf

then and chime Yes, start, in. you Mike, can I’ll

we’re OCI I reality -- is have on impact trying just -- the quarter. the during just do it’s the to we think of what do

is. And so, where you see CETX

dividend or $X quarter -- Our our a about so. billion quarter is

growth room inside us there to we’re grow show we ability do do to which to that of seeing. further plenty have So, for demand RWA, want we or for continues other OCI as to changes any the loan the

CCAR, specifically want obviously, we the we just -- that to out. figure we Company will through still the should quarter excess what And have I so, in we’re generates. think the do are second where beyond And going depend still come capacity with that, on but capital out we’ll to then rates where

Mike Santomassimo

our as And grows, capacity be you of still operating earnings and efficiency see as we cap, the through under asset prudent, of the look through you’ll NII go got we as us -- plenty but program, Yes. the think flexibility we the and grows we’re we’ve execute there’s there’s on year. rest -- year, -- I

Operator

Usdin from Ken comes Jefferies. of question next The

is open, line Your sir.

Ken Usdin

of side. the cost follow-ups couple a Just on

the Mike, And costs last sales stranded built transition business year the also decline? in for full again the does year expectation how us So, of kind through kind into then, the walk and that from that how And agreements, of that was the first quarter? and of cost you can is much your numbers?

Mike Santomassimo

Yes.

a not the other the you as about the what most you of the as first fell business. we the ongoing took next about So, about $XXX quarter, -- from at million the in place year, either run that we of on side businesses, But And into And said, remember, are TSAs, of today there’s and $XXX last run likely student costs. falls and was year early of $XXX look expenses of the the year. the have then, under Ken, which charge revenue if And remainder the was loan in away exited. million stranded for that. remainder the business rate quarter so million the is

laid the meaningful. said to then, we get are the and we’ll bit And to as year will the stranded time, best last out, a going highlight changed. costs but the that do take we’re at work it’s on our And -- little of them that continue of quarter. quarter we if end off, as TSAs roll to fourth the So, haven’t numbers last out

Ken Usdin

Right.

just interest then, little income. net And things two on Okay.

You the had am the still the net then, expecting plus I’m just income, understand those you And related out lower did And that how show if I took in EPBO you to from wondering to do go much the out trend us help year? NII? And EPBO and through sales here? premium you of how sales expect you can did are interest decline this quarter mention am. think premium you

Mike Santomassimo

PPP $XXX million, Yes. loans And came NII. of and the EPBOs on sequentially that down impact there on combo linked revenue and quarter the about was or

out. And so reiterate the when Q we’ll it -- in that and comes

roughly as As throughout the can little $XXX year. know And time. slow the have a you decline million mortgage-backed, slide or look a busy today. down quarter. million, it million, for I over decline at for $XX at day will it’s look in that But, you reference am the to continue premium $XXX prepay you when came

down quite we were come it’s since So, bit where a last year.

Operator

McDonald The Research. Autonomous John next comes from question of

John McDonald

venture lines the front, a terms capital Norwest tough expected banking, core investment maybe What should What and income of couple fee a you markets the comments the quarter. thinking on about I side? about a already the trading be on capital better Venture more some in about line? Just bit of in fee than think, of came in little the line. made market we the volatile this

Mike Santomassimo

Yes.

it’s year, given we’ve of issues. the side, with markets, seen. banking particularly the As has side, that look, on the you the investment fraught investment quite -- this think, of volatility is know, and But bit fees the predicting a lots slowed of market clear fees I banking some on equity some capital

coming Our It’s quarter. hasn’t change strong pretty pipeline much. really stand from into the still where we

realization deals And of so, on that some timing pipeline that of just is dependent market-dependent some some deals, of and of somewhat closing. the

markets So, see. the we’ll see dependent that is The see. demand on somewhat volatility we and revenue we the

back last at three the go number on -- from at end And there’s it. hard that’s there’s others look, of through some years. And you we’ll when think look and some if you over number gone look this, to to Venture, you four of Norwest like But so, go a that up. years we’ll line or benefit that have some as exactly then, stability we predict I as through where

business this look of you some when one did or think being cases realized, bunch or two some a I happened what of of quarter, of at have sold like the in investments. going public we

see think of see how was still some I goes. market that to that we’ll the it volatility. really And continuing so, And despite that’s good

it’s line I of some good imagine we revenue expect performance the do in continue last think to But we we’ll see see item. to I saw we’ll that those -- year won’t peaks hard businesses. across some that

John McDonald

little framework comments make any any you improvement NII, basis, year you bps, from your premium throughout in like the about the expectations you’re maybe on of XX maybe -- spot the what and am for there? get the or on on a a also of could just cadence a XX much hike baking how benefit bit of And NII and

Mike Santomassimo

Yes. No.

the So, that Fed moves. a moves, the lot is of on you fast dependent it’s immediate, going when that the you And as after. realizing start of Fed know, day be impact to the how

those obviously, changed expectations there so, quite a bit. And have

be will So, case. the that

I to numbers think the first in you terms the you are in impact. most close And it. Q, few for shock rises XXX rate again, what the basis-point of the pretty it’s And we give should expect the those for pretty on immediate moves. of

John McDonald

that assume down year? you the throughout And that comes am, premium Mike, the

Mike Santomassimo

ballpark you’ll I it’s think come as quarter think yes. things basis quarter to progress, a to will it’s see upon I that. in bit down as from but somewhere how the a yes, it the this dependent down. to Will will go to, quarter. It little slow, of unreasonable linked see saw -- think mean, what that on continue prepay But Yes. again -- we that It we it about look I not come start -- has absolutely. at sorry up and we be next rates it’s

John McDonald

guess, wondering, did just the I is of kind it. assumptions that part NII upgrade, more -- Got or I Is okay. the improve was that rates you of that? for

Mike Santomassimo

NII increase baked in John. the gave, That’s into we Yes. that

Operator

of America. question of Bank Ebrahim next comes The Poonawala from

Ebrahim Poonawala

XX% question, and ROTCE rates. the the lift in past, the higher level of you’ve, about capital I talked asset some guess, as Charlie, first needing

lot getting a rates more ago. We’re expected we of in higher six terms than months

of ROTCE growth. the NII mid-teens being to it’s even asset we outlook, lifted? some expense how without cap in about math terms you’ve four hit XX% quarters, next Just you talked over think Do conceivable the six at that doing rough point

Charlie Scharf

the have on is of would to the a is to and bit I But us. But time don’t to and necessary we’ve assume XX% that I and rises being was stick yet we’ll frame then will consistently because cap thought it little talk about what about question a and we’ll with the more we’re get more want little that I XX%, than said timing. are rate talk fair think that we not the a to more hone think to so, try to bit seeing think I asset do XX%. still get

that -- the is I that’s just think reality.

wait in would and until and the And would so, be that more should us rate for it’s XX%. rate quite seeing a possible have But more positive I that asset than than have meaningful rises certainly, terms we these of expected. get have that think certainly to we’re sensitivity we we are we can’t just benefit hoped -- a offsetting we will the rises that. of just But I

Ebrahim Poonawala

about I just loss we’ve just question appreciate us Mike. loan scenario. your I reserves, another weight on reserves, day outlook quarter peers one XX a putting release, a case leads And of economy today your basis CECL that to your a credit, they are how that in seen and the sizable where talking one When about higher reserve stress response. think of one think of points. we about yesterday quick build on Give for sense terms was versus

that would how you’re around be process helpful. thought any Just thinking through

Charlie Scharf

Yes. stab first. This I’ll is take at it Charlie. a

-- is it’s in which important. CECL assumptions what’s think something is I I our think understanding

very because As But companies We models that thinking book things it our and the different on across to different put it the conservatism compare in we profitabilities different -- across different things. hard companies. is is way have And scenarios. and how loan it out to does we’re for other play is about how calculation. in a reserving hard items sense give as predict, you

is assumptions side conservative a of I think levels of now which our as the might and just to in embedded we’ve a what or impacts the models the potential slowing about of just more impacts we a we’ve COVID, think conservative been of economy. our on way that or be view set in more reserving something others, seen relative consistently the potential

here go way at of you it, already if we we say, downside. percentage -- to the I assumptions on reasonable So, into sitting look overall, don’t I the a our look were -- the were assuming probability that think would at today, I

about so, changed, we And inflation. but of to relative the hasn’t some to assumptions made added we assumptions COVID, feel that better relative we’ve some and

we’re a of still are. So, reduction the I come more think think -- end can terms what where CECL feel are And net-net-net, at what we comfortable we conservative of and very the calculation. of in out hopefully that’s drives I

Ebrahim Poonawala

in over then And the reserves at next few macro? assume quarters, helpful. big the track that That’s probably we change should a lower least still the absent

Charlie Scharf

Yes.

-- based think outlook point. and CECL losses to in the -- at amount take dependent you upon all this at I what the what macro you embedded on specific relative of it’s the macroeconomic to full a the requires performance. see as portfolio look the

go gets So, by if And it outlook, same, it up. stays gets better, reserves will down. come the If there. be it it worse, will we’ll along

Operator

Graseck from of Morgan comes question Stanley. next The Betsy

Betsy Graseck

came for your I your point technical bit. semi I thinking here. yields this question about from near release you in rate on improvement just put the that loan the term I’m NII But loans should see yields get least had where what outlook, you pretty another down environment. at quarter, a on the

So on first probably that on to mortgage in second quickly what get year? also auto in that saw I wanted through but then, we a side. right? I this and also go -- a that’s declines part And the just and sense of we could resi day and how playing just And I wanted know revert Q-on-Q? sense into was to get Now, count, lien C&I, as some

Mike Santomassimo

try it’s shot Betsy, I’ll at Mike. Hey take Yes. a that. to

of I what -- so mortgage coming the the side, is resi you’re impacted us seeing they’re EPBO think loans and on down. they the impact coming

that think, bit creates to of yield there relative there. the I noise, little a So,

in starts direct pretty moving. you’ll minus I’m of -- bit that rates -- neighborhood to on so the react at rates react or look go book, rate, rest that but there, but quickly to noise percentage. And quarter, see to maybe see that C&I the obviously directionally the the of C&I and pretty yield, as in of going a the you start you a floating it’s, If to any it, book, little that the little is plus the -- call given get But two-thirds up. bit on

Betsy Graseck

Okay. Q-Q saw it’s like we why It’s what that’s we not and hedged out, saw

Mike Santomassimo

No.

Betsy Graseck

And the from drop morning rate Okay. line, message is this to that you the getting this to is bottom other then improvement that you’re expecting I’m fair?

Mike Santomassimo

Well, and I the reiterated is think our a we lot expense for to guidance year, better. be NII going

Charlie Scharf

I Betsy, understand. I’m what’s question? sure your in not

Betsy Graseck

an getting that in the rate uptick guidance drop it all like to that given you’re hike the expenses your steady, is seems line. going And fact holding on you’re bottom Well, to rates.

Charlie Scharf

levels how for will still nearly even We low at future, charge-offs make much went that up income Well, on to I benefit yes, go number. the And on the expenses but come remain point. mean, the continue more specifics yes, we’re Mike will NII. foreseeable over not to down come money us likely XX.X NII. get down, going -- obviously through you And as noninterest though as look the will will we’ll out at to as for those some -- not meet

Betsy Graseck

I at know high-singles all to on EPS, uptick Yes. feels I line, least it EPS. what you me, I to mid-singles drop but… mean, uptick closer it’s I bottom at That’s feels like NII if consensus something the to it the like mean a But consensus get least. on

Charlie Scharf

I out noninterest to what’s on of at a going you make income. mean, lay just to I’ll sure look try -- I happen little bit

I think lows. at all-time charge-offs are

delinquency You numbers. see the

the aware we feel, it’s unless think So, we’re we -- -- or economy. how -- on when the wholesale something talk about -- it’s that one we economy of it’s there’s side not of, side the commercial I feel the is

make kind just are the they’re we We conscious in the of should all of environment. that think line also for movement well this sure items. positioned But people

Betsy Graseck

is took a the on but it’s then, feels you that other customer question it’s I’ve like of that getting quarter, lot. been And the kind guess it that’s happened I one-timey, remediation this charge

So, how more left? is much

Charlie Scharf

hard portfolios. captured say we want really customer I sense we with the we’ve what we quarter, to to I these make and to answer, we say, look we have are sure makes the that And this, and they’re remediations, But -- through every sure all for that got everything. go frustration. It’s we we’ve when make at the understand that would aligned

some some remediations from XX, ago. recreate our And years these to of and back a go -- of required scenario us XX

part And complication see. we of so, that that’s the

the in least say but scheme we from but And given into at what things to that big that of see And point, have so, specific. have overwhelming. to we’re we’ll this understand the NII, be we benefits not full-year us, there’s we we’ve like they’re going to they to the fits aren’t relative at And these on do. that very no how some will guidance do And things behind more, expenses. case

Operator

question from comes Bank. of Deutsche next Matt O’Connor The

Matt O’Connor

remarks, still that a And the -- like on issues. you’re I kind progress. there to things is, and of on basis are that question years? you answer. you in the I significant continue cautionary regulatory next to is just The meaningful you’ve making guess, of daily And guess, language? this fundamentals implementing Or clearly are you’re ongoing of in several to you questions close acknowledged But and some But some that. execution acknowledged kind to gaps The these say you ask could still fixes the just progress. just I it’s kind are to thought a significant need the moving address I regulators right line to of making talk direction guess I the way. the had the in implemented of situation. as have usual, maybe you legacy oversight and are But following up prepared got over questions. tough the

Charlie Scharf

that the words saying just recall don’t you used. I Yes.

of we ongoing frameworks do that feel have frameworks significant that in of we implementation you the develop you be -- been that we we the of very framework, think a work as time. about clear are good once very lot the we But the have I to a have amount trying place. -- to takes

the it’s we there, that some is stronger remain just We and things say continue will that. amount we as things have work develop we’re to because would we And of as at things prudent of of specific it’s the something that think possible point. these but But doing in look is these I we of continue that’s at -- years I things that to think it takes put that that place or regulators expect have situation potentially -- company, likely. we do if find, it this get find at out time do we’re to remediated many to just legacy was and in. to controls that there this say, reality the think controls the then that’s And the just fixed that inside as the we I it we

And it -- ourselves, speak ourselves so, find is where -- I’ll is for regulators. we and not the

a is from we We where amount work do. are -- but there we to significant significant of were here, more progress have got made still when

Matt O’Connor

And buybacks quarter, follow-up on I different this bought remind second Did back us or But buy loans. you talk back next you until the out? quarter. it. topic. rates, partly about that And you a apologize a Okay. And I missed slowing magnitude your targeted CCAR then, a comes partly you in at just if expect the give did obviously, to lot capital least the

Mike Santomassimo

that. Yes. take I’ll Matt,

year. run As X.X%. we between few our is and somewhere framework rest right basis past, times reg we is we’ve minimum, think over the to throughout the now XXX plan as on points at go And forward, a the buybacks which XXX ratio in look of to works said flexibility of what given CETX I have is the way we plenty the as prudent do think the we we’ll

Operator

of next UBS. Najarian The Erika from question comes

Erika Najarian

and been My questions answered. asked you. Thank have

Charlie Scharf

Thank you.

Operator

next Charles come The will of Peabody from question Portales Partners.

Charles Peabody

of my of you questions question mortgage have banking one operation do Most origination. But well, your recent But been large side. do that the viewed banks few of and recently still asked. that servicing balanced When manage a servicing your kind in was case originations relatively a would one hasn’t balance well. been as me history. to about Historically, ask didn’t you’re the let how origination has because servicing

to isn’t two those can you why pieces? so, And you’re managing it balance talk and about there a how

Charlie Scharf

is Mike, this and Yes, I’ll start, Charlie, pipe in. then you can

whole our I the in entity think mortgage we about as has a not separate, the by of to independent stand business company, that think context itself.

the kidding the And types risks think think of offsets, happens difficult. entire of at as happens And yourselves about The what is very in the what in all X MSR the different company, as the versus you be value management got look so, It’s side is. the on servicing where when we about some that’s what could you it. did of interest rate those to was embedded production risk potentially we of position MSR. the

when of benefit net-net-net, the as NII. I company banking so the but look And not a get would company, the by of will at I rest of as being the that the income mortgage look position offset at offset reduction being said, MSR, we by the

Charles Peabody

you a you quarter, step a talking banking guidance the in a whole second mortgage in as the material on And when strictly origination just were gave side about entity? follow-up, or as down

Mike Santomassimo

to. line income think mortgage as we’re As a of what whole, referring banking the

Charlie Scharf

there And MSR fairly remember, that fact the is well is hedged. the included in

it’s really origination. it’s -- -- basically but the what’s whole, also it’s driving is So, it

Operator

come Capital question for final of will Markets. RBC today Gerard Cassidy from Our

Gerard Cassidy

of to metrics on you and higher industry in have of your you or some you’re comments of capacity excess capacity anticipating that eye coming that Charlie, come for both keeping originations the monitoring capacity What waiting the you an system? rates. the banking and some out show is referenced mortgage about come as out to down excess for are the guys that of in course, are to

Mike Santomassimo

at. excess I But people is I industry the margins out, specific think, as as as comes as hard, metrics Well, normalize it’s probably whole, first to look think that that’s see about you’re you gain a right? per So, any Gerard, I the look sale capacity I to likely one at se. start going think areas where would of to on think

Charlie Scharf

look Yes. of the -- down looks that industry where then changes are have. substantially, competitive amount the amount expense that the of volume have about And people it. they rationalize that and people The being listen, People around at just the in mean, dynamics they everyone naturally pricing. I expense they

what we’ve that that’s and to the we’re on focused everyone exactly else we’re volume relative making So, level expense of the revenue and sure right that got does. seeing,

Gerard Cassidy

sale And And Mike, your where sale you they good. you -- what on and on for consider on just margin Very margins, today? gain following normal? gain up would are guys

Mike Santomassimo

as Well, mortgage of in cycle sort varies, forward. the sort normal margin itself through But you the we disclose right, look don’t as look business. the you of

indicator about -- where to more think go, levels thinking margins at if excess to you normal now or -- start as what come I secondary so I think sort there. And that’s then, primary, I that’s And back will I so, see on of And start we’re think. XXX spreads, one look around historical we’re on is that. certainly like basis sale right up. kind sale of gain you back when a to you’ll goes you’re more back capacity points out, so level think gain And of likely the

to normal I the we look go hard through as cycle. So, exactly like think there will it’s what say

Gerard Cassidy

alluded Is year possibility as making be just way? think little stress this folks. what follow-up you capital a then, the the buffer that -- higher some could for And a to Mike, that us is can Okay. you question. color CCAR give following you there you

Mike Santomassimo

of severity the the what Gerard. of box exactly just into -- black It’s that it’s went the bit what variables of obviously, it, a answer And in a terms is.

it. we look try through. that of so, And how to might us scenario But, like to really our the might the based that the at severity how it’s look played impact at on do Fed and best

Gerard Cassidy

you. Thank color. the appreciate always Great,

Mike Santomassimo

the And that’s it. last think I I appreciate question.

So, everyone. really we know busy it’s a day for

for you So, and spending talk the soon. we time, we’ll thank

Wells Fargo & Company (WFC) 14 Apr 222022 Q1 Earnings call transcript