The paragraph is a transcript from the Wells Fargo & Company First Quarter 2025 Earnings Conference Call. The call is introduced by an operator, who explains the process for the conference, including the question-and-answer session. John Campbell, Director of Investor Relations, then introduces the CEO, Charlie Scharf, and CFO, Mike Santomassimo, who will discuss the company's results. The quarter's earnings materials can be accessed on Wells Fargo's website, and caution is given regarding forward-looking statements. Charlie Scharf briefly comments on the company's solid first quarter results, noting a 16% increase in diluted earnings per share compared to the previous year, and hands over to Mike Santomassimo for a detailed review.

The company experienced a decline in revenue due to lower net interest income but successfully increased its fee-based revenue by diversifying its business. It has maintained disciplined expense management, resulting in reduced expenses and headcount reductions for 19 consecutive quarters. Credit performance improved with lower net charge-offs, and capital was returned to shareholders through dividends and share repurchases. The management team has made significant progress on risk and control initiatives, resolving five consent orders in the first quarter, and demonstrating improved processes and controls. Since 2019, eleven orders have been terminated, highlighting the company's transformation under new management. The team remains confident in closing remaining open consent orders.

The paragraph discusses Wells Fargo & Company's progress on its strategic priorities, highlighting improvements in its card business, with Ed Oly joining as head of cards and merchant services, following Ray Fisher's successful leadership. The company is launching a partnership with Volkswagen and Audi for auto financing in the U.S. Since terminating a consent order over a year ago, Wells Fargo has initiated growth in consumer small and business banking, resulting in net checking account growth, increased credit card originations, and better customer experience scores. The company continues to invest in branch refurbishment and enhance account opening experiences across digital and physical channels.

In the first quarter, active mobile customers increased by 4%, and digital account openings are on the rise. The collaboration between bankers and advisors has boosted net asset flows into the wealth and investment management sector. Clients are investing more in alternative products. The commercial business is experiencing strong growth in investment banking fees, particularly in debt capital markets. John Weiss, who is retiring, has significantly contributed to the success of corporate investment banking. Fernando Rivas is now the CEO of corporate and investment banking. Efforts to expand commercial banking have resulted in attracting new clients and offering investment banking services to them. Customers generally show financial stability, with affluent ones remaining strong, although less affluent customers are experiencing stress. Overall, consumer credit continues to perform well, and spending patterns on debit and credit cards remain stable.

The paragraph discusses the current financial situation of Wells Fargo & Company, highlighting stable delinquencies, strong unsecured payment rates, and consistent deposit flows. Modest overall loan growth was noted, with increased demand in commercial loans. The company supports the administration's efforts to review and adjust regulations from the past 15 years of financial changes to better support economic growth. They emphasize the importance of reducing regulatory and trade barriers for corporations while maintaining oversight. Timely resolution of trade issues is deemed beneficial for the US economy, businesses, consumers, and Wells Fargo, which is primarily focused on the US market.

The paragraph discusses the current economic environment and its implications for Wells Fargo & Company. Despite client concerns about a transitionary economic period, no significant impact is yet observed. The company expects ongoing volatility and a potentially slow economic environment in 2025, dependent on policy changes. Wells Fargo is prepared with a strong balance sheet, having implemented credit tightening measures to improve performance. The company aims to partner with clients and communities to drive sustainable economic growth in the US and is undergoing transformation to become more efficient and higher-returning. Charlie expresses pride in past achievements and optimism for Wells Fargo’s future, before handing over to Mike Santomassimo, who reports solid first-quarter results.

The company has executed its strategic priorities, resulting in growth in fee-based revenue, expense reduction, and strong credit discipline, while also returning excess capital to shareholders. The first quarter benefits included significant tax benefits and a gain from a sale, offset by losses from repositioning the investment portfolio. Net interest income decreased due to fewer days in the quarter and lower rates, while both average and period-end loans grew slightly for the first time since early 2023. Average deposits increased year-over-year, enabling a significant reduction in higher-cost deposits, despite a 1% decline from the previous quarter. Noninterest income remained stable compared to the previous year.

The paragraph discusses financial performance, highlighting that gains across various business investments, advisory, and investment banking fees helped offset impairments in the venture capital and investment portfolios. It notes a gain from selling part of the commercial mortgage servicing business. Expenses decreased by 3% year-over-year due to lower operating losses and FDIC assessments, despite higher seasonal costs in the first quarter. Credit quality improved, with net loan charge-offs decreasing from the fourth quarter in both commercial and consumer categories, despite a slight rise in non-performing assets due to an increase in non-accrual loans.

In the first quarter, the company's allowance for credit losses on loans decreased by $84 million due to lower commercial real estate loan balances, though a slight adjustment was made anticipating potential economic weakness. The allowance coverage for the corporate and investment banking commercial real estate office portfolio was at 11.2%, consistent with the previous year, while the CET1 capital ratio remained strong at 11.1%, above the regulatory minimum. The company repurchased $3.5 billion of stock and maintains capacity for more buybacks. In consumer banking, revenue declined 2% due to higher deposit costs despite an increase in deposit balances and strong debit card spending. Home lending revenue was stable, with a 26% rise in mortgage originations and a streamlined business model reducing headcount and third-party servicing. Credit card revenue increased by 2% driven by higher loan balances.

The paragraph discusses a decline in auto and personal lending revenues due to lower loan balances and loan spread compression, which resulted from prior credit tightening leading to better credit performance. Commercial banking revenue decreased by 7% due to lower net interest income despite growth in non-interest income sources such as treasury management fees and investment banking fees. Corporate and investment banking revenue fell by 4% due to lower interest rates, though offset partly by reduced deposit pricing and increased debt capital markets activity. Commercial real estate revenue rose by 18%, driven by gains from a mortgage servicing sale, increased capital markets activity, and higher income from the low-income housing sector. While markets revenue remained stable year-over-year, it experienced a 22% increase from the previous quarter due to seasonality and heightened trading activity across various asset classes.

The paragraph discusses financial trends and projections for a company. Average loans have slightly increased from the previous quarter despite a year-over-year decline, with growth in markets and banking countering declines in commercial real estate. Wealth and investment management revenue rose due to higher asset-based fees, though offset by increased deposit costs. Corporate revenue decreased, affected by venture capital results and investment portfolio repositioning. The company maintains its net interest income outlook for 2025, projecting a 1% to 3% increase over 2024, but anticipates results at the lower end of this range due to recent volatility. Key factors affecting this include interest rates, deposit flows, mix, and loan growth.

The paragraph discusses the financial outlook and performance of a company. It notes that interest income from trading will be affected by rates and asset levels, but this will be offset by non-interest income. The company expects its non-interest expenses to be around $54.2 billion in 2025. The first quarter results showed improvements in financial performance, with increased diluted earnings per share, fee-based revenue growth, reduced expenses, and better credit performance. The strong balance sheet, capital, liquidity positions, risk management, and diversified business model are highlighted as strengths. The passage ends with the beginning of a Q&A session, where Scott Siefers from Piper Sandler asks about customer sentiment, and Charlie Scharf acknowledges that customers are trying to figure out their path forward amidst economic uncertainty.

The paragraph discusses the current economic situation, noting that both consumers and corporate customers are showing continued strength, which is a positive starting point. However, there's uncertainty about resolutions to various issues affecting businesses, leading people to adopt a cautious approach and take stock of their positions. While business activities haven't halted, there's a wait-and-see attitude. There is hope for long-term benefits from regulation, tax reform, and trade changes. In the short term, caution is advised, but there's optimism for long-term growth. Scott Siefers asks Mike Santomassimo to elaborate on Net Interest Income (NII) commentary, focusing on interest rates, loan growth, and performance projections. Mike acknowledges the uncertainties and notes that current interest rates are lower than expected, particularly in the second half of the year.

The paragraph discusses the volatility and unpredictability of interest rates, particularly focusing on the first half of the year. It notes shifts in rates over recent days and how this impacts expectations for the year-end on federal funds. The discussion includes observations on loan growth rates, which are anticipated to be mid-single-digit percentages, and mentions slight growth observed in the first quarter. The uncertainty in projections is acknowledged, with hopes that conditions will stabilize and anticipated growth will occur. Additionally, changes in deposits are noted, with non-interest-bearing deposits decreasing slightly and interest-bearing deposits increasing a bit in the first quarter.

The paragraph discusses the financial uncertainties and variables affecting net interest income (NII). On the positive side, there is growth in the consumer business and better retention of deposits. However, trading assets have resulted in lower NII, which is offset by fees. The outlook remains uncertain due to potential fluctuations in trading, interest rate changes, and loan balances. The speaker emphasizes the unpredictable nature of these factors and the difficulty in forecasting due to volatile market conditions and unknowns regarding interest rate cuts and consumer borrowing behavior.

The paragraph discusses a company's current evaluation of multiple potential future scenarios, emphasizing their flexibility and the uncertainties surrounding rate curves. Scott Siefers thanks them for the clarity provided. The conversation then shifts to Ken Usdin from Autonomous Research, who asks Charlie Scharf about the regulatory environment and whether changes in leadership affect their approach to closing orders. Scharf responds that no adjustments are necessary because regulators are objective and fact-based. He highlights that 11 orders have been closed since 2019, indicating no significant impact from changes in administration.

The paragraph features a conversation between two individuals, likely in a financial or regulatory context. The first speaker discusses confidence in their administration's constructive approach to regulation and supervision, pointing out the progress made and expressing optimism about future actions. Ken Usdin asks Mike Santomassimo about a reserve adjustment and mentions a reserve release, highlighting the organization's conservative stance. Mike responds by explaining that the reserve release could have been larger due to changes in balances and strong credit performance, referencing charge-offs as an indicator.

The paragraph discusses the approach to managing economic scenarios and allowances, emphasizing a strong focus on downside scenarios and baselines. It highlights that models predict unemployment rising to around 5.8% over the next few quarters. However, the analysis doesn't stop at these projections, as additional judgment is applied to account for risks not captured by the models, increasing the allowance further. The paragraph notes that allowances may change based on economic developments, especially if a deeper recession occurs. Overall, it underscores a cautious and flexible approach in managing economic uncertainties.

The paragraph discusses the financial health and performance of clients in both the consumer and corporate sectors, noting that clients are generally in good shape, with no significant deterioration in charge-off performance. The only area experiencing systematic stress is the office portfolio, but it has remained stable. Charlie Scharf adds that the company's reserve changed due to reduced loan balances and commercial property charge-offs where reserves were significant. Despite conservative modeling and weighing scenarios against unemployment numbers, the company chose not to release reserves, maintaining a more conservative stance. This decision reflects the company's cautious response to current market conditions.

In the paragraph, Mike Santomassimo discusses the factors contributing to commercial loan growth in the recent quarter. He attributes the growth mainly to increased utilization, particularly among larger clients in the mid-corporate segment, while noting some new customer acquisitions. There was also an uptick in asset-based lending and activity in the corporate investment bank, driven by both utilization and new clients. Overall, this growth seemed to be typical business activities rather than a response to tariffs. Additionally, John McDonald inquires about market-sensitive fee businesses, asking how the environment affected trading, investment banking, and venture capital, prompting Santomassimo to begin addressing the venture portfolio.

The paragraph discusses the impact of market volatility on a venture portfolio and an IPO lock-up period, which has led to some mark-to-market losses and delays in portfolio exits. Despite these challenges, the portfolio is still considered a strong investment. Trading activities have been positive across various desks, showing consistent improvement over the past two to three years. There is some concern about volatility in the upcoming quarter. Additionally, the response to a query about investment banking acknowledges a slowdown in activity, but mentions efforts to expand the investment bank by adding personnel.

The discussion in the paragraph centers around the investments being made in financial markets, particularly emphasizing a disciplined plan for maintaining consistent coverage and product capabilities over time. There is notable activity in debt capital markets, while equity capital markets are less active due to recent volatility. The M&A pipeline looks promising, though contingent upon policy adjustments. Emphasizing a long-term approach in investment banking, the dialogue touches on fees and expenses, with John McDonald and Steven Chubak discussing fee outlooks and expense management. Chubak inquires about the model's expense flexibility if fee challenges continue.

In this paragraph, Mike Santomassimo discusses the flexibility in managing expenses throughout the year, particularly concerning revenue-related expenses in wealth and investment management as well as investment banking (IB) compensation. He mentions that these expenses are adjusted based on market conditions and revenue performance. Santomassimo highlights their successful management of operating losses in the recent quarter and emphasizes the ongoing monitoring and management of investments. In response, Steven Chubak asks for more details about NII (Net Interest Income) expectations, noting the positive guidance despite changes in the forward curve, and seeks clarification on the exit rate for NII after potential cuts, as they plan for the future up to 2026.

The paragraph involves a discussion on forecasting financial outcomes and the challenges involved. The speakers emphasize that while interest rates are a factor, predicting precise outcomes for 2025 is difficult due to variable factors like the forward curve, which they describe as often inaccurate and subject to change. They mention ongoing loan growth and its dependence on macroeconomic conditions, particularly in the commercial banking sector. Charlie Scharf advises planning for different scenarios rather than relying solely on the forward curve. In another part of the conversation, Betsy Graseck from Morgan Stanley asks Charlie about the impact of closing five consent orders in 2025, particularly on management's time.

In the paragraph, Charlie Scharf explains that completing work on consent orders has required significant management time and resources, but as they fulfill these obligations, there will be fewer resources needed for these projects. This shift will allow for more efficient operations and a focus on other priorities, although they will continue the foundational work necessary for control environments. The completion of these tasks also enables more freedom in running the organization. When Betsy Graseck asks about the optimistic outlook for the future, even with existing limitations like the asset cap, Scharf expresses excitement about understanding and improving operations more effectively, suggesting potential growth and efficiency improvements once the asset cap is lifted.

The paragraph discusses the company’s strategic focus on growing areas that do not rely on its balance sheet due to an existing asset cap. Over the past few years, the company has concentrated investments in areas like the card business, wealth management, and fee-based services in the corporate investment bank, which have bolstered non-interest revenues. These initiatives are expected to continue regardless of the asset cap, but lifting the cap would further enhance growth opportunities, particularly by allowing more customer financing in trading businesses and increasing loan demand without having to limit deposits. The overall message is that the company feels optimistic about its future prospects, both with and without the asset cap, as reflected in shareholder communications. Betsy Graseck inquires about the potential for a higher return on equity (ROE).

In the paragraph, Charlie Scharf discusses the company's aim to achieve a sustainable 15% return on equity (ROE) and emphasizes that each business within the company should be among the best in the industry. Though not committing to a specific timeline, Scharf highlights confidence in their business strategies despite market volatility. Ebrahim Poonawala asks about the consumer business's potential ROE improvement factors, such as opportunities from the removal of an asset cap and better utilization of the branch network post-consent order. Scharf reiterates the focus on reaching the 15% target without specifying a time frame.

The paragraph outlines the company's focus on sustainable growth and improving Return on Tangible Common Equity (ROTCE) over the long term. The speaker emphasizes the importance of investing in growth to build a strong franchise, which may delay achieving industry-leading ROTCE figures. The company is working on improving returns in its consumer lending segment, including the card and auto businesses. The card business is in a growth phase with front-loaded expenses but is expected to yield higher returns over time. The auto business is addressing uncertainty related to tariffs but sees potential in a new partnership with Volkswagen Audi.

The paragraph discusses Wells Fargo's strategies to improve profitability, particularly in its home lending and consumer and small business banking operations. Although the consumer and small business banking sector has strong returns, growth has lagged behind competitors. The speaker expresses confidence in future growth and improved returns, noting that the business is not capital intensive. Additionally, there is a focus on capital management, questioning why their Stress Capital Buffer (SCB) increased by 90 basis points, despite Wells Fargo being less risky and having higher margins and returns. Charlie Scharf indicates confusion over the SCB increase, emphasizing the company's improved financial position.

The paragraph discusses the potential changes in the regulatory and capital environment for banks, highlighting a hope for increased transparency and alignment among regulators. This could lead to a more favorable environment, allowing banks more flexibility to serve customers by making loans, taking deposits, and providing market liquidity. However, there is caution against making specific predictions until more is known about regulatory intentions. The paragraph concludes with a transition to a question from John Pancari about the pace of stock buybacks, noting a recent buyback of $3.5 billion and querying the outlook amid a potentially softening economic backdrop.

In the paragraph, Mike Santomassimo and Charlie Scharf discuss their company's approach to stock buybacks. Mike explains that their method remains consistent each quarter, starting with evaluating opportunities to support clients and assessing risks before determining the amount available for buybacks. They've made it a priority over the years and continue to have the capacity for more buybacks. Charlie adds that the company currently holds a strong capital position with significant excess capital, which grants them the flexibility to continue buybacks, despite some initial concerns about potential capital requirement changes. Ultimately, decisions about buybacks will be evaluated as the quarter progresses.

The paragraph discusses the monitoring and management of credit lines and lending standards in light of economic conditions and recessionary fears. Charlie Scharf mentions that they've observed minimal drawdowns on credit lines, with only one draw that isn't linked to COVID-19 or tariffs. They are actively monitoring draw activity to ensure quick response. Scharf also addresses credit tightening actions, explaining that they have implemented conservative underwriting parameters, resulting in reduced credit volume but strong credit performance. They remain cautious about loosening these standards, contemplating the potential impact on consumers amidst economic uncertainty.

The paragraph is part of a conversation involving John Pancari, Mike Santomassimo, and Matt O'Connor, discussing the company's expenses and efficiency improvements. Mike Santomassimo emphasizes that although specific quantifications aren't provided, the company sees ongoing opportunities to become more efficient through automation, reducing excess real estate, and minimizing third-party expenses, among other strategies. He notes that the company is not yet fully optimized and is undertaking numerous activities to improve efficiency. Matt O'Connor suggests that these efforts could allow the company to maintain stable costs while hopefully increasing revenue in the medium term.

The discussion focuses on the company's strategic perspective regarding future expenses and investment allocation. Over past years, they have significantly reduced expenses and reinvested in their businesses, a trend they intend to evaluate annually relative to efficiency and investment needs. The conversation then shifts to the auto loan business, noting its minimal impact on the total loan book but its recent positive contribution to loan growth. Despite improvements in competitive dynamics, loan spread compression persists, primarily due to lending to higher FICO score clients following credit tightening initiatives implemented a few years ago.

The paragraph discusses the company's strategic focus over the past few years on enhancing credit performance and building relationships, like the one with Volkswagen, to improve business growth and returns. It emphasizes a cautious approach to growth, prioritizing solid returns over expansion at any cost, and indicates that although lending will remain a small part of the balance sheet, there is an expectation of gradual growth and better returns. The conversation then shifts to the markets business, particularly the flat performance in the equities sector compared to competitors who saw significant year-on-year increases. Saul Martinez asks for clarification on whether this is due to base effects or other factors, suggesting some disappointment in the results.

In the paragraph, Mike Santomassimo discusses the challenges and differences his business faces compared to its peers, particularly due to its smaller global presence and constraints from an asset cap. Despite these challenges, he commends his team for effectively managing their markets business, noting consistent performance and strategic growth without relying heavily on the balance sheet. Charlie Scharf further praises the team's efforts, led by Dan Thompson and Mike Riley, for strengthening the fixed income and equity divisions, investing in technology, expanding corporate relationships, and achieving solid trading revenue growth without increasing risk.

In the conversation, Erika Najarian from UBS asks about the expected trajectory of net interest income (NII), recalling that it was projected to be flat in the first half of the year before increasing in the second half. Mike Santomassimo responds by confirming that the expectation remains consistent with previous discussions, with more loan growth anticipated later in the year. He also notes that recent security repositioning was relatively small and didn't significantly impact yields. Additionally, Mike explains that their decisions are economically driven rather than guided by preliminary forecasts, and he advises caution in predicting trading NII due to volatile interest rates.

In the paragraph, Charlie Scharf discusses the company's plan to reduce reliance on net interest income (NII) and shift focus towards non-interest income or fee revenues. He mentions that they are not yet specifying the exact mix between these income streams due to the existing asset cap. However, he outlines that they are working on building fee-oriented businesses in areas like card services, wealth management, advisory and underwriting for both large and middle market companies, and payments-related services. He emphasizes that these strategic initiatives make sense irrespective of the asset cap situation. Gerard Cassidy from RBC Capital Markets asks about the timing of the asset cap release and the potential mix of income streams post-release, but Scharf maintains a general discussion without specifics.

The paragraph is a conversation about a company's strategy to become a more attractive service provider by diversifying its revenue streams and improving credit quality. Gerard Cassidy asks Mike Santomassimo about their focus on the C&I loan portfolio in a slower economy. Santomassimo emphasizes the company's strong credit discipline and the importance of monitoring the entire portfolio rather than focusing on specific categories. The conversation concludes with an expression of appreciation for the information shared during the call.

This summary was generated with AI and may contain some inaccuracies.