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F500-2023-047-Wells-Fargo

The fourth biggest bank in the U.S. in terms of revenue dropped six spots on this year’s list amid a tumultuous period marked by rising interest rates. 
<ul> 
 	<li>The bank posted revenues of $82.8 billion for 2022, up 0.5% from the year prior. It accrued $13 billion in profits in 2022, down 38.8% from the previous year.</li> 
 	<li>In May 2023 Wells Fargo paid $1 billion to settle a class action lawsuit in which shareholders accused the bank of overstating its progress toward fixing practices that had gotten it into legal trouble in the 2010s. Most prominent of those scandals was a fake-accounts scheme in which bank employees frequently opened accounts without depositors’ knowledge to meet sales goals.</li> 
</ul>

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

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F500 2022-Wells Fargo

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Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500 103 Wells Fargo

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G500-2020-069-Wells-Fargo

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F500-2020-030-Wells-Fargo

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Wells Fargo was among the top six U.S. banks in terms of total assets in 2026. It provides consumer, commercial, corporate, and investment banking services, as well as wealth and investment management.

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Wells Fargo (WFC): Company Profile, Stock Price, News, Rankings

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Wells Fargo

wells fargo

Welcome and thank you for joining the Wells Fargo Second Quarter twenty twenty five 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. Please note that today's call is being recorded. I would now like to turn the call over to your host, Mr. John Campbell, Director of Investor Relations. Sir, you may begin the conference.

Thank you, Brad. Good morning, everyone. Thank you for joining our call today where our CEO, Charlie Sharf and our CFO, Mike Sanamacimo, will discuss second quarter results and answer your questions. This call is being recorded. Before we get started, I would like to remind you that our second quarter earnings materials, including the release, financial supplements and presentation deck are available on our website at wellsfargo.com.

I'd also like to caution you that we may make forward looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form eight ks filed today containing our earnings materials. Information about any non GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings and the earnings materials available on our website. I will now turn the call over to Charlie.

Thanks, John. Good morning, everyone. I'll make some brief comments about our results and update you on our priorities. I'll then turn the call over to Mike to review second quarter results in more detail before we take your questions. Let me start with some second quarter highlights.

Our second quarter results reflect the progress we're making to consistently produce stronger financial results with net income, diluted earnings per share and our return on tangible common equity all up from both the first quarter and a year ago. We continue to invest in our businesses which has driven higher fee based income. This growth was diversified with each of our business segments increasing during the first half of the year. While we've been investing, we've also continued to take a disciplined approach to expenses and we have now reduced headcount for twenty consecutive quarters resulting in a 23% decline from five years ago. We maintained our strong credit discipline and credit performance continued to improve in the second quarter with lower net loan charge offs from both a year ago and the first quarter.

Losses in both our consumer and commercial portfolios improved from a year ago. The big news during the quarter was having the asset cap removed. The lifting of the asset cap marks a pivotal milestone in our transformation along with the termination of 13 orders since 2019 including seven this year alone. We are far stronger company today because of the work we've done. In addition, we've also changed and simplified our business mix, transformed the management team and how we run the company and have been methodically investing in the company's future while improving our financial results and profile.

I know this call is for investors, but I want to once again thank the over 212,000 employees at Wells Fargo who all contributed in one way or another to this milestone. Though we have tremendous opportunities, this has been a demanding place to work. We have recognized the contributions of many here by increasing compensation, improving benefits, investing more investing in more employee learning and development programs and by giving those employees making below $85,000 in total compensation special year end cash awards for the past two years. With the lifting of the asset cap, we wanted to do something special for everyone who invested so much of themselves into the company in recent years. As a demonstration of our appreciation from what we've accomplished, we gave a special award to all employees so they could own part of Wells Fargo and hopefully benefit from our future success.

So everyone has been asking what does the lifting of the asset cap mean? First, we will continue to move forward with our risk and control agenda embed the disciplines we have built deep into the culture of the company. But we are certainly in a different position with the asset cap and the many orders lifted. It is hard to convey the amount of time and effort the senior team has devoted to this work. So much of this work completed, we can allocate our time differently and spend more time focusing on growth and the future.

While we have not ignored this, the additional time we now have to prove meaningful. As you know, though we have generated substantial amounts of capital in the years since the asset cap was imposed, we've been limited in how much we've been able to deploy to support our customers and communities. While shareholders benefited from increased stock buybacks, we would have preferred to allocate more capital to grow our businesses and the overall balance sheet. We now have the flexibility to proactively grow deposits and to allocate capital to grow loans and our corporate and investment bank. Since I arrived, we've had to make difficult choices where to allocate our balance sheet given our inability to increase total assets.

As we pointed out, we have turned away deposits from corporate clients. And while we have not turned away consumer deposits, we've been careful not to aggressively grow consumer deposits given the limitations we were subject to. We've also had to be cautious about loan commitments, especially given the potential for significant drawdowns of committed facilities as we saw during the early days of COVID. We have also pointed out that we have constrained our markets related balance sheet to allow for activity elsewhere in the company. As we look forward, we are now able to move forward more aggressively to serve consumers, businesses and communities to support U.

S. Economic growth. We expect to be more aggressive in our pursuit of consumer and corporate deposits and we will selectively look to grow loans, though we will be cautious during periods of economic uncertainty. We also see opportunities to allocate more balance sheet to our markets business to drive increased profitability. Our goal is to increase customer trading flow and financing activity without significantly increasing our risk profile.

We also have the opportunity to think more broadly about using our balance sheet as we evaluate additional opportunities. In addition to the lifting of the asset cap, we expect that changes in both the regulatory and supervisory environment will allow us to compete more effectively. We announced earlier this month that our expected stress capital buffer will decrease by 120 basis points starting in the fourth quarter, which would reduce our required CET1 regulatory minimum plus buffers back to 8.5%. We are also encouraged by the Federal Reserve's intention to provide more detail supporting the CCAR process and that detail along with the finalization of the broader set of capital rules will help us determine the appropriate level of capital we should hold going forward. We are also very supportive of the review the different regulatory agencies are conducting regarding rules and supervisory constraints that go beyond safety and soundness and do not allow us to effectively serve our customers and communities.

We are committed to continuing to maintain a strong capital position and are excited about using our excess capital and additional capital generation to reinvest in our franchise as well as continuing to return excess capital to shareholders. As a reminder, we have returned a significant amount of capital to shareholders over the past five years, including reducing our average common shares outstanding by 23% since 2019. As we previously announced, we expect to increase our third quarter common stock dividend by 12.5% to $0.45 per share subject to approval by the company's Board of Directors at its regularly scheduled meeting later this month. We've repurchased over $6,000,000,000 of common stock during the first half of this year and during the second quarter our Board of Directors authorized an additional common stock repurchase program of up to $40,000,000,000 We continue to make significant investments in our core business, which are helping to improve our returns. We continue to invest in our credit card business, not only by launching new products but also enhancing the overall customer experience.

Our commitment to delivering a seamless secure and user friendly digital experience to our card members was recently recognized by J. D. Power which ranked Wells Fargo number two in both mobile app and online credit card satisfaction. Enhancements like these has spurred new account growth and higher balances in spending from a year ago. In our auto business, we completed the launch of our multi year co branded agreement as a preferred purchase financing provider for Volkswagen and Audi vehicles in The U.

S. We had strong auto originations in the second quarter and ending balances in our auto portfolio grew for the first time in over three years. In consumer, small and business banking, we have continued to see momentum in the growth of primary checking accounts benefiting from our investments in marketing offers and enhancements to both the digital and branch experience. We are on track to have over half of our branch network refurbished by the end of this year and to complete a refresh of the entire network by the end of twenty twenty eight. We continue to optimize and better position our network including expanding in certain locations including Chicago, New York City and Nashville.

We continue to enhance our digital experience and consumer checking accounts opened digitally continued to increase and active mobile users now exceed 32,000,000, up 4% from a year ago. We also continue to see good momentum from Wells Fargo Premier, our offering for affluent clients. Let me highlight a few areas that demonstrate our growth. We are investing in more bankers to serve these clients and have increased branch based financial advisors by over 10% from a year ago. The improved collaboration between our bankers and advisors has helped to drive over $16,000,000,000 of net asset flows into the wealth and investment management premier channel during the first half of the year, up over 60% from a year ago.

Deposit and investment balances from premier clients have also been steadily increasing and were up approximately 10% from a year ago. Turning to our commercial businesses, the investments we have been making in corporate and investment banking have continued to help drive growth with investment banking fees up 16% during the first half of the year. We've also made steady progress increasing our U. S. Investment banking market share with our share up each of the last two years and again in the first half of twenty twenty five driven by gains in leveraged finance and M and A.

We're continuing to invest in top talent and strengthen and expand our commercial banking business. For example, in our technology banking group, we have grown our team of bankers by over 25% over the past year. We expect to continue to add bankers to this priority sector and in a number of additional markets and sectors where we have room to grow. In addition to driving growth in our core business, our strategy also includes simplifying our businesses and focusing on the products and services that matter most to our clients. As part of the strategic focus in the second quarter, we entered into agreement to sell the assets of our rail equipment leasing business.

This transaction is expected to close in the first quarter of next year. As we look ahead, what we see regarding the health of our clients and customers has not changed. Consumers and businesses remain strong as unemployment remains low and inflation remains in check. Credit card spending growth softened very slightly in the second quarter, but is still up year over year and remains strong overall and debit card spending growth has remained strong and consistent with what we saw in prior quarters. Consumer delinquencies continued to improve from a year ago and commercial credit performance continued to be relatively strong.

Deposit flows for both our consumer and commercial clients were in line with seasonal trends. I've had the opportunity to meet with many of our commercial banking clients this past quarter and many have conveyed optimism that the administration is working to level the trade playing field. They would like certainty, but prioritize a good outcome for U. S. Trade above short term certainty.

Many have found ways to avoid passing the 10% tariffs on to their customers. At the same time they are preparing for the downside and are not growing inventories or hiring aggressively and developing contingency plan if the downside scenario occurs. As I've said before, we are hopeful that the results of the current negotiations will make our clients more competitive and help drive stronger economic growth in The U. S, but there is uncertainty and we should recognize there is risk to the downside as the market seem to have priced in successful outcomes. As I highlighted, now that the asset cap has been lifted, we are more committed than ever to serving our customers, supporting businesses and communities and contributing to economic growth in The U. S. Continue to believe we have one of the most enviable financial services franchise in the world. I'm excited to continue to move forward with plans to produce industry leading sustainable growth and returns. I'll now turn the call over to Mike.

Thank you, Charlie, and good morning, everyone. In the second quarter, we had net income of $5,500,000,000 or $1.6 per diluted common share, up from both the first quarter and a year ago. These improved results reflect our continued focus on our strategic priorities. Through our ongoing investments in our businesses, expense focus, strong credit discipline and continued capital return, we have steadily increased profitability and returns. Our second quarter results included $253,000,000 or $06 per share from the gain associated with our acquisition of the remaining interest in our merchant services joint venture.

Turning to Slide four. Net interest income increased $213,000,000 or 2 percent from the first quarter driven by lower deposit costs, one additional day in the second quarter and higher securities yield and higher loan balances. I'll update you on our expectations for full year net interest income later in the call. Moving to slide five. Both average and period end loans grew from the first quarter.

Period end balances were up $10,600,000,000 from a year ago driven by growth in commercial and industrial loans predominantly in the corporate investment banking business as well as slightly higher auto, other consumer and credit card loans while residential mortgage and commercial real estate loans continued to decline. Average deposits in our businesses increased 4% from a year ago. We reduced higher cost corporate treasury deposits by 58% from last year causing total average deposits to decline 1%. Total average deposits also declined 1% from the first quarter as a small increase in consumer deposits was more than offset by lower commercial and corporate treasury deposits. Average deposit costs continued to decline and were down six basis points from the first quarter.

Turning to slide six. Non interest income increased $348,000,000 or 4% from a year ago. Results in the second quarter benefited from the gain associated with our Merchant Services joint venture transaction. I would note that the increase in card fees versus the first quarter reflected a change in where we recognize merchant services revenue resulting from this transaction. Revenue is now included in card fees, whereas previously our share of the net earnings in the joint venture were included in other non interest income.

We continue to have growth in many of the businesses where we have been investing including a 9% increase in investment banking fees from a year ago. The growth in non interest income more than offset lower net interest income resulting in modest revenue growth from a year ago. Turning to expenses on slide seven. Non interest expense increased $860,000,000 $86,000,000 or 1% from a year ago driven by an increase in revenue related compensation predominantly in wealth and investment management. Our other expenses were relatively stable as the investments we were making in our businesses including the increased spending in technology and advertising were offset by lower operating losses and the impact of efficiency initiatives.

The 4% decline in non interest expense from the first quarter was driven by seasonally higher first quarter personnel expense. Turning to credit quality on slide eight. Credit performance continued to improve and remained strong. Our net loan charge off ratio declined 13 basis points from a year ago and one basis point from the first quarter. Commercial net loan charge offs increased $36,000,000 from the first quarter to 18 basis points on average loans.

The losses in our commercial and industrial loan portfolio were borrower specific with little signs of systematic weakness across the portfolio. Commercial real estate losses decreased during the first quarter. As we have said, it will take time for the office fundamentals to recover. Valuations appear to be stabilizing and although we expect additional losses, they should be well within our expectations. Consumer net loan charge offs declined 48,000,000 from the first quarter to 81 basis points of average loans with improvement across all of our non real estate portfolios, while the residential mortgage portfolio continued to have net recoveries.

Non performing assets declined 3% from the first quarter driven by lower commercial real estate non accrual loans predominantly in the office portfolio. Moving to Slide nine. Our allowance for credit losses for loans increased modestly from the first quarter and our allowance coverage ratio for total loans has been relatively stable for the past five quarters as credit trends have remained fairly consistent even amid macroeconomic uncertainty. Our allowance for coverage allowance coverage for our corporate investment banking commercial real estate office portfolio has also been relatively stable over the past year and was 11.1% in the second quarter. Turning to capital and liquidity on slide 10.

We maintained our strong capital position with our CET1 ratio at 11.1%, well above our current CET1 regulatory minimum plus buffers of 9.7%. Starting in the fourth quarter of this year, our new CET1 regulatory minimum plus buffers is expected to decline to 8.5%. As you know, the Federal Reserve has a pending notice of proposed rulemaking that would include averaging stress test results from the previous two years to determine the stress capital buffer. If that is finalized as proposed, the effective date may move to January 1 and our expected new CET1 regulatory minimum plus buffers would be 8.6%. We repurchased $3,000,000,000 of common stock in the second quarter and have the capacity to continue to repurchase shares.

Also as Charlie highlighted, we expect to increase our common stock dividend to $0.45 per share in the third quarter subject to Board approval. Moving to our operating segments starting with Consumer Banking and Lending on Slide 11. Consumer Small and Business Banking revenue increased 3% from a year ago driven by lower deposit costs and higher deposit balances. For the second consecutive quarter, deposit balances grew from a year ago even with higher outflows for tax payments in the second quarter of this year compared with last year. Debit card spending remained strong, up 4% from a year ago consistent with the prior two quarters.

Home lending revenue was stable from a year ago. Mortgage loan originations increased 40% from a year ago as we focused on servicing Wells Fargo customers. This higher volume also reflected a stronger mortgage market from a year ago. However, the mortgage market continued to be weak compared with historical levels due to the high rate environment. We continue to reduce headcount, which has declined 49% since the end of twenty twenty two as we have simplified the business and reduced the amount of third party mortgage loan service for others by 33% since the end of twenty twenty two.

Credit card revenue grew 9% from a year ago as loan balances increased and spending slowed slightly but remained strong. Auto revenue decreased 15% from a year ago driven by lower loan balances and loan spread compression from previous credit tightening actions. While these actions have reduced revenue, they have improved credit performance. Auto revenue increased 2% from the first quarter, the first linked quarter increase since fourth quarter twenty twenty one. The decline in personal lending revenue from a year ago was driven by lower loan balances.

Turning to Commercial Banking results on Slide 12. Revenue was down 6% from a year ago as lower net interest income due to the impact of lower interest rates was partially offset by growth in non interest income driven by higher revenue from tax credit investments and an increase in treasury management fees. Average loan balances in the second quarter increased one percent from both a year ago and the first quarter as clients have largely remained cautious while waiting for more clarity on the economic environment. Turning to Corporate Investment Banking on Slide 13. Banking revenue was down 7% from a year ago, driven by the impact of lower interest rates.

This decline was partially offset by lower deposit pricing and higher investment banking revenue, including higher advisory fees. Commercial real estate revenue declined 6% from a year ago due to lower loan balances, the impact of lower interest rates as well as reduced mortgage banking income after the sale of our commercial non agency third party servicing business in the first quarter. Markets revenue declined 1% from a year ago as higher revenue in foreign exchange and rates products was offset by declines in equities. We had $122,000,000 gain related to an exchange of shares for vis a vis common stock that benefited equities a year ago. Average loans grew 4% from a year ago and 3% from the first quarter.

The increase from the first quarter was broad based with higher balances in markets, banking and commercial real estate. On Slide 14, Wealth and Investment Management revenue increased 1% from a year ago as growth in asset based fees driven by higher market valuations was partially offset by lower net interest income due to the impact of lower rates. As a reminder, the majority of WIM advisory assets are priced at the beginning of the quarter, so third quarter results will reflect higher July 1 market valuations. Slide 15 highlights corporate results. Revenue increased from a year ago driven by the gain associated with our merchant services joint venture transaction.

Turning to our 2025 outlook on Slide 16. Starting with net interest income, we currently expect net interest income for 2025 to be roughly in line with full year 2024 net interest income of $47,700,000,000 While there are several moving pieces of why we currently expect net interest income to be a little lower than we've discussed in April, the largest driver is that we have dedicated more balance sheet to our markets business than we originally assumed, including supporting stronger client activity in products like commodities and rates, which can be low which can have low or non earning assets. The cost of funding this activity results in lower net interest income, while most of the revenue generated is recognized in non interest income. Our updated expectation still assumes net interest income grows sequentially in both the third and fourth quarter of this year. We are only halfway through the year and several key variables including net interest income remain uncertain.

We will closely monitor how these assumptions evolve over the remaining of the year. Turning to expenses. Our expense outlook has not changed and we still expect 2025 non interest expense to be approximately $54,200,000,000 In summary, our second quarter results reflected the consistent progress we've been making to improve our financial performance. Compared with a year ago, we had double digit growth in net income and diluted earnings per share grew revenue including fee based growth across many of our businesses, maintained our expense discipline, improved our credit performance and reduced common shares outstanding and increased our dividend. Now that the asset cap is lifted, the management team has more time to focus on our growth initiatives and we'll have we will also have the flexibility to allocate more capital to growing our balance sheet, including deposits, loans and trading assets. We will now take your questions.

And our first question will come from John McDonald of Truist Securities. Line is open, sir.

Hi, good morning. Mike, thanks for the explanation on the NII outlook. It's helpful, the markets piece of it. Just on the non markets NII, could you talk about what kind of loan growth assumptions you kind of built into the NII outlook for the back half of the year and how that connects to what you saw in terms of loan growth in the second quarter?

Yes. Sure, John. Thanks for the question. When you break apart the portfolio on the consumer side, we're not on the mortgage portfolio, we expect that will likely just continue to come down just a little bit in the second half. I think you should see a little bit of growth in card, some of that seasonality in terms of what happens as you go into third and fourth quarter spending.

And then we started to see some growth in auto, small but started to see that turn. So hopefully that will continue to grow in second half of the year, but relatively modest in the overall balance sheet. On the commercial side, we do expect to see some modest growth as we go into the rest of the year. I think it likely comes from the same places at least in at least as we come into the third quarter mostly in the Corporate Investment Bank. Hopefully we'll start to see some of the commercial bank customers borrow a little bit more as well.

But I'd say overall still relatively modest. But as you get to the end of the year, hopefully if things play out, we'll start to see a little bit more activity more broadly.

Okay. And then maybe you could just give us your thoughts in terms of total revenue. I know you don't give total revenue guidance, but just maybe when you look at your own internal projections and budgeting, how is the revenue outlook for this year shaping up? What are the puts and takes relative to your expectations as we think about the year so far?

Yes. No, it's as you sort of break apart like the pieces, we talked a bit about where NII is coming out at this point. I think when you look at the fee side, the biggest go through the biggest line items and you look at the investment advisory fees, the market has been very supportive as you look at the rest of the year. And you can easily sort of model what the third quarter looks like based on where the markets ended already given most of the fees are already sort of certain. And then and so as long as the market sort of holds up or grows a little potentially as you go into the fourth quarter that should be constructive.

You start breaking down deposit fees, card fees, all that stuff plays into some of the seasonal activity that we'll see in the third and fourth quarter. And I'd say largely those things are kind of playing out pretty close to what we modeled depending on the month or quarter, maybe a little bit better, but they're playing out largely as we expected across most of those. And then it's really sort of the trading line and that will be driven by what kind of activity and volatility we see in the market. But I think we've had a pretty constructive environment now for a couple of quarters. So hopefully that continues.

And then I think lastly just we'll see how the year comes out on the equity securities gains that we saw. We did see some modest gains in this quarter, big improvement relative to what we saw last quarter. As the market remains constructive that hopefully that will continue as well.

Okay. And I guess just to clarify, Mike, mentioned you used to previously say that your NII guide assumes the asset cap remains in place and now we relax that assumption, the outlook is a little worse. Is it just this counterintuitive mix shift that you're going to grow the capital markets balance sheet, but it's going to come in fees?

Yes. I would well, I'll remind you first, it's been off for what six weeks now, five, five point five weeks, six weeks. And so I do think it has been off for a very short amount of time. And I think what's happened as we sort of looked at and some of this started in towards the end of the first quarter, early second quarter we sort of talked about it in some other public forums, we've seen some increase in the activity and that's what's causing it to that's the by far the largest driver of what's causing it to move down a little bit from the low end of the range that we talked about in April. And so and as we said like that's largely offset in fees on those because you get paid in fees for some of those for some of that activity.

Yes. Let me just add a little hey John, this is Charlie. Let me just add just one thing here, which is as we look forward to the end of the year, we have so far assumed would describe it as a very small increase in the overall size of the balance sheet. So we do assume it grows above what used to be the cap, but not in any really meaningful way. And when we look at where that growth is coming from, part of it is the loan growth that Mike spoke about earlier, but we have been and assume that we dedicate balance sheet to our markets business. And as we think about that, we're not focused on maximizing net interest income. We're focused on maximizing returns, how much money we make overall.

And so we'll try and do as good a job as we can going forward, giving some more clarity on how we intend to use that balance sheet, how it can affect the different pieces. But that is it's a little bit of what we saw during this past quarter and it's the way we're thinking about the rest of the year.

The next question will come from Scott Siefers of Piper Sandler. Your line is open.

Good morning guys. Thanks for taking the question. I was hoping Mike maybe we could approach the NII question maybe, I guess, a little differently. Just what are if loan growth in the second half will only be kind of modest, what are the other factors that will allow NII to grow? Because I think you'll still need to average a few percent higher in the second half than you just did in the second quarter.

So just trying to understand what the major puts and takes are within there?

Yes. Scott, it's a little bit of a lot of things, right, that will sort of add up to some growth each quarter. We do expect deposit costs to continue to come down. We do expect to see some loan growth come through. We do expect which will be a driver.

We do expect to see further repricing of the securities portfolio. So it really is a little bit of a lot of things plus some deposit growth as we go into the end of the year. And so I think all of that sort of adds up to seeing it grow sequentially each quarter.

Okay, perfect. Thank you for that. And then Charlie, maybe just sort of a top level thing with the asset cap now off, I guess one of the questions that I get pretty frequently is sort of when or how might be the right time to revisit medium term return targets. Do you have any broad sense for sort of where you are in thinking about that kind of dynamic?

Sure. I guess a couple of things on that. I think you didn't directly ask the question, but let me just maybe talk for a second about capital levels because capital levels obviously dictate returns to a certain extent. And so with what's happening, we've certainly seen a lot of change over the past quarter. So obviously, we've got the ability to rethink how we use balance sheet with the

And I do just want to remind people that like I have said very consistently over and over and over again, when the asset cap is lifted, it's not like this light switch is going to go off and all of a sudden things are going to dramatically change. We didn't know exactly when the cap was going be lifted. We didn't want to get ahead of ourselves. And so we're very carefully thinking through how we use the additional capacity to help grow the company. And so we expect that to happen over time.

We never wanted to lead people to believe that there'd be any major change in the next week, the next month or the next quarter, but it certainly does open options for us to grow and increase returns beyond what we've seen in the past. And so now that it's off, we're going to be thoughtful about it. And as we go through our planning for next year, like this is the perfect time, we will do our best to talk more about it and provide more clarity broadly to everyone, so we can create a level of understanding there. We have the lower SCB, which is it is a huge decrease after a significant increase from the year before, which we commented in the year before we didn't understand why we saw the increase. As we think about how that impacts where we should be running our capital levels, we want to take a little bit of time to let the Fed go through its process, both on CCAR and on, the work they're doing on capital requirements.

So we can try and get an understanding of what the right long term level of capital is. So they've said that they're going to provide more transparency on CCAR, whether it's the underlying assumptions, the models, things like that. That will be extremely helpful for us so that we're not constantly readjusting capital targets on a yearly basis in any material way when in our view we haven't materially changed the risk of the company. So that will be forthcoming hopefully over the next couple of months as the work they're doing on capital. So that will allow us to come back with a more definitive point of view on where we should be running capital.

But certainly all of these things are lower levels where we had been running it because of the increases that we saw. So that allows us to deploy excess capital either organically or through buybacks. And so we do expect to get there. And then just more specifically to your question, we've also said very clearly 15% is not the it's an interim target. It's not the final target.

Once we get there, it's a good time to revisit where we go. So both through hopefully some increased returns that we're seeing in terms of how we run the business, running at some point with lower capital returns, We believe we'll be consistently at that 15% and then we'll provide more information on where we go from there, which will obviously be a higher number not a lower number.

All right. That's perfect. Thank you both very much.

Next question comes from Ken Usdin of Autonomous Research. Your line is open.

Hi, thanks. Good morning, guys. Just one more question Given what all you just said, Charlie, and that we still have now a really big amount of capital, the buyback in the second quarter was a little smaller than the first. Loan growth, as you said, looks like it's getting better, but not that quickly.

So should we can we expect that you might do more in terms of the buyback in advance of kind of getting that final zone of where you want to live given that you just have it seems like you have enough capacity to do kind of all things you would want to do in terms of growing the balance sheet and also returning more?

Listen, don't think we want to give a specific forecast on how much we intend to do. But to your point, we have more capacity not less capacity. The price of the stock does matter. And so we'll be thinking about that. And I think we'll go from there. But I think we how do I describe it? I guess I would say we don't on the one hand we don't feel like we need to deploy all of this capital immediately because we do want to have the opportunity to use the balance sheet to grow and do interesting things. But I've also said that we don't intend to do anything dramatic.

And so that does create more opportunity to buy stock back. But again the way we're thinking about it is we want to first use the capital that we have to grow the company organically. That's what allows us to produce the right kind of returns. It allows us to create the ability to increase the dividend. And buying stock back is kind of what we're left with.

What we hope the answer is and what certainly seems like is we'll have the ability to do all of those things to a greater extent than we've been able to do in the past and we'll just be very hopefully be very thoughtful about the timing.

Got it. And on one of you've laid out all the organic potentials in the past, but the one I wanted to ask you specific about is on retail deposits, where there's obviously a strong competitive landscape and a lot of banks still building branches in other territories. You've talked about how that consent order coming off last year has helped you kind of just go to market in a broader sense. But like how will that manifest itself in terms of just retail deposit growth? Can you see you expect an acceleration there in either net new checking or just overall deposit growth taking on the retail side? Thank you.

Sure. Yes. I mean, I think the answer is, as I said, think if you just a little bit of if you go back for a second is, when we had the sales practices consent order it was specifically driven by some of the things that happened in those businesses. And so, we had to be very, very careful about what we did. We scaled back an awful lot of stuff, which stood in the way of our ability to grow.

And then even as that order came off recognizing we had a deposit cap, well, I'm sorry, an asset cap, effectively can be a deposit cap, we were even though we were adding back some of the things that would actually help us grow quicker, we were very careful about not doing too much too quickly because when you have a constraint, just don't want to bump up against that constraint. So the activities that we've kind of reinstated inside the consumer business have to do with reporting. They have to do with the way we manage the business. They have to do with the way we pay people. And so you're starting to see increased net checking account growth.

We're focused on primary checking account growth. That should and we believe will lead to higher deposits. That what you'll see is you're going to see more marketing. You're going to see more aggressive marketing. You're going to see more merchandising in our branches.

You're going to see more local advertising as well as national advertising as well as just expansion of footprint in areas where we think we have room to grow. And so those are all things that we have been very, very cautious about doing up till now. And with the value proposition that we have for our customers and the strength of the brand and the great quality of the people here, we think we'll be able to compete very effectively. And I remind people, we're not competing with a small number of banks. We're competing with a lot of banks out there that we believe we have a better value proposition for.

The next question will come from Ebrahim Poonawala of Bank of America. Your line is open.

Hey, morning. I just wanted to follow-up, Charlie, on what you said in terms of in one of your responses around nothing is going to change dramatically. 15% RoTE C was like step number one, which you were at 2Q again, just one quarter. I appreciate that. But I think last half full way of to look at this, you mentioned the word grow aggressively many, many times on the call.

And I think the concern from an investor standpoint is a lot of this growth may come from the cost of ROTCE. I don't think that's what you're saying, but just give us a sense of the lens with which you're looking at these growth, be it on consumer deposits, commercial deposits. Could it be that we could see a near term hit in terms of profitability before things pick up and you gain more wallet share? Just how should we think about the impact on the next six, twelve, eighteen months of returns? And are there offsetting factors on the expense side or productivity side that could mitigate things that you do to pursue growth? Thanks.

Yes. No, thank you for the question. I mean, we don't mean to imply at all that we will sacrifice returns for growth. As we do all of our planning and we think about the opportunities, we think the things that we're going to do to grow the company will actually be very focused on continuing to increase the returns that we have. So please don't take anything that we've said as anything under that other than we continue to be very focused on those two things.

You do raise the question about expenses. We do point out in the remarks that we made that we continue to be very, very focused on using the expense resource that we have as wisely as we can. And so that means that we are still focused on continuing to drive efficiencies in the company. And as we've done up till now hope to be able to use this material part of the efficiencies that we continue to drive in the company as a way to pay for a lot of the investments that we intend to make. But that is very consistent with what we've done.

So even as we've increased marketing spend, we've increased the number of hires that we have in the Corporate Investment Bank, we've increased the hires in the Commercial Bank, we've increased the number of bankers that we've had in the consumer business, we've increased the number of financial advisors that we have, We haven't stood up and say that those things are dilutive to returns. It's just the opposite. We've been able to do those things because we're driving efficiency elsewhere in the company and those things will drive increased revenue over a period of time and ultimately higher returns. And so we're continuing to think about those things the exact same way we've been thinking about them. And I would just say that we as I've said every quarter including I think we said it on the last quarter, we continue to feel like there are significant opportunities to drive efficiencies in the company both traditionally and through technology including AI.

And the only thing I'll just make sure we're clear on is yes, had 15% ROTCE in the quarter, but we also recognize that we had to gain in our merchant services business. So we don't really think about that as ongoing. So we would say it's still a little bit lower even though we were running capital levels at the before the SCB adjustment was put in place.

Got it. So thanks for walking through that. And maybe a separate question Mike for you on in terms of NII, the market's view on what the Fed might do keeps changing. I appreciate that. But remind us in terms of asset sensitivity as you put into context like the sequential growth in NII in the back half and maybe into next year.

But how should we think about what three or four rate cuts would do to the balance sheet and the ability to maybe offset that given the growth outlook that you have assumed? Thanks.

Yes. Look, I mean we're we look at the implied forwards and with the markets pricing in on cuts obviously and so that's all sort of embedded in sort of the view of where NII is sort of trending as we look into the latter part of the year. And obviously even with that you're still going to see pricing come down on the deposit side and the commercial businesses. You're going to see continued repricing on the fixed assets components of the balance sheet. And then you're going to see hopefully start to see some more growth come out of it that will also help from an NII perspective.

And so all those things will should be constructive as you look forward despite what could be rates coming down a little.

The next question will come from Matt O'Connor of Deutsche Bank. Your line is open.

Good morning. I was hoping you could just provide some clarity on the net interest income ex markets this quarter. I was having a hard time finding that. And then maybe just give the guidance or comments on kind of the full year guide on the other ex markets just to clarify?

Yes. We don't break out the components in total across markets versus non markets. That's not something we've historically done. I think when you look under what's happening NII ex markets there's lots of puts and takes across the balance sheet. I think if you look at the kind of rates in general are sort of about kind of what we expected plus or minus a little bit like so that's the change in rates that we've seen throughout the year is not impacting sort of our guide really in any significant way.

You've seen slightly higher payment rates in places like credit cards. So that's probably muting balances there just a little bit and as well as some other factors there. And so loan growth depending on the outside of card has been a little bit slower. Deposits are sort of mostly behaving the way we thought. We're not seeing any significant or we're seeing really the trends of any cash rebalancing into higher yields has sort of been stable now for a bit for a number of quarters.

And so we're not seeing that change in any significant way. And so I'd say overall the trends are ex markets are pretty stable to what we've seen over the last couple of quarters and largely consistent with what we've expected to see with a few puts and takes across the different portfolios.

Okay. That's helpful. And I'm sure you guys have heard it before, but just as you're growing the trading business, I think the clarity on the trading net I over time would be helpful. And then just separately, I want to ask about the lower tax rate this quarter and somewhat related just the impact of the new legislation reducing clean energy tax credits. I think there's some kind of puts and takes there as we think about some stuff going away and some stuff that you might be able to do that you're not doing now.

So just a broader tax this quarter and going forward. Thanks.

Yes. On the last piece, on the tax credits that will be a few years out before you see anything, any real impact on that in terms of new projects So it will be a little bit it will be a while before you start to see that matter much. The broader bill doesn't have a lot of direct impacts relative to the taxes other than the tax credit piece, few small things. I think just more broadly on the tax line, there's always puts and takes on tax line given how big we are.

There's a few things in the quarter that probably brought the tax line a little bit the tax rate down a little bit lower than what you see over a longer time period including California tax change that sort of changed the way they do revenue attribution and a few other sort of wonky items that sort of change it. And so our view on the tax rate over a longer period of time is still high kind of high teens. Tax rate is sort of probably the right place given what we see over a longer period of time. But there always seems to be stuff in each quarter that sort of changes that a little bit.

Wells Fargo (WFC) Q2 2025 Earnings Call Transcript

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