Wells Fargo at Morgan Stanley Conference: Strategic Growth and Capital Flexibility

On Tuesday, 10 June 2025, Wells Fargo (NYSE:WFC) engaged in a detailed discussion at the Morgan Stanley US Financials, Payments & CRE Conference 2025. The conversation, led by CFO Mike Centimisimo, centered on the bank’s strategic outlook post-asset cap removal, highlighting both growth opportunities and challenges. While the company expressed optimism about its financial trajectory, it acknowledged the current economic uncertainties impacting loan growth.

Key Takeaways

• Wells Fargo aims to improve its ROTCE from 14% in 2024 to over 15% in the long term.
• The removal of the asset cap allows increased capital flexibility to support growth.
• Loan growth is expected to be limited due to economic uncertainty.
• The bank plans to enhance efficiency with AI and other initiatives.
• Wells Fargo’s CET1 ratio stands at 11.1%, above the regulatory minimum.

Financial Results

• ROTCE: Achieved 14% in 2024, with goals set for 15% and beyond.
• Expense Ratio: Recorded at 64% for 2024, with plans for improvement.
• Loan Growth: Positive but minimal in Q1; limited growth expected for the rest of the year.
• Net Interest Income (NII): Projected to grow by 1% to 3% year-on-year.

Operational Updates

• Branch Refurbishment: Completed upgrades on 1,500 to 2,000 branches; 750 more planned this year.
• Card Business: Replatformed all products and launched 11 new ones since February.
• Auto Business: New agreement with Volkswagen and Audi operational recently.
• Wealth Management: Growth in advisors and large team acquisitions noted.
• Commercial Bank: Hundreds of bankers added over the past years.
• Corporate Investment Bank: Dozens of senior investment bankers hired, with more flexibility post-asset cap.

Future Outlook

• Growth Opportunities: Anticipated across all sectors except mortgage, with a long-term focus.
• Capital Allocation: More flexibility in markets business capital allocation.
• Expense Management: Aiming for efficiency improvements, with AI as a key driver.
• Regulatory Environment: Monitoring changes and adjusting strategies accordingly.

Q&A Highlights

• Asset Cap Removal: Increases flexibility in markets business and deposit gathering.
• Deposit Funding: Growth through wholesale markets and wealth management banking.
• Credit Trends: Positive trends with no significant deterioration.
• Tariff Risk: Reserving process accounts for multiple scenarios, including risks.
• NII Outlook: Consistent with previous guidance, with trading NII gaining importance.

For a detailed understanding of Wells Fargo’s strategic initiatives and financial outlook, readers are encouraged to refer to the full transcript.

Full transcript - Morgan Stanley US Financials, Payments & CRE Conference 2025:

Unidentified speaker, Analyst, Morgan Stanley: just gonna read a Morgan Stanley disclosure. Should I read now? Can I read it now, or do I have to wait?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: You can do everything.

Unidentified speaker, Analyst, Morgan Stanley: Okay. For important disclosures, please see Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures if you have any questions. Please reach out to your Morgan Stanley sales representative. Okay. With that out the way, we are so delighted to have with us today Mike Centimisimo, Chief Financial Officer of Wells Fargo.

Mike, thank you so much for joining us today, and congratulations on exiting the asset cap.

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Right. Thanks for having me. We’re, we’re excited.

Unidentified speaker, Analyst, Morgan Stanley: How did that feel?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. It it was, you know, it was it’s great. Right? And, like, look, it’s the it’s the culmination of, you know, just years and years worth of work across thousands of people across the company. And so, you know, we’re we’re proud of all of all the work everyone did and we’re thankful for all the effort that people put in over a long period of time.

And and so hopefully, now now with all of, you know, the other consent orders that were terminated throughout the year and over the last number of years, you know, it feels it feels like a very different sort of place. And I think that we’re a very different company than we were five, six years ago, and so we’re excited about what’s what’s next.

Unidentified speaker, Analyst, Morgan Stanley: Okay. The asset cap was in place for seven years. Right? And this just came off last week.

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. Tuesday. Yeah.

Unidentified speaker, Analyst, Morgan Stanley: Right. I think. Yeah. So can you talk a little bit about what opportunities it opens up for Wells in the near and medium term, call it over the next, you know, two and five years?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. You know, look. I think, you know, while while the last, like, five years or so, you know, you know, the risk and control work was the, you know, by far the the top priority that we all had, and and there was a significant amount of time that we all had to spend on that, you know, and and all of the broader regulatory work. You know, we started the path, and we’ve been talking about a lot of the priorities and where the growth comes from, but we started this, you know, journey, you know, five years ago. And if you look across each of the businesses, you know, the same priorities that we’ve been talking about are the places that we’re gonna see growth on from, you know, not just in the next year or two, but in the next five or ten years, you know, as you sort of look at each of them.

And when you start, you know, just start on the consumer side, you know, on the in the in the branch banking, you know, business, you know, we’ve been investing in the branches now for the last number of years. We’re refurbishing them. We’re we’re through 1,500 or close to 2,000 of them. I think we’ve we’ve refurbished something like seven or will refurbish something like 750 of them this year alone, and we’re gonna work our way through that just to, you know, change change the look, change the feel. We’re investing in the people in those branches.

You know, we’re adding wealth advisers to to service the affluent opportunity, which what we can come back to, you know, in terms of, you know, the opportunity that’s there. And so, you know, the and the growth that we should see coming out of the branches should be, you know, significant over a long long long period of time. That was somewhat impacted by not only, you know, the asset cap, but also sort of the sales practices consent order that went away, you know, a year or so ago. And after that consent order was terminated, we reintroduced the incentive plans. We reintroduced, you know, a lot of the priorities that you know, growth priorities that, you know, come through through that through that channel.

And so over a very long period of time, we should continue to see, you know, good good growth over that, you know, from that from that business, not only sort of in, you know, growing the the core checking accounts and and banking business, but also cards, wealth, and and the other things that we can do with clients coming out of that channel. When you start looking at consumer lending, our card business is another great example. You know, that started back in in the February. Know, new leadership team, you know, we’ve replatformed every single product that we have. We’ve launched 11 new products since then.

We’ve seen good growth in new accounts. And it starts with just like really good products, simple propositions, simple value propositions for clients, you know, good service, and we continue to kind of refine the business as we as we go. You know, we’ll there’ll likely be, you know, a few more card offerings over over time as we can, you know, continue to, you know, complete the the product set, but we should see, again, good sustainable growth, you know, coming through there there as well. You know, the auto business is is something we’ve been investing as well to become a bit more of a full spectrum lender across the platform there. We also signed up an agreement with Volkswagen and Audi that went operational just in the last, you know, thirty, forty five days, so we should start to see, you know, that portfolio trough and grow a little bit over time.

The the one place that we don’t really think of as a growth business is the mortgage business. You know, we it’s it’s still a very important business to clients and for us, but it’s not something that we wanna be really big in. It’s something we wanna be really good at for our clients, and we’re still in the process of of rightsizing the servicing component of that business, and that’ll take a little bit more time to do, but but that that’s probably the one exception on the consumer side. You then go to wealth. You know, if you go back five, six, seven years ago, you know, we had lots of attrition in that business as a result of, you know, some of the sales practice and other other issues.

That’s really started that’s really stemmed. We’re starting to see growth in advisers. You know, we feel like we’re seeing every big team that moves across the industry now where that wasn’t the case years ago. We also have a couple, you know, kind of unique, you know, characteristics of that business as well. We’ve got the bank channel, which I talked about, which we call Wells Fargo Premier.

It’s the offering we’ve been building out for the last couple, you know, couple years. You know, we’ve got, you know, a couple thousand advisers that sit in the branches today already that are going after that opportunity. And if we can do a good job in in in going after the wealth the wealth management business there, it also brings more banking and lending, you know, from those clients as well. And so that’s that and and we’re just in the early days to really see that, you know, start to start to build. We also service registered investment independent advisers in that business.

That’s unique to us in terms of the top, you know, number of wealth management franchises, fastest growing piece of the market in terms of advisers, and so that that should give us an ability to, you know, grow with those that piece as well. And then you go to the commercial side, you know, we’ve been adding hundreds of bankers in the commercial bank over the last, you know, couple years. While we’ve got good national share in the commercial bank, I think, you know, many markets across the country, we just don’t have, you know, the share that we think we should have. And I think, you know, we’ve been, you know, just methodically going market by market, you know, segment by segment within them in those markets and adding, you know, people there. And so that should that momentum should continue to build over over a long period of time.

And then in the corporate investment bank, you know, there’s, you know, three businesses within there. In the investment banking side, we’ve talked a lot about that. We’ve added dozens of of investment banks, senior investment bankers over the last, you know, few years, and we’re continually just, you know, executing the plan we’ve got there to fill in coverage gaps, to fill in gaps across segments within, you whether it’s equity or debt capital markets or the m and a m and a teams. We’re starting to see a little bit of share growth there. We’re we’re we’re certainly seeing lots of green shoots in terms of deals that we just wouldn’t have been part of if if we didn’t have those those those folks come into into the firm.

Our markets business has been, you know, the most constrained of the businesses given the asset cap. We just haven’t been able to allocate the balance sheet we would like to that business. And so that that business will have more flexibility now that the asset cap’s gone. And again, they’re just, you know, systematically investing in technology and people to sort of build out the right capabilities there. And and and we believe there’s a lot of demand there for for, you know, for what what we can offer.

And then commercial real estate, you know, again, you know, big business for us, important business for us, and will will be as we look forward. And so when you look across the, you know, the businesses, there should be really good growth opportunities in in in really all of them, mortgage aside. And that this will play out over a long, long period of time. You know, we we always are are a little bit cautious here to say, look. It’s not a light switch moment.

Like, it doesn’t happen Tuesday, the asset caps on. Wednesday, the growth just accelerates. Right? These are plans that we’ve been executing now, you know, methodically for a number of years, and growth should happen over over a period of time.

Unidentified speaker, Analyst, Morgan Stanley: But one one question is when the asset cap has been in place, capital is an even more scarce resource, right, than it is the day after the asset cap comes off. So is is there any change to how you consider or think about allocating capital in a post asset cap world?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. Sure. I mean but but initially initially, where you have most more flexibility that you didn’t have, you know, a week ago is in the markets business, you know, and that’s that’s where you can do more financing type activity with clients that then will ultimately drive other business you can do with them. So there’s certainly, you know, more flexibility there that starts right away, and and then you could be a little bit more front footed on on going after different types of deposits across the commercial side of the business. But but again, I I, you know, I just caution you.

It does take some time to grow. It doesn’t happen in a week. And I and but I but we’re we’re pretty we’re pretty excited about what the opportunity looks like across each of those businesses, and I think clients want alternatives. And I think we’ve got a full set of capabilities, and there really are just a few of us across, you know, across this the banking space where that have this full set of capabilities that we can bring to bear. You know, we’re largely US focused, but that can bring to bear with clients, and we think there’s a lot of opportunity to do that.

Unidentified speaker, Analyst, Morgan Stanley: And one of the questions I’ve gotten is, well, how will you be funding this incremental growth given the fact that you did have to pull back on deposits? So could you tell us a little bit about how you’re thinking about the deposit side of the equation?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. Look look, I think in the in the in the market side of things, you know, we know we’ll get back to a place where a lot of that growth is funded through, like like all other, you know, markets businesses across the street funded in in in through the through wholesale markets. You know, some of that was funded through our deposit franchise in the past. It doesn’t, know that that was a little bit different and a little bit because of the asset cap. On the deposit side, you know, it comes back to just basic blocking and tackling.

We on the consumer side, it’s about growing core checking accounts, you know, across the consumer business. In wealth management, same thing. We’re underpenetrated in the banking side of the wallet for our wealth management clients, and that’s been a focus for us. And on and on the commercial side, you know, we again, we can be just a little bit more front footed, a little bit more competitive as we go out there to compete for different types of deposits there or different clients.

Unidentified speaker, Analyst, Morgan Stanley: Okay. Great. What about on the expense side? And the reason I’m asking is, you know, does the asset cap removal spur any incremental expense saves?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. You know, we still outside of the risk and and control work and the expenses associated with that, there’s still a lot of opportunity to drive efficiency across everything else. And and and our mentality as we go into whether it’s budgeting or just normal, you know, business reviews as we go through each of the parts of the firm is that there needs to be more efficiency driven across, you know, each area. And and there really is opportunity just about everywhere still. It just takes some time as you sort of go through on, you know, pick unpeeling the onion to really find those opportunities, doing it in a methodical way, doing it in a sustainable way, and really across the whole company, I think there’s more.

On the risk and control work, for sure, there’ll be opportunities to streamline, to make it more efficient. It hasn’t been anything we focused on in any any significant way at this point. That will happen over over a longer period of time. But but as you go through, you know, the last five years of building all of this all these capabilities and you look back and you sort of you start to operate it with know, operate every day with it, there’s, you know, there’s tons of opportunities to do that as well. But that’s that’ll take take a little bit longer to to get at.

Unidentified speaker, Analyst, Morgan Stanley: Okay. And one somewhat technical question about the asset cap removal. The regulators removed the asset cap, but they left in place a consent order that requires you to maintain and improve your risk management program?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Well, the the asset cap was always phase one of the consent order. Right. So that that that was just that was the way, you know, the order was constructed. And as part of phase one, you adopt and implement all the things you need to do. And as phase two, you’ll you see it sustain itself over a slightly longer period of time.

And so that was always the plan, and and we’ll we’ll continue to see that one through as well.

Unidentified speaker, Analyst, Morgan Stanley: So this doesn’t change the Nope. Expense profile at all? Nope. And I don’t know, maintaining and improving a risk management program to me sounds like business as usual.

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. I mean, it really is. Right? It’s and it it’s it’s something that you should be doing all the time anyway. Right?

And and I think, you know, all the all a lot of other all the other firm big firms, you know, across the industry have done this over time. And I think over a period of time, you you you’ll look back and, you know, we started this journey, you know, five years ago. And so technology is different today than than you could’ve you can deploy. You know, you find lots of different interconnections, way to simplify things, way you know, and so it’s just natural course of of the way we approach not only the risk and control work, but but really just about everything else you do too. Right?

You should be, you know, constantly sort of reevaluating how you go about executing what you do every day for clients or internally and looking for ways to, you know, bring technology to bear in different ways or just look for ways to simplify things. And and in and in a lot of and and in most cases, that’ll save you money, but it but most importantly, it’ll actually make the client experience better too. You can be faster, you can be nimbler, you can you can sort of deal with, you know, client inquiries in different way as well. And so I think it all all comes together to hopefully, you know, be a win win for us, and our end clients as we go through that.

Unidentified speaker, Analyst, Morgan Stanley: Okay. One of the other questions we’ve been getting from investors is what about that ROTCE goal of 15% post asset cap environment? In ’24, you generated 14% and you’ve got a 64% expense ratio that’s, you know, a subset of that result. Can you talk us through what you’re thinking about with regard to the expense ratio, the ROTCE, and a post asset cap environment?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. I mean, you know, we we started this journey, you know, back, I guess, at the end of twenty twenty, 2021 where our where our ROTCE was 8%. And so we’ve made a lot of progress to get to kinda where to where we are. You know, we set out the goal, you know, at 10%, now 15%. And and, you know, what we wanted to make sure those goals were were something that we could achieve in a in a reasonable period of time, you know, and but we’re also kind of kind of respectable targets, I think, overall.

But but we’ve we’ve never thought of it as, like, the end goal. And I think when you look at each of the underlying business segments we have, there’s really no reason why they shouldn’t have returns and efficiency ratios that are comparable to the best in class peers over over some, you know, period of time by by segment. Right? And so so I think, you know, reasonable people can do different math, but but I think that would lead you to, you know, an end goal that would be potentially higher than 15%. And, you know, once we get to the, you know, 15%, you know, goal and and we feel like it’s it’s sustainable, then we’ll kinda reset expectations from there.

But but I think, you know, it was never meant to be sort of the the the end goal of of of where we would, you know, where we’d sustain for a long period of time. And so I think there’s more to do. And, again, everybody can have a maybe a slightly different view on what that should be, but we’ll talk about it when we when we get to the when we feel like we’re there.

Unidentified speaker, Analyst, Morgan Stanley: Okay. So let’s wait a few more quarters for that. That’s what I’m hearing given that you’re already at 14% for 2024. Just turning a little bit to some of the nuts and bolts here on loan growth. You did have positive loan growth in momentum in loan growth, I should say, in 1Q ahead of the asset cap removal.

And and part of this is coming from nondepository financial institution lending. Maybe you could give us a sense of how we should be thinking about your loan growth over the course of the, you know, rest of this year, and how important NDFI lending is to that.

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Sure. You know, you know, look, through the first quarter, we saw a little bit of loan growth. Not a lot. Very little. Positive.

It was it was positive for the for the time in a while, but but but it still wasn’t a lot. And so and and then, you know, what’s changed since the end of the first quarter is all the uncertainty that was sort of injected into the into the environment. And so when you look across, you know, the different, you know, portfolios, you know, you really shouldn’t expect much, right, for, you know, you know, for the rest of the year. And when you go through each, you know, on the consumer side, you know, we’re rate with rates where they are, mortgages likely, you know, continues to decline just a little bit. You know, credit card growth, you know, we’ll see where it ultimately sort of ends up, you know, each quarter, but that’ll that’ll move around a little bit.

And auto is is is is pretty small in the scheme of things. And so I wouldn’t expect, you know, large large growth on the consumer side in any in any way and and likely potentially a net, you know, decline as you sort of look, you know, across the quarters. The and then when you look at, you know, the commercial side, what’s what’s, you know, what’s hard to predict is just what’s gonna happen for the rest of the year. And, you know, I think the uncertainty that’s been there has caused people to, you know, pause a little bit on investment, on inventory builds, and being really thoughtful about sort of borrowing, you know, particularly given how expensive, you know, it can be. And that’s just hard to predict exactly what’s gonna happen.

You know, we haven’t seen in the in the c and I in the commercial industrial book, we haven’t really seen, you know, a big change. You know, you can see that through, you know, the Fed, you know, data that comes out. There really hasn’t been much. You know, people haven’t been drawing to build liquidity. They’re not making those investments, and I think they need to see more of what’s gonna play out for the rest of the year, you know, before they get that confidence to just kinda make those investments.

And so it’s a little hard to predict, but I wouldn’t expect too much as you sort of go into into the rest of the year. You know, there’s certainly some opportunities, you know, in in in some of the other portfolios like the the NBFI book, as you mentioned, which I can dig into. And then, you know, then you look at, you know, what’s happening in commercial real estate. You know, you’ll continue to see office decline a bit, but there’s opportunities in other in other ports other parts of that in that book, and so we’ll see how it plays out. But but as you look at the if you look at the the rest of the year, it’s hard to get too excited about seeing, you know, big big changes in in in loans as you look forward.

On the on the nonbank financial book, it is it is an important portfolio for us. It’s been that way for a long time. You know, the largest piece of that, you know, portfolio are are lines that, you know, are capital call facilities that we provide to largely bigger private equity, you know, private credit funds, and the the risk return there is quite good. You know? We focus the we focus those that exposure on on the the more established, bigger firms.

You know, I think when you look across that portfolio over a very long period of time, the risk is is quite quite the risk return is quite good, and so we feel really good about that part of the portfolio. As you look at the rest of it, you know, we lend against a bunch of different kinds of assets. You know, we lend against corporate, you know, corporate and kinda middle market corporate debt to corporate loans. And in those portfolios, we approach it, we think, a little bit of a different way maybe than than than some others at least, and where we’re underwriting every single loan. So we underwrite 20 you know, close to close to 25 to 100 to 3,000 loans underneath that portfolio.

We’re not lending to a portfolio. We’re lending loan by loan. We we evaluate them each quarter. We look at you know, we mark them. We’ve got attachment points that are quite good relative to, you know, lending directly to those underlying borrowers.

And, again, we’ve got a very experienced team and feel good about kind of the risk that’s underneath that. And then there’s a whole bunch of other different asset classes, you know, whether it’s, you know, mortgages of, you know, residential or or commercial mortgages or or other types of of loan of assets we have underneath that. And so all all that come with attachment points and and and risk that we feel is is quite good relative to the return we’re getting.

Unidentified speaker, Analyst, Morgan Stanley: So one question I’ve got from folks is when we think about NDFI loss content, is that similar to C and I? Is it higher? Is it lower?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Well, I I mean, you know, look, I think the loss content in there has been quite quite low, actually, over over a long period of time in our portfolio. And so it’s hard to make a general statement like that, but but I think, you know, as you look across the different portfolios, it’s actually been very, very low. And so we feel good about the risk that’s there. And and, again, you get different attachment points than you would if you’re lending directly to a lot of these borrowers.

Unidentified speaker, Analyst, Morgan Stanley: Which reduces the risk.

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Reduces the risk So

Unidentified speaker, Analyst, Morgan Stanley: it seems to me based on everything you said that NDFI loan losses are at or lower than, you know.

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. I mean, you can you we don’t just I don’t think we disclose that in that Right. Level of detail, but but we feel really good about that. And there’s been very low losses in that portfolio.

Unidentified speaker, Analyst, Morgan Stanley: Yeah. I’m interpreting really good. Yeah. Yeah. Okay.

Very excellent. And maybe you could give us a sense since we’re on the topic of credit. How is credit just generally trending in the quarter?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. Like, the shorter answer is pretty good. Right? I mean, it’s like the trends are consistent to what we’ve seen over the last, you know, quarters, last number of quarters. You know, when you look in the consumer side, you know, we’re not seeing deterioration of any of any note, you know, come across the portfolios there.

If anything, payment rates in in the credit card business are a little bit higher maybe than marginally than we sort of would have would have modeled, which is good from a credit perspective, obviously. And then when you look across the different, you know, portfolios, it’s been it’s been pretty trends have been pretty consistent on the commercial side, really not seeing systematic themes emerge that are causing, you know, near term credit issues really really at all across any of the underlying portfolios, which which is which is quite good. And and even with all of the, you know, volatility that’s been there now the last, I guess, it’s two months, you know, we’re not seeing the you know, that really change the trends in any in any significant way at this point.

Unidentified speaker, Analyst, Morgan Stanley: And how do you think about reserving for these tariff risk, which seems to be on again, off again or high, low, medium. Yeah. How do you deal with that in the reserving?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. Look. I mean, I think, you know, with with any with the the the whole process around the allowance and CECL requires a lot of judgment in any in any quarter. Certainly, in in a quarter where there’s lots of headlines that you sort of need to digest, that that that is certainly the case. And, you know, but but underpinning underpinning it is that there’s multiple scenarios that you look at all the time.

Right? And so as you look at our our process, you know, we we we have, you know, three, four, five scenarios, but really all of our waiting is either on a base case scenario or downside scenarios at this point. You know, we’ve had significant waiting on those downside scenarios for a while. That’s not that’s not changing. So that, in essence, incorporates, you know you know, potential, you know, volatility or, like, negative impacts from lots of different, you know, potential,

And so so a lot of that is is sitting sitting in sort of the the the reserving process already. And so and then as you look forward today, you know, is there more uncertainty? Yes. But but, as we come back to what we were just talking about, the you know, what we’re actually seeing in performance is still quite good. And so and and and if there’s some guardrails in terms of where the public policy ends up or trade policy and other things, then then it feels like, you know, you can get to a place where it’s you know, the the base case scenario is pretty pretty manageable and not maybe not as bad as people feared, you know, two months ago.

So we’ll we’ll see how it we’ll see how it plays out. But a lot of that uncertainty was, you know, largely baked into sort of the way we were thinking about the allowance, and it’s been that way for a while. You you always get the reason why it could be negative wrong. You know, that’s just like the reality. But but nonetheless, you sort of you need to you need to sort of think about, like, a lot of different scenarios each quarter, and that’s the way we’ve been thinking about it for a while.

Unidentified speaker, Analyst, Morgan Stanley: And the lost content that’s being generated this quarter is more similar to last quarter. No real big change.

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. We’re not I mean, there’s always some seasonality in some of the portfolios like card and stuff, but but, you know, we’re not seeing, you know, trends change in any in any significant way, you know, across really any of the portfolios at at this point.

Unidentified speaker, Analyst, Morgan Stanley: While we’re on the quarter, can we talk a little bit about NII? And just generally speaking, your overall guide for NII, plus one to plus three year on year for the full year. Right? Mhmm. Maybe you could talk about how that’s holding up this quarter.

And if there’s no rate cuts, does that matter? And you’ve got a steeper curve, does that matter?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. Well, when you look at, like, rates, you know, if you go back to the expectations from the beginning of the year, you know, long term like, the ten year or long term longer term rates are are still lower than, you know, what we anticipated in the beginning of the year. Although they’re up maybe from the prior quarter, they’re actually lower than where we started started the year. And then short term rates, you know, they’re they’re close. Right?

But it’s really a half story in terms of what’s gonna happen, you know, ultimately with with the Fed. But the later you get the later you get in the year, the less, you know, the less impactful it is for for the calendar year. And and we’ll see. You know, obviously, rate expectations in terms of what’s gonna happen is have been, you know, I guess maybe the understatement is probably volatile, right, over the last, you know but but it’s been that way now for a couple years. Right?

Two or three years where I feel like every time we get into a conference like this, like, three days ago, something happened or three days from now, something’s gonna happen. And so, you know, so the expectations just keep keep, you know, keep evolving quite a bit. But but, you know, as you get later in the year, obviously, they’re gonna be less impactful, you know, for for this year. And then, you know, the things we continue to, you know, focus on, you know, for the rest of the year and watch are, obviously, deposit levels, deposit mix. You know, we’re not seeing, again, big big changes in trend there at all.

We know pricing, there’s not we’re not seeing pressure on the price on pricing, you know, on the consumer side. You know, the the commercial side is always more competitive, but that’s just the reality of that market. We’re not seeing, you know, again, you know, the any any real pressure there. And and so we’ll see how how it goes. We’ll provide, you know, more fulsome update as we sort of get, you know, to earnings.

And then we talked about loan growth, right, which is we didn’t expect a lot as we go through the year, but but I think, you know, as as the year progresses, we’ll see what that, you know, what that brings. And then, obviously, you know, trading NII is becoming a little bit of a bigger bigger driver. We’ll probably talk more about that in the future. And so that can be that can, you know, move things around a little bit in different in different periods as we as we go, and so we’ll we’ll see how it goes. But I’d say there’s no big changes in trend than what we what we talked about in in July.

Unidentified speaker, Analyst, Morgan Stanley: Could I just ask you to explain a little bit the trading NII has been a bigger driver? Could you just unpack how to become

Mike Centimisimo, Chief Financial Officer, Wells Fargo: you know, as our as our trading business just gets bigger, you know, it’ll it’ll be a bigger driver of NII, and so we’ll talk more about that as we go in the coming quarters.

Unidentified speaker, Analyst, Morgan Stanley: Which benefits if rates come down?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Sure. Certainly. You know, certainly NII benefits, and and then in different environments, you have more fees than you have NII or vice versa. And so it’s just know, in a lot of cases, it’s just geography Right. That moves around a little bit.

So

Unidentified speaker, Analyst, Morgan Stanley: And then just on trading and investment banking, the whole capital markets business that Wells Fargo has, can you speak a little bit about how the year’s been progressing? I mean, I think we started off a little lighter. And is there any inflection?

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Well, you know, inflections are hard to hard to predict hard to predict and, like, you only know them after the fact. And sometimes they don’t last very long. So we’ll see. But, you know, certainly, as you look at different, you know, different parts of the investment banking side, you know, you know, the the m and a fee pool is up a little bit in The US, but, like, announced volume Right?

You look at some of the equity capital markets year to date down. Right? And so so I think you’ve seen somewhat muted in terms of what maybe people had hoped they’d see, you know, as you came came into the year, but but those things can change pretty quickly. You know, the debt capital markets are wide open, you know, for issuers, and I think that’s really good. And I think you can get lots lots done there.

You know, hopefully, the equity side has started you know, equity for IPOs and other things, it’s starting to, you know, open up there more. I think we saw obviously a a pretty successful IPO or a couple of them over the last, you know, couple week or so. So hopefully, that that continues. And then I think you’re starting to see more deal activity. But again, I think that that, you know, maybe got put got a little bit muted, you know, in the quarter given what happened earlier in the quarter, but I think, hopefully, that’ll start to pick back up.

You know, and I think, as you know, the investment banking game is it’s a it’s a long game. Right? And so, you know, a lot of the investments we’re making are are really intended to drive, you know, growth and market share over over a long period of time. And what happens sometimes, you know, quarter to quarter can be a little, you know, out of your out of your control. But I think the opportunity there is gonna be huge, and I think, you know, the activity level with clients is is pretty high.

So now we need to see that translate into into more more activity, and then, you know, we’ll see where it goes.

Unidentified speaker, Analyst, Morgan Stanley: Okay. And then on expenses, any key drivers for getting that expense ratio down? Does AI factor at all? What’s really behind expectation that you can get expenses, the expense ratio improved? Yeah.

Well, I think, again, I come back to

Mike Centimisimo, Chief Financial Officer, Wells Fargo: what we were talking about earlier on the efficiency side. You know, we really feel like just about every part of the company still has more to do on on efficiency. And and sometimes that’s technology driven, sometimes not. And and I think as you look at AI, I think certainly AI is gonna help drive some of that efficiency in a different way and maybe faster pace than you could have done three, four, five years ago And we’ve got, you know, whole a whole set of use cases that are that are that are focused on drive you know, the efficiency side of it, everything from, you know, call center agents and making that experience better for for customers to and we’re you know, that’s live, you know, piloting for internal, you know, call centers already.

You know, it’s using AI, you know, either, you know, agentic AI or sort of regular AI to sort of automate sort of a lot of processes across different, you know, parts of the company. It makes it makes digesting the, like, numerous research, you know, analyst reports we get, like, much more efficient, like, throw them into an AI and

Unidentified speaker, Analyst, Morgan Stanley: Oh, you only have to pay attention to one.

Mike Centimisimo, Chief Financial Officer, Wells Fargo: One. Only one. Yep. The and and so we can compare and contrast your tone versus somebody, you know, and and so you can do lots of different things now that that in a much much more efficient way. And I and that’s why I do think AI is gonna help drive, you know, efficiency for really everybody, not just our industry, but certainly across banks, maybe in a different at a different pace than you saw, you know, historically.

But it’s but a lot of the efficiency agenda is it really is hundreds and hundreds of different projects at any given time across the whole company that drive it. There really are no, like, one or two that I would sort of highlight that are the ones that are gonna be the thing. And that’s and that’s what we’ve seen now for the last, you know, three, four three, four years. Right? We’ve seen headcount come down significantly from the peaks.

We’ve seen, you know, us generate 12,000,000,000 of gross saves across the company, reinvest those back many much of that back into the businesses. And that’s still, you know, the same mindset we bring each each time we go through each time we go through it.

Unidentified speaker, Analyst, Morgan Stanley: So as you go through the process of thinking about what the ROTCE target could be as you hit 15 over the coming quarters, years, it would be really helpful to understand what you think you can get that expense ratio to.

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Yeah. Yeah. I mean, they they’re like part and parcel. Right? They come to get like, they’re like, they sort of moved moved in some ways moved together.

Right? So Absolutely. So I think that that’s certainly important. Super.

Unidentified speaker, Analyst, Morgan Stanley: Last topic I wanted to touch on here is capital. And, clearly, you have significant excess capital with a CET one of 11.1%, which is well above your minimum of 9.8. And we’ve got a regulatory environment that looks like it’s going to be reassessing, and we get the CCAR soon. So this will all be exciting. The question I have for you is how do you think about what the right capital level is for Wells?

Because I’m sure the regulators will be asking you that at their confab in July. Right? Michelle Bowman’s putting together Yep. Industry confab on this. So how are you thinking about what the right level of capital is, and how are you thinking about capital deployment in this new world?

Yeah. I mean, look, I

Mike Centimisimo, Chief Financial Officer, Wells Fargo: think there’s a lot to that, and I know we’re running out of time. But but I look, I think the the thing I’d say is, like, you know, the rules hopefully will become a little clearer over time in terms of where, like, the Basel three ends up, so that’s that’s positive. Hopefully, the stress test reform gets us to a more reasonable place in terms of where, you know, where that where that ends up for us as and and the broader industry. And and as we look forward, you know, from a capital it’s great that we have a lot of excess capital. We have more flexibility to deploy it now now that we have an asset cap, which is great.

Approval. And so that’ll help that’ll help drive the growth. And then I think, you know, we’ll you know, we’ve we’ve been pretty active in sort of, you know, giving some back to shareholders as well, and so we’ll we’ll look at that. And then we’ll assess sort of where our buffer needs to be over the regulatory minimums and buffers, you know, over a period of time, and that potentially can get a little bit smaller. But I think the good news is we come into an environment where we’ve got a lot more balance sheet and growth flexibility with a lot of capital, and we can deploy that to help clients and and grow over a long period of time.

So I think we feel really good about where we are.

Unidentified speaker, Analyst, Morgan Stanley: Super. Mike, thanks so much for joining us this morning. Yep.

Mike Centimisimo, Chief Financial Officer, Wells Fargo: Thank you.

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