Wells Fargo & Company · NYSE:WFC

Wells Fargo & — Q4 2017 Earnings Presentation

42 slides from Wells Fargo &'s earnings presentation, Jan 12, 2018

  1. Slide 1: 4Q17 Quarterly Supplement

    4Q17 Quarterly Supplement January 12, 2018 © 2018 Wells Fargo & Company. All rights reserved.

  2. Slide 2: Table of contents

    Wells Fargo 4Q17 Supplement 1 Appendix Innovating for our customers 32 Adoption of hedge accounting update ASU 2017-12 33 Noninterest expense analysis (reference for slides 17-18) 34 Real estate 1-4 family mortgage portfolio 35 Consumer credit card portfolio 36 Auto portfolios 37 Student lending por

  3. Slide 3: Continued focus on our stakeholders in 2017 (page 1 of 2)

    Wells Fargo 4Q17 Supplement 2  Customer-friendly changes to deposit accounts included: - Overdraft Rewind℠ feature: Waives overdraft and non-sufficient funds (NSF) fees if a covering direct deposit is received by 9am the day after the account is overdrawn - Automatic zero-balance alerts sent during

  4. Slide 4: Continued focus on our stakeholders in 2017 (page 2 of 2)

    Wells Fargo 4Q17 Supplement 3  Shareholders: - Returned $14.5 billion to shareholders through common stock dividends and net share repurchases, up 16% from 2016  Board and governance changes included: - Elected Elizabeth A. (“Betsy”) Duke, a former member of the Federal Reserve Board of Governors,

  5. Slide 5: 4Q17 Highlights

    Wells Fargo 4Q17 Supplement 4 5,274 5,634 5,856 4,542 6,151 4Q16 1Q17 2Q17 3Q17 4Q17 4Q17 Highlights  Earnings of $6.2 billion included: Tax Cuts & Jobs Act impact: - $3.35 billion after-tax benefit from the impact of the Tax Cuts & Jobs Act (Tax Act) Other items: - $848 million pre-tax gain from t

  6. Slide 6: Noteworthy items in 4Q17

    Wells Fargo 4Q17 Supplement 5 Noteworthy items in 4Q17 ($ in millions) Line Affected Revenue Expense Income Tax Adjustments Net Income Diluted EPS Income Statement Tax Act impacts $ $ 0.67 See page 6 for additional information Sale of Wells Fargo Insurance Services USA (WFIS) $ 0.11 Sold on 11/30/17

  7. Slide 7: Tax Cuts & Jobs Act 4Q17 impact and 2018 expectations

    Wells Fargo 4Q17 Supplement 6 Tax Cuts & Jobs Act (Tax Act) 4Q17 impact and 2018 expectations  $3.35 billion net income benefit, or $0.67 per share, in 4Q17 primarily due to: - $3.89 billion estimated tax benefit from the reduction to net deferred income taxes • Provisional result from re-measureme

  8. Slide 8: Balance Sheet and credit overview (linked quarter)

    Wells Fargo 4Q17 Supplement 7 Balance Sheet and credit overview (linked quarter) Loans  Up $4.9 billion driven by higher commercial and consumer loans - Commercial loans up $3.2 billion on growth in commercial & industrial loans - Consumer loans up $1.7 billion on growth in real estate 1-4 family f

  9. Slide 9: Income Statement overview (linked quarter)

    Wells Fargo 4Q17 Supplement 8 Income Statement overview (linked quarter) Total revenue  Revenue of $22.1 billion, up $201 million Net interest income  NII down $136 million driven primarily by a $183 million loss due to a one-time adjustment related to leveraged leases resulting from the Tax Act,

  10. Slide 10: Loans

    Wells Fargo 4Q17 Supplement 9 964.1 963.6 956.9 952.3 951.8 4Q16 1Q17 2Q17 3Q17 4Q17 967.6 958.4 957.4 951.9 956.8 4Q16 1Q17 2Q17 3Q17 4Q17 Loans  Total average loans of $951.8 billion, down $12.3 billion, or 1%, YoY and down $521 million LQ - Commercial loans down $692 million LQ as growth in comm

  11. Slide 11: Commercial loan trends

    Wells Fargo 4Q17 Supplement 10 On growth of…  $1.9 billion in Financial Institutions reflecting seasonal liquidity demand  $1.1 billion in Commercial Capital on higher Commercial Distribution Finance on seasonality and higher Asset Backed Finance reflecting strong market conditions  $1.1 billion

  12. Slide 12: Consumer loan trends

    Wells Fargo 4Q17 Supplement 11 Consumer loan trends ($ in billions, Period-end balances) Consumer loans down $7.7 billion YoY and up $1.7 billion LQ  First mortgage loans up $3.9 billion LQ: - Nonconforming loan growth of $5.9 billion - Growth partially offset by continued run-off of higher-yieldin

  13. Slide 13: Deposits

    Wells Fargo 4Q17 Supplement 12 907.3 942.1 944.1 376.9 364.3 367.5 1,284.2 1,306.4 1,311.6 4Q16 3Q17 4Q17 Interest-bearing deposits Noninterest-bearing deposits 1,306.1 1,306.7 1,336.0 4Q16 3Q17 4Q17 Deposits  Average deposits up $27.4 billion, or 2%, YoY and up $5.2 billion LQ - Noninterest-bearin

  14. Slide 14: Net interest income

    Wells Fargo 4Q17 Supplement 13 12,402 12,324 12,471 12,449 12,313 4Q16 1Q17 2Q17 3Q17 4Q17  Net interest income decreased $89 million, or 1%, YoY and $136 million LQ; 4Q17 results included: - $183 million loss due to a one-time adjustment related to leveraged leases resulting from the Tax Act, part

  15. Slide 15: Noninterest income

    Wells Fargo 4Q17 Supplement 14 Noninterest income  Deposit service charges down $30 million LQ driven by customer-friendly changes including the November launch of Overdraft Rewind℠  Trust and investment fees up $78 million on higher asset-based fees and retail brokerage transaction activity  Oth

  16. Slide 16: Trading-related net interest income and noninterest income

    Wells Fargo 4Q17 Supplement 15 Trading-related net interest income and noninterest income  Trading-related revenue of $842 million was down $49 million, or 5%, from 3Q17: - Net interest income increased $64 million on higher trading assets • Average trading asset balances up 7% on higher inventorie

  17. Slide 17: Noninterest expense and efficiency ratio

    Wells Fargo 4Q17 Supplement 16 Noninterest expense and efficiency ratio (1)  Noninterest expense up $2.4 billion LQ - Personnel expense up $173 million • Salaries up $47 million reflecting an accrual for additional team member holidays, as well as higher severance expense • Commission and incentive

  18. Slide 18: Noninterest expense – linked quarter

    Wells Fargo 4Q17 Supplement 17 $14,351 $16,800 $142 $10 $43 $2,068 $101 $85 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 Third Party Services: Higher project spending, and legal expense Infrastructure Typically higher 4Q equipment expense Compensation & Benefits: Higher stock award expense on high

  19. Slide 19: Noninterest expense – year over year

    Wells Fargo 4Q17 Supplement 18 $13,215 $16,800 $475 $64 $46 $3,041 ($8) ($33) $8,000 $9,000 $10,000 $11,000 $12,000 $13,000 $14,000 $15,000 $16,000 $17,000 $18,000 Third Party Services: Higher project spending and contract services Infrastructure: Lower equipment expense “Running the Business” – Dis

  20. Slide 20: Efficiency improvement program highlights in 2017

    Wells Fargo 4Q17 Supplement 19 Efficiency improvement program highlights in 2017 Initiatives 2017 Accomplishments included: Centralization & Optimization  Ongoing centralization and standardization in enterprise functions - Eliminating redundancies and lower value work, leveraging best practices, c

  21. Slide 21: Targeting a total of $4 billion in expense reductions

    Wells Fargo 4Q17 Supplement 20 Targeting a total of $4 billion in expense reductions  We expect efficiency initiatives will reduce expenses by $2 billion annually by year-end 2018 and that those savings support our investment in the business  We expect an additional $2 billion in annual expense re

  22. Slide 22: 2018 Expense expectations

    Wells Fargo 4Q17 Supplement 21 2018 Expense expectations  We currently expect full year 2018 total expenses to be in the range of $53.5 - $54.5 billion - Includes ~$0.6 billion of typical operating losses, and excludes litigation and remediation accruals and penalties  2018 revenue, which will inf

  23. Slide 23: Income statement impact from business divestitures

    Wells Fargo 4Q17 Supplement 22  Divestitures have been focused on businesses that no longer meet our return requirements, and/or future investment spending requirements to maintain market positioning, and product capabilities exceeded our desired investment spend  Revenues generated and direct exp

  24. Slide 24: Community Banking

    Wells Fargo 4Q17 Supplement 23 Community Banking  Net income of $3.7 billion, up 34% YoY and 69% LQ. 4Q17 included the income tax benefit of the Tax Act to the Company, which was partially offset by $3.3 billion of pre-tax litigation accruals Key metrics  See pages 24 and 25 for additional informa

  25. Slide 25: Community Banking metrics

    Wells Fargo 4Q17 Supplement 24 Community Banking metrics (1) A customer communication or transaction qualifies as a customer traffic interaction, which is consistent with the definition used by management for each customer channel presented. Preparation of customer traffic interaction metrics requir

  26. Slide 26: Community Banking metrics (customer experience)

    Wells Fargo 4Q17 Supplement 25 Customer Experience Survey Scores with Branch (period-end) 4Q17 3Q17 2Q17 1Q17 4Q16 vs. 3Q17 vs. 4Q16 Customer Loyalty 58.2% 57.2% 58.8% 57.9% 55.5% 101 bps 277 Overall Satisfaction with Most Recent Visit 78.0% 77.5% 77.8% 77.6% 76.4% 52 161 Community Banking metrics 

  27. Slide 27: Wholesale Banking

    Wells Fargo 4Q17 Supplement 26 Wholesale Banking  Net income of $2.1 billion, down 2% YoY and up 5% LQ  Net interest income down 3% LQ reflecting a $183 million reduction related to leveraged leases as a result of the Tax Act  Noninterest income up 5% LQ reflecting the $848 million gain on the sa

  28. Slide 28: Wealth and Investment Management

    Wells Fargo 4Q17 Supplement 27 Wealth and Investment Management  Net income of $659 million, up 1% YoY and down 7% LQ  Net interest income down 2% LQ, and up 7% YoY on higher interest rates and loan growth  Noninterest income up 3% LQ primarily due to higher asset-based fees and higher retail bro

  29. Slide 29: Credit quality

    Wells Fargo 4Q17 Supplement 28 Credit quality Nonperforming Assets ($ in billions) Provision Expense and Net Charge-offs ($ in millions)  Net charge-offs of $751 million, up $34 million, or 5%, LQ  $100 million reserve release reflected continued strong credit performance  0.31% net charge-off ra

  30. Slide 30: Capital

    Wells Fargo 4Q17 Supplement 29 10.8% 11.2% 11.6% 11.8% 11.9% 4Q16 1Q17 2Q17 3Q17 4Q17 Estimated  Common Equity Tier 1 ratio well above the regulatory minimum and our internal target of 10% - Common Equity Tier 1 ratio (fully phased-in) of 11.9% at 12/31/17 (1)  Period-end common shares outstanding

  31. Slide 31: Summary

    Wells Fargo 4Q17 Supplement 30 Summary (1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable intangible assets (including goodwill and intangible assets associated with certain of

  32. Slide 32: Appendix

    Appendix

  33. Slide 33: Innovating for our customers

    Wells Fargo 4Q17 Supplement 32 Digital Acquisition Payments Personalized Advice Expanded and Integrated Distribution Platform for Innovation 5-min mobile account open for deposits Card-free ATM access (via one- time password) to Wells Fargo’s 13,000 ATMs Personalized insights and advice with predict

  34. Slide 34: Adoption of hedge accounting update ASU 2017-12

    Wells Fargo 4Q17 Supplement 33 Adoption of hedge accounting update ASU 2017-12  Final standard issued in late August with an effective date of 1Q19  Elected to early adopt in 4Q17 retroactive to January 1, 2017, and our financial statements for 2017 include a cumulative effect adjustment to openin

  35. Slide 35: Noninterest expense analysis

    Wells Fargo 4Q17 Supplement 34 Noninterest expense analysis (reference for slides 17-18) For analytical purposes, we have grouped our noninterest expense into six categories: Compensation & Benefits: Salaries, benefits and non-revenue-related incentive compensation Revenue-related: Incentive compens

  36. Slide 36: Real estate 1-4 family mortgage portfolio

    Wells Fargo 4Q17 Supplement 35 Real estate 1-4 family mortgage portfolio (1) Nonconforming mortgages originated post February 2009. (2) The current loan-to-value (LTV) ratio is calculated as the net carrying value divided by the collateral value.  First lien mortgage loans up $3.9 billion LQ as non

  37. Slide 37: Consumer credit card portfolio

    Wells Fargo 4Q17 Supplement 36 Consumer credit card portfolio  Credit card outstandings up 5% LQ from seasonal holiday spending and up 3% YoY reflecting purchase volume growth - General purpose credit card outstandings up 6% LQ and 6% YoY - Credit card household penetration (3) (4) of 45.3%, down 1

  38. Slide 38: Auto portfolios

    Wells Fargo 4Q17 Supplement 37 Auto portfolios Consumer Portfolio  Auto outstandings of $53.4 billion, down 4% LQ and 14% YoY - $1.9 billion of outstandings in Puerto Rico (Reliable Financial) - Customer payment moratorium provided the option to defer payments up to 90 days beginning in September 2

  39. Slide 39: Student lending portfolio

    Wells Fargo 4Q17 Supplement 38 Student lending portfolio  $11.9 billion private loan outstandings down 2% LQ and 4% YoY on higher paydowns/payoffs - Average FICO of 761 and 83% of the total outstandings have been co-signed - Originations down 17% YoY reflecting lower customer sentiment  Net charge

  40. Slide 40: Common Equity Tier 1 (Fully Phased-In)

    Wells Fargo 4Q17 Supplement 39 Common Equity Tier 1 (Fully Phased-In) Wells Fargo & Company and Subsidiaries COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1) Estimated (in billions, except ratio) Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Total equity (2) $ 208.1 206.

  41. Slide 41: Return on average tangible common equity (ROTCE)

    Wells Fargo 4Q17 Supplement 40 Return on average tangible common equity (ROTCE) Wells Fargo & Company and Subsidiaries TANGIBLE COMMON EQUITY (1) Quarter ended Year ended (in millions, except ratios) Dec 31, 2017 Dec 31, 2017 Return on average tangible common equity (1): Net income applicable to com

  42. Slide 42: Forward-looking statements and additional information

    Wells Fargo 4Q17 Supplement 41 Forward-looking statements and additional information Forward-looking statements: This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we may make forward-looking statements in our

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