Wells Fargo & Company · NYSE:WFC
Wells Fargo & — Q4 2018 Earnings Presentation
37 slides from Wells Fargo &'s earnings presentation, Jan 15, 2019
Slide 1: 4Q18 Quarterly Supplement
Exhibit 99.2 4Q18 Quarterly Supplement January 15, 2019 © 2019 Wells Fargo & Company. All rights reserved.
Slide 2: Table of contents
Table of contents 4Q18 Results Appendix 4Q18 Highlights Pages 2 Real estate 1-4 family mortgage portfolio 28 4Q18 Earnings 3 Consumer credit card portfolio 29 2018 year-over-year results 4 Auto portfolios 30 Balance Sheet and credit overview (linked quarter) 5 Student lending portfolio 31 Income Sta
Slide 3: 4Q18 Highlights
4Q18 Highlights Earnings . Net income of $6.1 billion and diluted EPS of $1.21 . Return on assets (ROA) = 1.28% Returns . Return on equity (ROE) = 12.89% . Return on average tangible common equity (ROTCE) (1) = 15.39% . Positive business momentum with strong customer activity - Linked quarter (LQ) g
Slide 4: 4Q18 Earnings
4Q18 Earnings . Earnings of $6.1 billion and diluted Wells Fargo Net Income ($ in millions, except EPS) earnings per common share (EPS) of $1.21 included: 6,151 6,007 6,064 - $614 million gain on the sale of $1.6 billion of Pick-a-Pay PCI mortgage loans (recognized in 5,136 5,186 all other nonintere
Slide 5: 2018 year-over-year results
2018 year-over-year results Revenue Noninterest Expense Common Equity Tier 1 Ratio ($ in billions) ($ in billions) (CET1) (fully phased-in) (1) 88.4 12.0% 86.4 11.7% 58.5 56.1 2017 2018 2017 2018 4Q17 4Q18 Net Interest Income ($ in billions) Provision Expense ($ in millions) Period-end Common Shares
Slide 6: Balance Sheet and credit overview (linked quarter)
Balance Sheet and credit overview (linked quarter) Loans . Up $10.8 billion on higher commercial & industrial loans, credit card loans, and consumer real estate first mortgage loans - Commercial loans up $11.5 billion as growth in commercial & industrial loans was partially offset by a decline in co
Slide 7: Income Statement overview (linked quarter)
Income Statement overview (linked quarter) Total revenue . Revenue of $21.0 billion, down $961 million, or 4% Net interest income . NII up $72 million; NIM stable at 2.94% Noninterest income . Noninterest income down $1.0 billion - Mortgage banking down $379 million driven by lower net mortgage serv
Slide 8: Loans
Loans Average Loans Outstanding Average ($ in billions) . Total average loans of $946.3 billion, down $5.5 billion, or 1%, YoY and up $6.8 billion, or 1%, LQ 951.8 951.0 944.1 939.5 946.3 - Commercial loans up $7.7 billion LQ on higher commercial & industrial loans - Consumer loans down $835 million
Slide 9: Commercial loan trends
Commercial loan trends Commercial loans up $10.0 billion YoY and up $11.5 billion LQ: ($ in billions, Period-end balances) B= billion, MM = million Commercial and industrial (C&I) loans up $12.2 billion LQ on broad-based, diversified growth Commercial and Industrial 370 Including… …partially offset
Slide 10: Consumer loan trends
Consumer loan trends Consumer loans down $13.7 billion YoY and included $8.1 billion of strategic sales and transfers to held-for-sale of Pick-a-Pay loans and Reliable consumer auto loans; down $709 million LQ and included $1.6 billion of Pick-a-Pay PCI loan sales ($ in billions, Period-end balances
Slide 11: Average deposit trends and costs
Average deposit trends and costs Average Deposits and Rates Average ($ in billions) . Average deposits of $1.3 trillion, down $42.7 billion, or 3%, YoY reflecting lower Wholesale 1,311.6 1,266.4 1,268.9 Banking deposits including actions taken in first half of 2018 to manage to the asset cap, as wel
Slide 12: Deposit beta experience
Deposit beta experience . Deposit costs have trended higher with the increase in the Fed Funds rate and the delayed repricing from the prior rate moves. The cumulative beta over the last year was above the experience for the first 100 bps move 2.50 100% 90% and Fed 2.00 80% bearing Deposit - 2.29 70
Slide 13: Period-end deposit trends
Period-end deposit trends Period-end Deposits Period-end ($ in billions) . Period-end deposits of $1.3 trillion, down $49.8 1,336.0 1,266.6 1,286.2 billion, or 4%, YoY . Period-end deposits up $19.6 billion LQ - Wholesale Banking deposits up $10.6 billion, 482.2 429.7 419.1 or 3% - Corporate Treasur
Slide 14: Net interest income
Net interest income . Net Interest Income Net interest income increased $331 million, or 3%, ($ in millions) YoY, and $72 million, or 1%, LQ; linked quarter increase reflected: 12,541 12,572 12,644 12,313 12,238 - Benefits of higher interest rates and favorable hedge ineffectiveness accounting resul
Slide 15: Noninterest income
Noninterest income . Deposit service charges down $28 million LQ reflecting vs vs ($ in millions) 4Q18 3Q18 4Q17 fee waivers for customers affected by natural disasters Noninterest income including the California wildfires and hurricanes on the Service charges on deposit accounts $ 1,176 (2) % (6) E
Slide 16: Noninterest expense and efficiency ratio
Noninterest expense and efficiency ratio (1) vs vs . Noninterest expense down $424 million LQ ($ in millions) 4Q18 3Q18 4Q17 - Personnel expense down $587 million Noninterest expense • Salaries up $84 million on one additional Salaries $ 4,545 2 % 3 payroll day in the quarter Commission and incentiv
Slide 17: Noninterest expense – linked quarter
Noninterest expense – linked quarter ($ in millions) $15,000 $14,000 $13,763 $107 $94 $70 $27 $13,339 Infrastructure: Third Party “Running the $13,000 ($601) Revenue- ($121) Higher Services: Business” – Compensation related: “Running the occupancy and Typically Discretionary: & Benefits: Higher Busi
Slide 18: Noninterest expense – year over year
Noninterest expense – year over year ($ in millions) $18,000 $17,000 $16,800 $16,000 ($493) ($126) ($16) Compensation & Benefits: Revenue- Third Party related: Services: $15,000 Lower deferred compensation Lower Lower expense, commission professional partially offset and incentive services $14,000 b
Slide 19: Delivered on 2018 expense target and on track for 2019 and 2020
Delivered on 2018 expense target and on track for 2019 and 2020 . Total noninterest expense in 2018 of $56.1 billion included $3.1 billion of operating losses . 2018 noninterest expense excluding $2.5 billion of operating losses in excess of $600 million = $53.6 billion, in line with the 2018 expens
Slide 20: Efficiency actions included in the 2018 results
Efficiency actions included in the 2018 results There are significant ongoing efforts being implemented across the company reflecting changing customer preferences and our focus on efficiency. Our goal is to realize sustainable cost reductions through operational excellence which is expected to redu
Slide 21: Community Banking
Community Banking . Net income of $3.2 billion, down 9% YoY vs vs ($ in millions) 4Q18 3Q18 4Q17 primarily due to higher income tax expense, as Net interest income $ 7,340 - % 1 4Q17 included an income tax benefit from the 2017 Tax Cuts & Jobs Act, and up 13% LQ on Noninterest income 4,121 (8) (8) l
Slide 22: Community Banking metrics
Community Banking metrics Branch and Digital Activity vs. vs. (in millions, unless otherwise noted) 4Q18 3Q18 2Q18 1Q18 4Q17 3Q18 4Q17 Teller and ATM Transactions (1) 336.8 343.6 351.4 343.3 356.4 -2% -5% Digital (Online and Mobile) Secure Sessions (2) 1,851.1 1,824.2 1,675.0 1,576.5 1,547.3 1% 20%
Slide 23: Community Banking metrics
Community Banking metrics Balances and Activity vs. vs. (in millions, unless otherwise noted) 4Q18 3Q18 2Q18 1Q18 4Q17 3Q18 4Q17 Deposits ($ in billions) Consumer and Small Business Banking Deposits (Average) $ 736.3 743.5 754.0 755.5 757.5 -1% -3% Debit Cards (1) POS Transactions 2,249 2,235 2,222
Slide 24: Wholesale Banking
Wholesale Banking . Net income of $2.7 billion, up 13% YoY on lower vs vs ($ in millions) 4Q18 3Q18 4Q17 income tax expense and down 6% LQ reflecting lower noninterest income and higher expense Net interest income $ 4,739 - % 4 . Net interest income flat LQ as the benefit of Noninterest income 2,187
Slide 25: Wealth and Investment Management
Wealth and Investment Management . Net income of $689 million, up 2% YoY and down 6% LQ vs vs driven by lower noninterest income ($ in millions) 4Q18 3Q18 4Q17 . Net interest income up 1% LQ Net interest income $ 1,116 1 % (3) . Noninterest income down 9% LQ largely driven by net Noninterest income
Slide 26: Credit quality
Credit quality Provision Expense and Net Charge-offs . Net charge-offs of $721 million, up $41 million ($ in millions) LQ on higher consumer losses . 0.30% net charge-off rate, up 1 bp LQ 751 741 721 - Commercial losses of 10 bps, down 2 bps LQ 651 680 on lower C&I net charge-offs and higher CRE 602
Slide 27: Capital
Capital Common Equity Tier 1 Ratio Capital Position (Fully Phased-In) (1) . Common Equity Tier 1 ratio (fully phased-in) of 11.7% at 12/31/18 (1) was well above the regulatory minimum and our internal target 12.0% 11.9% 12.0% 11.9% 11.7% of 10% Capital Return . Period-end common shares outstanding d
Slide 28: Appendix
Appendix
Slide 29: Real estate 1-4 family mortgage portfolio
Real estate 1-4 family mortgage portfolio . First lien mortgage loans up $792 million LQ ($ in millions) 4Q18 3Q18 as growth in nonconforming mortgage loans Real estate 1-4 family first was partially offset by paydowns and $1.6 mortgage loans: $ 285,065 284,273 billion of Pick-a-Pay PCI loan sales (
Slide 30: Consumer credit card portfolio
Consumer credit card portfolio . Credit card outstandings up 3% LQ from ($ in millions) 4Q18 3Q18 seasonal holiday spend and up 3% YoY Credit card outstandings $ 39,025 37,812 reflecting purchase volume growth as well as Net charge-offs 338 299 continued growth in the business as % of avg loans 3.54
Slide 31: Auto portfolios
Auto portfolios Consumer Portfolio ($ in millions) 4Q18 3Q18 . Auto outstandings of $45.1 billion, down 2% LQ Indirect Consumer: and 16% YoY Auto outstandings $ 44,008 44,952 - 4Q18 originations of $4.7 billion, down 1% LQ Nonaccrual loans 128 116 due to the sale of Reliable, and up 9% YoY. as % of
Slide 32: Student lending portfolio
Student lending portfolio . $11.2 billion private loan outstandings, down 2% LQ and 6% YoY on higher paydowns/payoffs ($ in millions) 4Q18 3Q18 Private outstandings $ 11,220 11,463 - Average FICO of 764 and 81% of the total Net charge-offs 36 27 outstandings have been co-signed as % of avg loans 1.2
Slide 33: Trading-related revenue
Trading-related revenue ($ in millions) 4Q18 3Q18 4Q17 Linked Quarter Change Year-over-Year Change Trading-related revenue Net interest income $ 789 764 678 $ 25 3 % $ 111 16 % Net gains/(losses) on trading activities 10 158 (1) (148) (94) 11 n.m. Trading-related revenue $ 799 922 677 $ (123) (13) %
Slide 34: Noninterest expense analysis (reference for slides 16-17)
Noninterest expense analysis (reference for slides 16-17) 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 compensation directly tied to generati
Slide 35: Common Equity Tier 1 (Fully Phased-In)
Common Equity Tier 1 (Fully Phased -In) Wells Fargo & Company and Subsidiaries COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1) Estimated Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, (in billions, except ratio) 2018 2018 2018 2018 2017 Total equity $ 197.1 199.7 206.1 205.9 208.1 Adjustments: P
Slide 36: Return on average tangible common equity (ROTCE)
Return on average tangible common equity (ROTCE) Wells Fargo & Company and Subsidiaries TANGIBLE COMMON EQUITY (1) Quarter ended (in millions, except ratios) Dec 31, 2018 Return on average tangible common equity (1): Net income applicable to common stock (A) $ 5,711 Average total equity 198,442 Adju
Slide 37: Forward-looking statements and additional information
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 other documents filed or furnis
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