Wells Fargo & Company · NYSE:WFC

Wells Fargo & — Q2 2017 Earnings Presentation

35 slides from Wells Fargo &'s earnings presentation, Jul 14, 2017

  1. Slide 1: 2Q17 Quarterly Supplement

    2Q17 Quarterly Supplement July 14, 2017 © 2017 Wells Fargo & Company. All rights reserved.

  2. Slide 2: Table of contents

    Wells Fargo 2Q17 Supplement 1 Appendix Real estate 1-4 family mortgage portfolio 28 Consumer credit card portfolio 29 Auto portfolios 30 Student lending portfolio 31 Common Equity Tier 1 (Fully Phased-In) 32 Return on average tangible common equity (ROTCE) 33 Forward-looking statements and additiona

  3. Slide 3: 2Q17 Highlights

    Wells Fargo 2Q17 Supplement 2 5,558 5,644 5,274 5,457 5,810 2Q16 3Q16 4Q16 1Q17 2Q17 2Q17 Highlights  Earnings of $5.8 billion  Diluted earnings per common share of $1.07  Revenue stable year-over-year (YoY) and up 1% linked quarter (LQ) - Net interest income up 6% YoY and 1% LQ - Noninterest inc

  4. Slide 4: Year-over-year results

    Wells Fargo 2Q17 Supplement 3 5,048.5 4,966.8 2Q16 2Q17 1,236.7 1,301.2 2Q16 2Q17 11.7 12.5 2Q16 2Q17 5.6 5.8 2Q16 2Q17 950.8 956.9 2Q16 2Q17 22.2 22.2 2Q16 2Q17 Year-over-year results Diluted earnings per common share Net Income ($ in billions, except EPS) Revenue ($ in billions) Period-end Common

  5. Slide 5: Balance Sheet and credit overview (linked quarter)

    Wells Fargo 2Q17 Supplement 4 Balance Sheet and credit overview (linked quarter) Loans  Down $982 million driven by lower consumer loans - Consumer loan balances reflected the anticipated decline in auto on tighter credit underwriting standards, as well as continued paydowns in junior lien mortgage

  6. Slide 6: Income Statement overview (linked quarter)

    Wells Fargo 2Q17 Supplement 5 Income Statement overview (linked quarter) Total revenue  Revenue of $22.2 billion, up $167 million Net interest income  NII up $183 million as the benefit of repricing of certain earning assets in response to higher short-term rates exceeded the cost of repricing lia

  7. Slide 7: Loans

    Wells Fargo 2Q17 Supplement 6 957.2 961.3 967.6 958.4 957.4 2Q16 3Q16 4Q16 1Q17 2Q17 950.8 957.5 964.1 963.6 956.9 2Q16 3Q16 4Q16 1Q17 2Q17 Loans  Total average loans of $956.9 billion up $6.1 billion, or 1%, YoY and down $6.7 billion, or 1%, LQ – Commercial loans down $1.1 billion LQ on modestly l

  8. Slide 8: Commercial loan trends

    Wells Fargo 2Q17 Supplement 7 Growth in balances…  $1.1 billion in Government & Institutional Banking on new originations late in 2Q  $605 million in Wells Fargo Commercial Capital despite a $1.0 billion decline in Commercial Distribution Finance on seasonality  $469 million in Global Banking on

  9. Slide 9: Consumer loan trends

    Wells Fargo 2Q17 Supplement 8 Consumer loan trends ($ in billions, Period-end balances) Consumer loans down $11.1 billion YoY and $1.9 billion LQ  First mortgage loans up $1.9 billion LQ: - Nonconforming loan growth of $7.3 billion - Growth partially offset by continued run-off of higher-yielding l

  10. Slide 10: Deposits

    Wells Fargo 2Q17 Supplement 9 883.7 935.5 934.9 353.0 363.7 366.3 1,236.7 1,299.2 1,301.2 2Q16 1Q17 2Q17 Interest-bearing deposits Noninterest-bearing deposits 1,245.5 1,325.4 1,305.8 2Q16 1Q17 2Q17 Deposits  Deposits up $64.5 billion, or 5%, YoY and $2.0 billion LQ - Noninterest-bearing deposits u

  11. Slide 11: Net interest income

    Wells Fargo 2Q17 Supplement 10 11,733 11,952 12,402 12,300 12,483 2Q16 3Q16 4Q16 1Q17 2Q17  Net interest income increased $750 million, or 6%, YoY, and increased $183 million, or 1%, LQ as the benefit of repricing earning assets in response to higher short-term interest rates exceeded the cost of r

  12. Slide 12: Noninterest income

    Wells Fargo 2Q17 Supplement 11 Noninterest income  Deposit service charges down $37 million LQ on higher Earnings Credit Rate on higher interest rates, and lower consumer and business checking service charges  Trust and investment fees up $59 million primarily on an 11% increase in investment bank

  13. Slide 13: Trading-related net interest income and noninterest income

    Wells Fargo 2Q17 Supplement 12  Trading-related revenue of $839 million was down $151 million from 1Q17: – Net interest income increased $51 million • $44 million in net interest income associated with the periodic dividends and carry income on positions in our equity and RMBS books, with offsettin

  14. Slide 14: Noninterest expense and efficiency ratio

    Wells Fargo 2Q17 Supplement 13 Noninterest expense and efficiency ratio (1)  Noninterest expense down $251 million LQ - Personnel expense down $522 million • Salaries up $82 million reflecting the impact of annual salary increases • Commission and incentive compensation down $226 million from a sea

  15. Slide 15: Noninterest expense analysis

    Wells Fargo 2Q17 Supplement 14 Noninterest expense analysis (reference for slides 15 and 16) 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 com

  16. Slide 16: Noninterest expense – linked quarter

    Wells Fargo 2Q17 Supplement 15 $13,792 $13,541 ($570) $37 $266 $65 $3 ($52) $6,000 $7,000 $8,000 $9,000 $10,000 $11,000 $12,000 $13,000 $14,000 $15,000 Third Party Services: Higher project spending, consulting, contract services and legal expense included spending for: Infrastructure: Lower equipmen

  17. Slide 17: Noninterest expense – year over year

    Wells Fargo 2Q17 Supplement 16 $12,866 $13,541 $339 ($152) $339 $185 ($60) $24 $8,000 $9,000 $10,000 $11,000 $12,000 $13,000 $14,000 $15,000 Third Party Services: Higher project spending, consulting, contract services and legal expense Infrastructure: Higher equipment expense “Running the Business”

  18. Slide 18: Targeting $2 billion expense reduction by year-end 2018 (1 of 2)

    Wells Fargo 2Q17 Supplement 17 Targeting $2 billion expense reduction by year-end 2018 (Slide 1 of 2) Centralization and Optimization ($1.3 billion) Initiative and Targeted Savings Areas include: Human Resources, Finance, Marketing, Communications, Technology, Operations and Data & Analytics Highlig

  19. Slide 19: Targeting $2 billion expense reduction by year-end 2018 (2 of 2)

    Wells Fargo 2Q17 Supplement 18 Targeting $2 billion expense reduction by year-end 2018 (Slide 2 of 2) Branch Optimization ($170 million) Professional Services and Third Party Expenses ($200 million) Travel ($100 million) Risk ($100 million) Initiative and Targeted Savings Plan to close ~450 branches

  20. Slide 20: Community Banking

    Wells Fargo 2Q17 Supplement 19 Community Banking  Net income of $3.0 billion, down 6% YoY and down 1% LQ Key metrics  See pages 20 and 21 for additional information  5,977 retail bank branches reflect 54 branch consolidations in 2Q17  Credit card penetration (1)(2) of 45.5% stable LQ  Consumer

  21. Slide 21: Community Banking metrics

    Wells Fargo 2Q17 Supplement 20 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

  22. Slide 22: Community Banking metrics

    Wells Fargo 2Q17 Supplement 21 Community Banking metrics  Average consumer and small business banking deposit balances (1) stable LQ and up 5% YoY  Debit cards (2) and consumer general purpose credit cards (3): - Point-of-sale debit card transactions up 7% LQ on seasonality and up 4% YoY on strong

  23. Slide 23: Wholesale Banking

    Wells Fargo 2Q17 Supplement 22 Wholesale Banking  Net income of $2.4 billion, up 15% YoY and up 13% LQ  Net interest income up 3% LQ reflecting higher trading related income, increased loan yields and one additional day in the quarter  Noninterest income down 8% LQ as lower trading and lower prin

  24. Slide 24: Wealth and Investment Management

    Wells Fargo 2Q17 Supplement 23 Wealth and Investment Management  Net income of $682 million, up 17% YoY and up 9% LQ  Net interest income up 5% LQ, and up 21% YoY on loan and deposit growth and higher interest rates  Noninterest income down 2% LQ primarily due to lower gains on deferred compensat

  25. Slide 25: Credit quality

    Wells Fargo 2Q17 Supplement 24 Credit quality Nonperforming Assets ($ in billions) Provision Expense and Net Charge-offs ($ in millions)  Net charge-offs of $655 million, down $150 million, or 19%, LQ  $100 million reserve release reflected credit improvement across auto, residential mortgage and

  26. Slide 26: Capital

    Wells Fargo 2Q17 Supplement 25 10.6% 10.7% 10.8% 11.2% 11.6% 2Q16 3Q16 4Q16 1Q17 2Q17 Estimated  Common Equity Tier 1 ratio well above the regulatory minimum and our internal target - Common Equity Tier 1 ratio (fully phased-in) of 11.6% at 6/30/17 (1) increased LQ primarily due to higher Common Eq

  27. Slide 27: 2Q17 Summary

    Wells Fargo 2Q17 Supplement 26 2Q17 Summary  Strong earnings of $5.8 billion - Diluted EPS of $1.07  Revenue of $22.2 billion on higher net interest income  Solid returns - ROA = 1.21% - ROE = 11.95% • ROTCE (1) = 14.26%  Strong balance sheet with high levels of capital and liquidity, and record

  28. Slide 28: Appendix

    Appendix

  29. Slide 29: Real estate 1-4 family mortgage portfolio

    Wells Fargo 2Q17 Supplement 28 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 $1.9 billion LQ as non

  30. Slide 30: Consumer credit card portfolio

    Wells Fargo 2Q17 Supplement 29 Consumer credit card portfolio  Credit card outstandings up 2% LQ reflecting seasonality, and up 3% YoY; general purpose credit card outstandings up 2% LQ and 6% YoY reflecting active account growth - Credit card household penetration (3) (4) of 45.5%, flat LQ and dow

  31. Slide 31: Auto portfolios

    Wells Fargo 2Q17 Supplement 30 Auto portfolios Consumer Portfolio  Auto outstandings of $58.0 billion down 4% LQ and 6% YoY - 2Q17 originations of $4.5 billion down 17% LQ and 45% YoY reflecting our tighter underwriting standards  Nonaccrual loans increased $3 million LQ and decreased $7 million Y

  32. Slide 32: Student lending portfolio

    Wells Fargo 2Q17 Supplement 31 Student lending portfolio  $12.2 billion private loan outstandings down 3% LQ and 1% YoY - Average FICO of 760 and 82% of the total outstandings have been co-signed - Originations down 26% YoY driven by lower customer sentiment  Net charge-offs increased $5 million L

  33. Slide 33: Common Equity Tier 1 (Fully Phased-In)

    Wells Fargo 2Q17 Supplement 32 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) Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Total equity $ 206.1 202.5 20

  34. Slide 34: Return on average tangible common equity (ROTCE)

    Wells Fargo 2Q17 Supplement 33 Return on average tangible common equity (ROTCE) Wells Fargo & Company and Subsidiaries TANGIBLE COMMON EQUITY (1) Quarter ended (in millions, except ratios) Jun 30, 2017 Return on average tangible common equity (1): Net income applicable to common stock (A) $ 5,404 Av

  35. Slide 35: Forward-looking statements and additional information

    Wells Fargo 2Q17 Supplement 34 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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