Wells Fargo & Company · NYSE:WFC
Wells Fargo & — Q2 2018 Earnings Presentation
34 slides from Wells Fargo &'s earnings presentation, Jul 13, 2018
Slide 1: 2Q18 Quarterly Supplement
Exhibit 99.2 2Q18 Quarterly Supplement July 13, 2018 © 2018 Wells Fargo & Company. All rights reserved.
Slide 2: Table of contents
Table of contents 2Q18 Results Appendix 2Q18 Highlights Page 2 Real estate 1-4 family mortgage portfolio 25 Update on customer remediation for previously Consumer credit card portfolio 26 disclosed matters 3 Auto portfolios 27 Balance Sheet and credit overview (linked quarter) 4 Student lending port
Slide 3: 2Q18 Highlights
2Q18 Highlights . Wells Fargo Net Income Earnings of $5.2 billion included: ($ in millions, except EPS) - $481 million net discrete income tax expense - $619 million of operating losses primarily related 6,151 to non-litigation expense for previously disclosed 5,856 matters - $479 million gain on th
Slide 4: Update on customer remediation for previously disclosed matters
Update on customer remediation for previously disclosed matters Foreign Exchange (FX) Business . The FX business is under new leadership and has substantially completed an assessment, with the assistance of a third party, of its policies, practices and procedures. The business is currently in the pr
Slide 5: Balance Sheet and credit overview (linked quarter)
Balance Sheet and credit overview (linked quarter) Loans . Down $3.0 billion on lower auto, legacy consumer real estate and commercial real estate loans - Commercial loans down $291 million LQ as growth in commercial & industrial loans was more than offset by declines in commercial real estate loans
Slide 6: Income Statement overview (linked quarter)
Income Statement overview (linked quarter) Total revenue . Revenue of $21.6 billion, down $381 million Net interest income . NII up $303 million driven by $120 million less negative impact from hedge ineffectiveness accounting(1), the net benefit of rate and spread movements, and one additional day
Slide 7: Loans
Loans Average Loans Outstanding Average ($ in billions) . Total average loans of $944.1 billion, down $12.8 billion, or 1%, YoY and down $6.9 billion, 956.9 952.3 951.8 951.0 944.1 or 1%, LQ - Commercial loans down $310 million LQ as growth in commercial & industrial loans was more than 4.64% offset
Slide 8: Commercial loan trends
Commercial loan trends Commercial loans down $2.8 billion YoY and $291 million LQ: ($ in billions, Period-end balances) Commercial and industrial (C&I) loans up $1.9 billion LQ 350 Commercial and Industrial 340 On growth of… …partially offset by declines of: . $3.9 billion in Asset Backed Finance .
Slide 9: Consumer loan trends
Consumer loan trends Consumer loans down $10.4 billion YoY and $2.8 billion LQ: ($ in billions, Period-end balances) . . Consumer Real Estate First mortgage loans up $6.4 Credit card up $1.4 billion YoY and $343 million Credit Card billion YoY reflecting 1-4 Family First & 40 LQ: purchase volume Jun
Slide 10: Average deposit trends and costs
Average deposit trends and costs Average Deposits and Rates Average ($ in billions) . Average deposits of $1.3 trillion, down $29.9 billion YoY, or 2%, and down $25.9 billion, or 2%, 1,301.2 1,297.2 1,271.3 LQ largely driven by lower commercial deposits including a $13.5 billion decline from actions
Slide 11: Period-end deposit trends
Period-end deposit trends Period-end Deposits Period-end ($ in billions) . Period-end deposits of $1.3 trillion, down $36.9 1,305.8 1,303.7 1,268.9 billion, or 3%, YoY . Period-end deposits down $34.8 billion, or 3%, LQ - Wholesale Banking deposits down $23.6 billion and 463.9 433.6 410.0 included:
Slide 12: Net interest income
Net interest income . Net Interest Income Net interest income increased $70 million, or 1%, ($ in millions) YoY, and $303 million, or 2%, LQ; linked quarter increase included: 12,471 12,449 12,541 12,313 12,238 - $120 million less negative impact from hedge ineffectiveness accounting (1) - ~$105 mil
Slide 13: Noninterest income
Noninterest income . Deposit service charges down $10 million LQ on lower vs vs ($ in millions) 2Q18 1Q18 2Q17 consumer monthly service fees reflecting continuing Noninterest income efforts to help customers minimize monthly fees and Service charges on deposit accounts $ 1,163 (1) % (9) overdraft fe
Slide 14: Noninterest expense and efficiency ratio
Noninterest expense and efficiency ratio (1) . vs vs Noninterest expense down $1.1 billion LQ on lower ($ in millions) 2Q18 1Q18 2Q17 operating losses, and lower personnel expense from Noninterest expense a seasonally high 1Q Salaries $ 4,465 2 % 3 - Personnel expense down $377 million Commission an
Slide 15: Noninterest expense – linked quarter
Noninterest expense – linked quarter ($ in millions) $16,000 $15,042 $151 $15,000 $59 ($447) Revenue- Third Party related: Services: $58 $13,982 $14,000 Compensation Higher Primarily & Benefits: compensation higher ($819) “Running the ($62) Seasonally in WFS and contract Business” – Infrastructure:
Slide 16: Noninterest expense – year over year
Noninterest expense – year over year ($ in millions) $15,000 $50 $34 $13,982 $14,000 $278 $265 Infrastructure: $13,541 “Running the Higher ($86) “Running the Business” – Compensation ($100) equipment and Revenue- Business” – Discretionary: & Benefits: Third Party occupancy related: Non Higher $13,00
Slide 17: Community Banking
Community Banking . Net income of $2.5 billion, down 10% YoY on vs vs ($ in millions) 2Q18 1Q18 2Q17 lower noninterest income and higher income tax expense; up 30% LQ on lower operating losses Net interest income $ 7,346 2 % 3 Noninterest income 4,460 (4) (8) Key metrics Provision for credit losses
Slide 18: Community Banking metrics
Community Banking metrics Branch and Digital Activity vs. vs. (in millions, unless otherwise noted) 2Q18 1Q18 4Q17 3Q17 2Q17 1Q18 2Q17 Teller and ATM Transactions (1) 351.4 343.3 356.4 365.9 371.2 2% -5% Digital (Online and Mobile) Secure Sessions (2) 1,675.0 1,576.5 1,547.3 1,514.5 1,436.2 6% 17% .
Slide 19: Community Banking metrics
Community Banking metrics Balances and Activity vs. vs. (in millions, unless otherwise noted) 2Q18 1Q18 4Q17 3Q17 2Q17 1Q18 2Q17 Deposits ($ in billions) Consumer and Small Business Banking Deposits (Average) $ 754.0 755.5 757.5 755.1 760.1 0% -1% Debit Cards (1) POS Transactions 2,222 2,071 2,120 2
Slide 20: Wholesale Banking
Wholesale Banking . Net income of $2.6 billion, down 4% YoY and down vs vs ($ in millions) 2Q18 1Q18 2Q17 8% LQ reflecting higher operating losses . Net interest income up 4% LQ related to the Net interest income $ 4,693 4 % (2) impact of higher rates, partially offset by a lower Noninterest income
Slide 21: Wealth and Investment Management
Wealth and Investment Management . Net income of $445 million, down 37% YoY and 38% vs vs LQ reflecting higher impairment and operating ($ in millions) 2Q18 1Q18 2Q17 losses Net interest income $ 1,111 - % (5) . Net interest income flat LQ and down 5% YoY driven Noninterest income 2,840 (9) (7) by l
Slide 22: Credit quality
Credit quality . Provision Expense and Net Charge-offs Net charge-offs of $602 million, down $139 ($ in millions) million LQ . 751 $150 million reserve release reflected strong 717 717 741 655 651 credit portfolio performance, as well as lower 602 555 loan balances 452 . 0.26% net charge-off rate, d
Slide 23: Capital
Capital Common Equity Tier 1 Ratio Capital Position . (Fully Phased-In) (1) Common Equity Tier 1 ratio (fully phased-in) of 12.0% at 6/30/18 (1) was well above the 12.0% 12.0% regulatory minimum and our internal target 11.8% 11.9% 11.6% of 10% Capital Return . Received a non-objection to our 2018 Ca
Slide 24: 2Q18 Summary
2Q18 Summary . Net income of $5.2 billion - Diluted EPS of $0.98 . ROA = 1.10%; ROE = 10.60%; ROTCE (1) = 12.62% . Strong balance sheet with high levels of capital and liquidity - Common Equity Tier 1 ratio (fully phased-in) of 12.0% at 6/30/18 (2) - Liquid assets (3) of $542.2 billion, or 29% of to
Slide 25: Appendix
Appendix
Slide 26: Real estate 1-4 family mortgage portfolio
Real estate 1-4 family mortgage portfolio . First lien mortgage loans up $343 million as ($ in millions) 2Q18 1Q18 growth in nonconforming mortgage loans Real estate 1-4 family first was partially offset by paydowns and Pick-a- mortgage loans: $ 283,001 282,658 Pay PCI loan sales of $1.3 billion ($4
Slide 27: Consumer credit card portfolio
Consumer credit card portfolio . Credit card outstandings up 2% LQ from a ($ in millions) 2Q18 1Q18 seasonally low 1Q, and up 4% YoY reflecting Credit card outstandings $ 36,684 36,103 purchase volume growth Net charge-offs 323 332 - General purpose credit card outstandings as % of avg loans 3.61 %
Slide 28: Auto portfolios
Auto portfolios Consumer Portfolio . ($ in millions) 2Q18 1Q18 Auto outstandings of $47.6 billion, down 4% LQ Indirect Consumer: and 18% YoY Auto outstandings $ 46,418 48,198 - 2Q18 originations of $4.4 billion, flat LQ, and Nonaccrual loans 117 115 down 3% YoY reflecting our tighter underwriting st
Slide 29: Student lending portfolio
Student lending portfolio . $11.5 billion private loan outstandings down 3% LQ and 5% YoY on higher paydowns/payoffs ($ in millions) 2Q18 1Q18 Private outstandings $ 11,534 11,879 - Average FICO of 763 and 83% of the total Net charge-offs 34 27 outstandings have been co-signed as % of avg loans 1.15
Slide 30: Trading-related net interest income and noninterest income
Trading-related net interest income and noninterest income ($ in millions) 2Q18 1Q18 2Q17 Linked Quarter Change Year-over-year Change Trading-related revenue Net interest income $ 688 652 593 $ 36 6 % $ 95 16 % Net gains/(losses) on trading activities 191 243 151 (52) (21) 40 26 Trading-related reve
Slide 31: Noninterest expense analysis (reference for slides 14-15)
Noninterest expense analysis (reference for slides 14-15) 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 32: 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 Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, (in billions, except ratio) 2018 2018 2017 2017 2017 Total equity $ 206.1 205.9 208.1 206.6 205.9 Adjustments: P
Slide 33: 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) Jun 30, 2018 Return on average tangible common equity (1): Net income applicable to common stock (A) $ 4,792 Average total equity 206,067 Adju
Slide 34: 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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