Wells Fargo & Company · NYSE:WFC

Wells Fargo & — Q3 2017 Earnings Presentation

35 slides from Wells Fargo &'s earnings presentation, Oct 13, 2017

  1. Slide 1: 3Q17 Quarterly Supplement

    3Q17 Quarterly Supplement October 13, 2017 © 2017 Wells Fargo & Company. All rights reserved. Exhibit 99.2

  2. Slide 2: Table of contents

    Wells Fargo 3Q17 Supplement 1 Appendix Noninterest expense analysis (reference for slides 14-16) 27 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 comm

  3. Slide 3: 3Q17 Highlights

    Wells Fargo 3Q17 Supplement 2 5,644 5,274 5,457 5,810 4,596 3Q16 4Q16 1Q17 2Q17 3Q17 3Q17 Highlights  Earnings of $4.6 billion included: - Higher operating losses linked quarter (LQ) including a $1 billion discrete litigation accrual in the quarter (not tax deductible) for previously disclosed, pre

  4. Slide 4: Year-over-year results

    Wells Fargo 3Q17 Supplement 3 5,023.9 4,927.9 3Q16 3Q17 1,261.5 1,306.4 3Q16 3Q17 12.0 12.5 3Q16 3Q17 5.6 4.6 3Q16 3Q17 957.5 952.3 3Q16 3Q17 22.3 21.9 3Q16 3Q17 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 3Q17 Supplement 4 Balance Sheet and credit overview (linked quarter) Loans  Down $5.5 billion driven by lower commercial loans - Commercial loans down $5.7 billion on lower commercial real estate and commercial & industrial loans - Consumer loans up $201 million as growth in real estate

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

    Wells Fargo 3Q17 Supplement 5 Income Statement overview (linked quarter) Total revenue  Revenue of $21.9 billion, down $243 million Net interest income  NII down $7 million as the impacts of lower investment portfolio yields driven by accelerated prepayments and lower average loan balances were la

  7. Slide 7: Loans

    Wells Fargo 3Q17 Supplement 6 957.5 964.1 963.6 956.9 952.3 3Q16 4Q16 1Q17 2Q17 3Q17 961.3 967.6 958.4 957.4 951.9 3Q16 4Q16 1Q17 2Q17 3Q17 Loans  Total average loans of $952.3 billion down $5.2 billion, or 1%, YoY and down $4.6 billion LQ - Commercial loans down $4.1 billion LQ on lower commercial

  8. Slide 8: Commercial loan trends

    Wells Fargo 3Q17 Supplement 7 On declines in…  $1.6 billion in Asset Backed Finance consumer and mortgage finance businesses reflecting securitization activity and paydowns  $561 million in Government & Institutional Banking reflecting paydowns in government banking and healthcare financial servic

  9. Slide 9: Consumer loan trends

    Wells Fargo 3Q17 Supplement 8 Consumer loan trends ($ in billions, Period-end balances) Consumer loans down $13.1 billion YoY and up $201 million LQ  First mortgage loans up $3.6 billion LQ: - Nonconforming loan growth of $7.5 billion - Growth partially offset by continued run-off of higher-yieldin

  10. Slide 10: Deposits

    Wells Fargo 3Q17 Supplement 9 898.4 934.9 942.1 363.1 366.3 364.3 1,261.5 1,301.2 1,306.4 3Q16 2Q17 3Q17 Noninterest-bearing deposits Interest-bearing deposits 1,275.9 1,305.8 1,306.7 3Q16 2Q17 3Q17 Deposits  Average deposits up $44.9 billion, or 4%, YoY and up $5.2 billion LQ - Noninterest-bearing

  11. Slide 11: Net interest income

    Wells Fargo 3Q17 Supplement 10 11,952 12,402 12,300 12,483 12,476 3Q16 4Q16 1Q17 2Q17 3Q17  Net interest income increased $524 million, or 4%, YoY primarily driven by growth in earning assets and higher interest rates  Net interest income decreased $7 million LQ as the impacts of lower investment

  12. Slide 12: Noninterest income

    Wells Fargo 3Q17 Supplement 11 Noninterest income  Deposit service charges flat LQ as higher consumer and business checking transaction activity was offset by the higher earnings credit rate applied to commercial accounts on higher interest rates  Trust and investment fees down $20 million on lowe

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

    Wells Fargo 3Q17 Supplement 12 Trading-related net interest income and noninterest income ($ in millions) 3Q17 2Q17 3Q16 Trading-related revenue Net interest income $ 646 602 505 $ 44 7 % $ 141 28 % Net gains/(losses) on trading activities 245 237 415 8 3 (170) (41) Trading-related revenue $ 891 839

  14. Slide 14: Noninterest expense and efficiency ratio

    Wells Fargo 3Q17 Supplement 13 13,268 13,215 13,792 13,541 14,351 3Q16 4Q16 1Q17 2Q17 3Q17 59.4% 61.2% 62.7% 61.1% 65.5% Noninterest expense and efficiency ratio (1)  Noninterest expense up $810 million LQ - Personnel expense up $38 million • Salaries up $13 million as higher average salaries offse

  15. Slide 15: Noninterest expense – linked quarter

    Wells Fargo 3Q17 Supplement 14 $13,541 $14,351 ($24) $77 ($82) $871 ($34) $2 $8,000 $9,000 $10,000 $11,000 $12,000 $13,000 $14,000 $15,000 Third Party Services: Lower project spending, legal expense and outside data processing expense Infrastructure Compensation & Benefits: Lower payroll tax expense

  16. Slide 16: Noninterest expense – year over year

    Wells Fargo 3Q17 Supplement 15 $13,268 $14,351 $338 ($131) $184 $665 $8 $19 $8,000 $9,000 $10,000 $11,000 $12,000 $13,000 $14,000 $15,000 Third Party Services: Higher project spending, legal expense, and contract services Infrastructure: Higher equipment expense “Running the Business” – Discretionar

  17. Slide 17: Drivers of targeted efficiency improvements

    Wells Fargo 3Q17 Supplement 16 Drivers of targeted efficiency improvements Initiatives Noninterest Expense Categories 2017 2018 2019 Centralization & Optimization – functional areas  Compensation & Benefits  “Running the Business” – Discretionary  Infrastructure X X X Professional Services & Thir

  18. Slide 18: Targeting a total of $4 billion in expense reductions

    Wells Fargo 3Q17 Supplement 17 Targeting a total of $4 billion in expense reductions (1) Includes actions taken through 2016 and 2017. Cumulative Percent of Expected $4 Billion Expense Savings by Year End  We expect efficiency initiatives will reduce expenses by $2 billion annually by year- end 201

  19. Slide 19: Community Banking

    Wells Fargo 3Q17 Supplement 18 Community Banking  Net income of $2.2 billion, down 31% YoY and down 26% LQ and included the $1 billion discrete litigation accrual for previously disclosed, pre-crisis mortgage-related regulatory investigations and the related non-tax deductibility Key metrics  See

  20. Slide 20: Community Banking metrics

    Wells Fargo 3Q17 Supplement 19 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

  21. Slide 21: Community Banking metrics

    Wells Fargo 3Q17 Supplement 20 Community Banking metrics  Average consumer and small business banking deposit balances (1) down 1% LQ and up 2% YoY  Debit cards (2) and consumer general purpose credit cards (3): - Point-of-sale (POS) debit card transactions down modestly LQ and up 3% YoY on strong

  22. Slide 22: Wholesale Banking

    Wells Fargo 3Q17 Supplement 21 Wholesale Banking  Net income of $2.0 billion, stable YoY and down 14% LQ from 2Q17 which included an income tax benefit  Net interest income up 2% LQ reflecting higher trading related income and one additional day in the quarter  Noninterest income up 2% LQ on high

  23. Slide 23: Wealth and Investment Management

    Wells Fargo 3Q17 Supplement 22 Wealth and Investment Management  Net income of $710 million, up 5% YoY and up 4% LQ  Net interest income up 3% LQ, and up 19% YoY on higher interest rates and loan growth  Noninterest income up 1% LQ primarily due to higher asset-based fees and higher gains on defe

  24. Slide 24: Credit quality

    Wells Fargo 3Q17 Supplement 23 Credit quality Nonperforming Assets ($ in billions) Provision Expense and Net Charge-offs ($ in millions)  Net charge-offs of $717 million, up $62 million, or 9%, LQ  No reserve build or release - Allowance for credit losses reflected strong credit quality in both th

  25. Slide 25: Capital

    Wells Fargo 3Q17 Supplement 24 10.7% 10.8% 11.2% 11.6% 11.8% 3Q16 4Q16 1Q17 2Q17 3Q17 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 11.8% at 9/30/17 (1) increased LQ primarily due to lower ris

  26. Slide 26: 3Q17 Summary

    Wells Fargo 3Q17 Supplement 25 3Q17 Summary Financial results impacted by the discrete litigation accrual of $1 billion, or ($0.20) per share  Earnings of $4.6 billion  Diluted EPS of $0.84  ROA = 0.94%  ROE = 9.06% - ROTCE (1) = 10.79%  Strong balance sheet with high levels of capital and liqu

  27. Slide 27: Appendix

    Appendix

  28. Slide 28: Noninterest expense analysis

    Wells Fargo 3Q17 Supplement 27 Noninterest expense analysis (reference for slides 14-16) 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 compens

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

    Wells Fargo 3Q17 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 $3.6 billion LQ as non

  30. Slide 30: Consumer credit card portfolio

    Wells Fargo 3Q17 Supplement 29 Consumer credit card portfolio  Credit card outstandings up 3% LQ and up 4% YoY reflecting active account growth - General purpose credit card outstandings up 3% LQ and 6% YoY - Credit card household penetration (3) (4) of 45.4%, down 9 bps LQ and up 2 bps YoY - Purch

  31. Slide 31: Auto portfolios

    Wells Fargo 3Q17 Supplement 30 Auto portfolios Consumer Portfolio  Auto outstandings of $55.5 billion down 4% LQ and 12% YoY - 3Q17 originations of $4.3 billion down 6% LQ and 47% YoY reflecting our tighter underwriting standards  Nonaccrual loans increased $33 million LQ and $29 million YoY large

  32. Slide 32: Student lending portfolio

    Wells Fargo 3Q17 Supplement 31 Student lending portfolio  $12.2 billion private loan outstandings stable LQ and down 3% YoY on higher paydowns/payoffs - Average FICO of 761 and 82% of the total outstandings have been co-signed - Originations down 26% YoY reflecting lower customer sentiment  Net ch

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

    Wells Fargo 3Q17 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) Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Total equity $ 206.8 206.1 20

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

    Wells Fargo 3Q17 Supplement 33 Return on average tangible common equity (ROTCE) Wells Fargo & Company and Subsidiaries TANGIBLE COMMON EQUITY (1) Quarter ended (in millions, except ratios) Sep 30, 2017 Return on average tangible common equity (1): Net income applicable to common stock (A) $ 4,185 Av

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

    Wells Fargo 3Q17 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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