Wells Fargo & Company · NYSE:WFC
Wells Fargo & — Q3 2018 Earnings Presentation
34 slides from Wells Fargo &'s earnings presentation, Oct 12, 2018
Slide 1: 3Q18 Quarterly Supplement
Exhibit 99.2 3Q18 Quarterly Supplement October 12, 2018 © 2018 Wells Fargo & Company. All rights reserved.
Slide 2: Table of contents
Table of contents 3Q18 Results Appendix 3Q18 Highlights Pages 2 Real estate 1-4 family mortgage portfolio 25 3Q18 Earnings 3 Consumer credit card portfolio 26 Year-over-year results 4 Auto portfolios 27 Balance Sheet and credit overview (linked quarter) 5 Student lending portfolio 28 Income Statemen
Slide 3: 3Q18 Highlights
3Q18 Highlights Earnings . Net income of $6.0 billion and diluted EPS of $1.13 . Return on assets (ROA) = 1.27% Returns . Return on equity (ROE) = 12.04% . Return on average tangible common equity (ROTCE) (1) = 14.33% . Positive operating leverage both linked quarter (LQ) and year-over-year (YoY) .
Slide 4: 3Q18 Earnings
3Q18 Earnings . Wells Fargo Net Income Earnings of $6.0 billion included: ($ in millions, except EPS) - $638 million gain on the sales of $1.7 billion 6,151 6,007 of Pick-a-Pay PCI mortgage loans (recognized in all other noninterest income) 5,136 5,186 - $605 million of operating losses primarily re
Slide 5: Year-over-year results
Year-over-year results Revenue Noninterest Expense Common Equity Tier 1 Ratio ($ in billions) ($ in billions) (CET1) (fully phased-in) (1) 11.9% 21.8 21.9 14.4 11.8% 13.8 3Q17 3Q18 3Q17 3Q18 3Q17 3Q18 Net Interest Income ($ in billions) Provision Expense ($ in millions) Period-end Common Shares and
Slide 6: Balance Sheet and credit overview (linked quarter)
Balance Sheet and credit overview (linked quarter) Loans . Down $2.0 billion on lower commercial real estate loans, legacy consumer real estate loans and auto loans - Commercial loans down $1.2 billion as growth in commercial & industrial loans was more than offset by declines in commercial real est
Slide 7: Income Statement overview (linked quarter)
Income Statement overview (linked quarter) Total revenue . Revenue of $21.9 billion, up $388 million, or 2% Net interest income . NII up $31 million; NIM increased 1 bp to 2.94% Noninterest income . Noninterest income up $357 million - Mortgage banking up $76 million on $92 million higher gains on m
Slide 8: Loans
Loans Average Loans Outstanding Average ($ in billions) . Total average loans of $939.5 billion, down $12.8 billion, or 1%, YoY and down $4.6 billion LQ 952.3 951.8 951.0 944.1 939.5 - Commercial loans down $3.1 billion LQ predominantly driven by lower commercial real estate loans reflecting continu
Slide 9: Commercial loan trends
Commercial loan trends Commercial loans up $1.7 billion YoY and down $1.2 billion LQ: ($ in billions, Period-end balances) B= billion, MM = million Commercial and industrial (C&I) loans up $1.5 billion LQ On growth of… …partially offset by declines of: Commercial and Industrial 350 . $2.6B in Corpor
Slide 10: Consumer loan trends
Consumer loan trends Consumer loans down $11.3 billion YoY and included $6.5 billion of strategic sales and transfers to held-for-sale of Pick-a-Pay loans and Reliable consumer auto loans, and down $746 million LQ and included $1.7 billion of Pick-a-Pay PCI loan sales and $374 million of Reliable au
Slide 11: Average deposit trends and costs
Average deposit trends and costs Average Deposits and Rates Average ($ in billions) . Average deposits of $1.3 trillion, down $40.0 billion, or 3%, YoY reflecting lower Wholesale 1,306.4 1,271.3 1,266.4 Banking deposits including actions taken in first half of 2018 to manage to the asset cap, as wel
Slide 12: Period-end deposit trends
Period-end deposit trends Period-end Deposits Period-end ($ in billions) . Period-end deposits of $1.3 trillion, down $40.1 1,306.7 1,268.9 1,266.6 billion, or 3%, YoY . Period-end deposits down $2.3 billion LQ - Wholesale Banking deposits up $9.1 billion, or 2% 461.0 410.0 419.1 - Corporate Treasur
Slide 13: Net interest income
Net interest income . Net Interest Income Net interest income increased $123 million, or 1%, ($ in millions) YoY, and $31 million LQ; linked quarter increase included: 12,541 12,572 12,449 12,313 12,238 - ~$80 million from one additional day in the quarter - $54 million from hedge ineffectiveness ac
Slide 14: Noninterest income
Noninterest income . Deposit service charges up $41 million LQ as higher vs vs ($ in millions) 3Q18 2Q18 3Q17 consumer primarily driven by seasonality was Noninterest income partially offset by lower commercial on a higher Service charges on deposit accounts $ 1,204 4 % (6) earnings credit rate (ECR
Slide 15: Noninterest expense and efficiency ratio
Noninterest expense and efficiency ratio (1) . vs vs Noninterest expense down $219 million LQ ($ in millions) 3Q18 2Q18 3Q17 - Personnel expense down $87 million Noninterest expense • Salaries down $4 million Salaries $ 4,461 - % 2 • Commission and incentive compensation down Commission and incentiv
Slide 16: Noninterest expense – linked quarter
Noninterest expense – linked quarter ($ in millions) $15,000 $13,982 $14,000 $82 $13,763 ($38) ($47) ($61) Compensation Revenue- ($134) ($21) Infrastructure: & Benefits: Higher related: Third Party “Running the “Running the Lower incentive equipment $13,000 Lower Services: Business” – Business” – co
Slide 17: Noninterest expense – year over year
Noninterest expense – year over year ($ in millions) $15,000 $254 $14,351 Compensation $14,000 ($211) $113 & Benefits: ($77) $13,763 Higher salaries $65 Revenue- expense related: Third Party including higher Infrastructure: Lower Services: “Running the severance, as ($732) Higher $13,000 commission
Slide 18: Community Banking
Community Banking . Net income of $2.8 billion, up 50% YoY on lower vs vs ($ in millions) 3Q18 2Q18 3Q17 operating losses and higher revenue, and up Net interest income $ 7,338 - % 3 13% LQ on lower net discrete income tax Noninterest income 4,478 - 3 expense Provision for credit losses 547 13 (16)
Slide 19: Community Banking metrics
Community Banking metrics Branch and Digital Activity vs. vs. (in millions, unless otherwise noted) 3Q18 2Q18 1Q18 4Q17 3Q17 2Q18 3Q17 Teller and ATM Transactions (1) 343.6 351.4 343.3 356.4 365.9 -2% -6% Digital (Online and Mobile) Secure Sessions (2) 1,824.2 1,675.0 1,576.5 1,547.3 1,514.5 9% 20%
Slide 20: Community Banking metrics
Community Banking metrics Balances and Activity vs. vs. (in millions, unless otherwise noted) 3Q18 2Q18 1Q18 4Q17 3Q17 2Q18 3Q17 Deposits ($ in billions) Consumer and Small Business Banking Deposits (Average) $ 743.5 754.0 755.5 757.5 755.1 -1% -2% Debit Cards (1) POS Transactions 2,235 2,222 2,071
Slide 21: Wholesale Banking
Wholesale Banking . Net income of $2.9 billion, up 23% YoY on lower vs vs income taxes and up 8% LQ reflecting lower ($ in millions) 3Q18 2Q18 3Q17 operating losses and higher revenue Net interest income $ 4,726 1 % (1) . Net interest income up 1% LQ reflecting the benefit of higher interest rates N
Slide 22: Wealth and Investment Management
Wealth and Investment Management . Net income of $732 million, up 2% YoY and up 64% LQ vs vs reflecting lower OTTI and operating losses ($ in millions) 3Q18 2Q18 3Q17 . Net interest income down 1% LQ driven by lower Net interest income $ 1,102 (1) % (6) average deposit balances primarily due to clie
Slide 23: Credit quality
Credit quality . Provision Expense and Net Charge-offs Net charge-offs of $680 million, up $78 million ($ in millions) LQ driven by higher commercial losses and lower recoveries 751 717 717 741 . 651 680 0.29% net charge-off rate, up 3 bps LQ 602 580 - Commercial losses of 12 bps, up 7 bps LQ on 452
Slide 24: Capital
Capital Common Equity Tier 1 Ratio Capital Position . (Fully Phased-In) (1) Common Equity Tier 1 ratio (fully phased-in) of 11.9% at 9/30/18 (1) was well above the 12.0% 11.9% 12.0% 11.9% regulatory minimum and our internal target 11.8% of 10% Capital Return . Period-end common shares outstanding do
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 $1.3 billion as ($ in millions) 3Q18 2Q18 growth in nonconforming mortgage loans Real estate 1-4 family first was partially offset by paydowns and $1.7 mortgage loans: $ 284,273 283,001 billion of Pick-a-Pay PCI loan sales ($63
Slide 27: Consumer credit card portfolio
Consumer credit card portfolio . Credit card outstandings up 3% LQ due to ($ in millions) 3Q18 2Q18 seasonality and continued growth in the Credit card outstandings $ 37,812 36,684 business, and up 4% YoY reflecting purchase Net charge-offs 299 323 volume growth as % of avg loans 3.22 % 3.61 - Gener
Slide 28: Auto portfolios
Auto portfolios Consumer Portfolio . ($ in millions) 3Q18 2Q18 Auto outstandings of $46.1 billion, down 3% LQ Indirect Consumer: and 17% YoY Auto outstandings $ 44,952 46,418 - 3Q18 originations of $4.8 billion, up 8% LQ and Nonaccrual loans 116 117 10% YoY reflecting our focus on growing high quali
Slide 29: Student lending portfolio
Student lending portfolio . $11.5 billion private loan outstandings down ($ in millions) 3Q18 2Q18 1% LQ and 6% YoY on higher paydowns/payoffs Private outstandings $ 11,463 11,534 - Average FICO of 764 and 82% of the total Net charge-offs 27 34 outstandings have been co-signed as % of avg loans 0.92
Slide 30: Trading-related revenue
Trading-related revenue ($ in millions) 3Q18 2Q18 3Q17 Linked Quarter Change Year-over-Year Change Trading-related revenue Net interest income $ 764 688 636 $ 76 11 % $ 128 20 % Net gains/(losses) on trading activities 158 191 120 (33) (17) 38 32 Trading-related revenue $ 922 879 756 $ 43 5 % $ 166
Slide 31: Noninterest expense analysis
Noninterest expense analysis (reference for slides 15-16) 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 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 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, (in billions, except ratio) 2018 2018 2018 2017 2017 Total equity $ 199.7 206.1 205.9 208.1 206.6 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) Sep 30, 2018 Return on average tangible common equity (1): Net income applicable to common stock (A) $ 5,453 Average total equity 202,826 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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