Wells Fargo & Company · NYSE:WFC
Wells Fargo & — Q1 2018 Earnings Presentation
35 slides from Wells Fargo &'s earnings presentation, Apr 13, 2018
Slide 1: 1Q18 Quarterly Supplement
1Q18 Quarterly Supplement April 13, 2018 © 2018 Wells Fargo & Company. All rights reserved. These preliminary results are subject to change due to our ongoing discussions with the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) to resolve matters regar
Slide 2: Table of contents
Wells Fargo 1Q18 Supplement 1 Appendix Real estate 1-4 family mortgage portfolio 26 Consumer credit card portfolio 27 Auto portfolios 28 Student lending portfolio 29 Trading-related net interest income & noninterest income 30 Noninterest expense analysis (reference for slides 13-14) 31 Common Equity
Slide 3: 1Q18 Highlights
Wells Fargo 1Q18 Supplement 2 5,634 5,856 4,542 6,151 5,936 1Q17 2Q17 3Q17 4Q17 1Q18 1Q18 Highlights Preliminary earnings of $5.9 billion included: - $643 million gain on the sales of $1.6 billion of Pick-a-Pay PCI mortgage loans - $250 million in mark-to-market unrealized equity gains under the n
Slide 4: Consent Order update
Wells Fargo 1Q18 Supplement 3 Consent Order (1) update Submitted governance and oversight, and compliance and operational risk management program plans to the Federal Reserve We take the Consent Order seriously and will work to fully satisfy all of the Consent Order’s requirements Achieving co
Slide 5: Balance Sheet and credit overview (linked quarter)
Wells Fargo 1Q18 Supplement 4 Balance Sheet and credit overview (linked quarter) Loans Down $9.5 billion driven by lower consumer loans - Commercial loans stable LQ as growth in commercial & industrial loans was offset by declines in commercial real estate - Consumer loans down $9.5 billion as gro
Slide 6: Income Statement overview (linked quarter)
Wells Fargo 1Q18 Supplement 5 All comparisons are 1Q18 compared with 4Q17. (1) Total hedge ineffectiveness accounting of $(87) million in the quarter included $(148) million in net interest income and $61 million in other income. (2) Consists of net gains from trading activities, debt securities and
Slide 7: Loans
Wells Fargo 1Q18 Supplement 6 958.4 957.4 951.9 956.8 947.3 1Q17 2Q17 3Q17 4Q17 1Q18 963.6 956.9 952.3 951.8 951.0 1Q17 2Q17 3Q17 4Q17 1Q18 Loans Total average loans of $951.0 billion, down $12.6 billion, or 1%, YoY and down $798 million LQ - Commercial loans up $1.8 billion LQ as growth in commer
Slide 8: Commercial loan trends
Wells Fargo 1Q18 Supplement 7 On growth of… $4.7 billion in Commercial Capital on higher Asset Backed Finance reflecting strength in corporate businesses, higher Commercial Distribution Finance on seasonality, and higher Capital Finance on strong factoring volume in March $1.1 billion in Middle
Slide 9: Consumer loan trends
Wells Fargo 1Q18 Supplement 8 Consumer loan trends ($ in billions, Period-end balances) Consumer loans down $9.5 billion YoY and down $9.5 billion LQ First mortgage loans down $1.4 billion LQ and up $8.0 billion YoY: - Nonconforming loan growth of $3.2 billion LQ - Offset by continued run- off of
Slide 10: Deposits
Wells Fargo 1Q18 Supplement 9 935.5 944.1 938.3 363.7 367.5 358.9 1,299.2 1,311.6 1,297.2 1Q17 4Q17 1Q18 Noninterest-bearing deposits Interest-bearing deposits 1,325.4 1,336.0 1,303.7 1Q17 4Q17 1Q18 Deposits Average deposits down $2.0 billion YoY, and down $14.4 billion, or 1%, LQ - Noninterest-be
Slide 11: Net interest income
Wells Fargo 1Q18 Supplement 10 12,324 12,471 12,449 12,313 12,238 1Q17 2Q17 3Q17 4Q17 1Q18 Net interest income decreased $86 million, or 1%, YoY and $75 million, or 1%, LQ; Linked quarter decline included: - ~$160 million lower NII from 2 fewer days in the quarter, $(148) million from hedge ineffe
Slide 12: Noninterest income
Wells Fargo 1Q18 Supplement 11 9,931 9,764 9,400 9,737 9,696 1Q17 2Q17 3Q17 4Q17 1Q18 Noninterest income Deposit service charges down $73 million LQ driven by the impact of customer-friendly changes including the full quarter impact of Overdraft Rewind℠, as well as a higher ECR offset for commerci
Slide 13: Noninterest expense and efficiency ratio
Wells Fargo 1Q18 Supplement 12 Noninterest expense and efficiency ratio (1) Noninterest expense down $2.6 billion LQ on lower operating losses - Personnel expense up $368 million • Salaries down $40 million from a 4Q17 which included the sale of WFIS, an accrual for additional team member holidays
Slide 14: Noninterest expense – linked quarter
Wells Fargo 1Q18 Supplement 13 $16,800 $14,242 $594 ($233) ($213) ($2,640) ($73) $7 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 Third Party Services: Primarily lower project spending from typically higher 4Q levels and legal expense Infrastructure Compensation & Benefits: Includes $781 million of
Slide 15: Noninterest expense – year over year
Wells Fargo 1Q18 Supplement 14 $13,792 $14,242 $143 ($109) $9 $369 ($4) $42 $8,000 $9,000 $10,000 $11,000 $12,000 $13,000 $14,000 $15,000 Third Party Services Infrastructure: Higher equipment expense “Running the Business” – Discretionary Compensation & Benefits: Higher salaries from annual increase
Slide 16: 2018 expense expectations and efficiency initiatives' targets
Wells Fargo 1Q18 Supplement 15 2018 expense expectations and efficiency initiatives’ targets We currently expect full year 2018 total expenses to be in the range of $53.5 - $54.5 billion - Includes ~$0.6 billion of typical operating losses, and excludes litigation and remediation accruals and pena
Slide 17: Income Statement impact from business divestitures
Wells Fargo 1Q18 Supplement 16 Divestitures have been focused on businesses that no longer meet our return requirements, and/or future investment spending requirements to maintain market positioning and product capabilities exceeded our desired investment spend Revenues generated and direct expe
Slide 18: Community Banking
Wells Fargo 1Q18 Supplement 17 Community Banking Net income of $2.7 billion, down 4% YoY and down 22% LQ; 4Q17 included the income tax benefit to the Company of the Tax Cuts & Jobs Act Key metrics See pages 18 and 19 for additional information 5,805 retail bank branches reflect 58 branch conso
Slide 19: Community Banking metrics
Wells Fargo 1Q18 Supplement 18 Community Banking metrics (1) Teller and ATM transactions reflect customer transactions completed at a branch teller line or ATM and does not include customer interactions with a branch banker. Management uses this metric to help monitor customer traffic trends within
Slide 20: Community Banking metrics
Wells Fargo 1Q18 Supplement 19 Community Banking metrics Average consumer and small business banking deposit balances relatively stable LQ and YoY as growth in Community Banking deposits was offset by lower WIM deposits reflecting movements to other investments Debit cards (1) and consumer gener
Slide 21: Wholesale Banking
Wells Fargo 1Q18 Supplement 20 Wholesale Banking Net income of $2.9 billion, up 16% YoY and up 21% LQ driven by the lower income tax rate Net interest income down 1% LQ as lower deposits and income from tax advantaged products were partially offset by the benefit of higher rates Noninterest in
Slide 22: Wealth and Investment Management
Wells Fargo 1Q18 Supplement 21 Wealth and Investment Management Net income of $714 million, up 7% YoY and up 6% LQ driven by the lower income tax rate Net interest income down 3% LQ and 3% YoY driven by lower average deposit balances reflecting movements into other investments Noninterest inco
Slide 23: Credit quality
Wells Fargo 1Q18 Supplement 22 Credit quality Nonperforming Assets ($ in billions) Provision Expense and Net Charge-offs ($ in millions) Net charge-offs of $741 million, down $10 million LQ $550 million reserve release; ~$400 million driven by an improvement in our outlook for 2017 hurricane-rel
Slide 24: Capital
Wells Fargo 1Q18 Supplement 23 11.2% 11.6% 11.8% 12.0% 12.0% 1Q17 2Q17 3Q17 4Q17 1Q18 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 12.0% at 3/31/18 (1) reflecting lower risk- weighted assets
Slide 25: 1Q18 Summary
Wells Fargo 1Q18 Supplement 24 Preliminary net income of $5.9 billion - Diluted EPS of $1.12 ROA = 1.26%; ROE = 12.37%; ROTCE (1) = 14.75% Strong balance sheet with high levels of capital and liquidity - Common Equity Tier 1 ratio (fully phased-in) of 12.0% at 3/31/18 (2) - Liquid assets (3) o
Slide 26: Appendix
Appendix
Slide 27: Real estate 1-4 family mortgage portfolio
Wells Fargo 1Q18 Supplement 26 Real estate 1-4 family mortgage portfolio (1) Nonconforming mortgages originated post February 2009. First lien mortgage loans down $1.4 billion LQ due to sales of $1.6 billion of Pick-a-Pay PCI loans, partially offset by nonconforming mortgage loan growth - Nonconfo
Slide 28: Consumer credit card portfolio
Wells Fargo 1Q18 Supplement 27 Consumer credit card portfolio Credit card outstandings down 5% LQ due to seasonality and up 4% YoY reflecting purchase volume growth - General purpose credit card outstandings down 5% LQ and up 6% YoY - Purchase dollar volume down 10% LQ driven by 4Q17 holiday spend
Slide 29: Auto portfolios
Wells Fargo 1Q18 Supplement 28 Auto portfolios ($ in millions) 1Q18 4Q17 Auto outstandings $ 48,198 51,831 Nonaccrual loans 115 127 as % of loans 0.24 % 0.25 Net charge-offs $ 205 184 as % of avg loans 1.66 % 1.39 30+ days past due $ 1,444 1,859 as % of loans 3.00 % 3.59 Auto outstandings $ 1,356 1,
Slide 30: Student lending portfolio
Wells Fargo 1Q18 Supplement 29 Student lending portfolio $11.9 billion private loan outstandings down 1% LQ and 5% YoY on higher paydowns/payoffs - Average FICO of 761 and 83% of the total outstandings have been co-signed - Originations down 18% YoY driven by lower customer sentiment Net charge-
Slide 31: Trading-related net interest income and noninterest income
Wells Fargo 1Q18 Supplement 30 Trading-related net interest income and noninterest income Trading-related revenue of $895 million was up $218 million, or 32%, from 4Q17: - Net interest income decreased $26 million, or 4% - Net gains/(losses) on trading activities increased $244 million on strong e
Slide 32: Noninterest expense analysis
Wells Fargo 1Q18 Supplement 31 Noninterest expense analysis (reference for slides 13-14) 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
Slide 33: Common Equity Tier 1 (Fully Phased-In)
Wells Fargo 1Q18 Supplement 32 Common Equity Tier 1 (Fully Phased-In) - 1 - Wells Fargo & Company and Subsidiaries COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1) Estimated (in billions, except ratio) Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Total equity $ 206.7 20
Slide 34: Return on average tangible common equity (ROTCE)
Wells Fargo 1Q18 Supplement 33 Wells Fargo & Company and Subsidiaries TANGIBLE COMMON EQUITY (1) Quarter ended (in millions, except ratios) Mar 31, 2018 Return on average tangible common equity (1): Net income applicable to common stock (A) $ 5,533 Average total equity 206,189 Adjustments: Preferred
Slide 35: Forward-looking statements and additional information
Wells Fargo 1Q18 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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