Wells Fargo & Company

Good morning. My name is Catherine, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Wells Fargo First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star and then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Please note that today's call is being recorded. Thank you. I would now like to turn the call over to John Campbell, Director of Investor Relations. Sir, you may begin the conference.

Thank you, Catherine. Good morning, everyone. Thank you for joining our call today where our Interim CEO and President, Alan Parker, and our CFO, John Shrewsbury, will discuss first quarter results and answer your questions. This call is being recorded. Before we get started, I would like to remind you that our first quarter earnings release and quarterly supplement are available on our website at wellsfargo.com. I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8K filed today containing our earnings release and quarterly supplement. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings, in the earnings release, and in the quarterly supplement available on our website. I will now turn the call over to Alan Parker.

Thank you, John. Good morning, everyone, and thanks for joining us for today's discussion of our first quarter results. As you know, this is my first time participating in the quarterly earnings call. I'm pleased to be with you, and I look forward to your questions and today's dialogue. This morning, I'll outline the actions I'm taking together with our leadership team to continue to transform Wells Fargo and to get that transformation right for all our stakeholders, including our customers, our team members, our shareholders, and our regulators. Since assuming my new role, I've been focused on leading our company forward by emphasizing my top priorities, serving our customers and supporting our Wells Fargo team members, meeting and exceeding the expectations of our regulators, and continuing the important transformation of the company. Today, we're honored to serve one out of every three U.S. households, but we know that some of our past practices harmed our customers. The team and I are committed to addressing these mistakes of the past, and over the coming weeks and months, I plan to spend much of my time listening to our customers and working to understand how we can best serve them. Our goal with respect to our customers is to develop even deeper relationships that are built on trust, accessibility, and outstanding service. As part of reaching that goal, we will continue, wherever appropriate, to contact customers we have let down and compensate them for any harm. To this end, over a year ago, we created a Customer Remediation Center of Excellence that so that we could provide more consistent, timely, and effective remediation to our customers. This team, which sits outside our lines of business, establishes our company-wide remediation policies, sets standards and coordinates with our lines of business and the day-to-day management of remediation efforts, and provides our board of directors, our regulators, and our senior management with comprehensive information about all customer requirements remediation efforts that we are taking place at Wells Fargo. And as you're aware, we have been providing updates on our remediation progress in our quarterly filings. We've also been dedicated to providing customer-focused innovation. A few examples include overdraft rewind, real-time balance alerts, control tower, and our online mortgage application. We remain focused on innovating for our customers, and these efforts will continue to be a top transformation priority. The changes we're making to better serve customers are possible only because of the hard work of our over 260,000 talented and dedicated team members. Since assuming my new role, I've had the opportunity to meet with and hear from many of my Wells Fargo colleagues around the country and across our businesses, and I'm impressed every day by their commitment and their enthusiasm regarding the opportunities ahead. We continue to strengthen Wells Fargo's leadership team with both internal promotions and external hires, including our head of technology, Sullivan Burden, who joined Wells Fargo earlier this week as a member of our operating committee. Our new chief auditor, Julie Scamahorn, joins us later this month as a member of the operating committee, and we've also strengthened our senior-most enterprise risk and control committee, which is co-chaired by our chief risk officer, Mandy Norton, and me, and includes the heads of every business and enterprise function. In addition to hiring Mandy last year, we've strengthened our risk leadership team with both internal and external talent, and we've continued to be successful in hiring externally for key roles during the first quarter. Our corporate risk management team grew by approximately 1,300 team members last year, and we currently expect to add another 1,300 team members this year, with the overwhelming majority of these new hires dedicated to strengthening our compliance and operational risk management efforts. In addition to these ongoing leadership changes, we're also realigning our business structure and making significant investments in key capabilities that, taken together, will help ensure that we meet the expectations of our regulators. Let me give you just a few examples. First, we've discarded our old decentralized corporate structure and centralized our enterprise control functions. As we have already seen, This important change will enhance our visibility into all aspects of our business and improve the consistency and sustainability of our results. Second, we're transforming our approach to risk management, and we will dedicate all necessary resources to getting these risk management enhancements right. Wells Fargo has always excelled at management of credit and market risk, and our goal is to bring our operational risk and compliance capabilities to that same level of excellence. Third, we're emphasizing operational excellence throughout the company, and as part of that process, we've named a dedicated leader who is responsible for driving company-wide business process management. We're building dedicated teams across each business group and enterprise function. and those teams will enable us to better deliver consistent desired outcomes for our customers and manage our operations more efficiently and effectively, all while strengthening operational risk management. Finally, we're transforming our technology platform with a goal of enhancing the customer experience, by becoming more centralized, consistent, and efficient in how we deliver technology products and solutions. While we're aggressively addressing our risk and control issues and building a better bank, I want to acknowledge clearly that we have a substantial amount of work yet to do, both to satisfy the expectations of our regulators and regulators. even more important, to create the financial institution we aspire to be. Recent public statements on the part of our regulators have indicated their disappointment with our progress to date. We understand and appreciate their criticism, and we are now redoubling our efforts to satisfy their expectations of us and our expectations of ourselves. We're focused on not only satisfying but also exceeding the expectation of all our regulators. I take this responsibility very seriously, and the operating committee and I have made clear that the entire Wells Fargo team must act assertively and decisively to meet our regulators' expectations as we go forward. Specifically, we agree with Chairman Powell's recent public comments that we have more work to do under the February 2018 Federal Reserve Consent Order. That necessary work is at varying stages of progress, and much of the work consists of completing and implementing efforts that are substantially underway. But regardless of the status of the progress of any particular part of the necessary work, I want to make clear that the most important thing for our company is that in our ongoing constructive engagement with the Federal Reserve, We focus on getting that work done in a first-rate and sustainable way and not focus unduly on when we believe that process will be completed. Accordingly, we do not feel it's appropriate to provide guidance as to the timing of the lifting of the asset cap. We understand the seriousness of getting our work with the Federal Reserve right, and we are therefore making and will be willing to make the investments that are necessary to complete the work that's needed to improve our compliance and operational risk capabilities. This work is fundamentally an evolution of our business model, and this evolution will both change how we manage compliance and operational risk, and by simplifying and strengthening our business processes, help us serve our customers better and become more efficient. all of which will benefit our shareholders over the long term. As you know, we're currently operating well below the asset cap, and we have had and will continue to have the ability to serve the needs of all our 70 million customers while we work to satisfy the requirements of the Federal Reserve Consent Order. While we've been working to fulfill the commitments to our regulators, we've also continued to deliver strong financial performance, as our first quarter results demonstrate. We remain focused on reducing expenses, even as we make significant and necessary investments to meet our regulators' expectations and to help ensure that we deliver best-in-class services to our customers. We remain committed to our 2019 expense target, We continue to pursue business simplification so we can focus our efforts on businesses where we believe we have the leadership position that's required to excel long-term. This week's announced sale of our institutional retirement and trust business advances that goal. We also remain committed to returning our excess capital to our shareholders, and this quarter we returned $6 billion to our shareholders through common stock dividends and and net share repurchases. I've met with the leaders of all our businesses over the past few weeks, and as we go forward, I will continue to work closely with them as part of the focus and my top priorities for the company. Bringing this all together, I'm firmly committed to doing what's right for our stakeholders. While there's a lot of work that still needs to be done, I believe the actions I've outlined this morning are the right steps to be taken by and for our company at this time. The work we're doing in conjunction with our regulators to improve operational effectiveness will make Wells Fargo a more simple and nimble company while at the same time bringing us closer to our customers, which is the real reason we're here. This in turn fits well with our objective of becoming more efficient. I take very seriously my responsibility as a steward of our shareholders' capital and I'm confident that these actions will create, day by day, a better company that will drive shareholder value over the long term. Simply put, we're engaged in a transformative effort with the goal of building the most customer-focused, efficient, and innovative Wells Fargo ever. A premier financial institution characterized by a strong financial foundation, a leading presence in our chosen markets, focused growth within a responsible risk management framework, operational excellence, and highly engaged team members. I have no doubt that we will achieve that goal. I'm confident and optimistic about the opportunities ahead to build something extraordinary, and I look forward to communicating with you regularly on our progress. John Shrewsbury will now discuss our financial results in more detail.