Wells Fargo & Company

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wells Fargo Second 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 would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. I would now like to turn the call over to John Campbell, Director of Investor Relations. Sir, you may begin the conference.

Thank you, Regina. 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 second quarter results and answer your questions. This call is being recorded. Before we get started, I would like to remind you that our second 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 second quarter results, which included strong quarterly earnings. On our call last quarter, I outlined my three top priorities for Wells Fargo, which are focusing on our customers and team members, meeting the expectations of our regulators, and continuing our company's important transformation. This morning, I want to update you on the progress we made on these priorities over the last 90 days. After spending a lot of time meeting with and listening to our team members and customers across Wells Fargo, it's clear to me not only that our team is dedicated to providing outstanding customer service, but also that this commitment is benefiting our customers who are choosing to do more business with us. Our results in the second quarter reflected our progress in this area, and I would call your attention to just a few of the metrics that demonstrate that progress. Period-end loans and deposits grew on both a linked quarter and year-over-year basis. Branch customer experience survey scores have now increased for four consecutive quarters, and in June, reached their highest levels at over three years. Primary consumer checking customers grew year over year for the seventh consecutive quarter. New investment assets referred by our community banking team to our wealth and investment management team reached their highest quarterly level in two years. And by continuing to meet our wholesale banking customers' needs for asset-based financing during the quarter, we increased our industry-leading market share in these financings. Our commitment to our team members during the second quarter included the completion of our 2019 Team Member Experience Survey, which gave all our team members an opportunity to share their feedback, feedback we'll use to continue to improve the team member experience through new technology, streamlined processes, and career and skill development programs. We also continued to strengthen Wells Fargo's leadership team through both internal promotions, and external appointments. In the second quarter, we added three new members to our operating committee. Two of these additions were Sol Van Burden, our new head of technology, and Julie Scammerhorn, our new chief auditor. And the most recent change to the operating committee was the addition of Derek Flowers, who will lead our newly created strategic execution and operations office. As a result of the changes in our operating committee over the past three years, almost all its members are now either new to Wells Fargo or new to their roles. The formation of the Strategic Execution and Operations, or SEO, team is an important step in our work to meet the expectations of our regulators, which is another of my top priorities. This team will focus on achieving across all our businesses the operational excellence that will enable us to execute more effectively on our regulatory priorities and further drive our transformation, which will benefit all our customers and team members. By centralizing a substantial part of the work related to our regulatory priorities, work that's being performed across all our different businesses, we believe we'll be more efficient and effective in all these efforts. The leader of the SEO team, Derek Flowers, is a 21-year company veteran who most recently was our chief credit and market risk officer, where he maintained our strong credit discipline and, in the process, displayed substantial skills in organization and execution. Reflecting our deep management team, Mary Catherine DuBose, who joined Wells Fargo in 1998 and was most recently a leader in wholesale banking, has assumed the role of Chief Credit Officer and Jeremy Smith will lead market and counterparty risk. I'm confident that Mary Catherine, Jeremy and their teams will continue our company's strong tradition in both these areas. My final top priority is continuing the important transformation of Wells Fargo so that we can build on our already strong foundation to become even more customer-focused, innovative, and better positioned for the future. This transformation is multifaceted, but it involves three essential components. First, we must strive for excellence in the way we conduct our business every day. Our work must be thoughtfully designed, seamless, and of the highest quality. And we must also constantly look for ways to improve. whether that improvement involves simplifying an operation, using technology to make things faster and easier, or seeking ways to be more streamlined and efficient in our work. Second, we must focus on and achieve high-quality execution in all we do, approaching each task with urgency, a well-designed plan, and an unwavering focus on getting the work done properly and on time. And finally, each one of us must act with absolute integrity in every situation. It's just a few examples of the work we're doing as part of our transformation. We're relentlessly focused on business process management, an effort to ensure a more consistent approach to how our work is done by simplifying the ways we conduct any given process and reducing the associated risk. This work is designed to achieve savings, enable our team members to be more productive, and deliver more consistent desired experiences for our customers. We're also pursuing business simplification so we can concentrate our efforts on businesses where we believe we have the leadership position that's required for us to excel long-term. On July 1st, We completed the previously announced sale of our institutional retirement and trust business, and we expect to complete the recently announced sale of Eastill Secured in the fourth quarter. We're also transforming our businesses to reduce risk, improve customer service, and become more efficient. An excellent example of this work is our auto business. Throughout 2017 and 2018, under the leadership of Lars Schupach, we made fundamental changes to this business, including centralizing functions by consolidating 57 business centers across the country to create four regional hubs, reengineering processes, automating pricing and decision-making, and enhancing the customer and team member experience. As we were implementing these changes, we seeded market share, as expected, and reduced the size of our auto portfolio. Now, with most of these transformational changes complete, our auto portfolio returned to growth in the second quarter for the first time since 2016 and in line with our expectations. Just as important, this growth has been disciplined and has resulted in a higher quality portfolio. As part of our ongoing transformation, we'll continue to make similar, fundamental, durable changes in how we run our businesses throughout the company. Let me close my remarks by touching on a few additional topics. We realize that you're all appropriately focused on the level of our expenses. While we're making progress and continuing to address our expenses with urgency, we still have work to do. And as John will explain, we expect our 2019 expenses to be near the high end of the range we specified in our previously provided guidance. As we stated last quarter, our strategic and financial targets beyond 2019 will be established once we have a permanent CEO in place. but we're still at the point where the savings we're achieving are not reaching the bottom line, and we anticipate that this could continue next year. We'll update you further on our 2020 expense expectations over the remainder of this year. I know you're also interested in the status of the CEO search, which is a top priority for our board of directors and is well underway. While there has been and will continue to be much speculation, in the media and otherwise regarding the search, the Board and the Search Committee do not plan to provide updates on their progress until they've made a final selection. Accordingly, we don't have any additional information to provide today. Separately, I want to note that during the second quarter, Charles Nofsky was elected to our Board of Directors, where he will serve on the Audit and Examination Committee. Chuck has many years of leadership experience at large financial institutions and other major corporations, both as a director and as an executive, and we're all looking forward to working with him. Finally, as you all know, we received non-objection to our 2019 capital plan during the second quarter. The capital plan includes a 13% increase to our third quarter 2019 common stock dividend to 51 cents per share, subject to approval by our board of directors, and gross common stock repurchases of up to $23.1 billion for the four-quarter period beginning third quarter 2019. Our CCAR results demonstrate the strength of our diversified business model, our strong capital position, our sound financial risk management, and our commitment to return excess capital to our shareholders in a prudent manner over time. We're all committed to doing what's right for all our stakeholders, and we're proud of the work we completed during the second quarter to bring us closer to our goals. While there's a lot of hard work that still needs to be done, I'm confident and optimistic that we're taking the right steps to build an extraordinary financial institution. John will now discuss our financial results in more detail.