Wells Fargo & Company

Welcome and thank you for joining the Wells Fargo third quarter 2021 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 one. If you would like to withdraw your question, press star two. Please note that today's call is being recorded. I would now like to turn the call over to John Campbell, Director of Investor Relations. Sir, you may begin the conference.

Thank you, Brad. Good morning, everyone. Thank you for joining our call today where our CEO, Charlie Scharf, and our CFO, Mike Santamassimo, will discuss third quarter results and answer your questions. This call is being recorded. Before we get started, I would like to remind you that our third quarter earnings materials, including the release, Financial Supplement and Presentation Decks 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 8-K filed today containing our earnings materials. 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 and the earnings materials available on our website. I will now turn the call over to Charlie.

Thanks, John, and good morning, everyone. I'll make some brief comments about our third quarter results, the operating environment, and update you on our priorities. I'll then turn the call over to Mike to review third quarter results in more detail before we take your questions. Let me start with some third quarter highlights. We earned $5.1 billion, or $1.17 per common share, in the third quarter. These results included a $1.7 billion decrease in the allowance for credit losses as credit quality continued to improve. Revenue declined on lower gains from equity securities, which were elevated in the second quarter, though still strong. Expenses continued to decline, reflecting progress on our efficiency initiatives. and included $250 million associated with the September OCC enforcement action. And for the first time since first quarter 2020, we grew both period end loans and deposits in the third quarter. We continue to see that our customers have significant liquidity and consumers are continuing to spend. While lower than the peak in March, our consumer customers' median deposit balances continue to remain above pre-pandemic levels. up 48% for customers who received federal stimulus and 40, I'm sorry, up 48% for customers who received federal stimulus and 40% higher for those who did not receive federal aid. Weekly debit card spend during the third quarter was up every week compared to 2019. And in the week ending October 1st was up 14% compared to 2020 and 26% compared to 2019. Areas hardest hit by the pandemic have recovered, including travel up 2%, entertainment up 39%, and restaurant spending up 20% during the week ending October 1st compared with 2019. Consumer credit card spending activity continued to increase up 18% in the third quarter compared to 2019 and 24% compared to 2020. During the week ended October 1st, Travel-related spending, which was hardest hit during the pandemic, was up significantly from 2020, but remains the only category that has not yet fully rebounded to 2019 levels, still down 8% compared to 2019. Commercial banking loans were up slightly at the end of the third quarter, while line utilization was stable at historic lows. Supply chain difficulties and labor shortages continue to represent significant challenges for our client base. And as I said earlier, overall credit performance continued to be strong. Now let me update you on the progress we've made on our strategic priorities. First, building an appropriate risk and control infrastructure has been and remains Wells Fargo's top priority. We reached a significant milestone with the termination of the CFPB consent order issued in September 2016 regarding improper retail sales practices. Its expiration reflects years of hard work by employees across Wells Fargo intended to ensure that the conduct at the core of the CFPB order will not recur. As a reminder, this is the second important regulatory milestone we achieved this year with the OCC terminating a consent order related to our BSA AML compliance program in January. But the recent OCC actions are a reminder that the significant deficiencies that existed when I arrived must remain our top priority. I believe we're making meaningful progress, and I remain confident in our ability to close the remaining gaps over the next several years. Having said that, it continues to be the case that we are likely to have setbacks along the way. We are a different bank today than we were several years ago. We run the company with greater oversight, transparency, and operational disciplines. We have a new leadership team. 15 of 18 operating committee members are now new to their roles. I've spoken of our new leaders in many of our control functions, but we also have many new business leaders. This includes new leaders in consumer banking, small business banking, auto lending, home lending, credit card, merchant services, retail services and personal lending, digital, strategy, wealth and investment management, and commercial banking. Our control infrastructure is different and we continue to invest in it. We take a different approach to the consumer today. We created a sales practice oversight and management function and an office of consumer practices. Our approach to consumer remediation is dramatically different, as we have meaningfully increased the amount paid to consumers and have accelerated payments to customers. While we are committed to devoting the resources necessary to our risk and regulatory work, we are also focused on improving the products and services we offer. We're making investments in digital capabilities and making it easier for customers to do business with us. In the third quarter, we announced our new long-term digital infrastructure strategy that will move us to a multi-cloud environment. This is a critical step in our multi-year journey to be digital first and offer easier to use products and services. We also joined AutoFi's North American network to provide car buyers and dealers with fast and easy online sales and financing. And as I've spoken about previously, we're on track to roll out a new consumer mobile app at the beginning of next year. We've also been making significant enhancements to our payments capabilities and are seeing that momentum pull through on our customers' Zelle usage, with Zelle users increasing 24%, transactions up 50%, and volumes are up 56% from a year ago. We're executing on our work to simplify our products and build compelling offerings tailored to different customer segments. Clear Access, our no fee overdraft checking product, now has over 1 million outstanding customer accounts. As a reminder, this launched in September 2020. And all of our retail accounts, which receive ACH direct deposit, have our overdraft rewind feature, which automatically reevaluates transactions from the prior business day that have incurred an overdraft. This feature has helped over 1.3 million customers avoid overdraft-related fees on 2.5 million transactions in the third quarter. For the emerging affluent and affluent segments, we're making substantial changes to more consistently and intentionally serve these customers, including products, service, marketing, and management routines. You'll hear us talk more about how we're executing on this in the coming quarters. After successfully launching Active Cash, our new cashback credit card in July, Earlier this month, we launched the Reflect card that rewards customers for making on-time payments. Our new head of small business, Derek Ellington, will start in just a couple of days, and we believe this is another attractive growth segment for us. Next month, Paul Camp will be joining Wells Fargo as the head of our global treasury management businesses. This new role brings together our treasury management and global payment solutions teams into one organization. which will enable us to be more efficient and leverage our capabilities more effectively to help clients manage their funds and process payments worldwide. While we've been focused on improving the products and services we offer to our customers, we've continued to support our communities. We voluntarily committed to donate all gross processing fees from PPP loans funded in 2020 and created the Open for Business Fund to support small businesses impacted by the pandemic. We've now donated $305 million in support of small business recovery, including 215 CDFIs, which in turn is expected to help nearly 150,000 small business owners maintain more than 250,000 jobs. Additionally, in the third quarter, we launched Connect to More, a resource hub for women-owned businesses and a mentoring program partnering with NASDAQ Entrepreneurial Center to empower 500 women-owned businesses. We committed to invest $5 million through the Neighborhood Lift Program to help more than 300 low and moderate income residents in Philadelphia with home down payment assistance. And we published our updated ESG report and goals and performance data, which includes new disclosures on our workforce by race, gender, and job category. As we look forward, while there certainly are risks that remain, including the latest wave of COVID infections, the recent U.S. fiscal policy stalemate and inflation concerns, the outlook for the economy is promising. Consumers' financial condition remains strong with leverage at its lowest level in 45 years and the debt burden below its long-term average. Companies are also strong as well. We remain on target to achieve a sustainable 10% ROTCE subject to the same assumptions we've discussed in the past on a run rate basis at some point next year. and we'll then discuss our plan to continue to increase returns. I want to thank our employees for continuing to work hard to make Wells Fargo better for our customers, shareholders, and communities. I will now turn the call over to Mike.