Wells Fargo & Company

Welcome and thank you for joining the Wells Fargo first quarter 2022 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 1. If you would like to withdraw your question, press star 2. 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.

Thanks, Brad. Good morning, everyone. Thank you for joining our call today where our CEO, Charlie Scharf, and our CFO, Mike Santamasimo, 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 materials, including the release, financial supplement, and presentation deck, 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 file 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 SSE filings in 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 first quarter results, the operating environment, and update you on our priorities. I'll then turn the call over to Mike to review the first quarter results in more detail before we take your questions. Let me start off with some first quarter highlights. We earned $3.7 billion, or 88 cents per common share, in the first quarter. Our results included 21 cents per share impact from a decrease in the allowance for credit losses. We had broad-based loan growth with both our consumer and commercial portfolios growing from the fourth quarter. While net interest income was down modestly from the fourth quarter, driven by fewer days in the quarter, it grew 5% from a year ago. Higher interest rates, along with our expectations for continued loan growth, should drive higher net interest income growth than we anticipated at the beginning of the year. Mike will provide more details regarding our current view later on in the call. However, the increase in rates negatively impacted our mortgage banking business. The mortgage origination market experienced one of its largest quarterly declines that I can remember. and it will take time for the industry to reduce excess capacity. Credit performance remained incredibly strong, and our net charge-off ratio declined to 14 basis points. While we have minimal direct exposure to Russia or Ukraine, we're monitoring certain industries that have the potential to be impacted by the conflict and economic sanctions, but thus far don't have concerns. In addition, we returned a significant amount of capital to our shareholders in the first quarter, including repurchasing $6 billion of common stock and increasing our common stock dividend to 25 cents per share. The significant changes we've made across the company have put us in a position to increase the dividend, and our work continues. The health of our consumer and businesses so far has remained strong, though we're entering a period of uncertainty. March was the eighth straight month in which inflation outpaced income, with lower-income consumers being most impacted by rising energy and food prices. That said, higher deposit balances and rising wages have thus far allowed consumers to weather these headwinds. We continued to see median deposit balances above pre-pandemic levels, up approximately 25% compared to 2020, but down from the highs observed in 2021. Consumer credit card spend remained strong, up 33% from a year ago, All spending categories were up with the highest growth in travel, entertainment, fuel, and dining. After strong growth in the first quarter of 2021 driven by stimulus payments, debit card spending increased 6% in the first quarter of 2022. Discretionary spending remained strong with entertainment up 39% and travel up 29% from a year ago. The increase in energy prices was reflected in a 27% increase in fuel spending. Loan demand from our commercial customers increased with growth in both commitments and loans outstanding as customers' borrowing needs are increasing to fund working capital expansion. Credit quality remains strong with net recoveries in our commercial portfolio. Now let me update you on progress we've made on our strategic priorities. Building an appropriate risk and control infrastructure remains our top priority, and I continue to believe that we're making significant progress. Early in the first quarter, we named Derek Flowers, our new chief risk officer, following Mandy Norton's retirement announcement. Derek has extensive experience managing risk, including the work he's done over the last several years of managing the build-out of Wells Fargo's risk and control framework. Derek has been with Wells Fargo for over 20 years, and his familiarity with the company and his risk background make him the ideal candidate to succeed Mandy who I'd like to thank for the tremendous progress she made in transforming the risk organization. We also continued to make progress in resolving legacy regulatory issues, with news in January that the OCC had terminated a consent order regarding add-on products that the company sold to retail banking customers before 2015. We have much more work to do to satisfy our regulatory requirements, and we will likely have setbacks. but I'm confident in our ability to continue to close the remaining gaps over the next several years. We remain focused on improving our financial performance while investing to drive growth across our businesses. Providing our customers with simple, easy-to-use and fast digital experiences is one of our most important strategic priorities. In the first quarter, we began rolling out our new mobile banking experience for our customers in our consumer businesses, and feedback has been very positive. Digital adoption, which is critical to both delivering seamless digital experiences that our customers expect and reducing the cost to serve, has continued to increase with mobile active customers up 4% from a year ago. We added approximately 500,000 new mobile active customers in the first quarter alone. We continue to invest to improve our digital capabilities with additional enhancements planned for this year. We're also focused on reducing friction and moving money. We've continued to invest in Zelle and made changes to expand customer usage, including increasing sending limits. These changes have helped to drive 21% growth in active SEND customers and a 33% increase in SEND volume from a year ago. We continued to enhance our credit card offerings with our partnership with Built Rewards and MasterCard. This first of its kind co-brand card allows members to pay rent and earn points with no transaction fees on rent payments at any apartment in the U.S. In the first quarter, we selected Encino to streamline our origination, underwriting, and portfolio management for our small business customers. This collaboration is expected to provide our customers with a more streamlined lending experience and builds on our existing relationship that we announced last year to accelerate our digital transformation within our commercial banking and corporate investment banking businesses. Let me just make some summary comments before I turn it over to Mike. As we sit here today, our internal indicators continue to point towards the strength of our customers' financial position, but the Federal Reserve has made it clear that it will take actions necessary to reduce inflation, and this will certainly reduce economic growth. In addition, the war in Ukraine adds additional risks to the downside. Wells Fargo is positioned well to provide support for our clients in a slowing economy. While we will likely see an increase in credit losses from historical lows, we should be a net beneficiary as we will also benefit from rising rates, we have a strong capital position, and our lower expense base creates greater margins from which to invest. We remain diligent in extending credit and are focusing on managing the other risk types within the company 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 this year. We continue to focus on a broad set of stakeholders in our decisions and actions. As we have all seen, the reports and images coming out of Ukraine are deeply concerning. In order to support those most impacted, we announced a million dollars in donations across three nonprofits in support of humanitarian aid for Ukraine and Ukrainian refugees, as well as services that support the U.S. military. Earlier this week, we also announced plans to introduce Hope Inside centers in select branches to increase access to financial education and guidance. Working with Operation Hope is one important way that we can remove barriers to financial inclusion as part of our Banking Inclusion Initiative, which is focused on helping more people who are unbanked gain access to affordable mainstream banking products. Since the pandemic began, close to 100,000 of our employees never left the workplace. And last month, we started to welcome the rest back to the office. It's been great to be back together again, and I want to thank all of our employees as they work together to better serve our customers, our communities, and each other. I will now turn the call over to Mike.