Wells Fargo & Company

Welcome and thank you for joining the Wells Fargo fourth 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.

Thank you. Good morning. Thank you for joining our call today, where our CEO, Charlie Sharp, and our CFO, Mike Santacimo, will discuss fourth quarter results and answer your questions. This call is being recorded. Before we get started, I would like to remind you that our fourth 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 8K 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 earnings materials available on our website. I will now turn the call over to Charlie.

Thanks, John. I'll make some brief comments about our fourth quarter results and then update you on our priorities. I'll then turn the call over to Mike to review fourth quarter results in more detail and some of our expectations for 2023 before we take your questions. Let me start with fourth quarter highlights. Our results were significantly impacted by previously disclosed operating losses, but our underlying performance reflected the continued progress we're making to improve returns. Rising interest rates drove strong net interest income growth. Our continued progress and our efficiency initiatives helped to drive expenses lower, excluding operating losses. Loans grew in both our commercial and consumer portfolios, and charge-offs have continued to increase, but credit quality remains strong. Our capital levels also remain very strong, and our CET1 ratio increased to 10.6%, well above our required minimums plus buffers. We also continue to make progress on putting legacy issues behind us. Our broad reaching agreement with the CFPB in December is an important step forward that helps us resolve multiple matters, the majority of which have been outstanding for several years. Over the past three years, we have made significant changes in the businesses referenced in the settlement, and many of the required actions were already substantially complete prior to this announcement. While our risk and regulatory work hasn't always followed a straight line and we have more to do, we've made significant progress, and we will continue to prioritize our work here. In addition to our risk and regulatory work, It's also critical for us to continue to invest in the future as we build off the great market positions we have. We are confident our processes will enable us to continue to prioritize our risk and control work at the same time that we invest in our future. And as I look back at 22, I'm enthusiastic about the progress we've made this past year and feel even better about the opportunities ahead. Let me start with the changes we've made during the year to help MILLIONS OF CUSTOMERS AVOID OVERDRAFT FEES AND MEET SHORT-TERM CASH NEEDS. THESE EFFORTS INCLUDED THE ELIMINATION OF NONSUFFICIENT FUNDS FEES AND TRANSFER FEES FOR CUSTOMERS ENROLLED IN OVERDRAFT PROTECTION. EARLY PAYDAY, MAKING ELIGIBLE DIRECT DEPOSITS AVAILABLE UP TO TWO DAYS EARLY. EXTRA DAY GRACE, GIVING ELIGIBLE CUSTOMERS AN EXTRA BUSINESS DAY TO MAKE DEPOSITS TO AVOID OVERDRAFT FEES. AND IN THE FOURTH QUARTER, WE LAUNCHED FLUXLOAN, A NEW DIGITAL-ONLY small dollar loan that provides eligible customers convenient and affordable access to funds. Teams from across the company came together to roll out this new product in record time. The rollout has been smooth, and though it's still early, customer response is exceeding our expectations. These actions build on services we've introduced over the past several years, including clear access banking, our account with no overdraft fees. We now have over 1.7 million of those accounts, up 48% from a year ago. We continue to transform the way we serve our customers by offering innovative products and solutions. We continue to improve our credit card offerings, including launching two new cards, Wells Fargo Autograph and Built. Our new products helped drive a 31% increase in new credit card accounts in 2022, while we continued to maintain strong credit profiles. We launched Wells Fargo Premier, our new offering dedicated to the financial needs of affluent clients by bringing together our branch-based and wealth-based businesses to provide a more comprehensive, relevant, and integrated offering for our clients. We continue to enhance partnership within our commercial business to bring corporate investment banking products such as foreign exchange and M&A advisory services to our middle market clients. Our different approach to technology helping us better serve our consumer and corporate clients. We rolled out our new mobile app with a simpler, more intuitive user experience, which has improved customer satisfaction. In 2022, mobile active customers grew 4% from a year ago. We launched intuitive investor, make it easier for customers to invest with a streamlined account opening process and a lower minimum investment and total active intuitive investor accounts increased 56% from a year ago. We completed the development of Fargo, our new AI-powered virtual assistant that provides a more personalized, convenient, and simple banking experience, which is currently live for eligible employees and set to begin rolling out to customers early this year. Last month, we announced Vantage, our new enhanced digital experience for our commercial and corporate clients. Vantage uses AI and machine learning to provide a tailored and intuitive platform based on our clients' specific needs. Over the past year, our industry-leading API platform team continued the development of payment APIs for commercial and corporate clients, invested in solutions to support our financial institution clients, ramped up in group product offerings and consumer lending, and began developing commercial lending solutions. We are investing heavily in modernizing the IT infrastructure and the way we develop code. We're implementing a cloud native operating model that allows us to innovate faster. We've also been investing in modernization in the areas of payments and corporate lending, taking out legacy applications and digitizing processes end to end. These enhanced digital capabilities are just the start of initiatives we have planned as part of our multi-year digital transformation. We also continue to evaluate our existing businesses. As we announced earlier this week, we plan to create a more focused home lending business aimed at serving primarily bank customers, as well as individuals and families in minority communities. This includes exiting the correspondent business and reducing the size of our servicing portfolio. I've been saying for some time that the mortgage business has changed dramatically since the financial crisis, and we've been adjusting our strategy accordingly. We're focused on our customers, profitability, returns, and serving minority communities, not volume or market share. The mortgage product is important to our customer base and the communities we serve, so it will remain important to us. But we do not need to be one of the biggest originators or services, servicers in the industry to do this effectively. Across all of our businesses, we must evolve as the market regulation and competition has evolved. And while it may seem counterintuitive, We believe the decision to reduce risk in the mortgage business by reducing size and narrowing our focus, this will actually enable us to serve customers better and will also improve our returns in the long term. Changing gears now, I'm proud of all we did last year to make progress on our environmental, social, and governance work. We are balanced in our approach to these issues and believe that thinking broadly about our stakeholders will enhance returns for shareholders And we provide many examples on slide two of our presentation. So let me just highlight two examples here. We published our first diversity, equity, and inclusion report, which highlights the progress that we've made on our DE&I initiatives. We'll continue to make progress in our commitment to integrating DE&I into every aspect of the company under the new leadership of Kirstie Furco, who joined Wells Fargo in 2020 to lead our home lending business and was named the company's new head of diverse segments, representation, and inclusion in the fourth quarter. We've commissioned an external third-party racial equity audit, and we plan to publish the results of the assessment by the end of this year. 2022 is a turning point in the economic cycle. The Federal Reserve has made clear that reducing inflation is its priority, and it will continue to take actions necessary to achieve its goal. We are starting to see the impact on consumer spend, credit, housing, and demands for goods and services At this point, the impact to consumers and businesses has been manageable. And though there will certainly be some industries and segments of consumers that are more impacted than others, the rate impact we see in our customer base is not materially, I'm sorry, the rate of impact we see in our customer base is not materially accelerating. This plus the strength with which consumers and businesses went into this slowing economy is a helpful set of facts as we look forward. Our customers have remained resilient with deposit balances, consumer spending, and credit quality still stronger than pre-pandemic levels. As we look forward, we're carefully watching the impact of higher rates on our customers and expect to see deposit balances and credit quality continue to return toward pre-pandemic levels. While we are not predicting a severe downturn, we must be prepared for one, and we are a stronger company today than one and two years ago. Our margins are wider. our returns are higher, we're better managed, and our capital position is strong. So we feel prepared for a downside scenario if we see broader deterioration than we currently see or predict. We still have clear opportunities to improve our performance as we make progress on our efficiency initiatives and continue to make the investments necessary to grow the business through technology and product enhancements. Two years ago, we shared a path to a higher ROTCE by returning capital to our shareholders and executing our efficiency initiatives. While high levels of operating losses in the second half of 22 impacted our results, our underlying business performance demonstrated our ability to improve our returns. In a moment, Mike will highlight the key drivers of our path to a 15 percent ROTCE, which we believe is achievable based on the strength of our business model and our ability to execute. While we're focused on improving our returns, Making progress on building the appropriate risk and control infrastructure for a company of our size and complexity will remain our top priority, and we will dedicate the time and resources necessary. I want to conclude by thanking our employees across the company who are working hard each day to continue to make progress in our transformation. I'm excited about all that we will accomplish in the year ahead. I'll now turn the call over to Mike.