Wells Fargo & Company

Welcome and thank you for joining the Wells Fargo third quarter 2023 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.

Good morning, everyone. Thank you for joining our call today where our CEO, Charlie Sharp, 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 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 file today containing our earnings materials. Information about any non-GAAP financials 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 very much, John. I'll make some brief comments about our third quarter results 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. Our results reflected the progress we're making to improve our financial performance. Revenue, pre-tax provision profit, net income, diluted earnings per common share, and ROTCE were all higher than a year ago. Our revenue reflected strong net interest income growth as well as higher non-interest income as we benefited from higher rates and the investments we're making in our businesses. Our expenses declined from a year ago due to lower operating losses. As expected, net charge-offs have continued to increase from historical low levels and we increased our allowance for credit losses primarily driven by our office portfolio as well as growth in our credit card portfolio. Average commercial and consumer loans were both down from the second quarter as higher rates and a slowing economy have weakened loan demand and we've continued to take some credit tightening actions. Average deposits also declined from the second quarter and a year ago driven by consumer spending as well as customers migrating to higher yielding alternatives. consumer spending remains strong with third quarter year-over-year growth rates for both credit and debit card spending increasing from the second quarter. Now let me update you on the progress we're making on our strategic priorities, starting with risk and control work, which remains our top priority. As time goes on, we continue to make the progress necessary to complete our work. I've said that we have detailed project plans which track interim deliverables, not just the dates the work is to be finalized and turned over to the regulators for validation. The work is not finalized all at once. It's not as if there's a big bang conversion at the conclusion of a big body of work. It's just the opposite. Building our risk and control framework is a continuous, ongoing effort. We are implementing changes throughout the life of the project, and we track effectiveness along the way. The numerous internal metrics we track show that the work is clearly improving our control environment, but we will not be satisfied until all of our work is complete. We remain focused on the work ahead, even as we are making progress. But I will repeat what I've said in the past. Regulatory pressure on banks with longstanding issues such as ours continues to grow, and until we complete our work and until it is validated by our regulators, we remain at risk of further regulatory actions. Additionally, until our work is complete, we could find new issues that need to be remediated, and these may result in additional regulatory actions. We also continued to take steps to advance our business strategy, which includes focusing on our core business and customers. We sold approximately $2 billion of private equity investments in certain Norwest Equity Partners and Norwest Mezzanine Partners funds. We were also making a number of investments to better serve our customers. As a leader in U.S. middle market and asset-based lending, we're focused on finding ways to support our clients with the recently announced strategic relationship with CenterBridge partners. Our middle market clients will have greater access to alternative sources of capital that can be used to pursue a broader set of growth and value creation initiatives across a variety of market conditions. Branches continue to play an important role in the way we serve our customers, and we continue to optimize our network, but we also look at targeted expansions in markets where we see opportunities for our franchise. Last week, we announced we are expanding our branch network in Chicago, where we only have seven branches today. We also continue to make enhancements to our mobile app, and in the third quarter, we launched stock fractions. giving Wells Trade clients the ability to buy fractions of companies' stocks to help build a diversified portfolio regardless of stock price. Just yesterday, we announced the expanded availability of LifeSync to all consumer customers. Available on the mobile app, LifeSync is our personalized digital approach to aligning customers' goals with their money and was launched to all wealth and investment management clients earlier this year. Customer's goals entered in LifeSync will be visible to bankers to enhance needs-based conversations. We also expanded the capabilities of Fargo, our AI-powered virtual assistant, and recently added the ability for customers to communicate with Fargo in Spanish. These enhanced capabilities are just the latest of our ongoing investments to deliver seamless and consistent experiences across all our channels. We are seeing more mobile adoption momentum, adding over 520,000 mobile active users in the third quarter, our best quarterly growth since first quarter of 2021. We've also continued to make important hires who bring expertise to Wells Fargo and businesses we're looking to grow. Before I highlight some of our new leaders, I'd like to take this opportunity to thank Bill Daley. Vice Chairman of Public Affairs who is retiring at the end of this year for all he has accomplished since he joined the company in 2019. Bill has been an invaluable asset to the company and we benefited from his long experience in both the public and private sectors. During his time at Wells Fargo, he helped strengthen our relationships with communities we serve, established new programs in housing and small business, and worked to rebuild our reputation both locally and nationally. I'm pleased to have announced that Tom Gneitz joined Wells Fargo as vice chairman earlier this month. Tom will be a close advisor to the senior management team on a range of issues, and we will work alongside our business leaders as we continue to expand our relationships with clients. The breadth of Tom's experience across the public and private sectors will be an important asset to us as we continue to move the company ahead. We continue to invest in our corporate investment banking business with new co-heads of equity capital markets. These new hires complement the other important hires we've been making over the past year. We also hired a new head of trust services and chief fiduciary officer in our wealth and investment management segment, and a new head of affluent and premier banking in consumer, small, and business banking. We also continue to focus on better serving our communities. During the third quarter, we published three reports that provide an overview of the work we are doing to build a sustainable, inclusive future in the communities we serve, outline our strategic approach to managing the risks associated with climate change and deploying capital to support a transition to a low-carbon economy, and describe our methodology for aligning our financial portfolios with pathways to net zero greenhouse gas emissions by 2050 and for setting interim emissions-based targets to track that alignment. We continue to make progress on our special purpose credit program initiative we announced last year to help drive economic growth, sustainable homeownership, and neighborhood stability in minority communities. We recently expanded our special purpose refinance offers to pre-qualified Hispanic customers with Wells Fargo mortgages to refinance at a lower than market rate. The program launched last year for Black or African American customers has seen strong results, and the Hispanic offer has shown similar levels of customer engagement. We also announced that we're offering a $10,000 home buyer access grant that will be applied towards down payment for eligible home buyers who currently live in or are purchasing homes in certain underserved communities in eight metropolitan areas. And we now have 14 HOPE inside centers in Wells Fargo branches, including the first focusing on serving the Navajo community. The centers help engage and empower communities to achieve their financial goals through financial education workshops and free one-on-one coaching. Looking ahead, the U.S. economy has continued to be resilient with key support from the labor market and strength in consumer spending. Delinquencies continue to deteriorate at a relatively slow, consistent rate without signs of acceleration across our portfolios. Our base case remains a continued slowing of the economy, but we remain prepared for a wide range of scenarios given there is still significant uncertainty ahead. regarding capital, the Basel III end game proposal included higher capital requirements as we expected. It's a complicated set of rules, but at this point, if nothing changed and we didn't take actions, we estimate that our RWA would increase by approximately 20%. There are some items that increased our capital requirements that we are hopeful will be adjusted, and we will be participating and sharing our perspectives on the proposal comment period. Additionally, we are evaluating changes we may make based on the proposed rules. Fortunately, we come into this from a strong position as our current capital levels are above the estimated regulatory minimum plus buffers. However, we still need to decide how much of an additional buckle we want to maintain and what mitigating actions we may want to take to reduce the impact of the new rules. At this point, we still see a path to concurrently increasing our level of CET1 as appropriate, increasing our dividend, and repurchasing common stock. Levels of each will be influenced by CCAR, the finalization of the proposed rules, and economic conditions. I'll now turn the call over to Mike.