Wells Fargo & Company

Welcome and thank you for joining the Wells Fargo first quarter 2025 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. Thank you for joining our call today where our CEO, Charlie Scharf, and our CFO, Mike Sanimasimo, 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 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 SEC filings and the 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 results, update you on our priorities, and provide some observations on what we're seeing in the current environment. I'll then turn the call over to Mike to review first quarter results in more detail before we take your questions. Let me start with first quarter highlights. Solid first quarter results with diluted earnings per share up 16% from a year ago, including some items noted in the earnings release. While revenue declined from a year ago, driven by lower net interest income as expected, we grew our fee-based revenue across many of our businesses, reflecting the benefit of the investments we've been making to diversify revenues and reduce our reliance on net interest income. We continue to take a disciplined approach to expenses, with expenses declining from a year ago as we executed on our efficiency initiatives, which have helped drive headcount reductions for 19 consecutive quarters. We maintained our strong credit discipline and credit performance improved during the quarter with lower net charge-offs from both a year ago and the fourth quarter, driven by improved performance in our commercial portfolio while consumer losses were relatively stable. We've been actively returning excess capital, and in the first quarter, we returned $4.8 billion of capital to shareholders through dividends and share repurchases. And our diluted average common shares outstanding were down 8% from a year ago. Regarding our strategic priorities, I'm very proud of the significant progress we've made on our risk and control work. It remains our top priority and closing consent orders is an important sign of progress. Five consent orders were terminated in the first quarter. Some of these were longstanding, and others were resolved with timeframes that are much improved from other historical orders, which is an indication that our team is establishing the right processes and controls to meet our regulators and our own expectations. Since 2019, 11 orders have been terminated. We are a different company today than when this new management team arrived. These recent closures reflect that we have completed much of the common risk and control infrastructure work across the company that is required by other orders. I'm incredibly proud of the work done by our teams and remain confident that we will complete the work needed to close our other open consent orders. We also continue to show progress on our other strategic priorities, which are helping to improve Wells Fargo's returns. Our investments in our card business have continued to drive higher balances and spend from a year ago, while credit results have continued to be within our expectations. During the first quarter, Ed O'Leave joined us as the head of cards and merchant services. I want to thank Ray Fisher for his leadership of our card business over the last five years. Ray was my first hire when I joined Wells, And I worked with Ray for much of the 38 years we've known each other. So I'm not surprised at the great job he did in transforming our card and merchant business. He brought great talent into the business, transformed our product offerings, and greatly improved the customer experience while making the card business an important strategic part of Wells Fargo. I'm equally excited to welcome Ed to the company. He brings more than 25 years of financial services and credit card experience. and his expertise will be invaluable as we continue to grow our credit card business and expand our payment capabilities across merchant services. Turning to our auto business, we've started to launch our partnership with Volkswagen and Audi Brands as their preferred purchase financing provider in the United States. Following the termination of the sales practices consent order over a year ago, we have been taking measured actions in consumer small and business banking that started to generate modest growth across a number of metrics, including net checking account growth, more credit cards originated in our branches, and improved customer experience scores. We've also continued to invest in refurbishing our branches, while at the same time making enhancements to our account opening experience in both our digital and branch channels. In the first quarter, active mobile customers grew 4% from a year ago, and digital account openings continue to grow. We continue to increase collaboration between our bankers and advisors that is helping drive an increase in net asset flows into the wealth and investment management premier channel. We've also seen more of our clients investing in alternative products, which is one of our goals. Turning to our commercial business, we continue to generate strong growth in investment banking fees driven by strength in debt capital markets. I want to thank John Weiss, who announced his retirement earlier this year and started leading corporate investment banking in 2020. John has built a great management team, and together they have taken a good corporate investment bank and have made it an important driver of growth and strong returns for the company. We are a better and stronger company because of John's leadership, and he is leaving corporate investment banking well-positioned for future growth. Fernando Rivas, We joined Wells Fargo last year with nearly 30 years of industry experience, is now the sole CEO of corporate investment banking. We are also focused on expanding our commercial banking business and the investments we've made in relationship managers and business development officers has helped to attract new clients. And we've seen some early success in offering our investment banking capabilities to our commercial banking clients. Now let me turn towards what we're seeing from our customers. Through the first quarter, our internal indicators continued to point towards the strength of our customers' financial position. Consumers have remained resilient, and debit and credit card spending patterns have remained stable. More affluent customers continue to show strength, while less affluent customers show more stress. Consumer credit also continues to perform well. Delinquencies appear to have leveled at historical norms, and payment rates on unsecured portfolios have been quite strong. Deposit flows for both consumer and commercial clients have been consistent and in line with seasonal trends. And while overall loan growth was modest, we've seen pockets of increased loan demand from our commercial clients, resulting in modest growth in both average and period and commercial loan balances from the fourth quarter. All of this points to the strength of our customer base through the end of the first quarter. Some broader comments now on what we see currently. I'm encouraged by the willingness of the administration to take on some very difficult issues. It's been over 15 years since the financial crisis, and we greatly support the willingness to look at the cumulative impact of the regulatory changes that have been made during this period and evaluate where changes are needed to better support a growing U.S. economy. This is not just a bank issue. We also hear from our corporate clients that they experience significant regulatory barriers to growth and support the effort to look at regulations and make meaningful changes. We believe the changes that are being discussed would allow us to better support our customers. That means make more loans, take more deposits, and provide more liquidity to the markets while still preserving robust regulatory oversight. Regarding trade. We also support the administration's willingness to look at barriers to fair trade for the United States, though there are certainly risks associated with such significant actions, and we see concern playing out in the markets and the economic uncertainty that now exists. Timely resolution, which benefits the U.S., would be good for businesses, consumers, and the markets, and therefore good for Wells Fargo, since we're predominantly a U.S. bank. Wells Fargo prospers when the U.S. prospers. But we have heard a great deal from our clients as they work through this transitionary environment. We have not seen an impact on their condition yet. This is a complicated issue and is our current expectation that we will face continued volatility and uncertainty and are prepared for a slower economic environment in 2025. But the actual outcome will be dependent on the results and timing of policy changes. We and our customers come into the current environment from a position of strength, and that should serve us well. We've managed credit well over many cycles, and over the past couple of years, we have taken several credit tightening actions that have reduced our origination volume and improved our credit performance, which should position us well if there is an economic downturn. We have a strong balance sheet, including our capital and liquidity levels, which allow us to support our customers and clients in a variety of economic scenarios. We will continue to react to both known and anticipated policy changes and their potential effects on the economy, and will continue to carefully monitor these trends and respond accordingly. Our focus is unwavering. We want to be an important partner for our clients, communities, and governments in driving sustainable economic growth in the U.S. We are transforming Wells Fargo by investing to build a well-controlled, faster-growing, and higher-returning company while we work to better serve our customers and become more efficient. I'm proud of all that we've accomplished and even more excited about our future as we build one of the most respected financial institutions in the country. I will now turn the call over to Mike.