Wells Fargo & Company

Welcome and thank you for joining the Wells Fargo first quarter 2026 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.

Good morning. Thank you for joining our call today where our CEO, Charlie Scharf, and our CFO, Mike Santamassimo, 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 SEC filings and the earnings materials available on our website. I will now turn the call over to Charlie.

Thanks, John. I'm going to provide some brief comments about our results and update you on our priorities. 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 our first quarter financial highlights. We saw continued positive impacts from the investments we've been making with diluted earnings per share increasing 15%, revenue increasing 6%, loans growing 11%, and deposits up 7% compared to a year ago. Revenue growth was driven by a 5% increase in net interest income and an 8% increase in non-interest income. Our consistent focus on investing across all of our businesses helped contribute to broad-based revenue growth, with each of our operating segments increasing revenue from a year ago. Consumer banking and lending revenue grew 7%, and commercial banking revenue grew 7% as well. Within our corporate and investment bank, we saw an 11% increase in bank revenue and a 19% increase in market revenue. Wealth and investment management grew 14%. While expenses increased driven by higher revenue-related expenses, we remain focused on expense discipline. At the same time, we're increasing our investments in areas like technology, including AI, as well as in advertising, while continuing to execute on our efficiency initiatives, which has resulted in 23 consecutive quarters of headcount reductions. With revenue growing faster than expenses, Pre-tax, pre-provision profit grew 14% from a year ago. Credit performance remained strong, and our net charge-off ratio was stable from a year ago at 45 basis points. Given that non-bank financial lending has generated a lot of interest lately, Mike will do a deep dive into that portfolio later in the call. But I will say we like the risk-return profile of the portfolio, given our deep understanding of the collateral, the diversification across both clients and asset types, and structural protections in place. And finally, we returned $5.4 billion to shareholders in the first quarter, including $4 billion in common stock repurchases while continuing to operate with significant excess capital. Turning to the progress we made during the quarter on our strategic priorities, last month we closed our final outstanding consent order, bringing the total 14 terminated since 2019. We are incredibly proud of the hard work and unwavering commitment that was required to reach this milestone and understand the importance of sustaining our risk and control culture. With this work behind us, we are now focusing more fully on accelerating growth and improving returns. We are seeing momentum across many business drivers, which we highlight on slide two of our presentation deck. Let me share some of them. starting with our consumer franchise. In the first quarter, we launched two new travel-focused reward credit cards available exclusively to new and existing premier and private wealth clients. Over the past five years, continued enhancements to our credit card offerings have driven higher purchase volume and loan balances, which were both up from a year ago. New account growth remains strong, increasing nearly 60% from a year ago, driven by higher digital and branch-based openings. We also had continued strong growth in our auto business. Originations more than doubled from a year ago, benefiting from being the preferred financing provider for Volkswagen and Audi vehicles in the United States, as well as our methodical return to broad-spectrum lending. Importantly, credit performance has remained strong and in line with our expectations. We have continued to invest in marketing to help drive new primary checking accounts, and consumer checking account openings increased over 15% from a year ago. While this momentum is encouraging, we are not yet growing accounts at the pace we expect to over time. As customer expectations evolve, we continue to modernize our digital offering, complementing our in-person service with seamless mobile experiences. The momentum continued in the first quarter as mobile active users surpassed 33 million. Zelle transactions increased 14% from a year ago. And Fargo, our AI-powered virtual assistant, reached over 1 billion customer interactions less than three years since its launch. We had continued momentum in our wealth and investment management business, with client assets growing 11% from a year ago to $2.2 trillion. Company-wide net asset flows accelerated in the quarter, reaching their highest level in over 10 years. Turning to our commercial businesses, in commercial banking, we continue to hire coverage bankers to drive growth, and we are seeing the early signs of success with higher new client acquisition as well as loan and deposit growth. Average loans and deposits both grew by approximately $5 billion in the first quarter, demonstrating accelerating momentum. We are also continuing to grow our banking and markets capabilities while not significantly changing the risk profile of the company. We continue to invest in senior talent to improve client coverage and broaden our product capabilities in investment banking. These investments helped drive 13% revenue growth from a year ago. While markets conditions can change, the outlook for investment banking remains strong, and we entered the second quarter with a strong pipeline driven by M&A and equity capital markets. We continue to grow our markets business amid a mixed and volatile trading environment with revenue up 19% from a year ago. Client sentiment is cautious but engaged as macro and geopolitical uncertainty has increased and clients have largely shifted to a more selective and defensive posture. Finally, we completed the sale of our rail car leasing business at the beginning of the quarter. We have now substantially completed our efforts to refocus and simplify the company by exiting or selling 12 businesses since 2019. Let me now turn to the future. I want to start by highlighting what we are watching in the economic data. The U.S. labor market continues to cool in an orderly but uneven fashion with few signs of systemic stress. Layoff activity remains contained. Weekly jobless claims reinforce this picture and are not signaling labor stress. The unemployment rate dipped to 4.3% in March, but this continues to reflect slower rehiring and longer job searches, not renewed labor market strength. Despite slowing employment momentum, U.S. economic growth has held up. The U.S. consumer remains resilient in the aggregate, but increasingly bifurcated beneath the surface. Spending has held up since early 2026, despite slower job growth. supported by higher-income households, steady wage growth for incumbent workers, and continued access to credit. However, confidence indicators and underlying balance sheet trends point to rising stress for less affluent consumers. Upper-income consumers continue to benefit from elevated equity prices. Home equity and cash buffers accumulated earlier in the cycle, allowing discretionary spending to remain firm. By contrast, lower income households are more exposed to higher interest rates and energy prices. Financial markets have absorbed these cross-currents with resilience, but we expect continued volatility driven by geopolitical headlines and outcomes, as well as the unfolding impact of higher commodities prices. Turning to what we are seeing from our customers, the financial health of consumers and businesses remains strong. Consumers are spending more than a year ago, which includes spending more on gas, but they haven't slowed spending on everything else. Gas represented 6% of our total debit card spend and 4% of our total credit card spend before the rise in oil prices. They now represent 7% and 5% of debit and credit card spend. Note that these numbers are higher for low-income households. We have seen historically that it often takes consumers several months to reduce their spend levels on other categories to adjust for higher oil prices. And while we don't know the exact timing, we would expect to see the same in the second half of the year. We also expect that higher energy prices will impact other goods and services. The duration and severity will be driven by the level and duration of higher oil prices. The ultimate impact on credit performance is not yet clear, given the uncertainties I just mentioned, but the strength across our consumer portfolios, including lower charge-offs and improved early-stage delinquencies in our auto and credit card portfolios from a year ago, provide time for consumers to adjust their behaviors. Having said that, at this point, it's likely there will be some economic impact based on what's already occurred, but there are both risks and potential mitigants, so it's hard to predict the ultimate impact. Middle market and large corporate clients are in a similar position. They've been resilient and balance sheets are strong, but they tell us they're approaching the remainder of the year cautiously. As we grow our balance sheet, we are cognizant there are risks that we do not yet see in our data and will respond accordingly. Putting all of this together, it's likely energy prices will have some impact on the economy, but we feel good about where our customers and our companies stand today. We have managed credit well over many cycles and are well positioned to support our customers and navigate the variety of economic scenarios. Turning to the recently proposed capital rules, we appreciate that the work our regulators have been doing is based on analysis, interagency coordination, public comment, and a focus on reforms that unlock economic potential. Importantly, the proposals are designed maintain a strong and resilient banking system that allow the industry to support the flow of credit and help grow the broader economy. We continue to work through the details, but view the proposals as a constructive step in supporting our role in serving households and businesses. If the proposals do not change and based on our current balance sheet composition, we estimate that under the new rules, our risk-weighted assets could decrease by approximately 7%. Regarding the GSIB surcharge, under the current proposal, we expect to remain around 1.5% for the foreseeable future, even as we continue to grow. In closing, we delivered solid financial results in the first quarter that were consistent with our expectations. We have clear plans in place and are focused on driving continued organic growth and increasing returns across the franchise using our broad set of capabilities. We're executing on our plans, and I'm encouraged by the momentum we have built and continue to have confidence that we can continue to deliver stronger results in all of our businesses. I'll now turn the call over to Mike.