Wells Fargo & Co Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Scott Siefers - Piper Sandler & Co. - Analyst : Charlie, maybe I was hoping you could start by perhaps expanding on your thoughts regarding current customer sentiment. Is your sense that customers are still eager to do things once we get past all this turmoil? In other words, we just sort of need a finite termination to some of this uncertainty. Or are they now beginning to like gear themselves for a more prolonged slowdown that would sort of dial back some of their plans?

Question: Scott Siefers - Piper Sandler & Co. - Analyst : Okay. Perfect. Thank you very much. And then Mike, I was hoping you could unpack a little more on the NII commentary. A few copy outs in there and appreciate your thinking more towards the lower end of the range given what we see currently. But maybe as you look at sort of some of the puts and takes regarding rates, the forward anticipated loan growth or lack thereof, if you could just maybe point to where you feel like you're most confident by contrast, what might need to be right to get a little stronger performance as the year plays out?

Question: Ken Usdin - Autonomous Research LLP - Analyst : Charlie, in your interest statements you mentioned the continued progress on knocking down more of the consent orders. And I just want to ask a bigger question about the regulatory backdrop? And there's anything in the moving parts that we're all watching happen in terms of appointments and new heads and such impact how you move forward on trying to get the rest of them done? And just if you have to make an adjustment like what are those adjustments that you have to just be thinking about? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 11, 2025 / 2:00PM, WFC.N - Q1 2025 Wells Fargo & Co Earnings Call

Question: Ken Usdin - Autonomous Research LLP - Analyst : Great. And Mike, one for you. You mentioned that you did a little bit of adjustment on the reserve. I think people are noticing that the reserve -- there was a bit of a reserve release, you guys are one of the more conservative in your scenarios. But can you kind of just talk through just how you feel about where you stand now and how the environment also just makes you think about whether that was fully captured in the first quarter reserve? Or are there any things we should be thinking about going forward? Thanks.

Question: John McDonald - Truist Securities, Inc. - Analyst : Mike, I was wondering if you could give a little more color on what you saw at commercial loan growth this quarter. It seemed like it picked up a little bit change in utilization or a build-out of customers. Just give a little color there, please.

Question: John McDonald - Truist Securities, Inc. - Analyst : Got it. Thanks. And I was wondering if you could give some more color on what you saw this quarter in terms of the market-sensitive fee businesses across trading, IB, and venture capital. How did the environment impact this quarter? And what should we keep in mind as we think about the outlook for those items?

Question: John McDonald - Truist Securities, Inc. - Analyst : Okay. And just again on the IB, obviously, things have kind of ground to a halt a bit on activity levels, but you guys are building out your investment bank and adding people. Just kind of some thoughts there would be helpful. Thanks.

Question: Steven Chubak - Wolfe Research, LLC - Analyst : Maybe just a follow-up to the discussion around the fee outlook, maybe within expense lens or framing it with an expense lens, just given the better core expense outcome in the quarter versus the quarterly run rate implied by the full-year guide and some of the headwinds you cited just on the fee side from various impairments or negative AUM marks, I was hoping you could speak to the expense flexibility in the model if the fee outlook or backdrop continues to deteriorate further?

Question: Steven Chubak - Wolfe Research, LLC - Analyst : Thanks for the color. And Mike, for my follow-up, I was hoping to drill down to some of the NII comments you made around the second half ramp and some of the [video] factors like the CD roll off you cited -- it's certainly encouraging guide, especially given the changes in the forward curve. But myself and others appear to be struggling to reconcile some of the resiliency in literally with all the incremental cuts that are now in the forward curve. And I was hoping you could maybe just speak to the exit rate on NII, once those cuts are fully absorbed, just as we try to think about the jumping off point looking ahead to 2026.

Question: Steven Chubak - Wolfe Research, LLC - Analyst : It's almost always wrong and is always changing. So I could certainly appreciate that sentiment. Thanks so much for taking questions.

Question: Betsy Graseck - Morgan Stanley - Analyst : Charlie, a couple of questions for you. One is on the 5 consent orders that were closed so far year-to-date, 2025. And I'm just wondering, how does that impact you? Does that give you more management time? Does it enable you to take down expenses at all? Does it make you more efficient? Or not. I'm just wondering if there's any tangible impact that we should see from this?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. And then the follow-up is you mentioned in your remarks about being excited about the future and it would be helpful to understand how you're thinking about that. What underlies that statement, especially given you still do have the asset cap on. I mean, we're all expecting at some point it will be taken off. But in an environment with the asset cap still on, what underlines that statement; and environment without it, what underlines that statement would be helpful to unpack a bit. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 11, 2025 / 2:00PM, WFC.N - Q1 2025 Wells Fargo & Co Earnings Call

Question: Betsy Graseck - Morgan Stanley - Analyst : And is there an opportunity for an even elevated -- more elevated ROE, ROTCE outlook here as you progress through that opportunity set?

Question: Ebrahim Poonawala - BofA Global Research - Analyst : I guess maybe just on the last thing you mentioned, Charlie, around each business should have best-in-class ROE. You've talked about that for a while. Like, the consumer business, obviously, stands out there. Give us a sense of how much of that improvement in the consumer business on ROE is a removal of the asset cap? Maybe there's some efficiency opportunities that arise out of that versus better using our branch network after the consent order that got lifted last Feb. Just would love to hear how we should think about that ROE gap relative to best-in-class peers, narrowing from here? And if there's a time frame that you have in mind? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 11, 2025 / 2:00PM, WFC.N - Q1 2025 Wells Fargo & Co Earnings Call

Question: Ebrahim Poonawala - BofA Global Research - Analyst : That's helpful. And just a second question. Would love to hear how you're thinking about capital management. Now your SCB went up 90 basis points last year and we'll see what the results have come end of June. But would -- assuming we have a similar size or some decline this year, is there an internal philosophy around where you think the right CET1 is for Wells regardless of where the SCB shakes out? And does potential changes in sort of the regulatory backdrop reduce the need for a 100 basis point buffer in terms of how you've thought about that?

Question: John Pancari - Evercore ISI - Analyst : Just related to that last topic, I just wanted to get your thoughts on how you're feeling about the pace of buybacks here. We saw you bought back $3.5 billion in the quarter and you just talked about your CET1 level where it stands now. How are you feeling about the pace of buybacks as you look forward, particularly if we are looking at some softening in the economic backdrop, does that make you feel any different in terms of how you're approaching the pace of buyback.

Question: John Pancari - Evercore ISI - Analyst : Got it. Okay. And then separately on credit. On the commercial front, are you seeing any indications of borrowers beginning to draw down lines as a precaution, given the economic backdrop and recessionary fears. And then secondly, on the commercial front, I guess, just to apply to consumer as well. Is there any areas that you're tightening lending standards incrementally now post the tariff announcement and the economic implications where you're looking at things more cautiously and therefore, tighten?

Question: Matt O'Connor - Deutsche Bank - Analyst : I just wanted to follow up on expenses in terms of how much benefit there is still to come from, call it, natural passage of time. You referenced the legacy servicing costs were down significantly from the top. But how much more kind of built those savings? Are there from things like that decisions that you've already made and taken, but just take time to play out. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 11, 2025 / 2:00PM, WFC.N - Q1 2025 Wells Fargo & Co Earnings Call

Question: Matt O'Connor - Deutsche Bank - Analyst : And I guess taking like a more medium-term outlook, my strength has been those opportunities will allow you to self-fund kind of best of your expense base. So conceptually are kind of relatively stable on costs as hopefully, revenue growth picks up a little bit. Is that still a reasonable framework as you think out over the next several years?

Question: Saul Martinez - HSBC - Analyst : I just wanted to maybe follow up on the Auto business. It's obviously not a big part of your total loan book, but the delta on growth has changed a lot -- and it is -- it's no longer declining as much as it was and that's helped the overall loan growth trajectory. But curious what your views are from here. My sense is that this business has become more rational in terms of the competitive landscape. But you also mentioned in the prepared remarks that the results were impacted by loan spread compression and obviously, you have tariffs in the background. So just if you can give us an update on what you're thinking for this business, what the outlook is, how you're strategically positioned. And yeah, just any color.

Question: Saul Martinez - HSBC - Analyst : Okay. Great. And then maybe a follow-up on the markets business, is obviously -- you're building those out. The equities piece was flat year-on-year. I know it's a small business at this point. But some of your competitors who reported this morning had reported very big increases year-on-year. Obviously, you've had a lot of engagement and volatility. Just curious if -- and I forget if last year, the base was very strong or there was a base effect. But just any color on what drove this. Is it a disappointing result?And just what -- is there anything in terms of your ability to use balance sheet that is really impairing you from growing in this business? Just any color would be helpful.

Question: Erika Najarian - UBS - Analyst : I know we've run long, so I just had one follow-up question. Mike, just going back to Steve's question, I think in -- on the previous call, you talked about a net interest income trajectory that was flattish in the first half of the year and then sort of ramps in the second half. I'm wondering, number REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 11, 2025 / 2:00PM, WFC.N - Q1 2025 Wells Fargo & Co Earnings Call one, if that's still your expectation? And perhaps help us frame maybe the impact of the swing in trading NII to this quarter's NII print and additionally, what impact should be securities repositioning have on your margin as we think about a go-forward basis?

Question: Erika Najarian - UBS - Analyst : Got it. And Charlie, I hear your message loud and clear. I just wanted to flag that. I'm sure that the investor base will look through some of these questions on NII given everything that you guys laid out on your recurring trajectory going forward.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Charlie, you said in your prepared remarks how you're going to be reducing the reliance on net interest income. Can you remind us, and I'm not suggesting or asking when you think the asset cap is going to be released. But when that happens, what's the optimal mix that you think you guys can get to between net interest income and noninterest income or fee revenues? And then what's the main driver of that fee revenue line?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Very good. And then, Mike, I know you touched on credit quality throughout the call. And in terms of your focus going forward on the C&I loan portfolio, are there specific categories within the C&I loan portfolio that you guys are ensuring that you're checking maybe more rigorously today than 12 months ago, just as a potential weakness could develop in a slower economy.