Wells Fargo & Co at UBS Financial Services Conference Transcript

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

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So I just said the word transformation. Obviously, I have to start with the big announcement that we saw a few weeks ago, that the OCC terminated the consent order that I like to say, started it all, the 2016 sales practices consent order. If you could give us just a little bit of insight, I know you have eight consent orders left, if that's right, what does this mean? And what can investors take away in terms of this consent order being terminated as it relates to your progress in remediation?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So you get a lot of questions about regulatory remediation, the asset cap, balance sheet positioning in this rate environment. But I thought we'd start in terms of how your lines of businesses are doing because I feel there's been a lot of work and it's obviously been done. And I think that you probably talk less about those opportunities than you would maybe like. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2024 / 1:00PM, WFC.N - Wells Fargo & Co at UBS Financial Services Conference So let's start off in Consumer Banking and Lending. Could you tell us what your deposit balance and spend data is telling you about the sustainability of U.S. consumer health?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So you talked about pressure on deposit balances. What inning are we in, in terms of consumer deposit mix shift? And CDs continue to be a low percentage of industry deposit balances relative to history. How do you expect that to develop this year?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : And speaking of that, how do you expect consumer deposit pricing trends to develop as we are in this prolonged Fed pause? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2024 / 1:00PM, WFC.N - Wells Fargo & Co at UBS Financial Services Conference

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So switching gears to card, where you've seen significant momentum. It's clearly a big topic for investors. You did say, Mike, during the earnings call that profitability should improve as accounts mature. In the cohort where you've been focusing on, how long is that investment cycle before inflection? And you also mentioned introducing two new products this year. Clearly, we have behemoths in terms of issuer in one new potential behemoth. How do you -- how hard is it to reach that inflection point when you're competing with folks with really high returns on a consolidated basis?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : And before I move away from the consumer, the consumer has been a source of savings as you've remade distribution and operations here. Are there any material -- is there any material opportunity to find gross cost savings in the consumer franchise? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2024 / 1:00PM, WFC.N - Wells Fargo & Co at UBS Financial Services Conference

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So switching to Commercial Banking. What's the mood of your corporate and SME clients as they think about the business climate in '24? And we've heard a lot about soft loan demand. What are really the primary concerns that your clients have that's underpinning the lower demand for financing?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : Outside of macro, maybe I should ask this question, where are you investing most in this business?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : In the commercial bank, yes.

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : I definitely want to ask you more in a little bit about the CIB. But before we move away from that, I suspect this is going to be a big topic at this conference given the corporate attendee list, but private credit. There's been so much discussion about private credit taking middle market share away from the banking industry. In your seat, how much of this is truth versus conjecture? And maybe also if you could give us a little bit more detail about your partnership with Centerbridge.

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So this is a good segue for the corporate and investment bank update. Your trading revenues have stepped up materially in 2023. And the environment was on your side, but clearly, the data is showing you're taking market share. What are you doing differently?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So if I'm asking you this question 5 years from now, what does your CIB look like? I mean like you said, you already have -- you have so much exposure. You have one the largest balance sheets and largest corporate client Rolodex already out there. What does it look like in 5 years? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2024 / 1:00PM, WFC.N - Wells Fargo & Co at UBS Financial Services Conference

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : And finally, before we take it back to the top of the house, every one of us in this room understands that when balance sheet is tight, the CIB business, especially markets tends to have -- get allocation pulled back. I think you mentioned on the earnings call that there'd be opportunities to ramp up businesses within the CIB once the asset cap is lifted, and maybe just elaborate on those opportunities.

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So I'm about to ask about net interest income, don't worry. But I thought it would be a good time to remind everybody that through the UBS conference app and the QR code, if you want to ask Mike a question, I'll get it on this iPad right here and I will ask him. But we also do have old school analog. We will have mics in the room also. So putting this all together, I do want to revisit your '24 guidance for a 7% to 9% decline in net interest income in '24, which was anchored off of a curve that had six cuts in it. And you noted that given your modestly asset-sensitive profile, the impact to each rate cut or lack thereof was linear and that you assume your balance sheet is flat. We've clearly pushed rate cuts out later. So could you tell us a little bit more about how we should think about the proportionate recovery to NII or the proportionate impact to NII?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So putting together something you said earlier during this conversation with this particular question, you did also mention in your earnings call that you've replaced the clients in consumer deposits in '24 with market funding and the latter grew something like $70 billion last year. With your LCR at 125% in 4Q '23, you have $237 billion in cash, why do you need to keep that much cash liquidity on hand funded by market funding?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : On the fee side, Mike, putting everything that we discussed together, it does seem like your biggest opportunity for near-term fee growth is taking market share in the CIB. But maybe we'll revisit wealth here. You've talked about the attrition being stemmed. But is there a point where Wells can REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2024 / 1:00PM, WFC.N - Wells Fargo & Co at UBS Financial Services Conference potentially grow more than the market? And are you now at the point where you're not just trying to retain but attract advisers to the platform? So tell us a little bit more about the transformation here.

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So moving on to expenses, a two-part question. Where would you say Wells Fargo is in terms of modernizing the infrastructure of the bank, technology, real estate org simplification? And second, can you identify costs that are above and beyond new BAU for risk and compliance that could leave the bank once regulatory remediation is completed? And I don't even know what completed would mean.

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : By the penny. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 26, 2024 / 1:00PM, WFC.N - Wells Fargo & Co at UBS Financial Services Conference

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So you mentioned upfront about continuing to see credit migrate. I do have to ask about commercial real estate. It's reemerged as a topic. You said on the earnings call that we're at the opening credits of the commercial real estate movie. Maybe elaborate on that. And should we continue to expect you to refill your reserve as you take charge-offs? And at what point should that reserve fully absorb your CRE net charge-offs?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : And just maybe some final questions on capital. You, of course, said on the call, you'll buy back more stock in '24 than the $12 billion that you purchased in '23 or repurchased in '23. Assuming part of the answer is macro and DFAST, what are the key signposts that you're looking at near term when you're sizing that buyback? And how valuation-sensitive are you?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : And then generally, do you feel like the DFAST parameters are somewhat in line with last year?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : And maybe just lastly on Basel III endgame, as you mentioned, we've heard a lot of chatter about the softening of Basel III endgame. What do you think the opportunities are? Or where do you think the regulators will agree in terms of trying to be more aligned with international standards versus gold plating?

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : Got it. And just wanted -- a reminder for the audience that if you wanted to ask a question electronically, please do so through your UBS conference app. And actually, we have maybe a minute for a question or two. If anybody has questions in the room, we also have a mic that we can pass around. Any questions from the audience? You're so detailed and articulate, not a lot of follow up.

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : So Mike, thank you so much for your time. We appreciate you coming to the conference, and have a good rest of your day.

Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst : Yes. Thank you.