Wells Fargo & Company (WFC) Earnings

Management highlights

- First quarter financial highlights: Diluted earnings per share up 15%, revenue up 6%, loans up 11%, deposits up 7%. Revenue growth from net interest income up 5% and non-interest income up 8%. - Strategic priorities progress: Closed final outstanding consent order, consumer franchise had new travel-focused reward credit cards, auto business originations doubled, consumer checking account openings up over 15%, mobile active users surpassed 33 million, Zelle transactions up 14%, Fargo reached over 1 billion customer interactions. Wealth and investment management had client assets up 11%, company-wide net asset flows at highest in over 10 years. Commercial businesses: Commercial banking hired coverage bankers, saw loan and deposit growth, investment banking saw 13% revenue growth, markets business had 19% revenue growth, completed sale of rail car leasing business. - Economic data and customer insights: U.S. labor market cooling, economic growth held up, consumer spending resilient but bifurcated, energy prices impact on spending, financial health of consumers and businesses strong but middle market and large corporate clients cautious. - Capital rules: Appreciate regulators' work, estimate risk-weighted assets could decrease by ~7%, GSIB surcharge expected to remain around 1.5%.

Guidance

- Net interest income for 2026 largely playing out as expected, retaining guidance of $50 billion plus or minus. - Net interest income expected to grow over the course of the year, average loan growth of mid-single digits from fourth quarter 2025 to fourth quarter 2026, deposits grown with interest-bearing deposits growth continuing. - Expense outlook: First four expenses in line with expectations, still expect 2026 non-interest expense to be approximately $55.7 billion.

Segment performance

Consumer banking and lending: Revenue grew 7%, credit card revenue grew 5% due to higher loan balances, home lending revenue declined 9%, auto revenue increased 24% due to higher loan balances. Commercial banking: Revenue grew 7%, loans grew 4% with broad-based growth. Corporate investment banking: Banking revenue grew 11%, markets revenue grew 19%. Wealth and investment management: Revenue grew 14%, client assets grew 11% to $2.2 trillion

Risks & headwinds

- Uncertainties in economic data and customer behavior, such as impact of energy prices on credit performance, macro and geopolitical uncertainty affecting client sentiment. - Regulatory proposals and their potential impact on the company, although viewed as constructive. - Risks associated with lending, including potential issues in non-bank financial lending portfolio if not properly managed.

Analyst Q&A

• Q: Mike, give more color on estimated impact of new regulatory proposals.

  A: Market risk not big driver, op risk to go up, big decline in credit risk due to investment-grade credits benefit, GSIB likely around current level. -

• Q: How does NIM compression interact with ROTCE goal?

  A: ROA to come down as repo growth and interest-bearing deposits grow, then moderate as other business activity adds, markets revenue up shows some growth, expect to get to 17-18% ROTCE. -

• Q: Thoughts on NIM going forward and earning asset mix?

  A: NIM impacted by market balance sheet growth, interest-bearing deposits growth, and rate impact, loans not major driver of compression. -

• Q: Comment on NDFI finance portfolio one-off item?

  A: It was a fraud situation, teams did in-depth review, confident it was isolated. -

• Q: Balance of NDFI quantitative risk reward and qualitative aspects?

  A: Different from CRE exposure, feel good about loan structure and client selection, engaged in diversification conversations. -

• Q: Thoughts on lending momentum pullback?

  A: Not seeing utilization increase in revolvers yet, probabilities weighted towards more growth if clients get comfortable. -

• Q: Path to 17-18% ROTCE?

  A: Confident through consumer credit card, wealth business, commercial bank client growth, corporate investment bank progress, expense control, and capital optimization. -

• Q: Thoughts on Basel III endgame RWA decline and capital?

  A: Not putting new target out yet, will reevaluate when rules finalized, directionally favorable. -

• Q: Net interest income growth and guidance?

  A: Drivers include loan growth, deposit growth, securities deployment, rate path, achievable $50 billion plus or minus. -

• Q: Expense topic and confidence in 55.7 guidance?

  A: Pressure mainly revenue-related comp, tracking to guidance, confident in investment and efficiency. -

• Q: Private credit exposure and regulatory impact?

  A: Majority in corporate debt finance $36 billion. -

• Q: Capital rules and CET1 target?

  A: Will reevaluate when rules finalized, directionally constructive. -

• Q: Loan loss reserves and macro risks?

  A: Significant downside weighting in scenarios, peak unemployment rate up slightly. -

• Q: Organic growth and future materialization?

  A: Seeing growth in consumer and commercial businesses across various metrics. -

• Q: NAI and forward curve impact?

  A: Bigger impact for next year, changes in forward curve have little impact this year. -

• Q: 7% RWA reduction and proposal expectations?

  A: Areas benefited are as expected, directionally where thought. -

• Q: Private credit exposure sizing?

  A: Majority in commercial debt finance $36 billion. -

• Q: Net interest income excluding markets and margin pressure?

  A: Driven by rates, interest-bearing deposit growth, not competing on pricing. -

• Q: Reserve rate and loss content in NVSI portfolio?

  A: No change in loss content views, allowance lower and not changing materially.