WELLS FARGO & COMPANY/MN Q1 FY2025 earnings call

Management Statement and Operational Highlights

• First Quarter Highlights: Solid first quarter results with diluted EPS up 16% y/y; revenue down y/y due to lower net interest income, but fee-based revenue grew; expenses declined for 19 consecutive quarters; returned $4.8B capital to shareholders; credit performance improved with lower net charge-offs.
• Strategic Priorities: Progress on risk and control work with 5 consent orders terminated in Q1; investments in card business, auto partnership with VW/Audi; growth in consumer small and business banking, home lending, credit card, wealth and investment management; commercial business growth in investment banking fees.
• Customer and Market Observations: Consumers resilient; deposit flows consistent; commercial loan demand up; support for regulatory and trade changes; prepared for slower economy but positioned well with strong balance sheet and credit discipline.

Segment Performance

• Consumer Banking and Lending: Consumer small and business banking revenue declined 2% y/y due to higher deposit costs; deposit balances grew y/y for first time since Q4 2022; debit card spending up 4% y/y; home lending revenue stable, mortgage loan originations up 26%; credit card revenue up 2% y/y; auto revenue down 21% y/y due to lower loan balances and spread compression; personal lending revenue down y/y.
• Commercial Banking: Revenue down 7% y/y; average loan balances stable y/y, up 1% q/q from Q4.
• Corporate and Investment Banking: Banking revenue down 4% y/y; commercial real estate revenue up 18% y/y; markets revenue stable y/y; average loans down 2% y/y, up 1% q/q from Q4.
• Wealth and Investment Management: Revenue up 4% y/y.
• Corporate: Revenue down y/y due to venture capital investments and debt securities repositioning.

Guidance

• Net interest income: Still expects 2025 NII to be 1%-3% higher than 2024, but now expects low end of range due to current market volatility.
• Expenses: Still expects 2025 non-interest expense to be approximately $54.2B.

Risks

• Regulatory and trade uncertainties; economic volatility; potential impact of tariffs on business; uncertainty in policy changes affecting the economy.

Question and Answer

• Q: Scott Siefers on customer sentiment A: Charlie Scharf says customers are cautious in the shorter term but bullish long-term, waiting to see resolution of uncertainties and positive economic changes.
• Q: Ken Usdin on regulatory orders A: Charlie Scharf states no need to adjust approach, progress on consent orders frees up management time to focus on other priorities.
• Q: John McDonald on commercial loan growth A: Mike Santomassimo mentions commercial loan growth was due to utilization and some new clients, mostly in mid-corporate segments and asset-based lending.
• Q: Betsy Graseck on asset cap A: Charlie Scharf says consent order terminations free up management time and provide more flexibility to run the company efficiently.
• Q: Gerard Cassidy on asset cap and revenue mix A: Charlie Scharf talks about fee-based businesses as strategic regardless of asset cap, building diverse revenue streams to support growth.