Summary of Wells Fargo Conference Call - November 06, 2025 Company Overview - **Company**: Wells Fargo (NYSE: WFC) - **Date**: November 06, 2025 - **Participants**: Dick Manuel (Equity Research Analyst, Columbia Threadneedle Investments), Mike Santomassimo (CFO of Wells Fargo) Key Points Industry and Company Performance - Wells Fargo has increased its Return on Tangible Common Equity (ROTC) target from 15% to 17%-18% [3][4] - The company aims for each business segment to achieve best-in-class returns, with a focus on consumer banking and lending [5][6] Consumer Banking Insights - The consumer banking segment is expected to drive improved returns through: - Maturation of the card business, which has been replatformed and invested in over the last five years [5][6] - Right-sizing the mortgage business to enhance profitability [6][7] - Improving branch productivity and sales culture, which has been reinstituted after regulatory challenges [8][10] - The company reported strong credit card originations in Q3, driven by direct customer engagement and improved branch productivity [9][10] Auto Lending Strategy - Wells Fargo is gradually expanding its lending spectrum to include near-prime and subprime segments, while maintaining a focus on prime lending [11][12] - The partnership with VW Audi has shown positive momentum since its operational launch [12][13] Commercial Banking Growth - The commercial bank is already achieving best-in-class returns, with opportunities for growth in under-penetrated markets [15][16] - The company has added hundreds of commercial bankers to target emerging middle-market customers and specific sectors like healthcare and technology [16][17] Investment Banking and Capital Markets - The commercial investment bank is generating near best-in-class returns, with a focus on growing fee-based businesses without significantly increasing lending [18][19] - Investment in sectors such as technology, healthcare, and M&A is expected to enhance returns [20][21] Wealth Management Opportunities - The wealth business is recovering from past reputational issues, with low attrition rates and successful recruitment of high-quality advisors [22][23] - The focus is on affluent customers and improving lending and alternative investment offerings to enhance margins [25][28] Expense Management and Efficiency - The company is committed to maintaining expense discipline, with ongoing efforts to drive efficiency across all business areas [34][41] - A significant reduction in workforce from 275,000 to approximately 210,000 has resulted in $15 billion of gross savings, which is being reinvested into the business [47][48] Capital Management - Wells Fargo is targeting a Common Equity Tier 1 (CET1) ratio of 10-10.5%, currently at around 11% [54][55] - The company has excess capital, allowing for growth and shareholder returns, with a focus on supporting client needs [55][56] Macro Environment and Consumer Health - The consumer health remains stable, with consistent credit performance and spending trends [60][62] - There are concerns about lower-end wage earners, but overall credit delinquencies are better than expected [61][63] Non-Depository Financial Institutions (NDFI) Perspective - The company has a disciplined approach to its NDFI portfolio, focusing on established players and maintaining a sound credit structure [74][75] Additional Insights - The company is optimistic about potential regulatory changes that could impact capital requirements positively [58][59] - There is a cautious sentiment among commercial banking clients regarding investments due to macroeconomic uncertainties [63][64] This summary encapsulates the key insights and strategic directions discussed during the Wells Fargo conference call, highlighting the company's focus on improving returns across various segments while navigating regulatory and macroeconomic challenges.

Core Viewpoint - The stock market is experiencing a challenging start to November, primarily driven by concerns over a potential AI bubble and high valuations in the tech sector, leading to significant declines in major AI-related stocks [1][6]. Market Trends - Investors are advised to focus on high-quality asset classes and sectors during market downturns, with a recommendation to avoid chasing rallies or selling during weakness [2]. - There is a notable shift away from communication services and information technology stocks, as these sectors have been downgraded due to more attractive valuations found in other market areas [2]. Valuation Concerns - There are growing doubts regarding the high valuations of certain tech firms, with specific mention of Palantir trading at a forward price-to-earnings multiple of approximately 217, indicating potential overvaluation [3]. Investment Recommendations - Investors are encouraged to buy into utilities, industrials, financials, and emerging market stocks, which are seen as having more favorable valuations compared to tech firms [4]. - Utilities and industrial stocks have outperformed the broader S&P 500 this year, with both sectors up over 17% year-to-date, highlighting their attractiveness [5]. Sector Adjustments - A strategic shift away from consumer discretionary stocks is recommended, as these stocks face risks from tariffs and reduced spending among lower-income consumers [5].

Core Viewpoint - Wells Fargo's CEO Charlie Scharf stated that the bank is not feeling pressured to pursue acquisitions for growth following the lifting of a seven-year regulatory penalty [1] Group 1: Company Insights - The lifting of the regulatory penalty allows Wells Fargo to explore growth opportunities without the constraints previously imposed [1] - The bank remains focused on organic growth strategies rather than acquisitions at this time [1] Group 2: Industry Context - The statement reflects a broader trend in the banking industry where institutions are reassessing their growth strategies in light of regulatory changes [1]

Core Insights - Wells Fargo & Company (WFC) has raised its medium-term return on tangible common equity (ROTCE) target to 17-18% from the previous target of 15%, indicating increased confidence in profitability as the company shifts focus towards sustainable growth after years of regulatory challenges [1][7]. Financial Performance and Strategy - The removal of the Federal Reserve's asset cap allows Wells Fargo to increase deposits, expand its loan portfolio, and enhance securities holdings, which is expected to boost net interest income (NII) [4]. - The bank is also focusing on expanding fee-generating activities such as payment services, asset management, and mortgage origination, with trading-related assets increasing by approximately 50% since the end of 2023 [5]. - New credit card accounts have risen by 9% year-to-date, reflecting improved customer engagement and diversified fee income streams [5]. Cost Management and Efficiency - Wells Fargo is implementing cost-efficiency programs, including streamlining its organizational structure and closing underperforming branches, aimed at reducing the cost base while maintaining service quality [6]. - The bank plans to manage its common equity tier 1 (CET1) ratio down to 10-10.5% from over 11%, optimizing capital usage to enhance returns [8]. Market Position and Valuation - Wells Fargo shares have increased by 26.1% year-to-date, compared to the industry growth of 32.9% [12]. - The bank trades at a forward price-to-earnings (P/E) ratio of 12.79X, which is below the industry average of 14.74X [15]. - The Zacks Consensus Estimate for Wells Fargo's earnings in 2025 and 2026 indicates a year-over-year increase of 16.8% and 10.8%, respectively, with upward revisions in estimates over the past week [18].

Core Insights - Financial services firms are increasingly establishing operations in Texas, moving away from traditional hubs like New York City due to tax and regulatory advantages [1][2][4] Company Presence in Texas - Goldman Sachs is constructing an 800,000-square-foot campus in Dallas, which will accommodate over 5,000 employees, making it the second-largest office for the firm in the U.S. after New York City [8][9] - JPMorgan Chase employs approximately 31,000 workers in Texas, with 18,000 in the Dallas-Fort Worth area, surpassing its New York City workforce of 24,000 [10][12][13] - Wells Fargo has opened a new 22-acre campus in Dallas, featuring two 10-story buildings for 4,500 employees, and is listed as having between 5,000 and 9,999 employees in the metroplex [16] - Charles Schwab relocated its headquarters to the Dallas area and employs between 5,000 and 9,999 workers in the region [19] - Bank of America is building a new 30-story office in Dallas, expected to be completed in 2027, while maintaining its headquarters in Charlotte, with over 10,000 employees in the metro area [21]

Group 1: AI and Technology Stocks - Amazon's stock rose 4% following a $38 billion partnership with OpenAI, indicating a significant move into generative AI and involving hundreds of thousands of Nvidia GPUs [1][7][22] - Chip stocks experienced gains, with Micron Technology increasing nearly 5%, Nvidia rising about 2%, and the VanEck Semiconductor ETF climbing approximately 1% [1][7][22] - Iren's shares surged 11% after signing a $9.7 billion multiyear data center deal with Microsoft, which also secured export licenses to ship advanced AI chips to the UAE as part of a $15.2 billion investment plan by 2029 [1][8][22] Group 2: Market Performance and Earnings - The third-quarter earnings season showed strength, with over 80% of more than 300 S&P 500 companies beating estimates, and Bank of America projecting a 12% year-over-year earnings growth [4][10][11] - The Nasdaq gained 4.7% in October, while the S&P 500 and Dow increased by 2.3% and 2.5%, respectively, driven by AI trades and solid corporate results [4][22] - Analysts noted that the market is rewarding key AI players like Amazon, Microsoft, Google, Nvidia, and Palantir, which dominate the AI infrastructure and demand curve [2][9][10] Group 3: Rare Earth Mining Sector - Rare earth mining stocks declined after the White House confirmed that China would lift export restrictions on critical minerals as part of a trade truce, with MP Materials dropping 7% and USA Rare Earth falling 14% [5][12][13][22] - The lifting of export curbs is expected to impact the market dynamics for rare earth materials significantly [12][13] Group 4: Other Notable Company Developments - Deutsche Bank raised its price target for Tesla to $470, citing optimism around its robotaxi rollout, with Tesla shares up 16% year-to-date [14][22] - Wells Fargo increased its target for JPMorgan Chase to $350 per share, highlighting its $18 billion technology spend and AI adoption as growth drivers, with the bank's stock up 29% this year [14][22] - Oppenheimer upgraded Costco to a top pick, forecasting a 15% upside from current levels through 2026 [14][22]

Core Insights - Mortgage rates have decreased for many lenders, with six of the top ten home loan providers offering rates below 6% [1] - The best rates this week are led by Navy Federal and PedFed, both offering 30-year fixed-rate mortgages below 5.5% [3] - Competition among lenders is increasing, with Bank of America and Wells Fargo entering the top ten lowest rates, displacing Citizens Bank and Fifth Third Bank [3] Mortgage Rate Trends - The lowest offered mortgage rate has dipped below 5.5%, with Navy Federal leading the survey with a significant APR advantage over other lenders [3][4] - A notable 1.311 percentage point difference exists between the top lender and the bottom-ranked lender in the survey [4] Shopping for Mortgage Rates - Borrowers can save an average of $44,000 over the life of a 30-year loan by shopping around for the best mortgage rates [7] - The annual percentage rate (APR) is emphasized as the most important figure, as it includes both the interest rate and lender fees [8] Discount Points and Offers - Lenders often provide mortgage discount points to lower interest rates, which can be confusing for borrowers [9][10] - Special rate offers and fee discounts are becoming more common, with lenders like Chase Home Loans and Citi Mortgage promoting limited-time discounts [12] Simplifying the Process - To streamline the mortgage rate shopping process, borrowers are advised to request quotes with zero discount points and focus on APR for accurate comparisons [14]

Core Insights - The top three mortgage lenders with the best rates are Navy Federal Credit Union, Citi Mortgage, and PenFed Credit Union, with a slight change in ranking this week [1] - The consistency in rankings among the top lenders indicates a stable competitive landscape in the mortgage lending market [3] Lender Rankings - The top five lenders with the lowest mortgage rates include a mix of large national banks and credit unions, with Citi, Chase, Navy Federal, and PenFed consistently appearing [3] - Truist has moved into the fifth position, replacing Better this week [3] Rate Differences - There is a significant 1.185 percentage point difference in APR between the top lender, Navy Federal, and the lowest lender, Third Federal, highlighting the importance of comparing rates [4] Survey Details - A total of 16 lenders were surveyed, with several notable banks like Wells Fargo and Rocket Mortgage not making the top 10 based on APR [4] - Citizens Bank improved its position significantly, moving from near the bottom to the top 10 [4] Shopping for Rates - Borrowers can potentially save up to $44,000 over the life of a 30-year loan by shopping around for mortgage rates [7] - The trend of promotional rates is growing, with lenders like Chase Home Lending offering limited-time rate reductions [8] Importance of APR - The APR is emphasized as the most critical figure for borrowers, as it encompasses both the interest rate and lender fees, providing a clearer picture of borrowing costs [10] Discount Points - Lenders may offer discount points to lower interest rates, which are optional upfront fees that can reduce the interest rate by approximately 0.25% per point [11][12] - Borrowers can request quotes without discount points for a more straightforward comparison of rates and fees [13]

Core Insights - Mortgage rates have decreased for many lenders, with six of the top ten home loan providers offering rates below 6% [1] - The best rates this week are led by Navy Federal and PedFed, both offering 30-year fixed-rate mortgages below 5.5% [3] - Competition among lenders is increasing, with Bank of America and Wells Fargo entering the top ten lowest rates, displacing Citizens Bank and Fifth Third Bank [3] Mortgage Rate Trends - The top lender, Navy Federal, has an APR that is 1.311 percentage points lower than the bottom-ranked lender, Third Federal [4] - A total of 16 lenders were surveyed, with several notable lenders not making the top ten based on APR [4] Shopping for Mortgage Rates - Borrowers can save an average of $44,000 over the life of a 30-year loan by shopping around for the best mortgage rates [7] - The APR is emphasized as the most important figure, as it includes both the interest rate and lender fees, providing a clearer picture of borrowing costs [8] Discount Points and Offers - Discount points can be used to lower interest rates, where one point typically costs 1% of the loan amount and reduces the interest rate by about 0.25% [10] - Lenders are increasingly offering special discounts on interest rates and fees, with examples including Citi Mortgage's $500 off closing costs [12] Simplifying the Process - When comparing rates, it is recommended to request quotes with zero discount points from multiple lenders and focus on the APR for accurate comparisons [14]

Core Viewpoint - Wells Fargo raised AMD's target price from $275 to $300 while maintaining an "overweight" rating [1] Group 1 - The increase in target price indicates a positive outlook for AMD's stock performance [1] - The "overweight" rating suggests that AMD is expected to outperform its peers in the semiconductor industry [1]