Wells Fargo & Company (WFC) 24th Annual Financial Services Forum (Transcript)

Summary of Wells Fargo & Company Conference Call Company Overview - Company: Wells Fargo & Company (NYSE: WFC) - Event: 24th Annual Financial Services Forum - Date: February 14, 2023 - Participants: Mike Santomassimo (CFO), Susan Katzke (Credit Suisse) Key Points Macro Environment - The macroeconomic data is mixed, with a strong job market but weaknesses in industrial and consumer sectors [4][5] - CPI data was slightly higher than expected, indicating potential inflationary pressures [4] - Anticipation of continued economic slowdown throughout the year, with preparations for various scenarios [5][12] Consumer and Commercial Behavior - Consumer spending remains healthy, with debit card spending up 3% year-over-year in January [7] - Credit card spending increased nearly 20% year-over-year, driven by new product offerings [8] - Commercial banking line utilization has stabilized, with new customer growth but limited changes in utilization [9] Deposit and Loan Dynamics - Deposit balances are tracking in line with industry trends, with a slight decline of less than 2% [14] - Non-interest-bearing deposits are expected to decrease from 34% to around 25% over time due to spending patterns [18][19] - Loan growth demand has moderated, with some sectors experiencing shrinkage, particularly in auto loans [25][26] Interest Income and Efficiency - Guidance for net interest income (NII) remains positive, with a projected increase of 10% for the year [31] - The efficiency ratio is a focus, with ongoing efforts to reduce costs and improve operational efficiency [38][40] - The company aims to achieve a lower efficiency ratio over time, which is crucial for sustaining a 15% return on tangible common equity (ROTCE) [41][42] Capital Management - Wells Fargo has begun stock buybacks, supported by a strong capital position [58] - The company maintains a CET1 capital buffer of around 100 basis points above the required 9.2% [60] - Ongoing uncertainties related to CCAR and Basel IV regulations are being monitored [63][64] Credit Risk and Portfolio Management - Incremental risks are being observed in commercial real estate, particularly in the office segment [66] - Consumer credit performance is gradually deteriorating, with slight increases in delinquencies and charge-offs [67] - The non-bank financial lending portfolio is performing well, with a focus on asset managers and investment-grade loans [73] Future Outlook - The path to achieving a sustainable 15% ROTCE involves a combination of growth, operating leverage, and efficiency improvements [76][79] - Continued focus on optimizing the balance sheet and enhancing product offerings in the credit card and investment banking sectors [78][79] Additional Insights - The company is committed to addressing legacy issues and regulatory compliance as a top priority [50] - Simplification of operations is ongoing, with a focus on core client segments [48] - The management team is optimistic about the medium-term outlook, despite current economic uncertainties [79]