WEBVTT -  Wells Fargo CFO Mike Santomassimo Talks Earnings

0:00:02.520 --> 0:00:07.000
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:07.880 --> 0:00:10.160
<v Speaker 2>Let's also talk a little bit about Wells Fargo, one

0:00:10.240 --> 0:00:13.280
<v Speaker 2>of the big banks reporting today. Taking a look at

0:00:13.320 --> 0:00:16.120
<v Speaker 2>their share is actually down slightly today, even though when

0:00:16.160 --> 0:00:19.200
<v Speaker 2>you take a look at non interest income, a big

0:00:19.239 --> 0:00:22.480
<v Speaker 2>recovery there. We've been following that story, that measure hitting

0:00:22.640 --> 0:00:26.840
<v Speaker 2>ten point three billion dollars in the most recent quarter reported.

0:00:26.880 --> 0:00:30.840
<v Speaker 2>That is a four year high. It's ahead of analysts expectations,

0:00:30.880 --> 0:00:33.760
<v Speaker 2>but not giving much of a lift to the stock

0:00:33.800 --> 0:00:37.080
<v Speaker 2>today because the focus really seems to be around margin,

0:00:37.159 --> 0:00:40.360
<v Speaker 2>that NIM measure, which is coming under some pressure.

0:00:40.400 --> 0:00:42.959
<v Speaker 1>Romain, all right, well, let's talk about that pressure. Mike

0:00:43.000 --> 0:00:46.760
<v Speaker 1>Sana Massimo joins us right now. The CFO over at

0:00:46.880 --> 0:00:50.000
<v Speaker 1>Wells afar Ago And obviously, on the surface, Mike, obviously

0:00:50.040 --> 0:00:51.600
<v Speaker 1>a lot of progress in the quarter, a lot of

0:00:51.600 --> 0:00:54.680
<v Speaker 1>progress over the last couple of years. But when we

0:00:54.720 --> 0:00:58.880
<v Speaker 1>talk about average loan growth growing in that twelve percent

0:00:59.000 --> 0:01:02.480
<v Speaker 1>ranger over year, but net interest income only up five percent,

0:01:02.800 --> 0:01:05.400
<v Speaker 1>I know you've said in the past that this is temporary,

0:01:05.680 --> 0:01:09.840
<v Speaker 1>but how long should investors expect that disparity?

0:01:11.200 --> 0:01:13.800
<v Speaker 3>Well, thanks thanks for having me, Romayne, and you know

0:01:14.160 --> 0:01:16.040
<v Speaker 3>when you look at like the backdrop of the quarter.

0:01:16.160 --> 0:01:19.040
<v Speaker 3>It was actually a really good quarter and broad based

0:01:19.200 --> 0:01:22.200
<v Speaker 3>revenue growth across every single business and you know, we

0:01:22.240 --> 0:01:25.199
<v Speaker 3>can sort of dig into aspects of it, but really

0:01:25.200 --> 0:01:28.040
<v Speaker 3>good performance across every one of them. And on net

0:01:28.080 --> 0:01:31.680
<v Speaker 3>interest income, you know, it's progressing exactly as we thought

0:01:31.680 --> 0:01:34.000
<v Speaker 3>it would, right, so our full year net interest income,

0:01:34.160 --> 0:01:36.280
<v Speaker 3>you know, guidance is still fifty billion dollars, that's where

0:01:36.319 --> 0:01:38.480
<v Speaker 3>we sat at the beginning of the year. You're seeing

0:01:38.680 --> 0:01:41.160
<v Speaker 3>you know, loan growth be a little bit higher than

0:01:41.200 --> 0:01:43.960
<v Speaker 3>what you know, we have projected in the year. We're

0:01:43.959 --> 0:01:47.600
<v Speaker 3>also seeing higher interest bearing deposit growth, which is actually

0:01:47.640 --> 0:01:50.120
<v Speaker 3>a good thing for the long run. So we're deepening

0:01:50.440 --> 0:01:52.720
<v Speaker 3>you know, our client relationships and the commercial side of

0:01:52.720 --> 0:01:56.760
<v Speaker 3>the house in particular. We're expecting you know, non intersparing

0:01:56.800 --> 0:01:59.720
<v Speaker 3>deposites to be more stable, and we were we were

0:01:59.720 --> 0:02:01.960
<v Speaker 3>thinking they would grow a little bit more earlier in

0:02:01.960 --> 0:02:04.040
<v Speaker 3>the year. And you know, part of that's the rate

0:02:04.160 --> 0:02:06.440
<v Speaker 3>environment as rates stay a little bit higher for longer,

0:02:07.520 --> 0:02:10.200
<v Speaker 3>and so we'll see how that progresses. And then we're

0:02:10.200 --> 0:02:13.360
<v Speaker 3>seeing really good growth across the markets business where you

0:02:13.440 --> 0:02:16.880
<v Speaker 3>see you know, NII contributions coming through a lot of

0:02:16.880 --> 0:02:20.400
<v Speaker 3>the financing we do there, so overall actually quite quite good.

0:02:20.800 --> 0:02:24.480
<v Speaker 3>You did see net interest margin decline as expected, you know,

0:02:24.800 --> 0:02:27.400
<v Speaker 3>three or four basis points this quarter. We expect that

0:02:27.440 --> 0:02:29.040
<v Speaker 3>to happen just a little bit more in the third

0:02:29.120 --> 0:02:32.240
<v Speaker 3>quarter than stabilized from there. But all of the underlying

0:02:32.320 --> 0:02:34.640
<v Speaker 3>inputs and trends that we're seeing across the business are

0:02:34.680 --> 0:02:38.520
<v Speaker 3>actually quite quite good and really what we expected to see.

0:02:38.680 --> 0:02:40.680
<v Speaker 3>You know, now that we're about a year off of

0:02:40.760 --> 0:02:43.160
<v Speaker 3>coming out of the asset cap, well, let's.

0:02:42.960 --> 0:02:45.239
<v Speaker 1>Talk a little bit about that, because that's obviously opened

0:02:45.320 --> 0:02:48.600
<v Speaker 1>up a lot of growth opportunities for you beyond just

0:02:48.639 --> 0:02:50.880
<v Speaker 1>the basic loan book. Here, let's talk about the wealth

0:02:50.919 --> 0:02:54.440
<v Speaker 1>management side of this business, the growth there, but also

0:02:54.480 --> 0:02:57.320
<v Speaker 1>the expenses that come along with it in order to

0:02:57.360 --> 0:03:00.520
<v Speaker 1>build it out.

0:03:01.160 --> 0:03:03.400
<v Speaker 3>Yeah, like the wealth business, says we've talked about a

0:03:03.440 --> 0:03:05.880
<v Speaker 3>number of times, is actually seeing really good momentum now.

0:03:06.480 --> 0:03:08.000
<v Speaker 3>You know, if you if you go back a number

0:03:08.000 --> 0:03:10.560
<v Speaker 3>of years, we were seeing high levels of attrition of advisors.

0:03:10.600 --> 0:03:13.520
<v Speaker 3>That's completely turned around. We've had you know, our three

0:03:13.600 --> 0:03:16.320
<v Speaker 3>best quarters maybe ever in terms of recruiting that we

0:03:16.400 --> 0:03:19.200
<v Speaker 3>put onto the platform. The last three quarters we are

0:03:19.240 --> 0:03:23.280
<v Speaker 3>seeing netflows as well the last couple quarters just broadly

0:03:23.320 --> 0:03:26.239
<v Speaker 3>across that business, and the markets have really helped in

0:03:26.320 --> 0:03:28.760
<v Speaker 3>terms of equity values. And so you see you know,

0:03:28.800 --> 0:03:31.680
<v Speaker 3>wealth management revenues up in you know, thirteen fourteen percent,

0:03:31.760 --> 0:03:34.280
<v Speaker 3>you know, year on year, and so quite quite good there,

0:03:35.160 --> 0:03:37.120
<v Speaker 3>you know, in terms of the overall you know trends

0:03:37.200 --> 0:03:40.040
<v Speaker 3>underneath that business. Now that does bring expenses too, right,

0:03:40.120 --> 0:03:44.320
<v Speaker 3>so you got commissions you pay advisors and other volume

0:03:44.320 --> 0:03:46.880
<v Speaker 3>based fees that are there, but revenue more than offsets

0:03:46.880 --> 0:03:48.840
<v Speaker 3>that and so that and that's what you saw in

0:03:48.880 --> 0:03:51.680
<v Speaker 3>the quarter, which was really good performance. And then lastly

0:03:51.720 --> 0:03:54.120
<v Speaker 3>on wealth is you're starting to see really good growth

0:03:54.200 --> 0:03:56.800
<v Speaker 3>in deposits and lending as well. We've talked about that

0:03:56.840 --> 0:03:58.920
<v Speaker 3>for a while as something we want to do to

0:03:58.960 --> 0:04:01.160
<v Speaker 3>broaden what we do with our clients, and you're really

0:04:01.200 --> 0:04:02.960
<v Speaker 3>starting to see that come through the results. And so

0:04:03.040 --> 0:04:05.120
<v Speaker 3>a lot of the effort the team's had there the

0:04:05.200 --> 0:04:07.360
<v Speaker 3>last couple of years is really really coming through.

0:04:08.080 --> 0:04:09.840
<v Speaker 2>And Mike, I want to talk a little bit about

0:04:10.040 --> 0:04:12.240
<v Speaker 2>M and A when it comes to Wells Fargo, because

0:04:12.520 --> 0:04:14.760
<v Speaker 2>you think about that asset cap that has now been

0:04:14.800 --> 0:04:17.880
<v Speaker 2>removed from the fed. How big would you say that

0:04:18.279 --> 0:04:20.360
<v Speaker 2>M and A is for you at this moment.

0:04:23.200 --> 0:04:26.400
<v Speaker 3>Yeah, we're mostly focused, Katie, on on organic growth. I

0:04:26.440 --> 0:04:28.560
<v Speaker 3>think the opportunity we have across each one of the

0:04:28.600 --> 0:04:32.280
<v Speaker 3>business is just you know big, you know, to grow organically,

0:04:33.279 --> 0:04:35.160
<v Speaker 3>and that's what you've seen us really do now the

0:04:35.240 --> 0:04:38.360
<v Speaker 3>last number of quarters. And I think you know, when

0:04:38.360 --> 0:04:40.520
<v Speaker 3>you think about you know, opportunities for M and A,

0:04:40.720 --> 0:04:43.400
<v Speaker 3>you know, there could be some you know, product capabilities

0:04:43.480 --> 0:04:45.920
<v Speaker 3>or other you know, payments related stuff that could be interesting,

0:04:46.000 --> 0:04:48.360
<v Speaker 3>but but it would be very you know, very much

0:04:48.480 --> 0:04:50.839
<v Speaker 3>just adding capabilities to our what we do. You know,

0:04:50.920 --> 0:04:53.760
<v Speaker 3>our our main focus is really growing sort of organically

0:04:53.839 --> 0:04:54.960
<v Speaker 3>across each of the businesses.

0:04:55.720 --> 0:04:58.400
<v Speaker 2>Understood there with the focus on organic growth. But I

0:04:58.440 --> 0:05:00.000
<v Speaker 2>do want to talk a little bit about the pipeline

0:05:00.080 --> 0:05:01.800
<v Speaker 2>because you did say when it comes to the M

0:05:01.800 --> 0:05:05.360
<v Speaker 2>and A pipeline for Wells Fargo, it looks robust here

0:05:05.440 --> 0:05:07.680
<v Speaker 2>and I'd love to dig into that a little bit more.

0:05:07.720 --> 0:05:11.000
<v Speaker 2>Are there any industries which particularly stand out to Wells

0:05:11.000 --> 0:05:13.880
<v Speaker 2>Fargo at this moment or that you're you know, pursuing

0:05:13.920 --> 0:05:14.960
<v Speaker 2>more aggressively than.

0:05:14.880 --> 0:05:21.080
<v Speaker 3>Others well, you know, across the investment banking space. You know,

0:05:21.120 --> 0:05:23.960
<v Speaker 3>we've been adding you know, people in equity and deck

0:05:24.000 --> 0:05:26.440
<v Speaker 3>capital markets, our M and A practice, and all the

0:05:26.480 --> 0:05:29.239
<v Speaker 3>coverage groups you know, just sector bisector over the last

0:05:29.560 --> 0:05:33.279
<v Speaker 3>few years, and the pipelines aren't quite healthy, you know now,

0:05:33.400 --> 0:05:35.520
<v Speaker 3>and they've been that way for a while across really

0:05:35.560 --> 0:05:38.640
<v Speaker 3>all the products set there, including M and A, and

0:05:38.680 --> 0:05:41.520
<v Speaker 3>you're certainly seeing, you know, cross a number of different

0:05:41.560 --> 0:05:45.039
<v Speaker 3>industries sort of you know, deals that may not have

0:05:45.080 --> 0:05:47.600
<v Speaker 3>been you know, totally possible, you know, a couple of

0:05:47.640 --> 0:05:50.040
<v Speaker 3>years ago. And so I think that that idea of

0:05:50.880 --> 0:05:54.200
<v Speaker 3>pursuing those strategic goals across really you know, in a

0:05:54.240 --> 0:05:58.120
<v Speaker 3>pretty broad way is definitely alive. And the in the

0:05:58.160 --> 0:06:01.839
<v Speaker 3>conversations the team's having it really fans everything from healthcare

0:06:01.960 --> 0:06:04.840
<v Speaker 3>to tech, to media to you know, a whole different

0:06:04.920 --> 0:06:08.120
<v Speaker 3>you know, all all industrial sectors as well, and so

0:06:08.360 --> 0:06:10.920
<v Speaker 3>I think you're seeing you're seeing it in a pretty

0:06:10.960 --> 0:06:12.919
<v Speaker 3>broad based way. Now we'll have to see what actually

0:06:12.960 --> 0:06:15.400
<v Speaker 3>happens in terms of deals getting announced and done, but

0:06:15.960 --> 0:06:17.839
<v Speaker 3>I think the activity level is quite high, and I

0:06:17.839 --> 0:06:21.120
<v Speaker 3>think people see this as an opportunity to you know,

0:06:21.160 --> 0:06:23.320
<v Speaker 3>think broadly about their strategic goals and M and A

0:06:23.440 --> 0:06:24.280
<v Speaker 3>is definitely part of it.

0:06:24.640 --> 0:06:27.240
<v Speaker 1>Well overall, I mean just looking at this business a

0:06:27.360 --> 0:06:30.600
<v Speaker 1>year of kind of post that asset gap being lifted,

0:06:31.320 --> 0:06:33.719
<v Speaker 1>with loan growth going well. Obviously the M and A

0:06:33.800 --> 0:06:36.960
<v Speaker 1>business and fees they are also strong. Here is there

0:06:37.000 --> 0:06:39.800
<v Speaker 1>a certain part of this business right now that you

0:06:39.920 --> 0:06:42.360
<v Speaker 1>and Charlie Sharp, the CEO, are really looking to where

0:06:42.360 --> 0:06:44.640
<v Speaker 1>maybe you don't think Willis Fargo at least right now

0:06:45.160 --> 0:06:46.960
<v Speaker 1>punches up to the weight of his competitors.

0:06:50.080 --> 0:06:52.599
<v Speaker 3>Well, I think there's opportunity to grow and improve the

0:06:52.680 --> 0:06:57.120
<v Speaker 3>returns everywhere. Still, that doesn't take away from the progress

0:06:57.160 --> 0:06:59.680
<v Speaker 3>we've made, because we've made a lot of progress. You

0:06:59.680 --> 0:07:02.440
<v Speaker 3>know in our corporate investment bank. You've seen that progress

0:07:02.440 --> 0:07:04.680
<v Speaker 3>in our investment banking business. We had a record fee

0:07:04.720 --> 0:07:07.440
<v Speaker 3>quarter for investment banking fees this quarter. Across the firm,

0:07:07.920 --> 0:07:10.320
<v Speaker 3>we've grown our balance sheet in the market's business by

0:07:10.400 --> 0:07:13.000
<v Speaker 3>almost two hundred billion dollars since the end of twenty

0:07:13.080 --> 0:07:15.800
<v Speaker 3>twenty four, and you're seeing the revenue in that business

0:07:15.800 --> 0:07:19.800
<v Speaker 3>grow twenty four percent in the quarter. You've seen our

0:07:19.800 --> 0:07:22.880
<v Speaker 3>wealth management business, as we talked about a minute ago, grow,

0:07:23.200 --> 0:07:25.920
<v Speaker 3>Our commercial bank was up six percent in the quarter.

0:07:26.040 --> 0:07:28.920
<v Speaker 3>Year and year, our consumer businesses were up. You know,

0:07:28.960 --> 0:07:32.480
<v Speaker 3>we saw really good growth in credit card acquisition, in

0:07:32.560 --> 0:07:35.320
<v Speaker 3>auto loans, really across the board, and so I think

0:07:35.360 --> 0:07:37.600
<v Speaker 3>we're excited to kind of see, you know, the results

0:07:37.600 --> 0:07:39.440
<v Speaker 3>of all the investments we've been making now for a

0:07:39.440 --> 0:07:42.720
<v Speaker 3>while across each one of the businesses, and I think

0:07:42.720 --> 0:07:44.800
<v Speaker 3>each of them have a lot of opportunity to continue

0:07:44.840 --> 0:07:48.280
<v Speaker 3>to deepen the relationship, deepen what we do with a

0:07:48.320 --> 0:07:50.880
<v Speaker 3>lot of the relationships we have, and really grow beyond

0:07:50.880 --> 0:07:54.360
<v Speaker 3>that in the over the coming quarters and years. So

0:07:54.760 --> 0:07:57.400
<v Speaker 3>it is it is an exciting time to be here.

0:07:57.840 --> 0:07:59.480
<v Speaker 2>And Mike, just quickly before I let you go, I

0:07:59.520 --> 0:08:01.440
<v Speaker 2>do want to talk a little bit about AI, because

0:08:01.440 --> 0:08:04.800
<v Speaker 2>we heard from JP Morgan's CFO actually talking about how

0:08:04.800 --> 0:08:07.280
<v Speaker 2>the bank is being a little bit more strategic when

0:08:07.280 --> 0:08:09.840
<v Speaker 2>it comes to using some of these AI models. He

0:08:09.920 --> 0:08:12.880
<v Speaker 2>said exactly that you really don't need the latest, cutting edge,

0:08:13.240 --> 0:08:17.559
<v Speaker 2>incredibly expensive model to summarize an analyst report. And I wonder,

0:08:17.880 --> 0:08:20.000
<v Speaker 2>you know how you're thinking through some of these token

0:08:20.080 --> 0:08:23.080
<v Speaker 2>expenses and AI costs when it comes to Wells Fargo.

0:08:26.080 --> 0:08:28.720
<v Speaker 3>Yeah, that just comes with any investment. I think really

0:08:28.840 --> 0:08:31.800
<v Speaker 3>is being smart about sort of how you deploy the

0:08:31.840 --> 0:08:34.760
<v Speaker 3>capabilities and with NAI is no different, right, there's a

0:08:35.160 --> 0:08:39.360
<v Speaker 3>there's a wide range of models, capabilities, use cases you

0:08:39.400 --> 0:08:41.280
<v Speaker 3>know for AI, and I think it's just you need

0:08:41.320 --> 0:08:43.840
<v Speaker 3>to be really thoughtful, smart, you know, focused on sort

0:08:43.880 --> 0:08:46.319
<v Speaker 3>of using the right solution for the right for the

0:08:46.360 --> 0:08:49.640
<v Speaker 3>right problem. And we're certainly doing that. And I think

0:08:49.679 --> 0:08:51.520
<v Speaker 3>you need to look at you know, token costs and

0:08:51.600 --> 0:08:53.800
<v Speaker 3>sort of the cost of broader AI sort of you know,

0:08:53.960 --> 0:08:56.680
<v Speaker 3>you know very closely, but but it's clear that the

0:08:56.800 --> 0:08:59.560
<v Speaker 3>benefit you're going to get from AI in terms of

0:09:00.320 --> 0:09:02.920
<v Speaker 3>what we do for customers driving more efficiency across the

0:09:02.960 --> 0:09:06.880
<v Speaker 3>firm is real. And it really has just just getting

0:09:06.920 --> 0:09:10.280
<v Speaker 3>started in terms of you know, those capabilities being rolled

0:09:10.280 --> 0:09:12.960
<v Speaker 3>out across you know, different you know, different business groups,

0:09:12.960 --> 0:09:15.200
<v Speaker 3>and so I think it's going to be very exciting

0:09:15.240 --> 0:09:17.160
<v Speaker 3>to see that come to fruition over the next twelve

0:09:17.240 --> 0:09:20.640
<v Speaker 3>or eighteen months or thereabouts. And so so and I

0:09:20.679 --> 0:09:22.400
<v Speaker 3>do think that you know, it's going to be quite

0:09:22.440 --> 0:09:24.760
<v Speaker 3>significant in terms of the impact that we'll have, you know,

0:09:24.920 --> 0:09:27.680
<v Speaker 3>just more broadly at our company and just you know,

0:09:27.720 --> 0:09:30.679
<v Speaker 3>lots of different companies there. But like any investment, you've

0:09:30.679 --> 0:09:33.400
<v Speaker 3>got to be really thoughtful and smart about how you

0:09:33.400 --> 0:09:36.440
<v Speaker 3>you know, prioritize, you know, the resources you put against it,

0:09:36.480 --> 0:09:39.559
<v Speaker 3>and certainly across these different large language models, there's a

0:09:39.679 --> 0:09:42.240
<v Speaker 3>range of outcomes and a range of costs that you've

0:09:42.240 --> 0:09:45.000
<v Speaker 3>got to be really careful about as you look forward.

0:09:45.000 --> 0:09:46.640
<v Speaker 3>And I think our teams have done a really really

0:09:46.720 --> 0:09:49.240
<v Speaker 3>good job on that being making sure that our tech

0:09:49.280 --> 0:09:51.920
<v Speaker 3>people are using the right use the right tools for

0:09:51.960 --> 0:09:55.080
<v Speaker 3>the right you know, solutions, and then just broadly across

0:09:55.120 --> 0:09:57.760
<v Speaker 3>the businesses doing the same thing. So that's something we've

0:09:57.760 --> 0:09:59.680
<v Speaker 3>been doing for a while now, all right.

0:09:59.600 --> 0:10:02.520
<v Speaker 1>Mike, Always a pleasure. Always appreciate you taking time for us.

0:10:02.679 --> 0:10:05.079
<v Speaker 1>Wells Fargo CFO, Mike Santa Massimo.

0:10:05.160 --> 0:10:05.360
<v Speaker 3>There