Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let's also talk a little bit about Wells Fargo, one
Speaker 2: of the big banks reporting today. Taking a look at
Speaker 2: their share is actually down slightly today, even though when
Speaker 2: you take a look at non interest income, a big
Speaker 2: recovery there. We've been following that story, that measure hitting
Speaker 2: ten point three billion dollars in the most recent quarter reported.
Speaker 2: That is a four year high. It's ahead of analysts expectations,
Speaker 2: but not giving much of a lift to the stock
Speaker 2: today because the focus really seems to be around margin,
Speaker 2: that NIM measure, which is coming under some pressure.
Speaker 1: Romain, all right, well, let's talk about that pressure. Mike
Speaker 1: Sana Massimo joins us right now. The CFO over at
Speaker 1: Wells afar Ago And obviously, on the surface, Mike, obviously
Speaker 1: a lot of progress in the quarter, a lot of
Speaker 1: progress over the last couple of years. But when we
Speaker 1: talk about average loan growth growing in that twelve percent
Speaker 1: ranger over year, but net interest income only up five percent,
Speaker 1: I know you've said in the past that this is temporary,
Speaker 1: but how long should investors expect that disparity?
Speaker 3: Well, thanks thanks for having me, Romayne, and you know
Speaker 3: when you look at like the backdrop of the quarter.
Speaker 3: It was actually a really good quarter and broad based
Speaker 3: revenue growth across every single business and you know, we
Speaker 3: can sort of dig into aspects of it, but really
Speaker 3: good performance across every one of them. And on net
Speaker 3: interest income, you know, it's progressing exactly as we thought
Speaker 3: it would, right, so our full year net interest income,
Speaker 3: you know, guidance is still fifty billion dollars, that's where
Speaker 3: we sat at the beginning of the year. You're seeing
Speaker 3: you know, loan growth be a little bit higher than
Speaker 3: what you know, we have projected in the year. We're
Speaker 3: also seeing higher interest bearing deposit growth, which is actually
Speaker 3: a good thing for the long run. So we're deepening
Speaker 3: you know, our client relationships and the commercial side of
Speaker 3: the house in particular. We're expecting you know, non intersparing
Speaker 3: deposites to be more stable, and we were we were
Speaker 3: thinking they would grow a little bit more earlier in
Speaker 3: the year. And you know, part of that's the rate
Speaker 3: environment as rates stay a little bit higher for longer,
Speaker 3: and so we'll see how that progresses. And then we're
Speaker 3: seeing really good growth across the markets business where you
Speaker 3: see you know, NII contributions coming through a lot of
Speaker 3: the financing we do there, so overall actually quite quite good.
Speaker 3: You did see net interest margin decline as expected, you know,
Speaker 3: three or four basis points this quarter. We expect that
Speaker 3: to happen just a little bit more in the third
Speaker 3: quarter than stabilized from there. But all of the underlying
Speaker 3: inputs and trends that we're seeing across the business are
Speaker 3: actually quite quite good and really what we expected to see.
Speaker 3: You know, now that we're about a year off of
Speaker 3: coming out of the asset cap, well, let's.
Speaker 1: Talk a little bit about that, because that's obviously opened
Speaker 1: up a lot of growth opportunities for you beyond just
Speaker 1: the basic loan book. Here, let's talk about the wealth
Speaker 1: management side of this business, the growth there, but also
Speaker 1: the expenses that come along with it in order to
Speaker 1: build it out.
Speaker 3: Yeah, like the wealth business, says we've talked about a
Speaker 3: number of times, is actually seeing really good momentum now.
Speaker 3: You know, if you if you go back a number
Speaker 3: of years, we were seeing high levels of attrition of advisors.
Speaker 3: That's completely turned around. We've had you know, our three
Speaker 3: best quarters maybe ever in terms of recruiting that we
Speaker 3: put onto the platform. The last three quarters we are
Speaker 3: seeing netflows as well the last couple quarters just broadly
Speaker 3: across that business, and the markets have really helped in
Speaker 3: terms of equity values. And so you see you know,
Speaker 3: wealth management revenues up in you know, thirteen fourteen percent,
Speaker 3: you know, year on year, and so quite quite good there,
Speaker 3: you know, in terms of the overall you know trends
Speaker 3: underneath that business. Now that does bring expenses too, right,
Speaker 3: so you got commissions you pay advisors and other volume
Speaker 3: based fees that are there, but revenue more than offsets
Speaker 3: that and so that and that's what you saw in
Speaker 3: the quarter, which was really good performance. And then lastly
Speaker 3: on wealth is you're starting to see really good growth
Speaker 3: in deposits and lending as well. We've talked about that
Speaker 3: for a while as something we want to do to
Speaker 3: broaden what we do with our clients, and you're really
Speaker 3: starting to see that come through the results. And so
Speaker 3: a lot of the effort the team's had there the
Speaker 3: last couple of years is really really coming through.
Speaker 2: And Mike, I want to talk a little bit about
Speaker 2: M and A when it comes to Wells Fargo, because
Speaker 2: you think about that asset cap that has now been
Speaker 2: removed from the fed. How big would you say that
Speaker 2: M and A is for you at this moment.
Speaker 3: Yeah, we're mostly focused, Katie, on on organic growth. I
Speaker 3: think the opportunity we have across each one of the
Speaker 3: business is just you know big, you know, to grow organically,
Speaker 3: and that's what you've seen us really do now the
Speaker 3: last number of quarters. And I think you know, when
Speaker 3: you think about you know, opportunities for M and A,
Speaker 3: you know, there could be some you know, product capabilities
Speaker 3: or other you know, payments related stuff that could be interesting,
Speaker 3: but but it would be very you know, very much
Speaker 3: just adding capabilities to our what we do. You know,
Speaker 3: our our main focus is really growing sort of organically
Speaker 3: across each of the businesses.
Speaker 2: Understood there with the focus on organic growth. But I
Speaker 2: do want to talk a little bit about the pipeline
Speaker 2: because you did say when it comes to the M
Speaker 2: and A pipeline for Wells Fargo, it looks robust here
Speaker 2: and I'd love to dig into that a little bit more.
Speaker 2: Are there any industries which particularly stand out to Wells
Speaker 2: Fargo at this moment or that you're you know, pursuing
Speaker 2: more aggressively than.
Speaker 3: Others well, you know, across the investment banking space. You know,
Speaker 3: we've been adding you know, people in equity and deck
Speaker 3: capital markets, our M and A practice, and all the
Speaker 3: coverage groups you know, just sector bisector over the last
Speaker 3: few years, and the pipelines aren't quite healthy, you know now,
Speaker 3: and they've been that way for a while across really
Speaker 3: all the products set there, including M and A, and
Speaker 3: you're certainly seeing, you know, cross a number of different
Speaker 3: industries sort of you know, deals that may not have
Speaker 3: been you know, totally possible, you know, a couple of
Speaker 3: years ago. And so I think that that idea of
Speaker 3: pursuing those strategic goals across really you know, in a
Speaker 3: pretty broad way is definitely alive. And the in the
Speaker 3: conversations the team's having it really fans everything from healthcare
Speaker 3: to tech, to media to you know, a whole different
Speaker 3: you know, all all industrial sectors as well, and so
Speaker 3: I think you're seeing you're seeing it in a pretty
Speaker 3: broad based way. Now we'll have to see what actually
Speaker 3: happens in terms of deals getting announced and done, but
Speaker 3: I think the activity level is quite high, and I
Speaker 3: think people see this as an opportunity to you know,
Speaker 3: think broadly about their strategic goals and M and A
Speaker 3: is definitely part of it.
Speaker 1: Well overall, I mean just looking at this business a
Speaker 1: year of kind of post that asset gap being lifted,
Speaker 1: with loan growth going well. Obviously the M and A
Speaker 1: business and fees they are also strong. Here is there
Speaker 1: a certain part of this business right now that you
Speaker 1: and Charlie Sharp, the CEO, are really looking to where
Speaker 1: maybe you don't think Willis Fargo at least right now
Speaker 1: punches up to the weight of his competitors.
Speaker 3: Well, I think there's opportunity to grow and improve the
Speaker 3: returns everywhere. Still, that doesn't take away from the progress
Speaker 3: we've made, because we've made a lot of progress. You
Speaker 3: know in our corporate investment bank. You've seen that progress
Speaker 3: in our investment banking business. We had a record fee
Speaker 3: quarter for investment banking fees this quarter. Across the firm,
Speaker 3: we've grown our balance sheet in the market's business by
Speaker 3: almost two hundred billion dollars since the end of twenty
Speaker 3: twenty four, and you're seeing the revenue in that business
Speaker 3: grow twenty four percent in the quarter. You've seen our
Speaker 3: wealth management business, as we talked about a minute ago, grow,
Speaker 3: Our commercial bank was up six percent in the quarter.
Speaker 3: Year and year, our consumer businesses were up. You know,
Speaker 3: we saw really good growth in credit card acquisition, in
Speaker 3: auto loans, really across the board, and so I think
Speaker 3: we're excited to kind of see, you know, the results
Speaker 3: of all the investments we've been making now for a
Speaker 3: while across each one of the businesses, and I think
Speaker 3: each of them have a lot of opportunity to continue
Speaker 3: to deepen the relationship, deepen what we do with a
Speaker 3: lot of the relationships we have, and really grow beyond
Speaker 3: that in the over the coming quarters and years. So
Speaker 3: it is it is an exciting time to be here.
Speaker 2: And Mike, just quickly before I let you go, I
Speaker 2: do want to talk a little bit about AI, because
Speaker 2: we heard from JP Morgan's CFO actually talking about how
Speaker 2: the bank is being a little bit more strategic when
Speaker 2: it comes to using some of these AI models. He
Speaker 2: said exactly that you really don't need the latest, cutting edge,
Speaker 2: incredibly expensive model to summarize an analyst report. And I wonder,
Speaker 2: you know how you're thinking through some of these token
Speaker 2: expenses and AI costs when it comes to Wells Fargo.
Speaker 3: Yeah, that just comes with any investment. I think really
Speaker 3: is being smart about sort of how you deploy the
Speaker 3: capabilities and with NAI is no different, right, there's a
Speaker 3: there's a wide range of models, capabilities, use cases you
Speaker 3: know for AI, and I think it's just you need
Speaker 3: to be really thoughtful, smart, you know, focused on sort
Speaker 3: of using the right solution for the right for the
Speaker 3: right problem. And we're certainly doing that. And I think
Speaker 3: you need to look at you know, token costs and
Speaker 3: sort of the cost of broader AI sort of you know,
Speaker 3: you know very closely, but but it's clear that the
Speaker 3: benefit you're going to get from AI in terms of
Speaker 3: what we do for customers driving more efficiency across the
Speaker 3: firm is real. And it really has just just getting
Speaker 3: started in terms of you know, those capabilities being rolled
Speaker 3: out across you know, different you know, different business groups,
Speaker 3: and so I think it's going to be very exciting
Speaker 3: to see that come to fruition over the next twelve
Speaker 3: or eighteen months or thereabouts. And so so and I
Speaker 3: do think that you know, it's going to be quite
Speaker 3: significant in terms of the impact that we'll have, you know,
Speaker 3: just more broadly at our company and just you know,
Speaker 3: lots of different companies there. But like any investment, you've
Speaker 3: got to be really thoughtful and smart about how you
Speaker 3: you know, prioritize, you know, the resources you put against it,
Speaker 3: and certainly across these different large language models, there's a
Speaker 3: range of outcomes and a range of costs that you've
Speaker 3: got to be really careful about as you look forward.
Speaker 3: And I think our teams have done a really really
Speaker 3: good job on that being making sure that our tech
Speaker 3: people are using the right use the right tools for
Speaker 3: the right you know, solutions, and then just broadly across
Speaker 3: the businesses doing the same thing. So that's something we've
Speaker 3: been doing for a while now, all right.
Speaker 1: Mike, Always a pleasure. Always appreciate you taking time for us.
Speaker 1: Wells Fargo CFO, Mike Santa Massimo.
Speaker 3: There