1 00:00:00,120 --> 00:00:03,360 Speaker 1: Mike Santo Massimo. He is the CFO of Wells Fargo, 2 00:00:03,440 --> 00:00:05,360 Speaker 1: and Mike, I want to start on net interesting income 3 00:00:05,400 --> 00:00:08,119 Speaker 1: because the takeaway from all the banks that reported today 4 00:00:08,320 --> 00:00:11,240 Speaker 1: is that we saw peak and II in twenty twenty three, 5 00:00:11,560 --> 00:00:13,960 Speaker 1: and Wells is now projecting a nine percent slide for 6 00:00:14,160 --> 00:00:17,960 Speaker 1: net interest income for twenty twenty four. What happens next? 7 00:00:18,079 --> 00:00:20,320 Speaker 1: I mean after that nine percent drop off, does it 8 00:00:20,400 --> 00:00:23,520 Speaker 1: plateau there? Do you see the trajectory going down? What's 9 00:00:23,560 --> 00:00:26,639 Speaker 1: going to drive it? Yeah? 10 00:00:26,640 --> 00:00:28,920 Speaker 2: Well, first, thanks thanks for having me. You know, when 11 00:00:28,960 --> 00:00:31,760 Speaker 2: you look at net interesting income, you know what's playing 12 00:00:31,800 --> 00:00:35,040 Speaker 2: out is exactly what has been you know, projected now 13 00:00:35,080 --> 00:00:37,440 Speaker 2: for the last couple of quarters. You know, we've seen 14 00:00:37,479 --> 00:00:40,120 Speaker 2: net interesting income come down a couple quarters in a row, 15 00:00:40,200 --> 00:00:42,839 Speaker 2: and so you're annualizing and coming into twenty twenty four 16 00:00:42,880 --> 00:00:45,040 Speaker 2: at a lower level than you did, you know, just 17 00:00:45,080 --> 00:00:47,559 Speaker 2: a couple quarters ago. You know, some of that is 18 00:00:47,600 --> 00:00:50,440 Speaker 2: the rate expectations, and as you all just pointed out, 19 00:00:50,960 --> 00:00:54,560 Speaker 2: the market and now projecting some rating decreases as we 20 00:00:54,640 --> 00:00:57,480 Speaker 2: go through the year. You've got muted loan growth in 21 00:00:58,160 --> 00:01:01,880 Speaker 2: most parts of the portfolio, with the exception maybe being 22 00:01:01,920 --> 00:01:05,199 Speaker 2: credit card you've got, you know, you know a little 23 00:01:05,240 --> 00:01:09,520 Speaker 2: bit more of a decline in consumer deposits coming, and 24 00:01:09,560 --> 00:01:11,959 Speaker 2: so all of this sort of adds up to you know, 25 00:01:12,080 --> 00:01:16,000 Speaker 2: an NAI projection that could be potentially seven to nine 26 00:01:16,040 --> 00:01:19,480 Speaker 2: percent down. We gave a range today as part of 27 00:01:19,480 --> 00:01:21,920 Speaker 2: our call. It's but it's very much what we've all 28 00:01:21,959 --> 00:01:25,800 Speaker 2: been expecting to happen as we got into this year. 29 00:01:26,120 --> 00:01:27,440 Speaker 1: I want to pick up on what you said about 30 00:01:27,520 --> 00:01:30,440 Speaker 1: muted loan growth because in the earnings call you mentioned 31 00:01:30,480 --> 00:01:32,360 Speaker 1: that muted loan growth at the start of the year, 32 00:01:32,400 --> 00:01:34,880 Speaker 1: but a bit of a pickup later on in twenty 33 00:01:34,920 --> 00:01:37,200 Speaker 1: twenty four. What kinds of businesses do you expect to 34 00:01:37,200 --> 00:01:39,360 Speaker 1: be the main drivers for that pickup. 35 00:01:41,640 --> 00:01:44,000 Speaker 2: Yeah, Well, when you look at what's been happening now, 36 00:01:44,280 --> 00:01:46,319 Speaker 2: you know, probably for the last six nine months, is 37 00:01:46,360 --> 00:01:49,800 Speaker 2: that many commercial customers have been very you know, very 38 00:01:49,840 --> 00:01:53,520 Speaker 2: conservative or very very much thought being thoughtful about how 39 00:01:53,600 --> 00:01:56,360 Speaker 2: much inventory they build, how many investments they make. As 40 00:01:56,800 --> 00:01:59,080 Speaker 2: you still had you know, rates you know, staying pretty 41 00:01:59,120 --> 00:02:01,160 Speaker 2: high and a bit of an un certain economic picture. 42 00:02:01,600 --> 00:02:04,400 Speaker 2: So as you get more clarity there, we think over 43 00:02:04,520 --> 00:02:06,760 Speaker 2: the next six or nine months you'll start to see 44 00:02:06,760 --> 00:02:08,880 Speaker 2: more of that uncertainty. Lift you'll see is a little 45 00:02:08,880 --> 00:02:10,720 Speaker 2: bit more investment. You'll see a little bit more demand 46 00:02:10,800 --> 00:02:14,160 Speaker 2: for credit on the commercial side. You'll also see you know, 47 00:02:14,200 --> 00:02:16,840 Speaker 2: some continuation of the card growth, credit card growth that 48 00:02:16,880 --> 00:02:19,880 Speaker 2: we've seen now for the you know year plus, and 49 00:02:19,919 --> 00:02:21,600 Speaker 2: then you know everything else. We'll kind of see how 50 00:02:21,680 --> 00:02:23,560 Speaker 2: it plays out. But I think those are going to 51 00:02:23,560 --> 00:02:25,480 Speaker 2: be the drivers as we look. And so the first 52 00:02:25,520 --> 00:02:27,600 Speaker 2: half of the year we still expected to be pretty muted. 53 00:02:27,880 --> 00:02:29,959 Speaker 2: Hopefully it'll start to pick up as we get later 54 00:02:30,240 --> 00:02:30,880 Speaker 2: later in the year. 55 00:02:31,320 --> 00:02:34,480 Speaker 3: Mike, let's talk about expenses and headcount here, because looking 56 00:02:34,520 --> 00:02:39,320 Speaker 3: backward your compensation expectations are expenses rather came in ahead 57 00:02:39,320 --> 00:02:42,960 Speaker 3: of expectations, and looking forward, Wells Fargo looking to shave 58 00:02:43,000 --> 00:02:47,359 Speaker 3: off another one billion in expenses this year, is reducing headcount. 59 00:02:47,400 --> 00:02:52,000 Speaker 2: Part of that conversation, well, you know what you saw 60 00:02:52,120 --> 00:02:56,600 Speaker 2: in the in the quarter, we booked some severance charges 61 00:02:56,639 --> 00:02:59,320 Speaker 2: that you know that go you know, continue some of 62 00:02:59,320 --> 00:03:01,280 Speaker 2: the efficiency work that we started, you know, a few 63 00:03:01,360 --> 00:03:03,399 Speaker 2: years ago, and so that's embedded in our run rate. 64 00:03:03,600 --> 00:03:05,680 Speaker 2: But when you look at what we what we disclosed, 65 00:03:05,680 --> 00:03:08,400 Speaker 2: we expect to have just under about three billion dollars 66 00:03:08,400 --> 00:03:12,399 Speaker 2: of efficiency impact come through in twenty twenty four, offset 67 00:03:12,480 --> 00:03:16,040 Speaker 2: by you know, normal merit increases and investments we're making 68 00:03:16,120 --> 00:03:18,799 Speaker 2: to some degree, but we're but that efficiency story that 69 00:03:18,840 --> 00:03:20,520 Speaker 2: we've had is very much part of it. And I 70 00:03:20,520 --> 00:03:23,640 Speaker 2: think you've seen our headcom headcount come down now consistently 71 00:03:24,440 --> 00:03:26,160 Speaker 2: for a while. And I think you'll see a little 72 00:03:26,200 --> 00:03:28,200 Speaker 2: bit more of that as we go through the rest 73 00:03:28,240 --> 00:03:29,720 Speaker 2: of the work that we've been doing we'll be doing 74 00:03:29,760 --> 00:03:31,600 Speaker 2: over the next few years on efficiency. 75 00:03:31,760 --> 00:03:33,720 Speaker 3: Okay, so a little bit more there. Let's also talk 76 00:03:33,720 --> 00:03:36,960 Speaker 3: about private credit because last year you announced a private 77 00:03:37,000 --> 00:03:40,360 Speaker 3: credit part private credit partnership. It's been a long week 78 00:03:40,560 --> 00:03:43,480 Speaker 3: with center Bridge. How is that going so far? And 79 00:03:43,520 --> 00:03:46,520 Speaker 3: what's the Wells Fargo view on private credit at this point? 80 00:03:47,280 --> 00:03:51,200 Speaker 2: Also, Yeah, well, the you know, we're really happy with 81 00:03:51,280 --> 00:03:54,640 Speaker 2: the you know, the way that partnership is starting to progress, 82 00:03:54,680 --> 00:03:57,680 Speaker 2: but it's just getting started, you know, it's just becoming 83 00:03:57,760 --> 00:04:01,480 Speaker 2: operational around now, and so we have a you know, 84 00:04:01,560 --> 00:04:04,160 Speaker 2: some pipeline of deals and but but it'll take some 85 00:04:04,200 --> 00:04:06,760 Speaker 2: time to ramp up. Or we're pleased with the partnership 86 00:04:06,760 --> 00:04:09,440 Speaker 2: that we've got with with center Bridge so far. You know, 87 00:04:09,440 --> 00:04:11,400 Speaker 2: when you think more broadly, many of the private clutter 88 00:04:11,440 --> 00:04:14,000 Speaker 2: plate private I'm having the same problem here having on 89 00:04:14,040 --> 00:04:16,800 Speaker 2: private credit, but like having private credit players are big 90 00:04:16,800 --> 00:04:19,760 Speaker 2: clients of ours already, you know, in our investment bank, 91 00:04:20,480 --> 00:04:22,839 Speaker 2: and so we work with them quite a bit, you know, 92 00:04:22,960 --> 00:04:24,920 Speaker 2: day to day. And then when you just think more broadly, 93 00:04:25,000 --> 00:04:26,960 Speaker 2: you know, I think, you know, many of the many 94 00:04:27,000 --> 00:04:29,279 Speaker 2: of the loans or the assets that are going into 95 00:04:29,279 --> 00:04:32,080 Speaker 2: those funds today are not something that a bank like 96 00:04:32,160 --> 00:04:34,359 Speaker 2: us would want necessarily on our balance sheet, and so 97 00:04:34,440 --> 00:04:37,159 Speaker 2: finding creative ways to partner with people like center Bridge 98 00:04:36,960 --> 00:04:39,600 Speaker 2: is one of the ways in which we'll we'll continue 99 00:04:39,680 --> 00:04:42,599 Speaker 2: to be able to offer our clients you know, you know, 100 00:04:43,279 --> 00:04:46,400 Speaker 2: the availability of those types of you know products. 101 00:04:47,240 --> 00:04:49,400 Speaker 1: Thank you for explaining that. I want to go big 102 00:04:49,440 --> 00:04:51,880 Speaker 1: pictures here, Mike, and talk a little bit about what 103 00:04:52,000 --> 00:04:55,919 Speaker 1: Well sees for the broader economy ahead, based on your position, 104 00:04:56,360 --> 00:04:59,200 Speaker 1: your role as a lender and consultant to so many 105 00:04:59,200 --> 00:05:01,440 Speaker 1: different kinds of comanies. With all the talk about the 106 00:05:01,520 --> 00:05:04,760 Speaker 1: US economy achieving a soft landing and expectations of rate 107 00:05:04,800 --> 00:05:07,120 Speaker 1: cuts later this year and so on, what is your 108 00:05:07,200 --> 00:05:10,520 Speaker 1: high level view on US companies and businesses right now? 109 00:05:13,320 --> 00:05:15,799 Speaker 2: Well, you know, I think it's clear, you know, many 110 00:05:15,960 --> 00:05:19,839 Speaker 2: consumers and many commercial clients are in really good shape. 111 00:05:20,600 --> 00:05:22,720 Speaker 2: You know, when you look in at the aggregate numbers 112 00:05:22,760 --> 00:05:25,360 Speaker 2: across both of the different you know types of customers. 113 00:05:25,440 --> 00:05:27,960 Speaker 2: You know, people still have a lot of liquidity. You know, 114 00:05:28,000 --> 00:05:31,680 Speaker 2: the credit performance has been strong, even though you've seen 115 00:05:31,760 --> 00:05:34,960 Speaker 2: delinquencies and charge offs increase off of the historic lows. 116 00:05:35,880 --> 00:05:37,800 Speaker 2: Now that's not to say on the consumer side, there 117 00:05:37,839 --> 00:05:40,640 Speaker 2: are a population of folks that are more stressed, you know, 118 00:05:40,960 --> 00:05:43,960 Speaker 2: folks that are you know, have lower income or wealth levels. 119 00:05:44,000 --> 00:05:46,640 Speaker 2: You know, the cumulative impact of inflation is definitely causing 120 00:05:46,640 --> 00:05:49,039 Speaker 2: some stress for them. That's not a big part of 121 00:05:49,040 --> 00:05:51,320 Speaker 2: our portfolio, but you should expect to see that kind 122 00:05:51,320 --> 00:05:54,599 Speaker 2: of play out over the next year or so. On 123 00:05:54,640 --> 00:05:57,279 Speaker 2: the commercial side, again, we're seeing we're seeing, you know, 124 00:05:57,360 --> 00:06:01,479 Speaker 2: good performance across most sectors, most clients, and I think 125 00:06:01,480 --> 00:06:04,400 Speaker 2: that sets us up well as we go into the year. Now. 126 00:06:04,440 --> 00:06:07,719 Speaker 2: Most economists now we're projecting kind of this soft landing. 127 00:06:07,880 --> 00:06:10,680 Speaker 2: Our own economists came out with their updated forecast today 128 00:06:10,760 --> 00:06:13,960 Speaker 2: and are also now projecting that. But I do think 129 00:06:14,320 --> 00:06:15,599 Speaker 2: we're you know, I do think you have to be 130 00:06:15,640 --> 00:06:18,640 Speaker 2: prepared for other scenarios. We're hopeful that that's the scenario 131 00:06:18,640 --> 00:06:20,240 Speaker 2: that will play out, but there's still a lot of 132 00:06:20,320 --> 00:06:22,799 Speaker 2: uncertainty and risks that are out there that could could 133 00:06:22,839 --> 00:06:24,880 Speaker 2: cause it to deviate from that base case, and so 134 00:06:25,279 --> 00:06:27,760 Speaker 2: you know, we're thinking about all those different kinds of scenarios, 135 00:06:27,760 --> 00:06:30,320 Speaker 2: but right now it's looking you know, the consumer and 136 00:06:30,680 --> 00:06:32,560 Speaker 2: the commercial customers are set up pretty well. 137 00:06:32,760 --> 00:06:35,240 Speaker 1: All right, Mike, really appreciate your joining us today. Mike 138 00:06:35,960 --> 00:06:39,320 Speaker 1: Santo Massimo, the Wells Fargo CFO, joining us on the 139 00:06:39,400 --> 00:06:41,719 Speaker 1: day of Wells Fargo's fourth quarter results.