1
00:00:00,080 --> 00:00:03,080
Speaker 1: Please to say that the CFO of Wells Fargo joins

2
00:00:03,160 --> 00:00:06,320
Speaker 1: us right now. Mike sanam messimo, Mike, Let's just start

3
00:00:06,400 --> 00:00:08,559
Speaker 1: off with net interest income. There's been so much talk

4
00:00:08,600 --> 00:00:11,880
Speaker 1: here about deposit betas and the balance between that rise

5
00:00:11,920 --> 00:00:14,080
Speaker 1: and interest rates and sort of what it means for

6
00:00:14,200 --> 00:00:16,959
Speaker 1: a bank like yours. What gave you the confidence to

7
00:00:17,000 --> 00:00:18,840
Speaker 1: bump up that net interest income target?

8
00:00:20,239 --> 00:00:23,040
Speaker 2: Yeah, Well, first remaining, Katie, thanks thanks for having me again.

9
00:00:23,120 --> 00:00:26,079
Speaker 2: You know, what you saw in the quarter again is

10
00:00:26,239 --> 00:00:28,360
Speaker 2: just you know, good continued.

11
00:00:27,800 --> 00:00:28,880
Speaker 3: Strong performance there.

12
00:00:28,880 --> 00:00:31,440
Speaker 2: And what we were looking at throughout the first half

13
00:00:31,440 --> 00:00:33,360
Speaker 2: of the year is the is what was going to

14
00:00:33,400 --> 00:00:35,800
Speaker 2: happen with deposit balances, what was going to happen with

15
00:00:35,840 --> 00:00:38,240
Speaker 2: the mix of non intersparing or interestparing, and what was

16
00:00:38,240 --> 00:00:40,920
Speaker 2: going to happen with pricing really driven by you know,

17
00:00:40,960 --> 00:00:43,640
Speaker 2: what was happening in the competitive environment. And as we've

18
00:00:43,680 --> 00:00:45,720
Speaker 2: got more as more time went by, we got more

19
00:00:45,760 --> 00:00:48,400
Speaker 2: confident that trends were going to be a little bit

20
00:00:48,440 --> 00:00:50,839
Speaker 2: better than what we had modeled earlier in the year,

21
00:00:50,880 --> 00:00:52,760
Speaker 2: and that's why we were confident to put out you know,

22
00:00:52,800 --> 00:00:56,880
Speaker 2: the higher the Higher guide today and I think it's

23
00:00:56,880 --> 00:01:00,240
Speaker 2: a good sign overall that, you know, it's what's happening

24
00:01:00,280 --> 00:01:02,560
Speaker 2: in the economy is probably better than what we all expected.

25
00:01:02,600 --> 00:01:05,840
Speaker 2: And you know, you see you see good activity in

26
00:01:06,000 --> 00:01:08,800
Speaker 2: the market. You see you know, our our our NII

27
00:01:08,880 --> 00:01:10,640
Speaker 2: is up quite a bit. You see fees up driven

28
00:01:10,680 --> 00:01:14,399
Speaker 2: by that activity. You see good controlled expenses in the quarter.

29
00:01:14,480 --> 00:01:16,520
Speaker 2: And I think that's really what's what's driving I think

30
00:01:16,560 --> 00:01:17,440
Speaker 2: our results.

31
00:01:17,080 --> 00:01:20,640
Speaker 1: Today interesting too, taking a look at trading revenue and

32
00:01:20,720 --> 00:01:23,120
Speaker 1: v revenue not something at least relative to some of

33
00:01:23,160 --> 00:01:25,200
Speaker 1: your peers that a lot of people look to well

34
00:01:25,240 --> 00:01:28,280
Speaker 1: as Fargo to dominate here, but there was significant outperformance

35
00:01:28,319 --> 00:01:31,320
Speaker 1: there released relative to what we heard today out of

36
00:01:31,360 --> 00:01:33,760
Speaker 1: City Group in JP Morgan, what was the driver of that?

37
00:01:35,240 --> 00:01:37,960
Speaker 2: Yeah, And keep in mind we're relatively small, you know,

38
00:01:38,360 --> 00:01:40,280
Speaker 2: you know, you know, compared to some of the you know,

39
00:01:40,360 --> 00:01:42,840
Speaker 2: the big peers out there. But but it's something that

40
00:01:42,880 --> 00:01:45,880
Speaker 2: we've been focusing on now for the last couple of years,

41
00:01:45,920 --> 00:01:49,480
Speaker 2: few years, and just really making sure that we're consistently

42
00:01:50,000 --> 00:01:53,360
Speaker 2: adding the right people. We were investing in technology and

43
00:01:53,400 --> 00:01:56,480
Speaker 2: really the focus is to just support our clients better.

44
00:01:56,560 --> 00:01:58,440
Speaker 2: You know, it's our U it's focused on the US

45
00:01:58,480 --> 00:01:59,720
Speaker 2: based clients for the most part.

46
00:02:00,400 --> 00:02:01,880
Speaker 3: There's some outside the US.

47
00:02:01,680 --> 00:02:03,880
Speaker 2: But really primarily here in the US, and it's just

48
00:02:03,920 --> 00:02:08,040
Speaker 2: supporting our corporate clients and our asset management clients and others.

49
00:02:08,760 --> 00:02:11,600
Speaker 2: Just better and better each day incrementally. And so we're

50
00:02:11,639 --> 00:02:14,560
Speaker 2: happy with the performance we had this quarter and last quarter,

51
00:02:15,280 --> 00:02:17,200
Speaker 2: and I think that shows through the fees. But it's

52
00:02:17,200 --> 00:02:19,400
Speaker 2: something that we'll just keep, you know, gradually building on

53
00:02:19,480 --> 00:02:19,919
Speaker 2: over time.

54
00:02:20,440 --> 00:02:23,000
Speaker 4: Mike, Let's talk about commercial real estate because it caught

55
00:02:23,040 --> 00:02:26,000
Speaker 4: a lot of eyes that actually Wells Fargo increased the

56
00:02:26,000 --> 00:02:29,720
Speaker 4: allowance for credit losses by about nine hundred and fifty

57
00:02:29,880 --> 00:02:33,200
Speaker 4: million dollars and it was commercial real estate office loans

58
00:02:33,200 --> 00:02:36,280
Speaker 4: that were cited for the reason behind the move. So,

59
00:02:36,320 --> 00:02:39,080
Speaker 4: as I understand it, you haven't seen significant losses yet,

60
00:02:39,080 --> 00:02:42,040
Speaker 4: but you had CEO Charlie Sharp say that you expect

61
00:02:42,080 --> 00:02:45,000
Speaker 4: to see it play out in the market over time.

62
00:02:45,080 --> 00:02:48,480
Speaker 4: When are you anticipating to see peak pain for commercial

63
00:02:48,480 --> 00:02:49,040
Speaker 4: real estate?

64
00:02:50,360 --> 00:02:52,280
Speaker 2: Well, I think I would just broaden it a little

65
00:02:52,280 --> 00:02:54,520
Speaker 2: bit first, then I'll come back to office. And you know,

66
00:02:54,520 --> 00:02:57,160
Speaker 2: when you look at the overall credit picture, it's quite good.

67
00:02:57,320 --> 00:02:59,359
Speaker 2: You know, on the consumer side, we're seeing a little

68
00:02:59,360 --> 00:03:02,959
Speaker 2: bit higher chart. Our jobs, but that's off historic loads,

69
00:03:03,000 --> 00:03:05,760
Speaker 2: and so you know, that's actually performing quite well so far,

70
00:03:06,400 --> 00:03:09,200
Speaker 2: and broadly on the commercial side of the business, it's

71
00:03:09,280 --> 00:03:11,160
Speaker 2: going quite well in terms of both the you know,

72
00:03:11,200 --> 00:03:14,880
Speaker 2: our middle market and commercial banking clients, and big chunks

73
00:03:14,919 --> 00:03:17,960
Speaker 2: of the commercial real estate portfolio are actually performing really

74
00:03:18,480 --> 00:03:20,440
Speaker 2: really well so far, particularly given where we are in

75
00:03:20,480 --> 00:03:24,480
Speaker 2: the cycle. And so really this conversation is focused and

76
00:03:24,560 --> 00:03:27,800
Speaker 2: isolated on the office portfolio, and I think as you

77
00:03:27,840 --> 00:03:29,840
Speaker 2: look at office, you know, it's a lot of the

78
00:03:29,880 --> 00:03:32,079
Speaker 2: trends that we all are talking about now for a

79
00:03:32,120 --> 00:03:35,520
Speaker 2: while in terms of return to office. You know, companies

80
00:03:35,560 --> 00:03:37,960
Speaker 2: needing less real estate, and that's starting to come through

81
00:03:38,320 --> 00:03:41,200
Speaker 2: in different cities and different properties across the country.

82
00:03:41,920 --> 00:03:45,400
Speaker 3: And what we did today, you know, or in the quarter, is.

83
00:03:46,160 --> 00:03:48,000
Speaker 2: Make sure as we sort of look at all the

84
00:03:48,000 --> 00:03:50,240
Speaker 2: things that we can see and all and then think

85
00:03:50,280 --> 00:03:54,160
Speaker 2: about a whole bunch of different scenarios that we stress

86
00:03:54,200 --> 00:03:57,000
Speaker 2: in the portfolio. And so we built a reserve that

87
00:03:57,040 --> 00:03:58,720
Speaker 2: we think is appropriate to deal with a number of

88
00:03:58,720 --> 00:04:01,720
Speaker 2: those scenarios. But keep in mind, you know, we haven't,

89
00:04:01,840 --> 00:04:05,560
Speaker 2: as you said, we haven't really seen the losses be

90
00:04:05,720 --> 00:04:08,640
Speaker 2: significant so far, but there will be some weakness over time,

91
00:04:08,760 --> 00:04:10,720
Speaker 2: and it will it will play out over an extended

92
00:04:10,720 --> 00:04:13,800
Speaker 2: period of time and likely years, not months or quarters,

93
00:04:14,480 --> 00:04:18,919
Speaker 2: as people work through the changing patterns and different issues

94
00:04:18,960 --> 00:04:20,160
Speaker 2: with individual properties.

95
00:04:20,440 --> 00:04:22,719
Speaker 4: So likely years will put a pin in that.

96
00:04:22,800 --> 00:04:24,120
Speaker 3: Let's also talk about.

97
00:04:23,880 --> 00:04:27,000
Speaker 4: Deposit betas as well, because you also said that the

98
00:04:27,080 --> 00:04:31,039
Speaker 4: average deposit cost is now one point one three percent.

99
00:04:31,120 --> 00:04:34,880
Speaker 4: For context, it is basically zero a year ago. How

100
00:04:34,960 --> 00:04:37,440
Speaker 4: much higher could that average cost rise?

101
00:04:39,080 --> 00:04:41,080
Speaker 2: Well, keep in mind that's you know, a little over

102
00:04:41,120 --> 00:04:43,839
Speaker 2: one hundred basis points with rates going up five hundred

103
00:04:43,880 --> 00:04:46,600
Speaker 2: basis points right, and so it's still you know, relatively

104
00:04:46,760 --> 00:04:50,000
Speaker 2: modest given the quick pace of right rates that we saw.

105
00:04:50,440 --> 00:04:53,080
Speaker 2: And when you look at each part of the portfolio

106
00:04:53,200 --> 00:04:55,280
Speaker 2: and the commercial side, you know, the pricing has been

107
00:04:55,279 --> 00:04:57,840
Speaker 2: pretty competitive for a number of quarters. Now we're not

108
00:04:57,880 --> 00:05:00,479
Speaker 2: seeing that accelerate one way or the other, and so

109
00:05:00,520 --> 00:05:03,720
Speaker 2: I wouldn't anticipate that'll just continue being pretty competitive as

110
00:05:03,720 --> 00:05:06,360
Speaker 2: we go over the nextcoming quarters. And then it's really

111
00:05:06,440 --> 00:05:10,360
Speaker 2: the consumer side where where we raised prices last year

112
00:05:10,400 --> 00:05:14,640
Speaker 2: and we were seeing that flow through our portfolios today

113
00:05:15,320 --> 00:05:16,760
Speaker 2: and I think we'll just have to wait and see

114
00:05:16,880 --> 00:05:19,279
Speaker 2: as the year goes on and we see what the

115
00:05:19,320 --> 00:05:22,400
Speaker 2: path of rates look like, and I think that'll help

116
00:05:22,480 --> 00:05:24,800
Speaker 2: us figure out exactly where that goes and what pace

117
00:05:24,880 --> 00:05:27,799
Speaker 2: it increases or decreases over the coming quarters.

118
00:05:28,360 --> 00:05:30,560
Speaker 4: Mike really appreciate the time on what I'm sure is

119
00:05:30,600 --> 00:05:33,760
Speaker 4: a very busy day. Our thanks to Mike santam Asimo

120
00:05:33,880 --> 00:05:34,880
Speaker 4: of Wells Fargo,