1 00:00:02,720 --> 00:00:07,240 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,039 --> 00:00:10,480 Speaker 2: So let's turn now to the banks and kick things 3 00:00:10,520 --> 00:00:13,920 Speaker 2: off on the Big Show with Mike. Mike Santo Massimo. 4 00:00:14,080 --> 00:00:14,640 Speaker 1: He is the. 5 00:00:14,640 --> 00:00:17,240 Speaker 2: CFO over at Wells Fargo and he joins us now 6 00:00:17,239 --> 00:00:19,640 Speaker 2: from their trading floor. Mike is always good to speak 7 00:00:19,680 --> 00:00:21,720 Speaker 2: with you. A pleasure to have you on on your 8 00:00:21,720 --> 00:00:24,320 Speaker 2: earnings day. The big question here is not so much 9 00:00:24,320 --> 00:00:27,440 Speaker 2: about what happened in the first quarter, but the path 10 00:00:27,600 --> 00:00:30,200 Speaker 2: moving forward. And I want to start there with what 11 00:00:30,240 --> 00:00:34,560 Speaker 2: you're hearing from your customers, whether they are individuals or companies. 12 00:00:34,960 --> 00:00:37,760 Speaker 3: Yeah, thanks, thanks Matt and Nascarl for having me again. 13 00:00:37,920 --> 00:00:40,400 Speaker 3: You know, like I think, first, you got to you 14 00:00:40,479 --> 00:00:42,760 Speaker 3: know that as we come into this environment, you know, 15 00:00:42,800 --> 00:00:46,519 Speaker 3: the consumer is in good shape. You know, consumer can 16 00:00:46,920 --> 00:00:50,159 Speaker 3: continues to spend. Most of our commercial customers are in 17 00:00:50,200 --> 00:00:51,080 Speaker 3: good shape as well. 18 00:00:51,159 --> 00:00:52,400 Speaker 1: We're not seeing any kind. 19 00:00:52,320 --> 00:00:56,120 Speaker 3: Of big deterioration across the portfolio. So we come in 20 00:00:56,200 --> 00:01:00,000 Speaker 3: with a pretty good strong foundation. And as you said, 21 00:01:00,280 --> 00:01:03,440 Speaker 3: now look forward. What's happened is you've got some uncertainty, right, 22 00:01:03,480 --> 00:01:05,720 Speaker 3: And what uncertainty does is cause people to take a 23 00:01:05,720 --> 00:01:08,520 Speaker 3: step back and say, you know, how's it going to 24 00:01:08,520 --> 00:01:10,640 Speaker 3: impact me, how's it going to impact the demand I 25 00:01:10,720 --> 00:01:12,199 Speaker 3: might have for my products, or how's. 26 00:01:12,040 --> 00:01:13,520 Speaker 1: It going to impact the cost of my goods? 27 00:01:13,520 --> 00:01:16,800 Speaker 3: Soul? And they're going to take a pause and see 28 00:01:16,800 --> 00:01:20,400 Speaker 3: how that may change their their perspective looking forward. 29 00:01:21,080 --> 00:01:23,600 Speaker 1: And that's pretty you know, natural, I think for folks. 30 00:01:23,680 --> 00:01:26,240 Speaker 3: And that's what we're hearing overwhelming for clients is they're 31 00:01:26,520 --> 00:01:29,679 Speaker 3: taking a step back on the commercial side saying okay, 32 00:01:29,720 --> 00:01:31,440 Speaker 3: I got to really understand this a little bit better. 33 00:01:31,760 --> 00:01:32,839 Speaker 1: But again, on the on. 34 00:01:32,760 --> 00:01:36,080 Speaker 3: The consumer side, what we're seeing is just good consistent performance. 35 00:01:36,160 --> 00:01:37,600 Speaker 1: Like you know, people are still spending. 36 00:01:37,640 --> 00:01:41,120 Speaker 3: People are still out there, you know, using their debit 37 00:01:41,120 --> 00:01:44,240 Speaker 3: and credit cards and so still you know, quite robust 38 00:01:44,280 --> 00:01:45,759 Speaker 3: in terms of the overall activity. 39 00:01:46,040 --> 00:01:48,240 Speaker 1: But I think you know, most most commercial customers are 40 00:01:48,240 --> 00:01:50,840 Speaker 1: taking a step back and trying to evaluate the situation. 41 00:01:51,320 --> 00:01:54,800 Speaker 2: Understood. So, Mike, you left or fool your guidance unchanged. 42 00:01:55,040 --> 00:01:58,160 Speaker 2: What would it take to actually update that and provide 43 00:01:58,160 --> 00:01:59,840 Speaker 2: more details to investors? 44 00:02:00,200 --> 00:02:01,120 Speaker 1: Well, I think you know. 45 00:02:01,080 --> 00:02:02,880 Speaker 3: The good news is we left it kind of you know, 46 00:02:02,920 --> 00:02:05,960 Speaker 3: they guidance unchanged, as you said, and you know, as 47 00:02:06,000 --> 00:02:08,200 Speaker 3: you look at you know, what's happening, right now there's 48 00:02:08,200 --> 00:02:10,520 Speaker 3: a whole bunch of factors that go into where it's 49 00:02:10,560 --> 00:02:12,160 Speaker 3: going to go for the rest of the year versus 50 00:02:12,360 --> 00:02:16,800 Speaker 3: just overall deposit levels and mix that's stabilized and looking 51 00:02:16,840 --> 00:02:19,320 Speaker 3: pretty good overall. You know, we've seen some deposit growth 52 00:02:19,320 --> 00:02:22,320 Speaker 3: in our consumer business. We saw the stabilization you know 53 00:02:22,320 --> 00:02:25,680 Speaker 3: in terms of people looking for higher rates continue, So. 54 00:02:25,680 --> 00:02:28,120 Speaker 1: All all positives as we sort of look forward. 55 00:02:28,440 --> 00:02:29,920 Speaker 3: We saw a little bit of loan growth in the 56 00:02:29,960 --> 00:02:33,200 Speaker 3: first quarter, unclear sort of how that progresses throughout the year. 57 00:02:33,280 --> 00:02:35,079 Speaker 3: We are expecting to see a little bit more as 58 00:02:35,120 --> 00:02:37,720 Speaker 3: we go. That'll be a factor of sort of how 59 00:02:37,840 --> 00:02:39,840 Speaker 3: how you know, how people feel about you know, the 60 00:02:39,880 --> 00:02:42,760 Speaker 3: certainty of where things are going. And then I think 61 00:02:42,760 --> 00:02:45,480 Speaker 3: it's just the macro view on rates, and I think 62 00:02:45,520 --> 00:02:47,360 Speaker 3: the you know, you can see over the last just 63 00:02:47,360 --> 00:02:48,799 Speaker 3: a couple of days or a couple you know, a 64 00:02:48,840 --> 00:02:51,440 Speaker 3: week or two, you know, the expectations for rates, both 65 00:02:51,480 --> 00:02:53,880 Speaker 3: long term and sort of short term rates have been changing, 66 00:02:53,960 --> 00:02:56,120 Speaker 3: you know, quite a bit, and so we need to 67 00:02:56,120 --> 00:02:58,240 Speaker 3: see that stabilize, and I think that'll all be a 68 00:02:58,280 --> 00:03:00,880 Speaker 3: fund Then those those are all the key inputs into 69 00:03:01,160 --> 00:03:02,919 Speaker 3: kind of what an interesting income will look. 70 00:03:02,800 --> 00:03:03,760 Speaker 1: Like for the rest of the year. 71 00:03:03,800 --> 00:03:05,760 Speaker 3: But as of now, from where we sit today, we 72 00:03:05,800 --> 00:03:09,040 Speaker 3: still think the range we gave in January still is reasonable. 73 00:03:09,480 --> 00:03:12,880 Speaker 4: You're not likely to see a lot of things stabilize 74 00:03:13,040 --> 00:03:15,720 Speaker 4: in this administration, Mike, and I wonder how you hedge 75 00:03:15,760 --> 00:03:19,200 Speaker 4: against that. You know, Charlie Sharp earlier or in the statement, 76 00:03:19,200 --> 00:03:22,960 Speaker 4: I think, said that he applauds the administration's willingness to 77 00:03:23,320 --> 00:03:26,239 Speaker 4: look at barriers to fair trade, But there are certain 78 00:03:26,360 --> 00:03:30,280 Speaker 4: risks associated with such significant actions, and how do you 79 00:03:30,440 --> 00:03:34,600 Speaker 4: hedge against those potential outcomes as broad as they are. 80 00:03:34,920 --> 00:03:36,640 Speaker 1: Well, I think you have to look back, and I 81 00:03:36,680 --> 00:03:37,640 Speaker 1: think we tried to cover. 82 00:03:37,440 --> 00:03:39,000 Speaker 3: A little bit of this on the call and look 83 00:03:39,040 --> 00:03:41,400 Speaker 3: at the full universe of stuff happening. 84 00:03:41,640 --> 00:03:43,240 Speaker 1: There's a lot of good things happening on. 85 00:03:43,200 --> 00:03:46,440 Speaker 3: The regulatory side, you know, both for banks and more broadly, 86 00:03:46,520 --> 00:03:48,680 Speaker 3: and we're hopeful that some of those changes will get 87 00:03:48,680 --> 00:03:51,880 Speaker 3: implemented and that'll be helpful for banks like us to 88 00:03:51,960 --> 00:03:55,200 Speaker 3: sort of help support you know, the broader economy, the markets, 89 00:03:55,560 --> 00:03:57,960 Speaker 3: our clients, and so we're hopeful of that will continue 90 00:03:58,000 --> 00:04:00,839 Speaker 3: and unobated from sort of what's happening, you know, with 91 00:04:00,840 --> 00:04:03,440 Speaker 3: with trade policy. And then I think it's it's a 92 00:04:03,480 --> 00:04:05,840 Speaker 3: matter of just getting a little bit more certainty in 93 00:04:05,920 --> 00:04:08,160 Speaker 3: terms of what the guardrails are and the timeline is 94 00:04:08,280 --> 00:04:09,600 Speaker 3: on the trade policy. 95 00:04:09,840 --> 00:04:12,840 Speaker 1: It doesn't have to all be locked and loaded and done. 96 00:04:12,920 --> 00:04:14,560 Speaker 3: It just needs to have a little bit of guardrails 97 00:04:14,560 --> 00:04:16,520 Speaker 3: around it, and then I think people will very quickly 98 00:04:16,560 --> 00:04:19,359 Speaker 3: sort of adapt from there. And you have to continue 99 00:04:19,400 --> 00:04:21,320 Speaker 3: to kind of look beyond sort of what you read, 100 00:04:21,720 --> 00:04:23,480 Speaker 3: you know, in the headlines every day and just look 101 00:04:23,520 --> 00:04:26,440 Speaker 3: at see what you know fact first, you know, versus 102 00:04:26,440 --> 00:04:28,280 Speaker 3: what may be presented to you and so. 103 00:04:28,760 --> 00:04:30,480 Speaker 1: And you know, like I'll you know, go back to 104 00:04:30,480 --> 00:04:31,200 Speaker 1: where I started. 105 00:04:31,240 --> 00:04:33,360 Speaker 3: Like the good news is, like the economy is still 106 00:04:33,400 --> 00:04:37,000 Speaker 3: pretty active and pretty strong, and most customers come you know, 107 00:04:37,080 --> 00:04:40,039 Speaker 3: into this environment in a pretty good place. So that's 108 00:04:40,080 --> 00:04:43,680 Speaker 3: all sort of supportive for you know, things continuing to 109 00:04:43,720 --> 00:04:44,560 Speaker 3: be you. 110 00:04:44,520 --> 00:04:46,760 Speaker 1: Know, pretty pretty constructive for the rest of the year. 111 00:04:46,839 --> 00:04:48,839 Speaker 3: But the risks have definitely gone up, you know, there's 112 00:04:48,839 --> 00:04:51,120 Speaker 3: no doubt about it over the last couple of weeks, 113 00:04:51,480 --> 00:04:53,000 Speaker 3: and so we have to we have to try to 114 00:04:53,000 --> 00:04:55,200 Speaker 3: find ways to you know, continue to support clients and 115 00:04:55,240 --> 00:04:57,560 Speaker 3: then make sure that we're thinking about all those risks appropriately. 116 00:04:58,000 --> 00:05:01,440 Speaker 4: I think, you know, going back to your earn this morning, Mike, 117 00:05:01,520 --> 00:05:03,599 Speaker 4: a lot of people on the street were surprised by 118 00:05:04,600 --> 00:05:08,680 Speaker 4: lower loss loan loss provisions than they expected. Saul Martinez 119 00:05:08,680 --> 00:05:12,599 Speaker 4: from HSBC notes that that, as well as the positive 120 00:05:12,720 --> 00:05:17,880 Speaker 4: tax expense, helped out. Gerard Cassid RBC also said that 121 00:05:17,960 --> 00:05:21,120 Speaker 4: your performance relative to their estimate was driven by a 122 00:05:21,120 --> 00:05:25,320 Speaker 4: lower than expected effective tax rate and lower than expected 123 00:05:25,360 --> 00:05:28,080 Speaker 4: provision for credit losses. Why keep that so low when 124 00:05:28,080 --> 00:05:30,640 Speaker 4: you're staring so much uncertainty in the face. 125 00:05:30,440 --> 00:05:34,480 Speaker 3: Here, Well, you know it is. We talked about this 126 00:05:34,520 --> 00:05:36,040 Speaker 3: on our call a little bit. You first start with 127 00:05:36,160 --> 00:05:39,599 Speaker 3: just the performance of the portfolio, which has done very well. 128 00:05:40,000 --> 00:05:41,760 Speaker 3: You know, we had we had a couple of years ago, 129 00:05:41,800 --> 00:05:43,719 Speaker 3: now two or three years ago at this point, you know, 130 00:05:43,920 --> 00:05:46,720 Speaker 3: had done a bunch of tightening actions, credit tightening actions 131 00:05:46,720 --> 00:05:49,320 Speaker 3: on the consumer side, and that's serving us well as 132 00:05:49,360 --> 00:05:51,040 Speaker 3: we come into this environment. 133 00:05:51,080 --> 00:05:53,159 Speaker 1: And so you can see the performance. 134 00:05:52,600 --> 00:05:55,320 Speaker 3: Continue to get, you know, better and better across many 135 00:05:55,440 --> 00:05:58,000 Speaker 3: of those portfolios. And then when you look at the 136 00:05:58,000 --> 00:06:01,200 Speaker 3: commercial side again, same thing. It's been performing quite well. 137 00:06:01,920 --> 00:06:03,960 Speaker 3: And I think as you look at the assumptions that 138 00:06:04,000 --> 00:06:05,039 Speaker 3: go into the allowance. 139 00:06:05,080 --> 00:06:06,880 Speaker 1: We're already assuming that. 140 00:06:06,839 --> 00:06:09,880 Speaker 3: You know, unemployment ticks up quite a bit, and we 141 00:06:09,960 --> 00:06:12,560 Speaker 3: noted on the call that we did increase the allowance 142 00:06:12,760 --> 00:06:15,080 Speaker 3: a bit more, you know, as it relates to some 143 00:06:15,120 --> 00:06:16,880 Speaker 3: of the uncertainty that we've seen as we came into 144 00:06:16,880 --> 00:06:20,040 Speaker 3: the end of the quarter. So if we hadn't done that, 145 00:06:20,080 --> 00:06:22,520 Speaker 3: we would have seen a bigger release there, you know, 146 00:06:22,560 --> 00:06:26,279 Speaker 3: given how well the portfolio is performing and slightly lower 147 00:06:26,320 --> 00:06:27,880 Speaker 3: balances across some of the portfolio. 148 00:06:28,880 --> 00:06:30,760 Speaker 2: Mike, can you give us an update on the acid 149 00:06:30,880 --> 00:06:33,400 Speaker 2: cap that's now seven years old at well Is it 150 00:06:33,400 --> 00:06:35,360 Speaker 2: limits your balance sheet to the size it was at 151 00:06:35,360 --> 00:06:37,560 Speaker 2: the end of twenty seventeen. I know that the bank 152 00:06:37,560 --> 00:06:40,200 Speaker 2: has made a lot of progress this year, resolving five 153 00:06:40,240 --> 00:06:43,160 Speaker 2: consent orders in the first quarter alone. Is there anything 154 00:06:43,200 --> 00:06:45,320 Speaker 2: more to resolve on Wells Fargo's end? 155 00:06:45,800 --> 00:06:48,679 Speaker 3: Well, I think you know, in the in the release 156 00:06:48,760 --> 00:06:51,360 Speaker 3: and in sort of this, you know, the call comments 157 00:06:51,400 --> 00:06:53,080 Speaker 3: that we had, you can see, you know, as you 158 00:06:53,080 --> 00:06:55,920 Speaker 3: pointed out that we've made a ton of progress not 159 00:06:55,960 --> 00:06:58,520 Speaker 3: only closing the consent orders, but we also noted that 160 00:06:58,560 --> 00:07:01,160 Speaker 3: we completed much of the work that's common across the 161 00:07:01,760 --> 00:07:03,960 Speaker 3: orders that got closed and some of the other orders 162 00:07:04,000 --> 00:07:06,200 Speaker 3: and so so you know, we're just going to keep 163 00:07:06,240 --> 00:07:09,400 Speaker 3: continuing focusing our energy and the things we can control, 164 00:07:09,400 --> 00:07:11,120 Speaker 3: which is making sure that the work's done at the 165 00:07:11,160 --> 00:07:13,720 Speaker 3: highest quality. And you know, we'll let the FED ultimately 166 00:07:14,040 --> 00:07:16,000 Speaker 3: determine sort of the timing and the asset cap. But 167 00:07:16,440 --> 00:07:19,360 Speaker 3: we feel good about the progress we've made and that's 168 00:07:19,360 --> 00:07:21,440 Speaker 3: thanks to the thousands of people across the company that 169 00:07:21,480 --> 00:07:21,840 Speaker 3: have done that. 170 00:07:22,280 --> 00:07:25,120 Speaker 2: So, if the FED removes the cap sometime this year, 171 00:07:25,320 --> 00:07:27,520 Speaker 2: what are the initiatives, what are the things that Wells 172 00:07:27,600 --> 00:07:29,840 Speaker 2: is going to start working on right away to look 173 00:07:29,880 --> 00:07:31,200 Speaker 2: for new streams of revenue growth. 174 00:07:31,320 --> 00:07:33,320 Speaker 3: Well, most of the strategies that we have in place 175 00:07:33,680 --> 00:07:35,920 Speaker 3: are going to be the same ones. So we've been 176 00:07:35,920 --> 00:07:39,200 Speaker 3: investing our wealth management business, our credit card business, our 177 00:07:39,240 --> 00:07:41,239 Speaker 3: corporate investment bank, our commercial bank. 178 00:07:41,520 --> 00:07:43,000 Speaker 1: None of that changes. You know. 179 00:07:43,120 --> 00:07:46,600 Speaker 3: What happens, you know in a time when we have 180 00:07:46,640 --> 00:07:48,600 Speaker 3: more flexibility on the size of the balance sheet, is 181 00:07:48,640 --> 00:07:50,520 Speaker 3: we'll be able to deploy more balance sheet to our 182 00:07:50,520 --> 00:07:53,720 Speaker 3: market's business, you know, in terms of financing trades that 183 00:07:53,720 --> 00:07:56,080 Speaker 3: we can sort of help our clients with, and then 184 00:07:56,120 --> 00:07:58,400 Speaker 3: maybe more broadly in certain types of deposits that we 185 00:07:58,440 --> 00:07:59,560 Speaker 3: can take, but a lot. 186 00:07:59,400 --> 00:08:01,080 Speaker 1: Of the core ategies don't change. 187 00:08:01,320 --> 00:08:03,280 Speaker 3: We're going to continue to execute those and those will 188 00:08:03,320 --> 00:08:05,240 Speaker 3: drive growth in the balance sheet and the revenue and 189 00:08:05,520 --> 00:08:07,480 Speaker 3: the company over a long period of time. But we'll 190 00:08:07,520 --> 00:08:10,040 Speaker 3: have a little bit more flexibility to do some do 191 00:08:10,160 --> 00:08:11,800 Speaker 3: some more activity in our markets business. 192 00:08:12,360 --> 00:08:16,200 Speaker 4: Mike, I saw that's interest income was down due to 193 00:08:16,320 --> 00:08:19,160 Speaker 4: the impact of lower rates, but partially offset by lower 194 00:08:19,200 --> 00:08:22,280 Speaker 4: deposit pricing and higher deposit balances, and I wanted to 195 00:08:22,320 --> 00:08:26,480 Speaker 4: ask about that specifically. You know, a lot of families, 196 00:08:26,480 --> 00:08:29,920 Speaker 4: when when they're facing uncertainty, will make sure that the 197 00:08:30,000 --> 00:08:31,960 Speaker 4: rainy day fund is stocked up. 198 00:08:32,240 --> 00:08:33,000 Speaker 1: Are you seeing that? 199 00:08:34,120 --> 00:08:36,920 Speaker 3: No, A lot of what we've seen now is just 200 00:08:37,080 --> 00:08:40,520 Speaker 3: consistent sort of activity and growth over the last you know, 201 00:08:40,600 --> 00:08:43,320 Speaker 3: four quarters, you know, and what you're seeing in the 202 00:08:43,360 --> 00:08:46,000 Speaker 3: first quarter is just you know, the cumulative impact of that. 203 00:08:46,520 --> 00:08:49,640 Speaker 3: We're not seeing big shifts and behavior at this point, 204 00:08:50,480 --> 00:08:52,720 Speaker 3: you know, across either the consumer or the or the 205 00:08:52,800 --> 00:08:55,600 Speaker 3: corporate client base. And so maybe that'll happen in the future, 206 00:08:55,640 --> 00:08:56,439 Speaker 3: but we're not seeing that. 207 00:08:56,400 --> 00:08:56,840 Speaker 1: At this point. 208 00:08:56,880 --> 00:09:00,319 Speaker 3: It's just it's just normal activity plus some growth that 209 00:09:00,360 --> 00:09:02,800 Speaker 3: we've seen as we've been able to grow a little 210 00:09:02,800 --> 00:09:05,720 Speaker 3: bit more in all the businesses on the consumer side, 211 00:09:05,760 --> 00:09:07,880 Speaker 3: but we're happy to see some of that growth come 212 00:09:07,920 --> 00:09:08,880 Speaker 3: across the client base. 213 00:09:09,520 --> 00:09:11,800 Speaker 4: Mike, great to get so much intel from you. Really 214 00:09:11,800 --> 00:09:14,320 Speaker 4: appreciate you sticking with us here on the close. Mike 215 00:09:14,320 --> 00:09:18,840 Speaker 4: Santamassimo there the CFO, chief financial officer over at Wells Fargo.