Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: So let's turn now to the banks and kick things
Speaker 2: off on the Big Show with Mike. Mike Santo Massimo.
Speaker 1: He is the.
Speaker 2: CFO over at Wells Fargo and he joins us now
Speaker 2: from their trading floor. Mike is always good to speak
Speaker 2: with you. A pleasure to have you on on your
Speaker 2: earnings day. The big question here is not so much
Speaker 2: about what happened in the first quarter, but the path
Speaker 2: moving forward. And I want to start there with what
Speaker 2: you're hearing from your customers, whether they are individuals or companies.
Speaker 3: Yeah, thanks, thanks Matt and Nascarl for having me again.
Speaker 3: You know, like I think, first, you got to you
Speaker 3: know that as we come into this environment, you know,
Speaker 3: the consumer is in good shape. You know, consumer can
Speaker 3: continues to spend. Most of our commercial customers are in
Speaker 3: good shape as well.
Speaker 1: We're not seeing any kind.
Speaker 3: Of big deterioration across the portfolio. So we come in
Speaker 3: with a pretty good strong foundation. And as you said,
Speaker 3: now look forward. What's happened is you've got some uncertainty, right,
Speaker 3: And what uncertainty does is cause people to take a
Speaker 3: step back and say, you know, how's it going to
Speaker 3: impact me, how's it going to impact the demand I
Speaker 3: might have for my products, or how's.
Speaker 1: It going to impact the cost of my goods?
Speaker 3: Soul? And they're going to take a pause and see
Speaker 3: how that may change their their perspective looking forward.
Speaker 1: And that's pretty you know, natural, I think for folks.
Speaker 3: And that's what we're hearing overwhelming for clients is they're
Speaker 3: taking a step back on the commercial side saying okay,
Speaker 3: I got to really understand this a little bit better.
Speaker 1: But again, on the on.
Speaker 3: The consumer side, what we're seeing is just good consistent performance.
Speaker 1: Like you know, people are still spending.
Speaker 3: People are still out there, you know, using their debit
Speaker 3: and credit cards and so still you know, quite robust
Speaker 3: in terms of the overall activity.
Speaker 1: But I think you know, most most commercial customers are
Speaker 1: taking a step back and trying to evaluate the situation.
Speaker 2: Understood. So, Mike, you left or fool your guidance unchanged.
Speaker 2: What would it take to actually update that and provide
Speaker 2: more details to investors?
Speaker 1: Well, I think you know.
Speaker 3: The good news is we left it kind of you know,
Speaker 3: they guidance unchanged, as you said, and you know, as
Speaker 3: you look at you know, what's happening, right now there's
Speaker 3: a whole bunch of factors that go into where it's
Speaker 3: going to go for the rest of the year versus
Speaker 3: just overall deposit levels and mix that's stabilized and looking
Speaker 3: pretty good overall. You know, we've seen some deposit growth
Speaker 3: in our consumer business. We saw the stabilization you know
Speaker 3: in terms of people looking for higher rates continue, So.
Speaker 1: All all positives as we sort of look forward.
Speaker 3: We saw a little bit of loan growth in the
Speaker 3: first quarter, unclear sort of how that progresses throughout the year.
Speaker 3: We are expecting to see a little bit more as
Speaker 3: we go. That'll be a factor of sort of how
Speaker 3: how you know, how people feel about you know, the
Speaker 3: certainty of where things are going. And then I think
Speaker 3: it's just the macro view on rates, and I think
Speaker 3: the you know, you can see over the last just
Speaker 3: a couple of days or a couple you know, a
Speaker 3: week or two, you know, the expectations for rates, both
Speaker 3: long term and sort of short term rates have been changing,
Speaker 3: you know, quite a bit, and so we need to
Speaker 3: see that stabilize, and I think that'll all be a
Speaker 3: fund Then those those are all the key inputs into
Speaker 3: kind of what an interesting income will look.
Speaker 1: Like for the rest of the year.
Speaker 3: But as of now, from where we sit today, we
Speaker 3: still think the range we gave in January still is reasonable.
Speaker 4: You're not likely to see a lot of things stabilize
Speaker 4: in this administration, Mike, and I wonder how you hedge
Speaker 4: against that. You know, Charlie Sharp earlier or in the statement,
Speaker 4: I think, said that he applauds the administration's willingness to
Speaker 4: look at barriers to fair trade, But there are certain
Speaker 4: risks associated with such significant actions, and how do you
Speaker 4: hedge against those potential outcomes as broad as they are.
Speaker 1: Well, I think you have to look back, and I
Speaker 1: think we tried to cover.
Speaker 3: A little bit of this on the call and look
Speaker 3: at the full universe of stuff happening.
Speaker 1: There's a lot of good things happening on.
Speaker 3: The regulatory side, you know, both for banks and more broadly,
Speaker 3: and we're hopeful that some of those changes will get
Speaker 3: implemented and that'll be helpful for banks like us to
Speaker 3: sort of help support you know, the broader economy, the markets,
Speaker 3: our clients, and so we're hopeful of that will continue
Speaker 3: and unobated from sort of what's happening, you know, with
Speaker 3: with trade policy. And then I think it's it's a
Speaker 3: matter of just getting a little bit more certainty in
Speaker 3: terms of what the guardrails are and the timeline is
Speaker 3: on the trade policy.
Speaker 1: It doesn't have to all be locked and loaded and done.
Speaker 3: It just needs to have a little bit of guardrails
Speaker 3: around it, and then I think people will very quickly
Speaker 3: sort of adapt from there. And you have to continue
Speaker 3: to kind of look beyond sort of what you read,
Speaker 3: you know, in the headlines every day and just look
Speaker 3: at see what you know fact first, you know, versus
Speaker 3: what may be presented to you and so.
Speaker 1: And you know, like I'll you know, go back to
Speaker 1: where I started.
Speaker 3: Like the good news is, like the economy is still
Speaker 3: pretty active and pretty strong, and most customers come you know,
Speaker 3: into this environment in a pretty good place. So that's
Speaker 3: all sort of supportive for you know, things continuing to
Speaker 3: be you.
Speaker 1: Know, pretty pretty constructive for the rest of the year.
Speaker 3: But the risks have definitely gone up, you know, there's
Speaker 3: no doubt about it over the last couple of weeks,
Speaker 3: and so we have to we have to try to
Speaker 3: find ways to you know, continue to support clients and
Speaker 3: then make sure that we're thinking about all those risks appropriately.
Speaker 4: I think, you know, going back to your earn this morning, Mike,
Speaker 4: a lot of people on the street were surprised by
Speaker 4: lower loss loan loss provisions than they expected. Saul Martinez
Speaker 4: from HSBC notes that that, as well as the positive
Speaker 4: tax expense, helped out. Gerard Cassid RBC also said that
Speaker 4: your performance relative to their estimate was driven by a
Speaker 4: lower than expected effective tax rate and lower than expected
Speaker 4: provision for credit losses. Why keep that so low when
Speaker 4: you're staring so much uncertainty in the face.
Speaker 3: Here, Well, you know it is. We talked about this
Speaker 3: on our call a little bit. You first start with
Speaker 3: just the performance of the portfolio, which has done very well.
Speaker 3: You know, we had we had a couple of years ago,
Speaker 3: now two or three years ago at this point, you know,
Speaker 3: had done a bunch of tightening actions, credit tightening actions
Speaker 3: on the consumer side, and that's serving us well as
Speaker 3: we come into this environment.
Speaker 1: And so you can see the performance.
Speaker 3: Continue to get, you know, better and better across many
Speaker 3: of those portfolios. And then when you look at the
Speaker 3: commercial side again, same thing. It's been performing quite well.
Speaker 3: And I think as you look at the assumptions that
Speaker 3: go into the allowance.
Speaker 1: We're already assuming that.
Speaker 3: You know, unemployment ticks up quite a bit, and we
Speaker 3: noted on the call that we did increase the allowance
Speaker 3: a bit more, you know, as it relates to some
Speaker 3: of the uncertainty that we've seen as we came into
Speaker 3: the end of the quarter. So if we hadn't done that,
Speaker 3: we would have seen a bigger release there, you know,
Speaker 3: given how well the portfolio is performing and slightly lower
Speaker 3: balances across some of the portfolio.
Speaker 2: Mike, can you give us an update on the acid
Speaker 2: cap that's now seven years old at well Is it
Speaker 2: limits your balance sheet to the size it was at
Speaker 2: the end of twenty seventeen. I know that the bank
Speaker 2: has made a lot of progress this year, resolving five
Speaker 2: consent orders in the first quarter alone. Is there anything
Speaker 2: more to resolve on Wells Fargo's end?
Speaker 3: Well, I think you know, in the in the release
Speaker 3: and in sort of this, you know, the call comments
Speaker 3: that we had, you can see, you know, as you
Speaker 3: pointed out that we've made a ton of progress not
Speaker 3: only closing the consent orders, but we also noted that
Speaker 3: we completed much of the work that's common across the
Speaker 3: orders that got closed and some of the other orders
Speaker 3: and so so you know, we're just going to keep
Speaker 3: continuing focusing our energy and the things we can control,
Speaker 3: which is making sure that the work's done at the
Speaker 3: highest quality. And you know, we'll let the FED ultimately
Speaker 3: determine sort of the timing and the asset cap. But
Speaker 3: we feel good about the progress we've made and that's
Speaker 3: thanks to the thousands of people across the company that
Speaker 3: have done that.
Speaker 2: So, if the FED removes the cap sometime this year,
Speaker 2: what are the initiatives, what are the things that Wells
Speaker 2: is going to start working on right away to look
Speaker 2: for new streams of revenue growth.
Speaker 3: Well, most of the strategies that we have in place
Speaker 3: are going to be the same ones. So we've been
Speaker 3: investing our wealth management business, our credit card business, our
Speaker 3: corporate investment bank, our commercial bank.
Speaker 1: None of that changes. You know.
Speaker 3: What happens, you know in a time when we have
Speaker 3: more flexibility on the size of the balance sheet, is
Speaker 3: we'll be able to deploy more balance sheet to our
Speaker 3: market's business, you know, in terms of financing trades that
Speaker 3: we can sort of help our clients with, and then
Speaker 3: maybe more broadly in certain types of deposits that we
Speaker 3: can take, but a lot.
Speaker 1: Of the core ategies don't change.
Speaker 3: We're going to continue to execute those and those will
Speaker 3: drive growth in the balance sheet and the revenue and
Speaker 3: the company over a long period of time. But we'll
Speaker 3: have a little bit more flexibility to do some do
Speaker 3: some more activity in our markets business.
Speaker 4: Mike, I saw that's interest income was down due to
Speaker 4: the impact of lower rates, but partially offset by lower
Speaker 4: deposit pricing and higher deposit balances, and I wanted to
Speaker 4: ask about that specifically. You know, a lot of families,
Speaker 4: when when they're facing uncertainty, will make sure that the
Speaker 4: rainy day fund is stocked up.
Speaker 1: Are you seeing that?
Speaker 3: No, A lot of what we've seen now is just
Speaker 3: consistent sort of activity and growth over the last you know,
Speaker 3: four quarters, you know, and what you're seeing in the
Speaker 3: first quarter is just you know, the cumulative impact of that.
Speaker 3: We're not seeing big shifts and behavior at this point,
Speaker 3: you know, across either the consumer or the or the
Speaker 3: corporate client base. And so maybe that'll happen in the future,
Speaker 3: but we're not seeing that.
Speaker 1: At this point.
Speaker 3: It's just it's just normal activity plus some growth that
Speaker 3: we've seen as we've been able to grow a little
Speaker 3: bit more in all the businesses on the consumer side,
Speaker 3: but we're happy to see some of that growth come
Speaker 3: across the client base.
Speaker 4: Mike, great to get so much intel from you. Really
Speaker 4: appreciate you sticking with us here on the close. Mike
Speaker 4: Santamassimo there the CFO, chief financial officer over at Wells Fargo.