Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: We want to welcome our TV and radio audience audiences
Speaker 2: as we continue our market coverage and turn now to
Speaker 2: the banks. With several reporting before the bell this morning,
Speaker 2: Wells Fargo shares are up after that bank reported net
Speaker 2: interest income for the fourth quarter that beat estimates and
Speaker 2: forecast an increase in twenty twenty five net interest income.
Speaker 2: Joining us now is Mike Santemassimo, CFO of Wells Fargo,
Speaker 2: and Mike, I want to ask you about a potential
Speaker 2: Trump bump that came through in your numbers. I know
Speaker 2: this investment banking revenue growth was strong in the fourth quarter.
Speaker 2: Is that as more people start to count on deals,
Speaker 2: as more people start to look to work with your advisors.
Speaker 3: Well, well, first, thanks thanks for having me. Look, I
Speaker 3: think you're what you're seeing across you know, our businesses
Speaker 3: is a continuation of like good performance now that we've
Speaker 3: seen for a number of quarters. So it's not about
Speaker 3: you know, a temporary you know bump that's coming. I
Speaker 3: think it's just continued execution across you know, all of
Speaker 3: the growth initiatives that we've talked about across investment banking
Speaker 3: and some of what you're referencing in terms of deal
Speaker 3: activity potentially coming. And then I think it's just you know,
Speaker 3: in addition, good continued strength in the in the US
Speaker 3: consumer where you're seeing good activity levels, you're seeing that
Speaker 3: come through in terms of the results and our numbers.
Speaker 3: You're seeing good credit performance, you're seeing good deposits levels,
Speaker 3: you're seeing good growth in credit card balances, and so
Speaker 3: it's a whole number of things I think that are
Speaker 3: really really driving it. But it's clear people have a
Speaker 3: sense of optimism coming into twenty twenty five as they
Speaker 3: look at the new administration really you know, focused on
Speaker 3: pro growth, pro business initiatives, and I think that's creating
Speaker 3: some optimism for the year.
Speaker 2: Yeah, even with rates you know, still high, not to
Speaker 2: day's drop. Stocks really haven't gotten back to the highs
Speaker 2: that we saw at the end of last year.
Speaker 3: And yet we have a lot of confidence.
Speaker 2: I knowe the NFIB the small Business Confidence the index
Speaker 2: they put out was up to the highest level since
Speaker 2: twenty eighteen.
Speaker 3: Is that coming through in loan demand? Not quite yet,
Speaker 3: you know. I think as we sort of talk to
Speaker 3: our customers, we're definitely hearing that optimism in the conversations,
Speaker 3: but it hasn't quite translated yet into demand for creditor
Speaker 3: or many customers making big investments. We're building inventory because
Speaker 3: they think demand will be there. I think there's still,
Speaker 3: you know, being there's still a little bit of a
Speaker 3: wait and see a little bit more prudence there in
Speaker 3: terms of thinking about it. But as the year goes by,
Speaker 3: if the if the macro picture continues to perform quite well,
Speaker 3: I think you'll see more demand as we get later
Speaker 3: in the later in the year.
Speaker 1: Mike, efficiency has been a big theme at all the banks,
Speaker 1: and I'm just curious, where are you in your efficiency push?
Speaker 1: What will be the highlights in twenty twenty five.
Speaker 3: Yeah, well, I think it. You know, it really started,
Speaker 3: you know four plus years ago where and since then,
Speaker 3: you know, we've delivered you know, twelve billion dollars of
Speaker 3: gross saves, you know, across the different businesses and parts
Speaker 3: of the company, and we've reinvested a lot of that
Speaker 3: back into people, technology, capabilities, products, you know, across all
Speaker 3: of our businesses. And I think as we look to
Speaker 3: twenty twenty five, our thinking is no different than it's
Speaker 3: been the last three or four years. Where you know,
Speaker 3: we still have a significant amount of opportunity and we've
Speaker 3: sort of highlighted that in our expense guidance for the year,
Speaker 3: and so you know, we think there's more to come
Speaker 3: there and we're focused on continuing to deliver that so
Speaker 3: we can continue to invest across the businesses for growth
Speaker 3: as well as efficiency.
Speaker 1: So if you continue to invest, presumably hiring will be
Speaker 1: quite important. What will your priorities for hiring be and
Speaker 1: also other investments.
Speaker 3: Yeah, like we you know, we've been hiring you know,
Speaker 3: across the businesses and areas that we want to grow
Speaker 3: while we get more efficient. And so generally that's in places,
Speaker 3: you know, in client facing roles across the commercial bank,
Speaker 3: the investment bank, or capital markets teams within our markets business,
Speaker 3: as well as in wealth management. As we've continue to
Speaker 3: you know, recruit more more advisors, not only you know,
Speaker 3: to serve kind of the core wealth management channels, but
Speaker 3: also in our bank branches as well. We've been hiring
Speaker 3: advisors and bankers to support to support the effort there,
Speaker 3: and I think we're going to continue to do that,
Speaker 3: you know, as we go into twenty twenty five. And
Speaker 3: we're happy so far with the return we're getting a
Speaker 3: lot of those investments that we've made.
Speaker 2: If we do see the FED able to cut rates here,
Speaker 2: do you worry about net interest income erosion as you
Speaker 2: have to sort of bring up what you pay on
Speaker 2: deposits and the amount you can charge on loans comes down.
Speaker 3: Well, I think, you know, what we've been seeing is
Speaker 3: actually deposit costs come down now that the FED has
Speaker 3: started to cut rates, and so if we see further cuts,
Speaker 3: I think the positive costs will continue to come down.
Speaker 3: You'll also see you know, loan yields come down as well.
Speaker 3: But I think we've already you know, baked that into
Speaker 3: our forecast and in our guidance that we gave today.
Speaker 3: We assume there'll be at least one or two cuts
Speaker 3: you know, coming this year. But we'll ultimately see and
Speaker 3: then there'll be a lot of other factors in terms
Speaker 3: of the level of deposits, the mix of those deposits,
Speaker 3: you know, what we're seeing in the security side, as
Speaker 3: well as other opportunities. So I think there's a number
Speaker 3: of things that will ultimately drive it. And we're pretty
Speaker 3: confident in our in the in the guidance we gave
Speaker 3: at this point.
Speaker 2: Is there going to be more opportunity to give money
Speaker 2: back to shareholders. Mike, A lot of bank investors have
Speaker 2: been optimistic about that going into Trump two point zero.
Speaker 3: Well, I think, you know, we certainly have you know,
Speaker 3: a lot of excess capital still here at the company,
Speaker 3: and I think we've we've now given back twenty billion Dot.
Speaker 3: We've bought back twenty billion dollars of stock last year,
Speaker 3: and you know, we'll look at the opportunities to support
Speaker 3: clients and you know, if we continue to see you
Speaker 3: know that we have excess capital this year, we'll buy
Speaker 3: back more stock like we've done, and I would anticipate
Speaker 3: that we will do some as we go into this year,
Speaker 3: but ultimately it'll we'll see it in terms of overall
Speaker 3: quantum as we go through the year.
Speaker 4: Mike, you did mention that the US consumer is strong,
Speaker 4: but your CEO will also said the cards, for example,
Speaker 4: as an area where Wells needs to get a little
Speaker 4: bit more profitable.
Speaker 1: Also home lending. What do you intend to do about that?
Speaker 1: Is it a mind problem or a consumer problem?
Speaker 3: Well? With credit cards, you know, we've we've refreshed our
Speaker 3: whole product line in the last three and a half years,
Speaker 3: and we've been in growth mode there to add new
Speaker 3: customers and new accounts. And when you do that, in
Speaker 3: the first few years of that, you've got a number
Speaker 3: of upfront cost either acquisition costs or accounting related to
Speaker 3: the allowance that you know, mutes the profitability of those relationships.
Speaker 3: So it normally takes a few years for those relationships
Speaker 3: to become profitable, just in normal course. And we're you know,
Speaker 3: we're two as I said, we're three years into sort
Speaker 3: of launching our first products. So it's just a matter
Speaker 3: of time, you know, to start seeing more of that
Speaker 3: profitability in the card as the as the new vintages
Speaker 3: mature in the home lending side. You know, we've we
Speaker 3: announced a number of things that we were doing, including
Speaker 3: reducing the size of our servicing portfolio that we have there,
Speaker 3: and that just takes some time to execute. We're down
Speaker 3: twenty percent so far in that servicing book since we
Speaker 3: started the effort, and we'll continue to do that over
Speaker 3: the next couple of years to get to the right
Speaker 3: size we want. But those things were pretty certain and
Speaker 3: confident that we'll get the benefits that we think there.
Speaker 1: Mike, from Monday, we'll have a new administration. I'm curious
Speaker 1: as to what's your biggest hope for the next four years.
Speaker 1: Several of the executives on the banking calls today so
Speaker 1: that it should be better environment for banks.
Speaker 3: Well, I think, broadly speaking, I think what's encouraging is
Speaker 3: this the focus on growth and pro business policy. And
Speaker 3: I think that's going to benefit everybody because for a
Speaker 3: bank like ours and most banks in the US, as
Speaker 3: if the economy in the US is doing well, we're
Speaker 3: going to do well too, because it means our customers
Speaker 3: are doing well and there's lots of activity that's there
Speaker 3: for us to support them. And so I think, you know,
Speaker 3: I think people are very encouraged by what they're hearing,
Speaker 3: what they're seeing as that as relates to the policies
Speaker 3: are talking about. And so we'll ultimately see over the
Speaker 3: next few weeks and month coming months in terms of
Speaker 3: what actually gets implemented. But this focus on growth and
Speaker 3: pro business I think is what is what's encouraged ending
Speaker 3: for most people.
Speaker 1: All Right, Mike, thank you so much for your time today.
Speaker 1: Wells Fargo the third best performer now in the KBW
Speaker 1: Bank Index, up more than seven percent. That's Mike Santomosimo
Speaker 1: CFO of Wells Fargo,