Wells Fargo & Co. Aktie

Welcome, and thank you for joining the Wells Fargo Third Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Please note that today's call is being recorded. I would now like to turn the call over to Mr. John Campbell, Director of Investor Relations. Sir, you may begin the conference.

Good morning. Thank you for joining our call today by our CEO, Charlie Scharf; and our CFO, Mike Santomassimo, will discuss third quarter results and answer your questions. This call is being recorded.

Before we get started, I would like to remind you that our third quarter earnings materials, including the release, financial supplement and presentation deck are available on our website at wellsfargo.com.

I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8-K filed today containing our earnings materials. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings and the earnings materials available on our website.

I will now turn the call over to Charlie.

Thanks, John. I'm going to provide some comments about our results and the momentum we see across all our businesses. I'll then turn the call over to Mike to review third quarter results in more detail before we take your questions.

Let me start with Slide 2 of the presentation deck. Our third quarter results reflected broad-based growth, higher earnings and stronger returns. Earnings per share grew to $1.87 in the third quarter, up 30% from a year ago. Our ROTCE increased from 14.7% during the first 9 months of 2025 to 16.2% during the same period this year and 16.3% this quarter. Revenue grew 2% versus the prior year, with growth across all our operating segments, partially offset by lower revenue from our venture capital investments as expected and lower lease income following the sale of our railcar leasing business in the first quarter.

Wealth and Investment Management revenues grew 12%, Commercial Banking grew 6%, Consumer Banking and Lending grew 5%, and Corporate and Investment Banking grew 3% with 8% growth in banking, partially offset by modest declines in commercial real estate and markets. Markets was trending towards achieving higher revenue growth that was impacted by a slowdown in the last several weeks of the quarter. However, we still had strong results in equities with revenue increasing 21% from a year ago. Within banking, key areas of investments for us continued to see strong results. M&A revenues grew 30% and both equity capital markets and investment-grade underwriting fees grew 33% from a year ago.

Expenses declined modestly from a year ago. As we have seen in other quarters, higher revenue-related expenses, up 15% were more than offset by a 4% decline in non-revenue-related expenses as we continue to invest while increasing efficiency. Headcount continued to decline, down 2% in the quarter, 8% year-over-year and down 30% from its second quarter 2020 peak and has decreased every quarter for the past 6 years. We generated strong growth in loans and deposits throughout 2026 with third quarter average loans and average deposits both up 11% from a year ago. This growth was broad-based with higher loan and deposit balances in both our commercial and consumer businesses.

Turning to Slide 3. We're seeing good performance across each of our businesses. Let me start with Consumer Banking and lending. Growing consumer primary checking accounts is a key indicator of our progress, and this quarter, we continued to see momentum. We achieved our 14th consecutive quarter of year-over-year growth as stronger branch and digital activity, improved product offerings and continued investments in marketing have helped drive increased account openings. Our segmented approach to serving affluent customers is also producing strong results.

Premier Client assets were up 10% from a year ago. We continue to invest in talent with double-digit growth in Premier bankers and financial advisers year-over-year. We've been investing in business banking, including adding over 130 business bankers over the past year. We are seeing the initial benefits in our results, including checking count openings up 9% and credit cards opening 61% from a year ago. Importantly, we remain disciplined on credit with growth focused primarily on customers with deep existing relationships. Credit card revenue increased from both a year ago and the second quarter with growth in balances and purchase volume. We opened more than 660,000 new accounts in the third quarter. We again saw strong account openings in our branch channel, which has allowed us to reduce our reliance on third-party channels.

Auto originations grew 15% from a year ago and average balances were up 31%. While we're growing our lending businesses and our customer base is still strong, our underwriting criteria recognize that at some point, consumer credit conditions will weaken. To be clear, we do not see signs of this yet, but we know that cycles are inevitable. Turning to Wealth and Investment Management. Wealth and Investment Management client assets grew 11% from a year ago to $2.5 trillion. Average loan balances increased 16% from a year ago. We identified this as a significant opportunity several years ago and have since enhanced our products and processes to better serve clients and scale the portfolio.

We have made significant investments in our technology platforms and expanded investment capabilities to provide advisers with a stronger platform to serve clients. These investments include a new portfolio analysis and client proposal tools for advisers leveraging Aladdin Wealth technology from BlackRock. We have also increased the number of alternative product offerings in our platform by over 30% this year. In addition, we just launched an AI-powered tool for our financial advisers that streamlines routine work and helps them access the information they need to better serve clients.

This is the first of several capabilities planned as part of our broader AI strategy in Wealth and Investment Management. Turning to Corporate Investment Banking. In our banking business, revenue grew 8% from a year ago and year-to-date increased 13%. The hiring we've done in investment banking has strengthened our client coverage model and improved our ability to compete, which you can see from our improved market share, including equity capital market share increasing 84 basis points to 3.9% and increasing our rank in announced U.S. M&A volume to #6, up from 9 a year ago. It is important to note that while we're building our investment banking business, and it benefits from strong market environments, its size is still relatively small in the context of the rest of the company. We don't expect it to drive outsized returns in any one period, but it has contributed and should continue to contribute to higher returns over time. Markets revenue was down modestly from a year ago. Market conditions were more difficult than prior quarters, but we continue to see the benefits of our strategic investments.

Year-to-date, markets revenues increased 14% versus last year. Finally, let me highlight Commercial Banking, where our client acquisition strategy helped to drive strong balance sheet growth. Average loans increased 10% from a year ago, reflecting our continued success in attracting new clients and deepening existing relationships supported by our investment in additional bankers.

Average deposits increased 16% from a year ago, reflecting our deposit gathering initiatives, which have attracted deposits from both new and existing clients even as we've maintained our pricing discipline. We also continue to capture a larger share of our commercial banking clients investment banking and markets activities with gross fees 25% higher than a year ago.

These results highlight the benefits of the investments we've made in our Commercial Banking franchise, which is driving client growth and increasing the diversity of our revenue base. More broadly, we are accelerating our investments in both traditional digital payments in traditional and digital payment solutions for consumers and businesses. We believe tokenized deposits can deliver important benefits for the businesses we serve. Last month, we launched tokenized deposits and our proprietary blockchain platform, providing corporate and commercial clients with a new way to move money more efficiently.

As we expand the platform, clients will be able to move funds 24 hours a day, 7 days a week across accounts and borders without changing how they bank with us. Use cases in the U.S. for stable coins remain unclear but we're building solutions to be prepared as opportunities potentially unfold.

We, along with 20 other international financial institutions, are establishing a new company to issue stable coins beginning in the first half of 2027. The product will support wholesale, institutional and retail use cases, providing clients with a trusted form of digital money that can improve cross-border payments and facilitate digital asset settlements. We're devoting significant management time and resources to building AI capabilities and drive value. The work here is multi-dimensioned. Internally, we're using it to write code faster. Over the past year, this has gone from being a tool to assist programmers to now being able to use autonomous agents when appropriate. To increase capacity and revenue from our branches, to launch marketing campaigns faster to help identify as well as right in test code to close previously unknown cyber vulnerabilities and to improve and simplify risk management processes.

Externally, we're using it to improve the customer experience, including helping customers complete common banking tasks such as making payments, replacing cards and getting insights into spending and to accelerate response times, for underwriting decisions and customer complaints. We will also evaluate how third-party models and agents can provide value-added capabilities to our clients while at the same time considering the potential risk these tools can introduce for both our clients and Wells Fargo.

Our focus was recently recognized in the evident AI index for banks, which independently tracks AI maturity across the world's leading banks. We increased our ranking to #5 globally, and ranked #3 in the U.S. based upon their evaluation of 4 core pillars, including talent, innovation, leadership and transparency. We're excited by the opportunities AI presents for our clients at our company, and we're taking a disciplined approach to managing risk. Looking externally, U.S. economic growth continues to be strong. While uncertainty persists due to sticky inflation, the conflict in the Middle East, persistent fiscal deficits and volatile energy markets, strong labor markets and wage growth, business investment, productivity investments, infrastructure spending and a historic wave of technology-related capital expenditures have proven more powerful than many predicted.

As a result, real GDP growth continues to track well with the third quarter shaping up to be strong. The consumer remains one of the economy's most important sources of resilience though higher prices continue to weigh on consumer sentiment. Let me highlight our customer trends. Consumer spending remains strong. Debit card spending increased 8% from a year ago, with broad-based growth across categories, accelerating from the 5% growth rate we saw in the third quarter last year.

Credit card spending was up 12% from a year ago. Our growth has been amongst the highest in the industry, driven by strong new account growth. At the same time, consumer credit remains strong with our charge-off ratio down from both the second quarter and a year ago, and early-stage delinquencies at historically low levels.

High income households continue to benefit from strong asset prices, substantial home equity and stable labor income. And while lower income households remain more sensitive to financing costs, inflation and higher living and fuel expenses, they appear to be stable. Corporate America also continues to demonstrate strength. Our corporate and commercial customers remain in good shape. Loan demand continues and credit remains strong with only 18 basis points of losses in the third quarter and nonaccrual loans down from both the second quarter and a year ago.

While our data is strong, we are conscious of the risks. Inflation and higher interest rates continue to be headwinds and the longer they persist, the more pressure they can place on both consumers and commercial clients. While markets have been strong and unexpected or significant movement could filter through the broader economy. And the AI investment cycle has become a complicated macroeconomic force in its own right. Demand for semiconductors, networking equipment, power generation, data center infrastructure, cooling systems, storage, cybersecurity and advanced manufacturing equipment continued to surge. The scale of investment here increasingly resembles prior infrastructure booms, creating both significant opportunities, but also risks given the significant leverage used to finance the build-out and the upward pressure on prices in selected industries and supply chains.

Having said this, the strength of the economy and the positive forces from these investments have thus far outweighed the potential downside. Before I conclude, I want to thank Derek Flowers, our Chief Risk Officer, for his leadership in strengthening our risk and control framework and culture to position Wells Fargo for continued growth.

As we announced last month, Derek plans to retire early next year, and he will work closely with Scott Powell, our Chief Operating Officer, to support a smooth transition when Scott assumes the Chief Risk Officer role.

As I close, I'll leave you with a few final thoughts. Our progress towards building a growing, high returning company continues. Our ROTCE continues to increase and is getting closer to our 17% to 18% target. Though timing is influenced by markets and the credit environment. We are confident this trajectory can continue, and ultimately, our targets should be higher. Like all management teams, we are balancing many things. growth, risk, changing interest rate expectations, inflation and AI opportunities, just to name a few.

However, our North Star remains the same: invest in our people, products, technology and marketing for the long term, but show consistent progress in growing revenue and returns in the short term, without taking outsized risks or growing in ways that is not consistent with our long-term vision for Wells Fargo. I'll now turn the call over to Mike.

Thank you, Charlie, and good morning, everyone. Since Charlie already covered the key drivers behind our financial performance and the business highlights, I'll begin my remarks on Slide 4. Our third quarter results demonstrated the progress we've made in strengthening the company's financial performance strong balance sheet growth, continued revenue growth, disciplined expense management and solid credit performance drove another quarter of double-digit EPS growth and continued improvement in returns year-over-year.

Turning to Slide 6. Net interest income increased $567 million or 5% from a year ago and increased 2% from the second quarter. The growth in the second quarter was driven by higher loan and investment securities balances, 1 additional day in the quarter fixed rate asset repricing as well as the impact of higher rates on floating rate assets. The net interest margin was stable from the second quarter as the benefits of loan growth and higher yields in almost all categories of interest-earning assets, including the impact of fixed asset repricing were offset by continued growth in interest-bearing deposits.

This was a better result than we expected at the beginning of the quarter due to slightly higher cash and securities balances, slightly lower funding costs and additional efficiency and deployment of the market's balance sheet. As we continue to grow the markets balance sheet on a gross basis, we are becoming increasingly more efficient in how we deploy it, and we made more progress this quarter than we originally anticipated. As our equity finance business expands, we are realizing greater netting benefits. And on the fixed income side, we are implementing more efficient funding structures, including sponsored repo and other balance sheet optimization solutions.

I will update you on our expectations for full year net interest income later on the call. Moving to Slide 7. Average loans increased $105 billion or 11% from a year ago, driven by growth in commercial and industrial loans, where demand remains healthy. Commitment levels have continued to increase across both Commercial Banking and the Corporate Investment Bank, while utilization rates have remained relatively stable. On the consumer side, auto securities-based lending and credit card continued to be the primary growth drivers.

Turning to deposits. Average deposits increased $143 billion or 11% from a year ago and were up 1% from the second quarter. We continue to have strong commercial interest-bearing deposit growth, reflecting continued client demand for higher-yielding products as well as our targeted growth initiatives. Consumer balances increased from a year ago and with a modest decline in balances from the second quarter, reflecting seasonal outflows.

Turning to Slide 8. Noninterest income declined 1% from a year ago. We had growth across several categories, including investment advisory, deposit-related fees, investment banking and card fees reflecting continued momentum in businesses where we've been investing. However, this growth was more than offset by lower trading gains, although revenue in our markets business was down only slightly versus a year ago. lower lease income following the sale of our railcar leasing business in the first quarter as well as lower gains from the equity securities also contributed to the decline. We had only modest net gains from equity securities in the third quarter, and we currently expect them to remain low in the fourth quarter.

As we have highlighted in the past, results from our venture capital investments can be volatile from quarter-to-quarter, but we continue to expect strong returns over time. It's important to note that we generated more than $1 billion of equity gains during the first half of the year which is in line with our historical full year average.

As a result, even with minimal gains in the second half of the year, we would still be on track for a solid full year results.

Turning to expenses on Slide 9. Noninterest expense declined $103 million from a year ago, and our efficiency ratio improved to 63%, down 2 percentage points year-over-year. Personnel expense declined driven by lower severance costs, which were $296 million a year ago. Higher revenue-related compensation expense was largely offset by the benefits of our efficiency initiatives. Non-personnel expense increased from a year ago driven by higher tech and technology and equipment expense.

Turning to credit quality on Slide 10. Our credit performance in the third quarter remained strong with a net loan charge-off ratio of 38 basis points of average loans, down from a year ago. Commercial net loan charge-offs were stable from a year ago and increased 8 basis points from the second quarter to 18 basis points. We continue to monitor a range of macroeconomic and industry-specific risks including higher interest rates, inflation, geopolitical uncertainty and AI-related destruction. But as of now, we do not see signs of broad-based credit deterioration. Losses continue to be idiosyncratic and driven by borrower-specific situations. Consumer credit performance was strong with good performance across all portfolios and consumer net loan charge-offs declined to 70 basis points.

Our allowance coverage ratio for total loans was relatively stable compared with the second quarter. Growth in commercial and industrial and auto loan balances drove a modest increase in the allowance, which was largely offset by a lower allowance for commercial real estate office loans.

Turning to capital and liquidity on Slide 11. Our capital levels remained strong with our CET1 ratio at 10%, well above our CET1 regulatory minimum plus buffers of 8.5%. The decline from the second quarter included a decrease in accumulated other comprehensive income driven by the impact of higher interest rates. We plan to continue to manage our CET1 ratio to be within our target range of 10% to 10.5%. During the third quarter, we increased our common stock dividend of $0.50 per share and repurchased $2.5 billion of common stock.

Looking ahead, we will continue to consider the interest rate environment and the impact on accumulated other comprehensive income in determining how much stock we repurchase. And as a reminder, we expect the Federal Reserve to finalize Basel III capital rules and based on the proposal, we have estimated that our risk-weighted assets could decrease by approximately 7%, which all else being equal, would increase our CET1 ratio.

We provide an update on our operating segments on Slides 12 through 15. Charlie has already covered the key drivers of revenue growth across the businesses. So I'll keep my comments brief and just highlight a few additional points. Let me start with Consumer Banking and Lending. We generated solid revenue growth while reducing expenses and return on allocated capital increased to over 32% in the third quarter. Commercial Banking had good revenue growth and combined with disciplined expense management, their efficiency ratio improved to 43% in the third quarter from 48% a year ago.

Turning to Corporate and Investment Banking. Banking revenue was up 8% from a year ago, including a 10% increase in investment banking. I'd like to focus for a moment on our markets business, where results can vary with market conditions, while equities revenue was up 21% from a year ago, total markets revenue was relatively stable from a year ago, and revenue in the third quarter was not as strong as during the first 2 quarters of the year. At an industry conference last month, I indicated that we expected third quarter markets revenue to be up mid-single digits year-over-year.

Our actual results reflected a more challenging market environment late in the quarter than we had anticipated. During the final weeks of September, interest rates moved sharply and these moves pressured fixed income valuations and significantly reduced client activity, particularly in strategic transactions, hedging activity in the primary issuance market. At the same time, equity market volatility stayed low, creating a less favorable environment for our equities derivative franchise.

Finally, turning to Wealth and Investment Management, which generated strong results. I'd like to remind you that the majority of WIM advisory assets are priced at the beginning of the quarter. So fourth quarter results will reflect October 1 market valuations, which were above both July 1 and year ago levels.

Turning to our 2026 outlook on Slide 17. Starting with net interest income, we still expect net interest income for full year 2026 to be $50 billion, plus or minus. Fourth quarter net interest income is expected to be approximately $13 billion and the net interest margin is expected to be stable from the third quarter. We expect the pace of net interest income growth to increase in the fourth quarter versus the prior 2 quarters due to a few factors. We expect continued benefit from loan growth as well as deposit growth. We also expect continued benefits from fixed rate asset repricing and higher investment security balances.

Given we are modestly asset sensitive, we expect fourth quarter net interest income, excluding markets to benefit from the higher interest rate environment. However, in markets, which is liability census, some of these benefits would be offset since markets net interest income is negatively impacted by higher rates. However, this would largely be offset by markets noninterest income.

Turning to expenses. We continue to expect 2026 noninterest expense to be approximately $55.7 billion, while full year revenue-related expenses are expected to be approximately $400 million above our original expectations, driven by strong business growth in equity markets. Our ongoing focus on improving efficiency is trading more savings across the company, allowing us to offset the higher revenue-related expense. Our third quarter results demonstrate the strength of the franchise and the ongoing successful execution of our strategy, we continued to grow earnings, increase returns and invest in the business while maintaining strong credit performance and approach expenses.

Our stronger performance during the first 3 quarters of the year highlights the continued incremental progress we are making towards our goal of higher growth and returns. We will now take your questions.

[Operator Instructions]

And our first question will come from John McDonald of Truist Securities.

Mike, I was hoping you could start off, maybe just repeat a little bit of the comments about the drivers of the net interest income growth you expect in the fourth quarter? And then maybe just clarify, what you're saying about the market NII versus non-markets maybe in the context of, I think for the full year, you originally were hoping for 48 in 2 to get to the 50. Is that still the same? And maybe just clarify what you're saying about the fourth quarter split maybe between markets and total NII.

Yes. John, thanks for the question. And so let me just start a little bit on Q3, and then I'll quickly bridge into Q4. So what we saw in Q3 is the NIM stabilized. The aggregate NIM stabilized. But when you look beneath that a little bit, what was happening is the NIM ex markets increased slightly. So we saw a little bit of expansion there. And that's part of what you're going to see as you go into Q4 as well. And then we also got the benefit of a lot of the efficiency work we've been doing and how we deploy the balance sheet in the markets business, and that sort of helps like bring good stability, I think, overall to the NIM.

And so we still expect that to be flat in Q4 relative to Q3. And just to double-click on that 1 second. So when you look at what we did in markets is -- and I think fixed income financing is a good illustration of it. The gross financing balances, they grew about 18% from the second quarter, but the net balances were down.

And that was a lot of the optimization that we have been doing, moving more clients to sponsored repo and other things. But -- and so we've got really good confidence that we've got more ability to continue to do that, and that will be pretty stable. So that sort of underpins sort of the NIM being pretty stable as we go into Q4.

What's happening in Q4 then is you start to get the benefits of a lot of what you started seeing in Q3. So you look at loan balances, the step off into Q4 is bigger than obviously, the average balances you saw in the quarter. I think we were up the end of period is up $15 billion or so going into the fourth quarter. You have to look through a little bit of that because there's a little bit of seasonality at the end of the quarter in the commercial bank, but nonetheless, the step-up is is bigger. And so you're getting the benefit of that in the fourth quarter.

We continue to grow deposits. And so you'll see more of that contribute into the quarter as well. You get the benefit of rates and sort of yield and repricing sort of coming through on the balance sheet. So almost every category outside of the markets business of earning assets saw a little bit of benefit in Q3 from higher yields, and you're going to see more of that in Q4. And that's going to lead to a little bit more of an expansion of the NIM ex markets as well as you go into the quarter. And then there are a few other factors that sort of drive it, but those are sort of the big ones that sort of lead to the step-up that we're going to see going into Q4.

And what I was saying on market NII is, as you go into this rising rate environment, we're asset sensitive on the banking book. You're going to see that NIM expand. You're going to see sort of the impact of rates come through. And since market is liability sensitive, you're going to see some impact on markets NII going into the fourth quarter, but that will be offsetting fees. And then when you look at the mix of the $50 billion, our best guess is on the market's NII that it will be slightly below $2 billion, call it, $1.8-ish billion and then you'll make up for some of it to get in the nonmarket NII to sort of get back to the full year of $50 billion.

Okay. That's very helpful. And I know it's too early for guidance on 2027 NII. But any early thoughts in terms of kind of just the drivers next year's NII relative to where you think you'll jump off on the fourth quarter, things we should keep in mind, good guys, bad guys as you go through your planning?

Yes. I mean, look, certainly, when you look at the step-off point coming out of Q4, that's a net positive sort of where we are. Rates appear to be either increasing or certainly staying higher for longer than we contemplated not that long ago. So that's a net positive. We're still seeing good growth across the loan portfolio. We expect to continue to see good growth in the card business, auto business as well as on the commercial side. So those will all be positive. And then we've been pretty successful at growing deposits, particularly the interest-bearing deposits.

And so I think all of those things should sort of continue as we go into next year with all the right caveats around sort of the macro environment sort of being pretty pretty constructive despite some of the noise you have there. But but we enter the year. And I think if you -- the $13 billion is, what, close to $700 million over last year, and so you sort of enter the year in a better place.

The next question will come from Scott Siefers of TD Cowen.

Mike or Charlie, I was hoping you could maybe just sort of touch on -- just sort of your thoughts for how a period of sustained higher rates kind of changes your sense for both customer health and resilience and then maybe also touch on sort of your sense for how commercial demand might change portions of the consumer book where you've had good growth, how that might change, et cetera. So basically, impact on sort of resilience and growth dynamics.

Scott, it's Mike. I'll take a shot and welcome back, I think, to the call, to the new seat. So look, I think we've been living in this environment now for a while where inflation has been higher. Rates have been pretty high, although have moved a little bit higher more recently. You've seen the -- and the cumulative impact of that has been flowing through the economy. But what we're seeing sort of offset some of what would be kind of the negatives is wages and employment continues to be really strong. And wages are largely keeping up with inflation even at all of the different cohorts of clients we have, when you look at the income levels, wealth levels, the data would say on a cumulative basis over the last number of years, wages have sort of kept up which is sort of supporting the activity levels that we're seeing.

We're seeing -- we're not seeing any like deterioration in the credit profile of the consumer -- so I think as long as the employment picture stays pretty strong, like we should be able to keep seeing sort of the strong activity levels and strong performance across the consumer base. And even when you start looking at energy and gas prices, it is meaningful for sure, but it ends up being 3% to 6% of spend, depending on your wealth level or income level. So it's still manageable and people were able to offset that -- offset that with savings in other categories of spend. So overall, we're seeing a pretty strong picture there.

And as long as the economy continues to grow and employment stays strong, that should continue. And we're just not seeing signs of that changing at this point, either from the way our -- the sentiment across our commercial client base or just in the actual metrics that we're seeing on the consumer side. On the commercial side, rates -- higher rates definitely matter. But in many of our commercial banking type clients, people have been pretty prudent now for a while, for years, in terms of how much leverage they're putting on.

So they're still being thoughtful about inventory levels or levels of investment despite sort of the AI and CapEx cycle that Charlie sort of talked about a little bit. So they come into this environment in pretty good shape. Now the higher rates are definitely going to impact valuations in places like commercial real estate. But that will take some time to really kind of play through those asset classes. So as we sit here today, things look pretty good. And despite sort of what you're seeing in terms of rates or just sort of overall sentiment that you're about.

Okay. Perfect. And then maybe switch gears a second. A whole host of AI-related questions sort of floating around investor cite these, these days. But maybe I was hoping you could touch on just this idea that AI agents eventually make it just a lot easier to kind of identify and move around idle cash toward higher-yielding alternatives. Just maybe you at a top level how you're thinking about the possibility that technology improves, just sort of reduces deposit inertia over time and kind of what it means for value behavior for large low-cost deposit bases like yours and others in the industry?

It's Charlie. I'll take that. Mike, you can chime in. Listen, I think I think we'd say like many other people have said, which is high rate alternatives exist today. They have existed for a long time. If you want to move to a high rate, you can just go online and do it yourself in no time. And so that's not something new. The idea that consumers are going to give the power to an agent to act on their behalf unilaterally and move money around institutions that they don't know. They don't understand what they don't understand the terms of the accounts, they're moving it to and all those types of things. I think it's a long ways away. There's no question that agents will become a part of the way people interact. We have them -- we're building them ourselves. But the idea that, that's going to contribute to mass movement to higher-rate alternatives, I think, is completely overdone especially for the time period we can see.

And just a reminder, people keep money with us for a lot of reasons beyond just maximizing that last value they get in terms of savings. They keep money because of the -- we're the primary payments account. They've got money coming in and going out all the time. We have wholesale customers that understand every last basis point and they want to pay us for certain services. And so clearly, these agents will become tools, but the idea that they're going to contribute to some mass movement anytime in the near future.

I just think it's completely overdone. And the opportunity for us is to use agents to better serve our customers and let them get access to the things that we can do for them.

Perfect. No, that all sounds great. So I definitely appreciate all the color. Thanks again.

The next question will come from Ken Usdin of Autonomous Research.

I wanted to ask a question just about capital and balance sheet utility. Noted that, obviously, AOCI was up, CEC was down a little bit as was TCE. You didn't grow RWAs as much as you had in the prior couple of quarters. So I just wanted to know like are you thinking any differently about like what you're thinking about growing, what you're putting on the balance sheet and how does that build into your expectations for where you want to keep capital and capital return within that.

Ken, it's Mike. Really no different in terms of how we're thinking about growth. But again, we can continue to optimize as we deploy the balance sheet. And even in some of the optimization work that we're doing in markets, it's the same client activity with a lower footprint. And so you you end up having less RWA associated with some of it as well. And so when you think about where we've been growing now for a while, it's all the same places that we expect to see some growth going forward.

On the consumer side, we continue to expect the card and the auto portfolios to grow. I think you won't see much growth in home lending. And then on the commercial side, we're seeing good loan growth. Again, you can see that in the commercial bank as well as pockets in the corporate investment bank. And that will flow on in any given quarter based on just sort of what's happening and the opportunity set that's there.

And then in the markets business, we're as excited as ever in terms of being able to continue to scale that business and seeing really good receptivity across a lot of clients that were either deepening relationships with or adding on to the platform. And so I think we continue to see really good opportunity there, all in the context of continuing to increase the return profile of the whole company as we go as well.

And I would just add on that. I think we feel like we've got a lot of flexibility when it comes to our ability to manage our overall capital. As Mike said, we are growing, but we're very conscious of and have the ability to manage the risk-weighted assets in that we earn at $6 billion a quarter in terms of earnings power, less dividends. That adds just when we show up 30 basis points or so to our CET1 ratio for the quarter. And then we've got just variability of rates and rates are back down from where they were. So we've got flexibility to both grow and manage capital and over a period of time, continue to return capital to shareholders as we've been doing.

Got it. And just a quick 1 on deposit betas. Given that you've been changing what's been growing since the asset cap came off. And obviously, we've seen the commercial deposits growing. Do a view at all on how in this up cycle for rates, how deposit betas might be different than the prior rising rate cycle.

Yes. Look, at this point, it's -- we don't think they're going to be that different versus what we saw last go around. And I think what we saw so far from the hike in September, I think, is a good example of that. In the Corporate Investment Bank, those are going to be the highest betas by far, but it's right on top of what our playbook is for the rate increase, maybe slightly -- the beta was slightly lower than at least so far in terms of what we expected to see. In the commercial bank, the betas are much lower than the corporate investment bank. And again, right on top of what we would have expected to see.

And then in the consumer space, it really is about sort of how you manage sort of CD rates and high-yield savings promos that we've launched through the branches. The rest of the book is actually quite stable and not moving from a rate perspective. So overall, so far, exactly what we would have expected to see and don't think at this point, it's going to be that different than what we've seen at all last time.

The next question will come from Ebrahim Poonawala of Bank of America.

I guess first question, just around -- I think, Charlie, you laid out all the areas that Wells has been investing in Business Banking, Wealth [indiscernible] payments. As we think about -- and that's been going on for a few years, as you think about where that monetization is showing up already versus where it's on the come, looking out over the next 12 to 24 months? Like could you just break it down for us how we should think about where we could see building momentum as we think about next year assuming the macro holds up and where you've already been able to monetize some of those investments more noticeably in -- over the last few quarters?

Sure, Ebrahim. It's interesting. When we look at our results, we talk about the statistics, whether it's growth in check accounts, growth in credit card accounts growth in loans in the commercial bank, growth in our lending products, growth in assets under our total client assets in wealth and I tried to lay out and across the entire franchise, we see all the businesses with the exception of mortgage growing those statistics.

When we look at our revenue growth, I went through this in my prepared remarks, our [ win ] revenues were up 12%. Our commercial banking revenues are up 6%. Consumer Banking and lending revenues up 5%, commercial -- corporate investment bank revenues up 3%, with areas of focus like M&A of 30%, ECM up 33%, investment grade up 33%. And so as we think about what we've been investing in versus what we're getting for it, we see that very clear payoff.

In terms of our revenue growth for the quarter this quarter, we had a very big quarter in our equity gains last quarter from our private equity investments. I didn't have that this quarter. We said those will be -- you need to look at them over a long period of time. So what we see is that these investments that we've been making are paying off, and we would expect that to continue.

When we think about where we are on the investment versus the payoff cycle, we're probably much earlier in the consumer bank because we -- because of the things that we had to fix over a period of time. And we compete with people who have been investing for a decade to 2 decades and we've been investing now for 2 years in that. And so even though we see growth in that part of the business, we would hope to see more acceleration in our core consumer and small business franchise.

We would expect to see more of the same in our card business, more of the same in our auto business, more of the same in the commercial bank. And I would say in our -- in the corporate investment bank, more of the same in some areas, but potentially broader growth with even markets. So overall, when we think about what we've been able to produce EPS growth of 13% ROTCE marching upwards, north of 16% now kind of continuous progression upwards with this kind of broad-based growth, and we see it continuing. And so we feel really good about being able to deliver that as time goes on.

That's helpful. And I guess, just out of curiosity, I realize it's not needle moving but you chose to talk about tokenization and take deposits in your prepared remarks. Just to put it in context, like do you see significant adoption happening either in the markets or the commercial payments business? And does it does that create a meaningful opportunity for Wells as you think about investing, growing client wallet share. Just if you can size that for us to whichever way you can.

Yes, Ebrahim, it's Mike. So I'd say what we're doing in tokenized deposit payments, really starts with how do you do a better job servicing cross-border payment needs of our customers. And I think the existing -- there's lots of discussion around some of the negatives of the existing payment rails when it comes to cross-border payments, takes too long transparency et cetera, et cetera. And I think what this allows us to do is completely change that experience.

And so it goes from what could be a day or 2 to sort of get your payment to where it's going to this is in production, by the way. And it's small volume so far. But like the payments that we're doing are getting from initiation to beneficiary count in 2 minutes or less. And I think -- so it completely starts to change sort of the experience that you can provide to the customers.

And then for us, more broadly, we don't have the same international branch network that other big global players have. And so this technology allows us to go after an addressable market in the cross-border space in a completely different way and provide a solution that is as good or better than a lot of the peers can provide.

And so it does, over time, increase our addressable market that we can go after without having to make significant investments of putting people locally in a bunch of different places around the world. And then just more broadly, it gives us the blockchain technology to do a whole bunch of other stuff if the use cases start to materialize around other tokenization of real-world assets, tokenization securities, whether it's crypto trading in our wealth business or a whole bunch of other different places.

So it does give us some real-world benefits today. It increases the addressable market in payments. And then just much more -- it gives us a lot of optionality over a whole bunch of different use cases if and when they develop and become more meaningful.

The next question will come from Manan Gosalia with Morgan Stanley.

I wanted to ask on the deposit mix. I know you've previously spoken about interest-bearing commercial deposits leading the growth initially and then lower cost operating balances coming through over time. Can you help us think through when we should see that mix start to improve consistently and are we getting close to an inflection in those noninterest-bearing deposit balances as well?

Yes. I think I would -- you probably need to focus a little bit less on mix and a little bit more on dollars of deposits growing because like we still think there's a lot of opportunity to grow on the interest-bearing side. And as I said on the call and just in other forums, these are great returning long-term balances that come with other fees associated with them and on the payment side. And so I think they're very valuable over a long period of time.

The noninterest-bearing or low interest-bearing deposits come as we grow more on the consumer side. You see momentum building, as Charlie sort of talked about in his remarks on the consumer side, those will bring either noninterest-bearing or sort of low interest-bearing deposits with them.

And then as we continue to grow our treasury management and payments business on the commercial side, those also bring noninterest-bearing deposits with them because for clients to support all of the payment needs that they have with us. And so those things just take a little bit longer to sort of materialize and grow in a more meaningful way. And so I think you'll see interest-bearing still grow at a faster clip for a while as we continue to deepen with many of our clients.

Got it. And then maybe pivoting to expenses. The full year guide implies about $14 billion or so of expenses in the fourth quarter. So it's a little bit of a step-up from this quarter. How much of that is just a timing of investments and other spend that you're making? And is that a good jumping off point as we think about next year?

Yes. [indiscernible], in the third to fourth quarter, there's always -- if you go back and look at it over time, there's always a little bit of an increase from the third to fourth. So there's nothing special embedded within that. And I think we're trending well to sort of hit the full year guide and potentially it could be a little bit better, but like we are trending well there.

I think as you sort of think about next year, without giving anything -- without giving specific numbers, the fourth quarter is not a good jumping-off point because it doesn't take into account all the work we continue to do on the efficiency side, which again, as we've said over and over, we still think there's a lot of meaningful opportunity to drive that. So as we enter sort of our budget conversations going into next year. We come at it in the same way we've been doing it for years now, which is like we expect every part of the company to drive meaningful efficiency we've got to continue to make the investments that we've got -- we want to make. You got to deal with inflation on salaries and other things. And that will net down to a number. And so I think we still expect we still expect to see sort of meaningful efficiencies as we go into next year to help offset some of that.

And maybe I can just add a couple of things to that. First of all, when we think about we as a company and what we're focused on, I think we're very focused on growing the business in a smart methodical way. We've talked about that a whole bunch in terms of where we're seeing that. In terms of like the expenses and what we've done and the way we think about it. We've been very consistent since we've been here about focusing on efficiencies, reinvesting. And even this quarter, the fact that our expenses were like somewhat flat to down when our revenue-related expenses, which are mostly commissions, which are formulaic or up, says a lot about levers that we're able to pull we're very focused on building a company which has higher embedded returns, which is more efficient.

And when we get lots -- and we get questions about AI and people talk about agents and all these other things, I personally think there's like this under-appreciation for the benefits that those with scale have when it comes to AI. And I think there are huge benefits when it comes to how we can serve customers and our ability to build tools for customers and deploy them broadly. But the same thing is true on the expense side.

We can go build an agent that can do the work in our call centers or in our sites, and we can spend the same amount of money as someone else but deploy it over a very large part of the company here. And so this idea of scale matters in AI world is even more so. And that's probably not very good English, but I hope you understand what I'm saying. Again, I think we feel that way, both on the how we serve customers and ultimately what it means for revenue over a period of time. But certainly, when it comes to our ability to continue to become more efficient, which will allow us to either control expenses and reinvest in other things at the same time. It's just -- that's just kind of something that's kind of appeared with the advent of these models that we're incredibly bullish about.

The next question comes from Erika Najarian of UBS.

Just a few follow-up questions for me. First on capital, when Moody's affirmed your ratings on October 5, they did say something about estimating that your RWA benefit from Basel III endgame would be RGA down 7%, but they would view operating at the low end of your CET1 ratio target of 10% to 10.5% as credit negative. I know that they said it in context of Basel III end game, but I'm just wondering with the current CET1 at 10% and some of the growth opportunities that you've mentioned so far in this call. how investors should think about the buyback as a priority and absolute buyback levels relative to your CET1 today and not comment from Moody's, if that comment at all is impactful to how you're thinking about capital?

Yes, Erika, it's Mike. I'll take a shot. Look, I think it's -- I think you're overreading the comment. I think, obviously, it is -- I think their comment was in the context of if RWAs go down by bunch and you manage below 10%, that would imply -- in their analysis, would imply, I think, they said a $13 billion decline in capital and so I think you just got to take that in context, like less capital from a rating agency perspective is worse than more capital. And so and there's a lot to play out between sort of now and then. So I wouldn't overthink that too much. I think as you look at like our capital priorities and the way we're going to manage capital, I think we said it in our remarks, again, we plan to manage capital between 10% and 10.5% depending on sort of what we think the growth opportunity looks like and all the risks that are out there in the quarter. We'll use buybacks as sort of that lever after we go through that assessment.

And that's kind of what -- the way we've approached it now for a number of years. And I think as Charlie, I think, said earlier, I think we've -- we certainly feel like we're going to have capacity over time to buy back plenty of stock. And I think we've done a lot since -- over the last number of years. But I think in any given quarter, it's going to be a function of like what we think the growth opportunity looks like and what risks are there and then buybacks end up being that last piece.

Let me just kind of put a fine point on what Mike said is we -- obviously, we care a lot about our ratings. We care a lot about what rating agencies think. We look at where we are today and believe we continue to still have a significant amount of flexibility to deploy capital and not be in a position to harm anything relative to our ratings. As Mike said, we are comfortable with the range of managing capital that we've said. We do have the change in RWA coming hopefully from Basel III endgame, which should be tailwinds for us. We earn a lot of money in the quarter. And so when we look at all of that, that gives us the opportunity to use the balance sheet to serve customers as well as return stock. So we don't view that comment as limiting to anything we otherwise would be contemplating doing.

As my second question, as a follow-up to John's line of questioning on net interest income. The exit rate for NII in the fourth quarter implies a 4% to 5% growth rate. And obviously, that's coming off of a 260 net interest margin in 4Q '25. Is that 4% to 5% the right sort of ballpark as we think about 2027? And sorry for the compound question, Mike. But just wanted to clarify, we're calculating your beta in the last cycle, 4Q '21, 2Q '24 to be about 46% versus 55% at JPMorgan and 52% of BofA. And I just wanted to like make sure that you meant that you will continue to outperform your peers in terms of deposit beta. When you responded to the question that your beta should be the same this time around as it was in the last hiking cycle.

Okay. If I miss a piece of that, Erika, you got to remind me, but I'll try to capture all of that. Maybe on the beta first. like I think when you look at the -- you have to look at each of the components of our deposit base separately. The mix is changing a little bit, right? But when you look at each component of the deposit base, we don't expect the betas to be any different than they were the last cycle. We will have -- if you're comparing it to that time frame, we had more a bigger percentage of our deposit base was in the consumer side, so you're going to have a lower beta. Now that we're growing on the commercial side, in aggregate, you'll have a slightly higher beta, but that's a good thing as you, sort of, see the growth overall come through. Exactly how that will compare to, sort of, the peer set as a function of like the mix of deposits and how much of it is consumer versus commercial. And so I think you do need to normalize through that, but we do not expect each component to be really any different than what we saw in the last go around.

I think in terms of the way to think about the jumping off point into 2027, I think we'll give more guidance like we normally do in January. But certainly, having a strong fourth quarter sets us up well as we go into next year.

The next question will come from Chris McGratty of KBW.

Great market. I think, Mike, in your prepared remarks or Charlie, you talked about markets in banking, not being a huge ROTCE P&L driver today. I guess my question is that the designed outcome when we think about your 17% to 18% ROE target over time? Or might that consider greater allocation to those businesses?

Yes. Let me just clarify what I meant to say. What I meant to say, so those businesses are very important drivers for our high ROTCE and improving ROTCE. And as we grow these businesses, we do expect those to be additive to the returns to the company. What I was just trying to say was that when you look at our company, we have like $80 billion in revenues.

When we look at the types of fees, whether it's like M&A, it's a relatively small portion of the revenues. So if there are significant market events or significant transactions, it's not going to move the needle as much for us because it's a smaller portion in any one quarter. So we compete with people that participate in super big underwritings and get very, very big fees or the market environment is very favorable, and they've got very favorable trading results. We participate in that, but just not to the same degree because the mix of those businesses is smaller. So I don't want to confuse this. It is an important part of both the returns today and the improvement, we just don't expect it to be outsized in any individual quarter relative to what other companies might see.

Okay. That's helpful. [indiscernible] to the capital I just wanted to try to fully understand the message. It seems like be it's coincidence that intangible common equity ratio for some of your peers plan fixed [indiscernible].

You are breaking up.

Operator, maybe we can come back. Maybe we can take the next call and see if he rejoins.

Certainly, we can go on to Matt O'Connor of Deutsche Bank.

I just want to drill into a couple of the consumer businesses. I guess, first, in credit card, how far along are we into the seasoning of some of the kind of promos that you've done, looks like the yields are relatively stable. But you're getting good revenue growth overall. But just how do we think about what ending of the seasoning of some of these new accounts that were on promotion?

Yes. I'll try to give a little color there. So when you look at the progression that we've seen, we've launched the first new product back in the summer of 2021, our active cash card. And what you've seen over the last few years is progressively the vintages have gotten bigger. And in particular, over the last 2 years, those have been the biggest vintages by far. So the earliest vintages are maturing and performing right on top of where we would have thought they'd be, but the most recent vintages are bigger. And so you don't see the full impact of those coming through in terms of the profitability.

I think as we look forward from here, I don't expect like big step-ups in terms of originations to continue to happen. I do expect we'll sort of operate in this 600,000 to 700,000 cards a quarter, somewhere in that range for a little bit. And I think as those vintages as the most recent vintages start to mature more, you'll start to see the profitability come into the P&L in a much more -- in a much bigger way. And I think that will start happening as we go into next year and then in a bigger way in the year after.

And just to be really like direct, that means that adds to earnings, that adds to return. So when we talk about continued progress that we expect to expect to see. We've been talking about this one for a while. And now that we're -- our originations are leveling out and those vintages are maturing, we should start to see more of an impact in the overall company, which is terrific.

Okay. That's helpful. And then maybe on the other side, in the auto business, you guys have continued to grow pretty aggressively over the last few quarters here, and you've seen some -- more of the smaller peers pull back and just wondering how you're able to kind of maintain reasonable returns there, spreads in light of some others pulling back your climbing spreads have gotten too tight for them.

Yes. No, it's a good question that we spend a lot of time talking about. And I think there's a few factors that are help where we are. One, we've got the relationship we put on about it, I guess, a little over a year ago now, maybe 15 months ago with Volkswagen and Audi. So that continues to add to the originations. And those returns are sort of right on top of where we would have expected at this point and decent. I think we've got other relationships with other OEMs where we've got some good flow that comes through there. And I think those are contributing to the core sort of returns. And then I think just more broadly, like we've been talking about becoming a slightly more full spectrum lender. And so we used to focus mainly on sort of the upper end of the prime spectrum. Now we sort of are a little bit closer to near prime. And so you see good returns coming out of some of those originations as well.

Just we're doing more near prime than we did before. And it ends up, if you look at sort of that lower end originations, it's only about 5% of the originations, but that also contributes to the returns we're getting. But it's a constant -- if rates stay high from here, that may compress returns more. And so we sort of -- we look at it quarter-to-quarter to see how we feel about it. But so far, we've been comfortable with what we put on year-to-date.

The next question will come from John Pancari of Evercore ISI.

Mike, just on the trading and IB revs, I know trading revs came in a bit lighter this quarter, and you noted [ SIC ] revs and then IB revs also a bit pressured. Could you maybe give us a little more color on underlying trends and how we -- maybe your thoughts on how we should think about IB Res here just given the pipeline, if you can update us on that and maybe similar thoughts on how we should think about trading just given the potential volatility amid the rate environment?

Sure. On the IB side, look, I mean, we're in the -- we were just under, I think, just under $900 million for the quarter, which is not a bad result given sort of where we've come from over the last couple of years. In there, you saw M&A up 30%. You saw equity capital markets up a bunch. And what you didn't see is sort of that led in leverage finance and sort of investment grade be as big a driver as you might have in other quarters. But overall, we continue to take a little bit of share like over time as we go, and that's kind of what we expected from all the investments that we've made over the last few years.

What happens in any given quarter is going to be a function of like individual deals closing, but we feel like the opportunity to continue to grow the IB, fee line is big. And I think we're continuing to make investments across a bunch of different coverage -- subsectors within the coverage group, whether it's in tech or in the health care space, in particular -- as well as some of the industrial subsectors. So we think there's a lot of opportunity to continue to grow that. And what we're also very pleased with is that we're really starting to see the efforts that to cover our commercial banking clients really work well. The fees for the commercial banking clients are up 25% and they're up a lot relative to where we started this journey 3 or 4 years ago. so we continue to see meaningful opportunity in that space. In the markets, if you break it apart, the NII is going to be -- it's a liability-sensitive business. And so rates go up, NII is going to go down and you're going to see this geography shift back to fees.

So you really have to look at overall markets revenue to sort of judge the overall business. And that was effectively kind of flat year-on-year despite -- including some of the slowdown that we saw in September. But over a period of time, the opportunity there business and grow total revenues is still as meaningful as we've been saying and we think it as and we thought it was for a while. So it's just methodically chipping away, it's sort of continuing to get more efficient at the point in the balance sheet, onboarding clients, continuing to deepen relationships across the financing side and parlaying that into doing more on the trading side. So we still think there's a lot of upside to come in the overall revenue in markets.

Okay. Good. And then on the credit side, it's good to hear that consumer and commercial health is mostly intact. You did cite that high rates could impact CRE valuations. Are you observing any incremental stress at this point as rates have spiked on the commercial real estate front. And we're fielding a number of questions around multifamily implications potentially. Are you seeing anything on that broader front?

Well, John, I mean, as you know, it's just math, right? So like rates go up, valuations got to go down, right, all else equal. And so I think -- but it's too early to kind of see real stress come through. It's not -- it will be very much specific to individual properties and whether the net operating income will be able to offset any increase in rate as they go through a refinancing. And so again, in some properties, I think it will be just fine, and you're going to see some of that get a little bit more stressed, but that will take some time to kind of play out over a longer period of time. But at this point, it's not causing like an acute issue in the first few weeks.

The only thing I would just add is I think just when we look at the -- our ACL that we feel very good about what we have for CRE.

And our final question for today will come from David Chiaverini with Jefferies.

Maybe a follow-up on the loan side. How should we think about loan growth from here in coming quarters relative to the guide of the mid-single-digit pace. And you spoke about this earlier, but maybe talk about your appetite to provide financing for AI infrastructure.

Yes, David, I think when you look at the -- what we've seen in actual loan growth and where we likely will end of the year, it's going to be higher than the guide we gave in the beginning of the year, but we've been sort of talking about that over the last couple of quarters. and so that's definitely going to be the case. And I think how that progresses after this quarter, I think we'll -- we'll see as we get to the end of the year and provide our assumptions as we think for our guidance next year. But overall, we're still seeing good demand for loans across a lot of the different parts of the business. I think when it comes to the AI trade, I think we are very, very cognizant of all the different kinds of layered risks that sort of are embedded in the in those investments, whether it's the data center construction and all the permitting and power issues that are well sort of trotted or sort of the financing related to chips and other things that go inside the data centers, and we're very focused on ensuring we understand sort of who the lessees are, where the guarantees are, all the different sort of layered risks that could potentially come into play there.

And we have very hard limits in terms of what we're willing to do and what we're not willing to do and are sticking to that. And it's a conversation that we're very focused on from the top down across all the different business businesses that are impacted by it.

Great. And then a follow-up on the net interest margin. Does the stable NIM guide for the fourth quarter assume a reduction in balances in the markets business or should we expect continued solid growth in the markets business? And is the netting of sponsored repos fully baked in at this point?

It's not fully baked in, and we do expect to see more activity growth in the business. And exactly what that nets into from the -- on a net balance sheet perspective, I think I won't -- I'm not going to, sort of, guide there, but I think we still have opportunity to[indiscernible].

We're not reducing market Yes, we're not to hit a NIM number at all.

Yes.

Just the opposite. We're continuing to grow the business.

Yes. And like I said earlier, our fixed income finance and gross balances were up 18% versus the second quarter, and that balance sheet was down. So the activity levels are increasing, and I expect that to continue into the fourth quarter, exactly where the net balance sheet ends up, we'll see, but the activity is quite robust.

Okay. Thanks for the questions. We'll talk to you next time. Thank you.

Right along. Very pleased to have Wells Fargo once again at this conference. Representing the company, Mike Santomassimo, Chief Financial Officer. Mike, thanks for joining us this morning.

Thanks for having me.

Maybe the best place to start, just big picture, U.S. economy has been resilient. Obviously, uncertainties. Fed, I'm told it's going to hike tomorrow, geopolitical backdrop, who knows, AI build-out impacting things. Just maybe just talk to how your customer base, consumer commercial is holding up in this environment. What are you watching most closely from a macro perspective as we look to the remainder of the year?

Yes. No, despite all the noise that's out there, it's been quite good in short. And I think -- when you look at the consumer side, I stopped using this word resilient because it's just strong. Activity levels have just been strong now consistently for a while. We see spend up across the debit and credit card products every week year-on-year.

Categories move around. Sometimes as oil or gas prices go up, it shifts a little bit in terms of the spending. But that's still sort of like a 3% to 5% of spend depending on who you are. And so there's still quite strong spending across the board, and it's just not been changing really at all. You couple that with like really good credit performance. So debt-to-income levels are quite good overall across the client base. We're not seeing changes in delinquency trends that would sort of lead you to believe there's like more credit issues coming.

Payment levels across the card space are quite high historically and not really changing. And I think as long as you've got the economy continuing to grow, call it, 2%, 2.5% this year, depending on who you sort of look at, you've got a really strong sort of employment picture with unemployment still quite low. You've got wages keeping up with inflation for the most part across most customer bases. And so it's hard to see sort of what's going to be the catalyst for that to change at this point. And I'm not sure a small increase in rates is the catalyst at this point. We're just not -- we're not expecting that to be the case.

When you look at the commercial side, again, still good performance. I'd say that commercial banking, middle market type customers still being pretty cautious and prudent. We're not seeing big increases in utilization across revolvers at this point. I know we'll talk about loan growth later, but that's not what's driving sort of the loan growth we're seeing. So you look at the commercial customer base still quite healthy, good liquidity. We're not seeing any systemic credit issues sort of pop through. And so it leads you to believe the rest of the year should be quite constructive, I think, still.

And then I think you got to look at the obvious markers, whether you start to see changes in unemployment sort of tick up on the consumer side and you sort of start to see stresses across the commercial side, but it's just not what we're seeing at this point. And I think that leads you to believe that the second half and into early next year should be still quite healthy.

Sounds good. I guess, middle of last year, the asset cap finally came off, final present removed in March, so positive milestones there. Just how has the removal of those constraints changed the way you think about growth, investment opportunities, capital deployment?

Well, first, it's a different place. There's no way -- you can't say it any other way, right? And I think as a lot of the work that went into it over many years to solve all the issues across the many consent orders we had. So it does feel like a very different place. And I think in a lot of respects, there's a lot of excitement around the growth opportunity that we have there.

And I think the way we've been thinking about it is the same thing we've been working on now for the last number of years. We started the investment agenda 4, 5, 6 years ago, depending on sort of the area of the product. And a lot of the growth that we're going to see across the investment bank, the wealth management business, the card business, the broader consumer franchise across the bank branches and wealth management that we do with in those branches is what's going to drive growth.

And I think you're starting to see some of that come through. The balance sheet has grown a bunch since last year. We saw really good growth across all of the businesses last quarter, bar none really in terms of what we're seeing in terms of some of the improvement. We saw a good uptick in core checking account growth. We saw wealth -- good flows into the wealth management business. We saw good I-banking activity levels, good markets revenues and activity across the client base. And so we still have a ton more to do and a ton more opportunity to go after, but we're starting to see some of that come through. And it's exciting to see sort of how the team is executing every quarter and going after it.

Got it. And I guess against this backdrop, I guess we've seen pretty good growth in trading assets and loans. I think every managed category outside of mortgages were up in the first half. Just as you start to think about the second half, maybe talk to the loan environment. I know you were kind of guided to mid-single-digit year-over-year growth by the fourth quarter, but I think we're up like 12% in the first half. So just how do you think about the trajectory from here? And just maybe talk about the competitive landscape.

Yes. Look, we're -- I mean, we're super happy that we had such good growth in the first half. And whether it's card, auto, the commercial portfolios really all saw some good growth. And we did see a very consistent home lending sort of portfolio as well in the first half after a number of years of that sort of getting rightsized.

So overall, the activity was quite good. But as we sort of said in July, we expect -- we didn't expect the 12% to continue for the whole year. And so while we'll likely be better than where we guided in the first part of the year, it will be a little bit lower than what that 12% number, certainly for the full year. But -- and I think that will set us up well as we go into next year. Activity levels are still pretty good.

We're seeing good new client acquisition in the commercial bank as we've added a couple of hundred commercial bankers over the last couple of years. We're seeing growth across the corporate investment bank and then just continue the growth across the card and the auto portfolios. But I think the growth rate will get a little bit lower than what we saw in the first half.

Got it. And then maybe on just deposits. There, too, you've kind of been running ahead of the mid-single-digit target you talked about, although mix is maybe more skewed to interest-bearing perhaps than originally anticipated. If I look at deposit costs, though, you've definitely seen, I guess, underperformance versus peers on that one metric. Maybe just talk to what's driving mix, what's driving price and just how we think about growth mix pricing as we move forward from here?

Yes. Look, while we are under the asset cap, we just couldn't grow the commercial deposit base the way that others could over the last number of years. And so it's actually quite good to see sort of the traction that we've got with clients since the asset cap has gone away, where we've been able to grow a lot of that operating business both across the commercial bank, corporate investment bank year-on-year, the wealth management deposits are up. And so we're seeing really good activity levels across the whole franchise, which is great to see.

As we sort of talked about a number of quarters, the first place you're going to see that growth is in the interest-bearing deposits primarily because it's where we saw the biggest dollar growth is the commercial side. That's just where you're going to see some of that growth come through first. And these are really good relationships, really good return over a very long period of time. They bring operating business. They bring the opportunity to get fees. They bring the opportunity to get more noninterest-bearing over time as you sort of grow the payments business and other things you do with these customers. And that just has a mathematical like impact on deposit costs, right?

So if you're growing interest-bearing faster and noninterest-bearing are sort of pretty stable, then you're going to see an increase in the deposit cost. But that's actually a good thing, I think, over a long period of time as we start to see a really good traction across the deposit acquisition across each of these businesses, which is great to see. And so -- and I think we still have a lot of opportunity to grow on the interest-bearing side. And then over a longer period of time, you'll see new checking account growth and growth in the consumer business grow the noninterest-bearing or the low sort of basis point sort of savings products as well on the consumer side.

And then as we grow our operating business in the payments business, you'll see more of those noninterest-bearing grow across the commercial side as well. Those just take a little bit longer to sort of come through, but we're seeing really good uptick in activity across those parts of the business as well.

Got it. I guess maybe sticking with deposits for a second. I know you recently launched a tokenized deposit product. Maybe just talk about that product. Is that something that there's customer demand for? Just how you see that opportunity evolving over time? And just maybe more broadly, what's your view of tokenized deposits alongside stablecoins and just how you see this playing out? There's a lot of questions out there.

Yes, there's a lot going on in that space. The conversation internally started with how do we do a better job helping our primarily U.S.-based customers, how do we serve their cross-border needs much better, whether it's increasing operating hours or providing more transparency in terms of the uncertainty around when the payment is going to get there.

And the blockchain technology and the tokenized deposit was the best technology to sort of help us solve some of those problems and some of the client needs there. And that's where we've really focused. It's not about optimizing our internal network. It's not about optimizing sort of like our own treasury needs. It really is just going straight to how do you do a better job helping clients meet the needs they have across their cross-border payments. And so I think that's what we're really focused on. And we're excited.

It's going to launch in production next week. And so we'll start doing like payments, and it will scale and sort of get much broader over the coming quarters. And I think there's a real need there to provide sort of better, more transparent sort of cross-border payments. And it allows us to tackle an addressable market that is probably much bigger than we could have using traditional rails, given our lack of sort of a global sort of branch network that others might have.

And so it should increase our addressable market quite substantially, help us do a better job with customers' cross-border needs. And so it's kind of a win-win, I think, overall. I think the focus there, if you then contrast that to stablecoins, is there a role for stablecoins in the payment ecosystem, maybe. It's likely going to be in places like cross-border remittance where you're sending U.S. dollars to a country that's got high inflation or other issues within their underlying economy.

And the recipient wants to hold a dollar-denominated sort of asset. And so there could be some limited use cases there. But I think these things will likely complement each other over time.

Got it. Maybe kind of shifting back to the income statement. We touch on this when we talk about deposits, but NIM was down 13 bps in the first quarter, 4 bps in the second quarter. I think you talked about 3Q having a similar decline to 2Q and then stabilizing in the fourth quarter. Is that still the right way to think about it? And just kind of looking out beyond that, ultimately, what do you think drives stabilization expansion kind of puts and takes and where should we focus?

Yes. Look, I think as we sit here today with a couple of months of the quarter through, and we think about NIM, it will be a little better than we thought. So I think we came into the quarter thinking it will be down 3 or 4 basis points. It's likely to be maybe down 1, maybe flat, like it will be pretty close to sort of that as we look.

And so we'll see how the last few weeks shape up in terms of the end of the quarter, but it will be better. And I think when you start looking at sort of what -- some of the things that are happening, we continue to get a grind up of yields across the asset side of the balance sheet. So higher rates have certainly been a little bit helpful as you sort of look at some of that. And when you got growth across the card book or the auto book or a lot of the lending portfolios, you're continuing to see a little bit of a grind up in yields.

And then as we reinvest the securities portfolio, we're picking up some yield there as well. And then on the market side of the balance sheet, we've talked about this a lot, but we continue to get more efficient on the balance sheet. As we've gotten -- as we continue to grow on the equity finance side, you get better netting and you get more efficient there.

On the fixed income side, we can do more efficient ways to sort of implement repo like sponsored repo and other products where you get a lot of netting benefit. And we're a little bit ahead of maybe where we thought we would be in terms of getting some of those benefits come through across the markets business. And so it's actually quite constructive, I think, given sort of what we're seeing. We're still growing at a good pace, but it's just more efficient use of the overall balance sheet across those businesses.

And as you sort of look forward, our view is the same. We expect it to be pretty stable as we sort of go into the fourth quarter. The banking -- if you separate markets from kind of the banking book in the third quarter, the banking book is going to be pretty stable to the second quarter. And I think that stability sort of continues as you go into the fourth quarter.

And then over a longer period of time, you should see some expansion, but it's all the things that we've talked about in terms of loan growth, you get the benefit of asset repricing as you continue to have higher rates for longer. And as we grow the underlying businesses across the consumer and the commercial side, you'll start to see some of that come through not only in NII, but NIM as well.

And I guess with the Fed potentially hiking tomorrow and maybe more so into next year or later this year, just how does that -- is that good for us, bad for us? I know the 10-year broke, 5% yesterday. Can you maybe talk about what's interest rate environment, just how it impacts you?

You know what, I think, obviously, some steepness to the yield curve would be helpful, right? And so that -- it's been a little volatile. But as you sort of look at -- if the Fed increases 25 basis points, we're still modestly asset sensitive on the banking book. You still have some noise in the markets business, right? Higher rates mean lower NII, higher fees.

And so you sort of have like some differences here in terms of where we could be. And so I think -- or actually, I got that backwards, right? So it's lower NII, higher fees, right, in terms of as rates go up on the market side. So you're going to have a little bit of noise there on the market side. But I think in the banking book, we're still modestly asset sensitive. So we'll have a little benefit from higher rates. And I think overall, like if it's 25 basis points, I don't think that's going to be a big driver of activity one way or the other as we look at the rest of the year.

Got it. And then since January, talking about $50 billion for the full year in NII and $2 billion of markets. Is that still the way to think about it?

Still the same. That's the update is the same. And so I think it's no change. And I think as we sort of talked about loans might -- talked about the last couple of quarters, loans are a little bit better than we thought. Noninterest-bearing deposits are pretty stable. We expect a little bit of growth, but with rates a little higher, stable is, I think, a good outcome. And so I think overall, it still shakes out to be about that $50 billion and about $2 billion of that is in the markets business.

I guess when you talk about loans and deposits running higher than maybe you initially expected, how much of that you think is like asset cap catch-up versus just kind of good core growth? And maybe what inning are we in of it if it is asset cap catch up?

Yes. I mean, look, the short answer is it's like early innings of growth, right? I mean that -- like the opportunity we have is much bigger over and should play out over the coming years. Certainly, you'll have a little bit of catch-up when you look at the markets business in terms of the pace of growth that we saw over the last 4, 5, 6 quarters.

And you won't see that same pace of growth that we've seen, but the opportunity is still quite big across each of the businesses. And so early innings across each of the businesses in terms of really having this organic growth opportunity that we can go after.

One thing I'm just curious on in NII is just credit card. I know it's a business that you've completely revamped. You've had good growth. I know some of that growth is maybe not earning initially. How do we think about that kind of layering in over time?

Yes. No, it's the right question. And you look at the -- what we've done, every product is brand new to the platform. And as it takes 2 to 3 years for these like vintages to mature, and we're still sort of in that ramp phase of seeing the profitability come through. So I think over the next couple of years, you'll start to see a more meaningful profit contribution from the growth that we've seen because of all the upfront costs will start to burn off from some of that growth we've seen.

We still have another new product or 2 that will come as we go later in the year, mostly focused on sort of that mass market client, which has a little bit less of some of those upfront costs that they experience in some of the products that we've launched so far. So I think coupled together, like we're seeing really good momentum in terms of the growth, and you'll see more of that profit contribution come through over the next year or certainly as the bigger vintages really start to mature more meaningfully.

Got it. Maybe kind of moving down the income statement to fee income. Growth has been strong, some of it market-related and maybe cyclical, some of it structural and initiatives you've undertaken. Maybe just kind of walk through kind of some of the bigger items and kind of what you expect to see going forward?

Yes. We certainly, in the first half of the year, had really good performance in our equity gains like in our venture portfolio. I think this quarter is probably closer to flat like in that portfolio. But when you look at like the full year, it's about where we thought it would be in terms of the expectations. We've had roughly $850 million or so of gains, I think, in the first half of the year.

And so when you look at that business over a long period of time, it's actually performing about where we thought, even though you have some volatility quarter-to-quarter as the timing of some of that comes through. And when you start looking at the rest of the P&L, we're seeing really good performance. I think in the investment advisory fee line, the market and the growth that we've seen in the wealth business has been quite helpful as that sort of has increased quite a bit over the last couple of years.

We've seen really good performance across the investment banking business as well. You look at deposit fees growing with the underlying franchise and sort of we optimize there. And so overall, I think you're seeing a very different level of fee generation than we saw maybe 3, 4, 5 years ago, in part due to a lot of the investments that we've made in each of the businesses over the last number of years.

Got it. And I guess before we talked about just kind of the lagged profitability benefit from credit card. I guess when we think about investment banking and trading, I guess some other areas you're actively in hiring, just kind of where are you in that process? And is there some more kind of lag way to think about it?

Yes. I mean you look at investment banking, we've hired 150 or so senior MDs over the last 3, 4 years. You've seen investment banking fees go from a few hundred million a quarter to a much higher number. They were over $900 million a quarter last quarter -- in the second quarter. So you've already seen this increase -- step change increase in sort of the fee generation, but it's just getting started.

We've been adding more people each year. We're going to continue to invest in covering different subsectors within places like health care, TMT and other parts. And we add in M&A and some of the equity capital market folks as well as we sort of need to continue to grow there. But it's still, I think, very early innings. You've seen our market share go from the 2s to 4.3% more recently. You've seen M&A -- announced M&A league tables. We're #6 there, where we were, I think, 14 a few years ago. And so you start to see -- you're seeing sort of that improvement in that like pulling of market share each year.

But I think there's a lot more to continue to do, and we have bigger aspirations in that business. Same thing in the markets business. We're focused primarily here in the U.S. we're serving U.S. customers. We have a little bit of activity outside the U.S. So it is a little bit of a different addressable market than maybe some others are going after. But when you go and talk to each of the big fee payers or clients across the street, there's a lot of appetite to do more with us.

We're in the process of onboarding many of those customers or different portfolios of those customers as we speak. And I think you'll see a systematic sort of growth in that business for a while. And I think the opportunity is still quite big across the CIB in general. And we're going to do it in a very methodical way within our risk appetite and sort of really drive sort of the right returns.

And I would just point out in the growth that we've seen so far, I think we've been able to grow the balance sheet while returns continue to get better. And I think that's important. I think there was some questions of like can you grow at the pace and still stay on that path to higher returns. And I think so far, so good, I think, in terms of being able to see that growth come through while returns continue to improve across the overall business.

We're going to talk about returns in a second, but maybe just as we continue our path down the income statement, turning to expenses. Beginning of the year, you guided to $55.7 billion for the year. Despite the fact the income better than expected in the first half, you kind of stuck with that. Is that still the number? And....

Still the number? $55.7 billion, yes. So guidance is unchanged. Like -- and as you point out, like we are seeing higher expenses in our wealth business as a result of better performance with equity markets and sort of the commissions that come along with a lot of those -- that business. And that's just offset by other efficiency initiatives that we continue to drive.

We've been at this now for a number of years, but still very much believe that we've got a lot more to do to drive efficiency across the whole company. I think AI helps us get at things faster differently maybe than you could have even a couple of years ago. But I think we continue just every month, every quarter, come in and look for -- continue to peel back that onion and look for other opportunities to keep getting more efficient. And that's really what's driving the ability for us to sort of keep our expenses where they are for this year, while we've got to pay higher commission-related expenses on the wealth side.

And so very pleased with the way the team has been executing on that across the whole company. And there's a ton more still to do across really almost every function. And as I said, AI just maybe helps you think about it a little bit differently, get there a little bit differently, maybe a little faster in some cases, but a tremendous amount of opportunity still to go.

I guess beyond tremendous amount, I know headcount has been down 24 straight quarters. You touched on AI, maybe just talk to maybe some of the bigger opportunities you see either leveraging AI within the company to get more efficient or just away from that? And just ultimately, where do you think the efficiency ratio could go?

Yes. I mean, look, I think the obvious places where you get like efficiency first is in technology. And if you went back 1.5 years ago, you would say like where you're getting that is by using tools that help you write code more efficiently for a developer, and that would make them maybe 2x more productive or certainly -- somewhere between 50% and 2x more productive depending on the developer.

Now it's shifting where you can use AI to completely disrupt the development cycle. You can use autonomous coding agents to write the code for you. You can use it to help you decompose like code that needs to get rewritten and come up with different requirements. You can -- there's a whole different sort of set of tool sets that's like there, ready, willing to be used today. And we're already making decisions to use more autonomous coding agents instead of hiring more people or using more contractors to deliver on some of the things that we're doing. And so you're going to see that continue to get bigger and bigger in terms of the efficiency benefit that you're going to get. And you're going to be able to move much, much faster to develop new things than you could have not that long ago.

And then when you look at every other function within the company, there's opportunities to use it better. You think about even a function like legal, when you're using third-party firms to do research for you on a whole bunch of different topics, you can use AI and bring that in-house and do it much less expensive. You can use it in finance to help you do reporting to understand trends better. You can use it in operations, call centers.

And so there's a number of things that will help you do in a much, much more efficient way. It will bring net -- it will bring headcount down more. And as you grow, the unit -- the effort you're going to need for every unit of growth is going to be much less than it was not that long ago. And so it really is almost every function within the company has some more to do to continue to use it to drive more efficiency.

Whether headcount will be down every quarter like forever, like probably not, but like we still have a lot more to do to continue to drive it. And it's a big focus, and we're as we sort of come into the budgeting cycle for next year, we're approaching it the same way we've approached it every year I've been here, right, as let's start with how we're going to drive more efficiency and where that's going to be and how fast we can get at it.

And then we can talk about separately where do we need to continue to make the investments. And I think you'll start to see sort of AI help you improve a lot of the product capabilities, not just drive more efficiency. We're using it in the payment space and some of the tokenized deposit work. And it just makes -- it makes us go much, much faster to develop some of those new products as well.

Cool. Credit quality has obviously been really benign across the industry. Just any areas you're paying particular attention to? And then if the Fed starts to tighten, does that change things?

I mean we look all the time for cracks, and we're just not seeing it yet. There's been strong performance across really every cohort on the consumer side. Delinquencies are a little better than we modeled, not worse every time we have the conversation. And so we're not seeing the roll bucket sort of the initial sort of bucket start to like give you any indication that there's something to get worried about yet.

On the commercial side, same thing. It's a big portfolio. So you see some idiosyncratic sort of company issues, but we're not seeing systemic sort of like concern come through the portfolio. And so we'll keep -- we keep sort of looking, but it's not quite there yet.

And just maybe on reserves. You've grown credit cards, growing auto, those require reserves on the flip side, right, Office CRE continues to work its way down. Just how do you think about the outlook there?

Yes. No, the allowance -- the coverage ratios have been quite stable across most portfolios. And so as the auto and card book grow or other portfolios grow, you're going to see -- obviously, you're going to have to add to the allowance for the growth.

And then on the commercial real estate side, we're kind of getting towards the tail end, I guess, of -- for lack of a better way to say it, sort of that story in terms of working through the portfolios there. And that continues to get better. And as you have more certainty around sort of the end result across the remaining credits you're working through, we've been releasing some of that reserve. And I think you'll see that continue likely over time.

Got it. And then just on capital, buyback for the last 2.5 years has kind of run $3 billion to $6 billion a quarter. regulatory outlook likely getting better, you get a pickup there when that comes through. Just how are you thinking about the future pace of buybacks? And when do kind of these upcoming regulatory changes influence your thinking on capital return?

Well, we probably need to get them to be finalized first. So hopefully, the rules will be finalized at some point soon, probably no earlier than year-end, but let's see. So before we start to incorporate that into sort of our buyback pace, I think we need to see how that shakes out. I think as we've said, we think -- we believe it's going to be a positive impact on RWAs for us. The estimate we had was roughly 7%, but let's see when the rule gets finalized.

And then I think as we sort of look forward, as we -- we want to make sure that like we're supporting clients and we see the balance sheet growth that comes through. Obviously, there's lots of risk that we sort of think through in terms of rates and other things happening. And then the buybacks end up being sort of the release valve for capital. And I think we're still managing to the 10%, 10.5% CET1, and we're very comfortable anywhere in that range. And so I think you'll see us continue to buy back stock as we go.

Got it. I guess we don't talk about an asset cap anymore, but at some point, maybe the national deposit cap comes to mind. And you still have room under to do a decent-sized bank acquisition, though every quarter you grow deposits, you kind of -- the size of potential targets get smaller. Just how are you thinking about bank acquisitions? I know CNBC had a view last month. What's your view?

Yes. I mean don't believe everything you read, I guess, or listen to on TV. But the -- look, I think we're focused on like organic growth. And I think we're very fortunate that every one of our businesses has a huge runway to grow organically. And that's where we're focused. Could you see us do an acquisition that adds some kind of capability in the payment space or -- maybe, but like -- but I think overall, there's a high bar for us to think about acquisitions.

And I think every day, it's just a matter of focusing on the opportunity that's like right in front of us across each of the businesses. And I think given our scale, given our franchise, given the client base that we've got across each of these businesses, it's -- there's a lot to do and a lot to go after, and that's really the focus of where we're spending our time.

Got it. And then maybe you had this medium-term ROTCE target of 17% to 18%. I guess you're sort of there in the second quarter, although in a favorable backdrop. Maybe just talk to what are the key levers required to kind of stay at that level?

Well, look, I mean, we feel really good about the progress we've made on returns, right? Obviously, when we started this conversation, we were at, I think, 8%, right, at one of these conferences, right? And I think we obviously hit 15% and sort of increased from there. And we feel really good about getting to sort of that range and in a very reasonable amount of time.

And then we believe that it goes higher from there. And I think given the mix of our business, which is different than some of our peer set, that would lead you to sort of think that the number should be over a longer period of time, be higher than the 17% to 18% range. And it just comes back down to sort of continue to execute on all the investments we're making across each of the businesses, continue to drive sort of the efficiency that we've got -- the opportunity we've got across the efficiency side there.

And I think that will get there. And I think the good news is there's lots of different paths to sort of get to higher returns for us. It doesn't require like perfect execution in any one business. It doesn't require an outsized contribution across any one of the businesses. It just -- we just need to continue to show incremental progress across sort of the opportunities that we've got, and that should get us there in a very reasonable amount of time, and then we'll reset expectations from there, which we would expect to be a little bit higher than that.

I guess with the asset cap now off, maybe what area has kind of been maybe the biggest upside surprise relative to your expectation? And is any area that maybe you thought could have moved faster on that's maybe been a bit slower?

Well, we're always trying to go faster, right? But I think we got to do it in a methodical sort of way. And I think when you look across each of the businesses, we're pleased with the progress we've made. It has only been a year and change, right, 15 months maybe since the asset cap went off.

And so I think you've seen the balance sheet grow quite substantially. You've seen continued growth across every one of the businesses. Even this quarter, you look at the backdrop of what's happening across like the CIB space, our IB fees will be up year-on-year. Our markets revenue and trading and fees will be up year-on-year, both probably sort of mid-single digits, right? And so we're seeing that growth really come through across each of the areas.

And so I think it's -- whether it's wealth management business continue to do really great job recruiting, driving flows on the platform, the consumer business, the productivity in the branches gets better and better every quarter. We saw like we first saw it start to come through in the card space last year about this time where we saw really an uptick in productivity.

We're seeing it now across -- we're seeing that happen now across the checking account growth as well. You look at the CIB businesses I talked about. And then you look at the commercial bank, where we're just seeing really good client acquisition, which is really helping sort of drive that loan growth. which is really what you want to see happen as you sort of add these -- we've had a couple of hundred commercial bankers across the country in sort of higher opportunity markets that we have, and we're seeing it come through each of it.

Now we have a lot more to do and like the progress isn't anywhere near where we want it to be yet in terms of like really meeting sort of that aspiration we have. But I think you're seeing really good results in each of the businesses, and the pace will be a little bit different depending on sort of the nature of what happens there.

Great. I think that's a perfect place to leave it. Please join me in thanking Mike for his time today.

Welcome and thank you for joining the Wells Fargo Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that today's call is being recorded. I would now like to turn the call over to John Campbell, Director of Investor Relations. Sir, you may begin the conference.

Good morning, everyone. Thanks for joining our call today where our CEO, Charlie Scharf; and our CFO, Mike Santomassimo, will discuss second quarter results and answer your questions. This call is being recorded.

Before we get started, I would like to remind you that our second quarter earnings materials, including the release, financial supplement and presentation deck are available on our website at wellsfargo.com. I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings including the Form 8-K filed today containing our earnings materials. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings and the earnings materials available on our website.

I will now turn the call over to Charlie.

Thanks, John. I'm going to provide some comments about our results and the momentum we are seeing across our businesses. I'll then turn the call over to Mike to review second quarter results in more detail before we take your questions. .

Let me start with Slide 2 of the presentation deck, where I will walk you through the broad-based strength we see in our business. We grew diluted earnings per share to $2 in the second quarter, up 25% from a year ago. Revenue grew 9% from a year ago. Growth was broad-based with every one of our operating segments generating higher net interest income and noninterest income. We are clearly benefiting from the economic strength we see in the U.S. but the investments we are making and our improved operating discipline drove strong momentum and continued to result in improved performance.

Net interest income grew 5% from a year ago and noninterest income grew 13% as we're making good progress against our goal to create a more balanced revenue mix by growing fee-based revenues. Expenses increased 2% from a year ago, reflecting investments we are making, offset by continued expense discipline. Expenses, excluding revenue-related compensation declined. One of the ways you can clearly see the results of our efficiency initiatives is through headcount, which has declined for 24 consecutive quarters. And in the second quarter, our headcount was 197,000, down 79,000 from 6 years ago, 15,000 from last year and 3,500 from last quarter.

We are using these efficiencies to offset broad-based investments across the company to drive growth, including adding branch bankers, investment advisers, commercial banking relationship managers, investment bankers and traders. We are also increasing our marketing investments, accelerating product development, investing in AI and increasing our cyber defenses. Consumer and commercial credit quality remains strong across all portfolios and net loan charge-offs declined 10 basis points from a year ago. After years of not being on a level playing field with our competitors because we could grow our balance sheet, we had strong growth during the first half of this year including in the second quarter with average loans up 12% and average deposits up 10% from a year ago.

Just a reminder, growth can be risky, and we are carefully deploying capital to grow and support our clients by taking risks that we think are prudent through economic cycles, not just the strong environment we see today. We returned over $9.8 billion of capital to shareholders in the first half of this year including repurchasing $7 billion of common stock while continuing to maintain the significant amount of excess capital. As we previously announced, we expect to increase our third quarter common stock dividend by 11% to $0.50 per share, subject to approval by our Board of Directors at its meeting later this month.

Our continued focus on improving returns was evident with ROTCE increasing from 15.2% a year ago to 17.7% in the second quarter and 16.1% in the first half of 2026. While outsized venture capital equity gains favorably affected our returns this quarter, we have said that they can be lumpy but that we do expect strong returns from these investments over time. But more importantly, the growth and efficiency improvements that we have seen over the past several years are now broader based and it is these trends that give us confidence in reaching our goal of a sustainable ROTCE of 17% to 18%.

We are often asked about the timing of achieving this goal, and I know you all understand that interest rates, markets and credit impact us and are harder to predict, making it difficult to give a definitive answer. But assuming favorable conditions continue to exist, we remain confident that our favorable trends will allow us to achieve this goal in a reasonable time frame and then reset the bar higher for the future.

As we show on Slide 3 our strategy is driving growth across all our businesses. Let me start with Consumer Banking and Lending with 6% revenue growth from a year ago. After years of little to no growth in check accounts, our investments in marketing and digital account openings are paying off, and we have owned consumer primary check accounts year-over-year for 13 consecutive quarters. We have significant opportunity to increase the pace of growth and this, along with offering our broad set of products, including credit cards, investments and mortgages should drive low-cost deposits higher over time.

Over the past 5 years, we have enhanced our credit card products and improved the customer experience, which has driven new account and balanced growth including new accounts increasing 46% in the second quarter from a year ago. Building a larger credit card business is an investment that puts pressure on profitability in the initial years with new products having significant upfront costs related to marketing, promotional rates, onboarding and allowance. It takes approximately 2 to 3 years for vintages to season and earn through these upfront costs.

Our 2022 through 2024 vintages are now adding to profitability. Our 2025 and '26 vintages are bigger as account openings have accelerated so they offset some of the positive contribution from the earlier visits. Importantly, we have seen strong performance versus our original assumptions regarding new account acquisition and credit performance, which gives us confidence that we should see profitability and returns increase. I do want to note that the rate of growth is a decision point for us. We could have higher profitability in the shorter term by reducing our growth but we are prioritizing longer-term results given the quality of the accounts we are generating. We evaluate this each quarter and will continue to do so.

The momentum in our digital offerings continued with mobile active users increasing to $33.7 million in the second quarter. That's $1.6 million more than a year ago. The investments we've been making to improve the customer experience were reflected in the 2026 J.D. Power mobile app study where we moved up to #2 in mobile app satisfaction. We were also doing more for our affluent clients. We've been hiring licensed bankers and branch-based financial advisers, and that investment is helping to drive better results with premier client assets up 13% from a year ago.

Our auto business returned to growth last year after intentionally scaling back to improve our capabilities and the momentum has continued. Originations increased 41% from a year ago and average balances were up 31% in part due to becoming the preferred financing provider for Volkswagen and Audi vehicles in the U.S. Importantly, credit performance has remained strong and in line with our expectations.

Turning to Wealth and Investment Management. Revenue grew 13% from a year ago. Wealth and Investment Management client assets grew 15% from a year ago to over $2.4 trillion, driven by increased market valuations and also benefiting from 4 consecutive quarters of positive net flows. We have invested over $1 billion over the past several years to modernize the technology platform. And in the second quarter, we launched Advisor Gateway, a new desktop technology with Gen AI capabilities that gives advisers better tools to serve clients and grow their practices. Investments like this are improving productivity, strengthening the client experience and driving improved adviser hiring and retention.

We are also working to be our clients' primary bank by expanding our deposit and lending capabilities and are seeing strong results with average deposits up 10% and average loans up 12% from a year ago. Securities-based lending has been a key driver of loan growth with average balances up 31% from a year ago, reflecting our success in increasing the number of financial advisers offering this product to their clients. Importantly, the opportunity in this business to grow investments and banking remains significant. We estimate that our existing customers hold trillions in assets at other financial institutions and their lending, deposit and payment needs are large and growing.

Turning to our commercial businesses, starting with the Corporate Investment Bank. Revenue grew 16% from a year ago. In our markets business, revenue grew 24% from a year ago. We've been growing our balance sheet to support our clients with average trading-related assets increasing 41% from a year ago driven primarily by financing related activity. While this financing activity impacts our net interest margin because it has lower spread, it has good returns and profitability and positions us to attract more flow business. We track this by clients, and we're seeing higher trading revenue and wallet share gains from customers where we are providing financing. While the most immediate revenue benefits are expected within markets, including trading, hedging and risk management products. These deeper client relationships also enhance opportunities across the broader corporate investment banking platform over time.

In our banking business, revenue grew 20% as our focus on providing a broader set of capital and advisory solutions is working. This was a record quarter for investment banking fees across the firm. Our willingness to invest more in senior talent and in technology and dedicate more balance sheet to these activities is paying off. What's important here is having a growth plan that is properly paced and leverages the broader strength of Wells Fargo. The team has executed with discipline, has hired and promoted the right people and is taking risks that are in line with our risk conference. The favorable environment for M&A and financing is helping drive higher revenues across the industry, but our investments are also delivering strong results, and we are increasing market share in key areas.

In leveraged finance, our year-to-date market share is 7.2%, and we ranked #3. In equity capital markets, our shares increased 74 basis points from a year ago to 3.8%. In M&A, we have climbed from #9 to #4 among U.S. advisers by announced deal volume, reflecting our active role in advising our clients on franchise defining transactions. We also have strong share in CRE Capital Markets, including being the #1 non-agency CMBS book runner, #1 in real estate loan syndications and #1 in CRE CLOs. This was a strong quarter across corporate investment banking, and we still have significant opportunity to grow each of the businesses.

Finally, let me highlight Commercial Banking, which generated 6% revenue growth from a year ago. The investments we've been making in the business over the past couple of years are driving strong results. Absent the transfers of loans and deposits to consumer banking lending last year, average loans grew 9% and average deposits grew 10% from a year ago. Our investments include targeted hiring in 20 high-density markets where we are underpenetrated relative to the rest of the country. The plan is working as we are seeing incremental client growth and higher loan and deposit balances, and we expect this momentum to continue as we execute on our plan.

We've also focused on delivering investment banking and market products to our commercial banking clients. We've had success, which has helped drive revenue growth, but we still see significant opportunities to grow revenue here. While Commercial Banking is one of our more mature businesses, we still have significant opportunities to grow. Our treasury management and payments revenues are embedded in our Commercial Bank and Corporate Investment Bank results. Across both segments, revenue was up 5% from a year ago. We've been investing in coverage teams and payment platforms and are beginning to innovate using blockchain technology to create better payment solutions for our commercial customers. These solutions will use blockchain-based payment rails cross-border payments faster, more transparent and more predictable. And over time, they will extend operating hours to 24 hours, 7 days a week.

As we look ahead, consumers and businesses remain strong. Consumer spending is higher, charge-offs are lower, and savings and investments are growing across customer segments. Businesses are cautious with balance sheets and cash flows remained strong, resulting in strong credit performance. Equity indices are at or near all-time highs and credit spreads are narrow. Concerns around affordability and inflation exists but the labor market and wage growth remains strong. The markets and U.S. economy have absorbed macroeconomic and geopolitical uncertainty well. Strong environments like this don't last forever, and we see large amounts of capital being deployed by both banks and nonbanks across a broad range of risk assets. Often, when times like this continue, leverage and risks develop that are sometimes hard to see.

We are proud of the progress we have made and remain excited about our competitive position and ability to execute and drive towards our goal of industry leadership in the U.S. We will watch carefully for signs of outsized risks and stress and continue to deploy our resources carefully and deliberately to serve our clients and build sustainable high returns and higher growth that can endure the inevitable market shocks and economic cycles.

In closing, we and most national institutions are benefiting from today's environment. However, we're also seeing the benefits in our results from the actions we've taken, which should endure the cycles, as I've said. Our metrics clearly show our momentum across all business segments, and we will continue to remain focused on driving towards higher sustainable returns.

I will now turn the call over to Mike.

Thanks, Charlie, and good morning, everyone. Since Charlie covered the drivers of our improved financial results and the momentum we are seeing across our businesses that we highlight in the first 2 slides, I will start my comments on Slide 4. Our second quarter results were strong with broad-based revenue growth, disciplined expense management and improved credit performance. Our earnings increased 17% from a year ago to $6.4 billion, and our diluted earnings per share grew to $2, up 25% from a year ago. Our second quarter results included $132 million or $0.04 per share discrete tax benefit related to the resolution of prior period matters.

Turning to Slide 6. Net interest income increased $609 million or 5% from a year ago and increased 2% from the first quarter. The growth from the first quarter was driven by higher loan and investment securities balances as well as one additional day in the quarter. As expected, the net interest margin declined 4 basis points from the first quarter, down from the 13 basis points decline we had last quarter. The biggest driver of the decline in NIM in the second quarter and over the past year has been growth in interest-bearing deposits as well as continued growth in our markets business. The success we are having growing interest-bearing deposits deepens our relationships with clients in the commercial bank and the corporate investment bank and gives us the opportunity to attract noninterest-bearing deposits in the future. And as Charlie mentioned, while financing balances in the marketing business are lower spread, they have good returns and profitability and position us to grow other activities of those volumes. We see it in our results, including total revenue in the markets business growing 24% from a year ago as well as returns starting to increase along with our market share. I would also note that even with the NIM compression, we grew net interest income versus last year and last quarter. While we'll talk more about our expectations for net interest income later on the call, we expect modest net interest margin compression in the third quarter broadly in line with the second quarter's decline from the first quarter before stabilizing in the fourth quarter.

Moving to Slide 7. Average loans increased $110 billion or 12% from a year ago, driven by growth in commercial and industrial loans as well as growth across our consumer portfolios except for residential mortgage loans. Turning to deposits. Average deposits increased $134 billion or 10% from a year ago, with growth across our consumer and commercial businesses as well as higher corporate deposits. Average deposits declined 1 basis point from a year ago and were up 8 basis points from the first quarter, driven by growth in interest-bearing deposits.

Turning to Slide 8. We had broad-based growth in noninterest income up $1.2 billion or 13% from a year ago. We generated over $10 billion in noninterest income in the quarter with growth across most key categories. We had strong performance from our venture capital investments with $847 million in both unrealized and realized net equity gains or $604 million after noncontrolling interest. It's important to look at these results as the impact of noncontrolling interest. We also had double-digit growth investment advisory fees, brokerage commissions and investment banking fees from a year ago. We had over $900 million investment banking fees in the second quarter, a new record.

Turning to expenses on Slide 9. Noninterest expense increased $282 million or 2% from a year ago, our efficiency ratio improved to 60%, down 4 basis points from a year ago -- 4 percentage points from a year ago. The increase in expenses from a year ago was driven by higher revenue-related incentive compensation expense which I'd like to remind you is a good thing as these higher expenses are more than offset by higher revenue. We also have higher technology and advertising costs driven by the investments we are making in our businesses to generate growth. These higher expenses were partially offset by the impact of efficiency initiatives, including a 7% reduction in head count from a year ago. We are pleased to see the continued execution of our efficiency initiatives quarter after quarter. This is the 24th consecutive quarter of pick out reductions and along with other meaningful efficiency initiatives, we have been able to continue to invest in our businesses while managing overall expense levels. In fact, as Charlie highlighted, nonrevenue-related expenses were actually down from a year ago.

Turning to credit quality on Slide 10. Our credit performance in the second quarter remained strong with our net loan charge-off ratio down 10 basis points from a year ago to 34 basis points of average loans. Commercial credit continued to be strong with net loan charge-offs declined to 10 basis points. Consumer performance was also strong with loan charge-offs declining 74 basis points with improvements across the portfolio from the first quarter and continued net recoveries in the residential mortgage portfolio. Nonperforming assets as a percentage of total loans declined from the first quarter and from a year ago, with improvements in both the commercial and consumer portfolios. Our allowance coverage ratio for loans was relatively stable from the first quarter credit card and auto loan growth drove a modest increase in our allowance, which was largely offset by a lower allowance for commercial real estate office loans.

Turning to capital and liquidity on Slide 11. Our capital levels remained strong with our CET1 ratio at 10.3% within our stated 10% to 10.5% target range and well above our CET1 regulatory minimum plus buffers at 8.5%. While the Federal Reserve test results do not impact capital requirements this year, our results continued to be below the stress capable buffer floor of 2.5%. We repurchased $3 billion of common stock in the second quarter and common shares outstanding declined 6% from a year ago. We continue to have capacity to repurchase shares while also supporting our clients.

Moving to our operating segments, starting with Consumer Banking and lending on Slide 12. Consumer Small and Business Banking revenue increased 8% from a year ago, driven by higher deposit and loan balances wider deposit spreads and growth in noninterest income. Credit card revenue grew 2% from a year ago due to higher loan balances. Home lending revenue declined 7% from a year ago, reflecting lower loan balances. However, the rate of reduction has continued to slow, with balances relatively stable from the first quarter. Lower revenue also reflected the continued reduction in the size of our servicing business with third-party mortgage loans serviced for others down 21% from a year ago. Auto revenue increased 33% from a year ago due to higher loan balances. Auto originations increased 41% year-over-year, but were stable from the first quarter.

Turning to Commercial Banking results on Slide 13. Revenue increased 6% from a year ago, driven by noninterest income growth from equity investments, revenue from the financing we do for renewable energy projects, that come in the form of tax credits and investment banking as well as growth in net interest income from higher loan and interest-bearing deposit balances. Loan growth was broad-based with increased demand from both new and existing customers.

Turning to Corporate Investment Banking on Slide 14. Banking revenue increased 20% from a year ago with growth in investment banking fees and equity and debt capital markets as well as higher loan and interest-bearing deposit balances. Commercial real estate revenue declined 1% from a year ago as higher capital markets activity and loan balances were more than offset by the impact of lower interest rates. Markets revenue grew 24% from a year ago, driven by stronger performance in equities and higher revenue across most fixed income products, including the impact of balance sheet growth. As you know, we've been growing our balance sheet in the markets business, has increased $198 billion since the end of 2024 with approximately 60% in financing balances, 20% on the trading side and 20% for the lending we do in this business. We extend these balances declined as it can also bring us additional business in our early tracking shows that is what's occurring. We track this on a granular basis, and we'll continue to optimize with clients to drive growth and returns. Average loans in Corporate Investment Banking grew 26% from a year ago with growth across all businesses, while utilization rates were relatively stable.

On Slide 15, Wealth and Investment Management revenue increased 13% from a year ago, driven by growth in investment advisory fees from increased market valuations as well as higher net interest income due to lower deposit pricing and higher deposit loan balances. As a reminder, the majority of WIM advisory assets are priced at the beginning of the quarter, so third quarter results will reflect market valuations as of July 1, which were up from April 1 and from a year ago.

Turning to our 2026 outlook on Slide 17. We are maintaining our guidance of $50 billion, plus or minus of net interest income for the full year and similar to last, we expect stronger growth in the second half of the year compared to the first half. We still expect net interest income, excluding markets to be approximately $48 billion for the full year, looking at the key drivers, starting with loans. As I highlighted, average loans in the second quarter grew 12% from a year ago. So year-over-year average loan growth in the fourth quarter will likely be higher in the mid-single-digit increase we assumed in our outlook back in January. This is a positive versus our original expectation.

We have also successfully grown interest-bearing deposits, which is a good thing since these higher balances help us deepen relationships with our customers. And as I mentioned earlier, it gives us the opportunity to attract noninterest-bearing deposits in the future. We had originally assumed some growth in noninterest-bearing deposits, but we now expect them to be relatively stable, which is a negative versus our original expectations. Interest rates are currently not a significant factor in our outlook this year. While interest rates have been higher than we expected in our original outlook, which benefits NII, excluding markets, the rate cuts we had originally assumed were expected later in the year, so the change is only a modest impact on this year's net interest income expectations.

In terms of market NII, as we all know, it's always hard to forecast. Higher short-term rates typically result in lower markets NII, but as of now, we still expect markets NII to be approximately $2 billion in 2026. So putting this all together, while the drivers have moved around since our original outlook, which is always the case, our current outlook is still $50 billion, plus or minus, of NII for 2026. Regarding our expense outlook, we still expect 2026 noninterest expense to be approximately $55.7 billion. Expenses in the first half of the year were in line with our expectations. As we look at the second half of the year, we expect revenue-related expenses to be somewhat higher than we expected at the beginning of the year, but we expect expenses in other areas to be lower through our continued focus on efficiency initiatives.

In summary, we had strong second quarter results, and they clearly demonstrate that the strategy we have been implementing to drive growth is working. Revenue growth was broad-based with every one of our operating segments generating higher net interest income and noninterest income from a year ago. Our continued focus on improved efficiency drove positive operating leverage. The asset cap came off last year, and we had double-digit growth in both average loans and deposits from a year ago. Credit quality was strong with improved performance in both our commercial and consumer portfolios. We continue to return significant capital to shareholders while maintaining our strong capital position, as Charlie highlighted, we are seeing strong momentum in key business drivers in every one of our businesses, and the steady improvements in our returns continue to give us confidence in achieving our medium-term 17% to 18% return on tangible common equity target.

We will now take your questions.

[Operator Instructions] The first question comes from Ken Usdin of Autonomous Research.

And Mike, thanks for the color on the second half expected NIM trends. The two questions I have. One is just -- again to get to $50 billion, I think we need to assume that the average earning assets continue to grow at around this 3% pace. And given your comments about loan growth and the deposit growth, is that kind of what we need to put forward to get there? Any other things we need to think about in terms of mix within?

Yes, sure. I mean look, when you look at what's going to progress for the second half of the year, it's very similar to what we saw last year, right, in terms of the step-up as we went through each of the quarters. you do benefit from an extra day as you sort of go into the third quarter. So you sort of have to account for that. But we expect to see some growth in loans, securities, you get benefit of the fixed asset turnover given where rates are. And so I think it's all progressing. So it's not a bad assumption sort of relative to what to expect. But we still feel very good about getting to that $50 billion in total.

Got it. And then the second question is just on that NIM stabilizing in the fourth quarter, what are the pieces that kind of get there, meaning like is it that one piece slows relative to the growth rate? Is it just that you kind of lap some comps? What are the helpful things underneath that, that can give us the confidence that, that stabilization happens?

Yes, sure. And we've talked about this a little bit over -- look, throughout the quarter. But we don't expect to see the market balance sheet to grow at the same pace. And so the impact that we've seen over the last quarters moderates. And that's certainly part of the story as you get into the latter part of the year. And then I think you continue to get the benefit of all of what we just talked about in terms of the growth in earning assets, the repricing and then you sort of see the rest of the growth across the balance sheet. But at this point, as I said, we expect just a small decline potentially in the third quarter, hopefully, it ends up maybe even being better than that, and then we sort of stabilize from there.

The next question will come from John McDonald of Truist Securities.

Yes, I was wondering, Mike, on expenses and efficiency, what's the outlook? I mean you've done a great job with the outlook on headcount. So from here, are you still looking to keep that flat to down and just the broader commentary about the opportunity for efficiency improvement from here to keep going.

Yes, sure. I'll take a shot and start and Charlie can add if he wants. On the head count side, just more broadly on efficiency, we still come into the environment, thinking the same thing we've now done now for a number of years. Like we've got a lot of room to go to continue to make the place more efficient. And in part, that drives head count down. And so given the size of our business, the activity levels we've got, we expect that we should be able to run this company with less head count that we've got today. Certainly, technology and AI helps us get out aspect of that in a different way or faster than maybe in the past, but we expect that we'll continue to see more efficiency from here. And then just more broadly, it applies to just about everything we do. I know we keep talking about this over and over and over. But -- but as you peel back the onion, there's more opportunity to make things more automated to improve the client experience to make things more efficient in terms of how we serve clients every day. And I think there's a lot still to go. And we just come in every day and every week to sort of make sure that we continue to execute like we've done over the last few years.

Okay. And then maybe just a follow-up on Ken's line of questioning around the net interest income drivers. The change in noninterest bearing from what you saw -- what you were expecting earlier in the year, Mike. Is that related to any developments in your checking account growth? Or is it more attributable to rate-seeking behavior on customers and just the rate environment? What do you attribute the change in your NIM outlook too?

Yes. No, it's actually not related to the checking account growth. That's actually progressing quite well. And as Charlie mentioned, we're up we're up in sort of the checking account growth now for a number of quarters and months in a row. And so I think that's actually doing quite well. I think when you look at just the broader backdrop in terms of the rate environment, we expected a little bit more growth than we're seeing. We did see a little bit of growth from the first quarter in the second quarter, so that's good. But we expect it to be pretty stable from here. we are seeing really good success in growing interest-bearing deposits and growing other business with clients in the payment space in the treasury management space. So those things will bring noninterest-bearing deposits with them over time. It just takes a little bit longer for that stuff to get onboarded and to see the results there. But we're not seeing pricing pressure sort of client behavior drive any results.

The next question will come from Erika Najarian of UBS.

As we think about the trajectory of net interest income and net interest margin, I'm wondering if we could maybe just take a step back because Obviously, there is a lot of focus on this number. But I'm wondering if you could sort of separate sort of the structural factors versus the cyclical factors. So first, what are you expecting for deposit costs in the second half of the year? Is there a rate hike priced in? I think you removed the cuts, but Mike, I just want to make sure what you were -- I understood what you were assuming for the short end. So what should we expect from a deposit cost standpoint from here. And additionally, you have two strategies that are sort of competing factors on the NIM. One is this great growth in markets, which is obviously NIM dilutive and also strong momentum in card, which, in theory, could be NIM accretive, especially once the accounts mature. So as we think of all of those factors, how should we think about whether or not we should expect more secular pressure on the NIM beyond the macro factors with rates and deposit costs in the second half of the year?

Yes. Okay. Erika, there's a lot in there. So I'll try to get it. If I miss a piece, please point me in the right direction. So I think when you look at what's happening across NIM. Obviously, what we've got baked into the second half of the year is the market is pricing in a little over 1 increase at this point. And so I think we'll see how that actually plays out. But that will have very little impact on the full year results, just given the timing of it, depending on when that happens. And so I think that's not like a huge driver one way or the other. I think what's happening in our deposit book, though, is that we're seeing the pace of interest-bearing deposits grow at a really good clip. And you can see that in the results quarter after quarter. And I think even if you just look at the CIB and the corporate investment bank and the commercial bank deposits, where you've seen really good deposit growth year-on-year and sequentially. And the majority of the deposits are going to be interest-bearing deposits. And so since they're growing faster and you're seeing slower growth in the consumer side and pretty stable noninterest-bearing deposits, you're going to see the deposit cost inch up a little bit. And that's actually fine and expected and frankly, not a bad thing because we're growing sort of these profitable balances across the businesses. So I would expect the deposit cost to just move up a little bit as you go in the second half of the year. But ultimately, I think that's actually a good thing from a probability point of view and support sort of the broader set of business that we do with those customers.

And then as I sort of mentioned in the commentary, we expect a little bit more NIM compression in the third quarter, things -- then it starts to stabilize and you get the benefit of all of the other impacts of that we sort of talked about in terms of the earning asset growth, the repricing that's happening across a large portion of the book of securities book. And so -- and all of that, I think, contributes quite well. And I think just keep in mind, as we sort of look at NII where we're most focused on here is really growing NII over a long period of time that will generate really profitable business and relationships that I think will see benefit us for many years to come. And you may see a little bit of volatility in the NIM number that you've seen over the last few quarters. And that's to be expected just given where we came from last year with the asset cap coming off and the pace of growth that you've seen since then.

Let me just add, Erika, this is Charlie, if I can, a couple of things. Number one is, I think the way we think about this is kind of separate out our balance sheet and what you're seeing into a couple of different components. One is just kind of the like the business that we have, which generates the majority of NII, that is very stable. And then we have these businesses that we're looking to grow both in the markets business, but also ultimately expanding relationships and treasury management on the consumer side. And there, as we talked about, you're seeing growth in interest-bearing liabilities. And so it's those additional businesses that have narrower margin NIM that is, that's bringing down the NIM. But we're looking at it in terms of what it means in the shorter term for profit growth and for returns. And we feel good about that at this point. But more importantly, over time, that should also help us grow NIM as we attract more noninterest-bearing over a period of time.

And away from NIM, we generate stronger trading revenues. And so that is the flywheel effect of that financing that we're providing. And as I've said, if we don't see that, then we can certainly pull back on some of that activity and improve the NIM. But as we said in our prepared remarks, we are seeing the payoff certainly on the market side at this point, even though it's early. But that's a decision point that we have to make, and we'll be very conscious of what the impact is both on NIM, but also on this balance between what you see in terms of NIM profit growth but returns.

Yes. Hear you loud and clear, Charlie. I think that's why I wanted to frame it in terms of structural and growth. And to that end, the second question is just the opportunity set in your areas of where you're focusing growth. So maybe talk a little bit about the investment banking pipeline but also in terms of the equities opportunity. So we're hearing that a lot of your peers are a little bit more limited in terms of prime equity financing capacity given the hyperscaler trade in Asia. Of course, you're not quite big globally yet. And you did mention it in your prepared remarks in terms of financing-related activity, maybe describe a little bit more the prime financing opportunity that lies ahead, especially if the sort of traditional counterparties have more limited capacity because of activities outside of the U.S.

Yes, it's Mike. Erika, I'll start and start on both parts of it. So on the investment banking pipeline, the pipeline is quite strong. And I think we see that now very consistently for a while now. And I think the environment is very supportive of deals. The markets are wide open, both on the equity side and sort of the debt side. And I think the art of the possible in the M&A space is quite alive, right? And I think there's a lot of active dialogue there. And I think you can see our investment banking business had a really good quarter. And I think that all the investments that we've made over the last 3 or 4 years have positioned us to take advantage more than we would have -- take advantage of this environment more than we would have been able to 3, 4, 5 years ago by a lot. And I think we're continuing to make more investments in targeted areas across different coverage sectors and in some of the product areas. And so we feel good about the trajectory there, and we'll see how it progresses.

And just on the broader question, I would just say, listen, I think what we've said in the past still holds true, which is that there's a lot of great competition out there. There are people that are very, very large in some of these businesses, including Prime, but what we have found is that they want more options. They want more counterparties. We have relationships with the broad set of these customers, and they generally like doing business with us and so they want to do more. And so for us, it's a question of just pacing that addition in terms of the amount of business that we do properly. We're still very, very early in terms of growing out our prime business. So but there's nothing really material in this current quarter relative to that, but it's an opportunity that we're going to be careful about. But that, along with other trading flow opportunities that we have and the investment banking opportunities that we've talked about, we still think are incredibly significant for us.

And the next question will come from Ebrahim Poonawala of Bank of America.

So not to beat the dead horse on the margin, and I like the stock obviously sold off when you started talking about your margin outlook understand you're running the bank on one day stock reaction. But maybe I think just a bigger picture question, if we take a step back, and I appreciate, Mike, your comments around the trajectory of the NII, which I think is more important than what the NIM does any given quarter. But as we look forward beyond even this year, do you think the net interest margin, given your balance sheet and the business strategy on the -- going forward, is at a point where the margin should begin to stabilize post the 3Q compression you talked about? And one of the pushbacks this morning has been like the markets revenue growth, predominantly NII driven. So I guess the speed is struggling to see the cross-sell of deploying that market's balance sheet into lower NIM and then that translating into better fee growth on the market side. So maybe help us understand that from a market standpoint? And then how should we think about just normalized NIM for your balance sheet or business strategy?

Sure. I think on the NIM side, as I said earlier on the call, we do expect it to stabilize after you get through the third quarter. And so that's definitely the case. And as Charlie mentioned, there's over a slightly longer time period, like there's opportunity to expand the NIM, not just stabilize. And so I think that's certainly what we expect as we sort of look at the rest of the year. I think when you start looking at the overall trading business there, you certainly see some growth in NII, but it's not all because of the rate move that we saw. You get paid in some of these trading businesses through NII, you think mortgages -- mortgage trading and other areas of that business. And so you do really need to look at overall sort of revenue in the markets business.

And when you look at the financing -- and I'll break it down a little bit for you. You look at the financing side of the business, that's up -- it's not quite a double, but it's pretty close when you sort of look at the year-on-year performance in the overall financing revenue within the business. And then you saw roughly a 20-plus percent increase in sort of the trading-related revenue off the back of that. And so I think we've seen quite a bit of growth across these parts of the business within trading. And then more importantly, when you start looking at the individual clients where we're deploying some of this incremental financing balance sheet to every single one of them, all but a couple have done significantly more business with us than they did just a year ago. And that's just getting started in terms of ramping up some of the volumes. And so I think you'll continue to see that across the markets business, I think, for -- into the coming quarters. But we feel really good about what we're seeing and the trend that we're seeing there.

Let me just add one thing, slightly different words, but kind of reinforcing a point that I made earlier, which is what we're seeing in NIM is not happening to us. What we're seeing in NIM is because things that we're doing. And those are things that we don't have to continue to do or we can unwind at some point as well. And again, the reason why we're doing it is because we believe that it will lead to stronger NIM in some of these businesses in the future by attracting more noninterest-bearing deposits or by attracting additional trading. And that's either going to drive the kind of profit growth and higher returns that we believe we can deliver or that's a decision point that we can make. And so we understand that it's hard to see that as clearly from the outside. So we've got to do a good job of doing her best to show you how that's actually playing itself out.

But as Mike said, when it comes to the financing as an example, we look client by client, and we're providing more financing. We're getting more share, higher trading revenues. And so that's what I said on the last call, we're either going to get paid for it. We're not going to do it. And that very much holds true. And so the fact that like that is in our control is something I think that's critically important and is a tool for us to help grow the returns and the profit of the company or we can either slow things down or reverse course if we had to, but nothing suggests that we should do that because we believe that we're getting the payoff for it, and we'll have to show that to you.

So I think that's a great point, Charlie, that the NIM is due to the deliberate actions you're taking. And I think the one point of discussion that's come up repeatedly with investors over the last month or 2 is no one doubts when they think about can well achieve a higher end of your 17% to 18%, so let's call it 18% growth over the next few years. I think as the street is trying to digest what the execution around this growth strategy may imply. I think the timing of that has become a bit more uncertain, I would say, over the last 6 months. And -- and so to the extent you can address that, like just through your crystal ball, like how do you think about when you could achieve that target, maybe towards that 18%, which also -- if I recall, you've talked about as a way point, and we could go even higher than 18%. Maybe if you can provide some color around the timing of how you think about it? I think that would be very helpful to our shareholders.

Sure. And listen, I know it's a very busy day, and you guys are trying to do lots of different companies. I did talk a little bit about this in my prepared remarks where I talked about the fact that I know that people ask about timing it's difficult to answer because what I don't want to do -- what we don't want to do as a company is give you a definitive date and then have the interest rate environment changes, the markets environment change, credit change and then you believe that we haven't actually delivered on something because the fact is we are subject to those things. But assuming that the markets continue to behave and that conditions continue to be favorable. What I said is that we would expect it to achieve in a reasonable time frame.

And the one other thing I would say, which is as him goes on and from last quarter's underlying performance in our business trends in this quarter, we feel even more confident about being able to deliver it. and what I said in my prepared remarks is that our intention is to get there and then raise the bar higher for future. So we didn't have the kind of confidence that we can get there in a reasonable period of time, we wouldn't be saying that. And again, what gives us that confidence is, looking at the underlying business drivers that we tried to lay out in the first 2 pages of the presentation, because it's those things which are going to drive the continued growth of the franchise, regardless to some extent of outsized performance in the markets. So I know it's not giving you a definitive time frame. But -- but I think what's important to read is our confidence is higher, not lower as each quarter goes by.

The next question will come from Manan Gosalia of Morgan Stanley.

I wanted to dig in a little bit on loan growth. Clearly, very strong this quarter. You noted upside to the original loan growth guide for the full year. Can you just walk us through some of the drivers on what you're seeing now? How much of the commercial loan growth flex high utilization versus new customer activity, and I guess, your willingness and ability to lead more on the auto side going forward?

Sure. I'll start maybe on the consumer side, and then I'll bring it back on the commercial side. So on the consumer side, we continue to see really good growth in auto. We see steady growth in card. And the home lending business is pretty stable at this point. And I think those trends like we would expect to continue as you sort of look at the rest of the rest of the year. And so steady as you go in terms of what we've been seeing quarter-to-quarter there. I think on the commercial loan side, it's really not utilization. We see a little bit in pockets of like slightly more utilization here or there, but it's really not substantially higher utilization of revolvers. It is new business we've been bringing on that drives a lot of it in the C&I space. And I think we'll see how the rest of the year progresses.

As I mentioned in the script, we certainly have seen higher loan growth than what we had assumed at the beginning of the year, and that's a positive. We'll have to see how the rest of the year goes. I think you definitely see tariff refund coming through, impacting some commercial bank clients in terms of the utilization, and you see a bunch of other factors there. But I think it's been good so far, and we'll see how it progresses for the rest of the year. And importantly, with that, we're not -- we're seeing really good performance from a credit perspective across really all of the portfolios. And I think that supports continued sort of execution across each of the businesses and growing those portfolios.

Got it. And then maybe on the capital side, $3 billion of buybacks this quarter, a little bit below the recent pace. How should we think about where you want to manage to in your CET1 target range? And how should we think about repurchases going forward here?

Sure. I mean we're really comfortable in the range that we put out there of 10% to 10.5% anywhere in that range, we're comfortable with. And we'll -- we approach buybacks the same way we do every quarter. We look at what we expect to do from a client perspective and what growth we expect to see across the portfolios and the business, we think about all the different risks that are out there, including the rate environment and the volatility that may be there and how that impacts capital, -- and then we'll make decisions on how much we will buy back each quarter. And so we'll sort of keep that progression as we go this quarter, and we'll see where we get to. But we certainly as we mentioned, we bought back $7 billion in the first half of the year, and I think we still have capacity to buy back more as we go. We'll make the decision as we go on the quarter.

And also keep in mind, Mike's talking about this absent the finalization of the capital rules. And as we've said in the past, the capital rules might not necessarily change that CET1 minimum plus buffers, but it could certainly change what goes into the calculation relative to freeing up capital through the RWA calculation for us.

And just as a reminder, we still expect our RWA to go down as a result of at least what was proposed by about 7%. So we'll see how it gets finalized.

Got it. And if I can ask a quick clarification on that. So you would need to see the rules being finalized before you act on that lower CET1 ratio. Sorry, on the higher capital -- on the ability for the new capital rules to give you more CET1, you would only act on that in terms of buybacks or capital deployment once the rule gets finalized.

Yes, I think we need to see the rule get finalized, but that will get done pretty quickly.

The next question will come from Matt O'Connor of Deutsche Bank.

Just a quick comment before my question here. As your markets business has gotten bigger, I know you give us the pieces that you could probably calculate it, but [indiscernible] and then ex markets, I think, might be helpful. And cut a handful of these questions related to it. My question is, the new credit card accounts, as you pointed out, of sharply post lifting of the asset cap. I think it's up 50% to 60% now in the 4 quarters. Anyway to estimate how much of a drag there is from those new cards and related promotions as we think about the credit card yield? And then when does that inflect as that backlog kind of starts overwhelming the new accounts?

Yes. So as Charlie sort of mentioned in his script, like we've made some intentional decisions to see the growth continue to execute on growing those accounts. And I think, the good part about what we've seen now for the last almost 4 quarters, I guess, started really in the third quarter of last year is a lot of that -- a lot of those new accounts are actually come through either our branch network or people coming directly to wellsfargo.com. And so the acquisition costs there are lower than if you're doing them through third-party affiliates and others. And so that's a really good thing. And with that comes really high-quality accounts. We know these customers. The majority of it is still existing customers that are coming to us for these cards. And so I think that's a good thing. And I think as those vintages are a little bit bigger than the early vintages. And so -- but overall, we continue to make -- we'll continue to make those decisions as we go quarter-to-quarter and decide sort of what we're seeing and how happy we are with the quality of it. And I think -- but despite that, I think over the next couple of years, you will see the profitability of that business just continue to increase and the returns increase in the business, and that's the way we've been sort of managing it.

And then the yield quarter-to-quarter in terms of what you see from the credit card deal, that will move around a little bit depending on sort of what we see from the new acquisitions. But over a longer period of time, you'll see that continue to increase as those as those vintages mature and you transition from the intro APRs or the balance transfer APRs into sort of revolving balances. And that will happen over the next couple of years.

The next question will come from John Pancari of Evercore ISI.

I just want to see if you can comment a bit more just around deposit price competition that you're seeing? How is it trending versus your expectations? And then related to that, I know you did comment on the growth expectation on the loan front on the mid-single-digit side. Do you still have confidence around a mid-single-digit pace growth as you look at your deposit strategy?

Yes. And the short answer on the second part is yes, on the deposits. And again, a little more weighted to interest-bearing than noninterest-bearing, as I mentioned, John, but we're seeing week-to-week, month-to-month sort of the growth that we expect there. So I think that's good. On the pricing competition question, it really hasn't changed over the last few quarters. On the consumer side, our standard rates haven't moved. We're not seeing shifts in behavior than what we've seen over the last few quarters there in terms of people yield-seeking in any way. So I think that's good.

And then on the commercial side, rates are always competitive, but we've not seen rates get more competitive than what we would have expected normally across those businesses, and we're really careful to not overpay to attract balances. And so I think we're not seeing that kind of pressure. And there's always an example of something to the contrary to what I said. But I think when you look at the vast majority of the activity we're seeing, it's all very much right in the fairway of what we would have expected to see.

Okay. And then separately on expenses. I appreciate the color you already gave around the efficiency everything. Can you maybe just give us a little update around the risk and rate area of the cost base. I know there's still a fair out of head count dedicated to that area. Is this broader area now that a lot of the regulatory issues have been worked through becoming a greater expense lever for you?

Yes, certainly. And I think we talked about that over the last couple of years, right, as we completed the work and moved past the consent orders that we have in place, you'll see us continue to make that those processes that we put in place more efficient. And if you think about where we started this journey 5 or 6, 7 years ago now, I think there's better technology, there's better ways to do things. And so the normal streamlining that sort of happens is happening. And -- but that will be a very methodical sort of approach and see that happen over time. But it's certainly part of some of the efficiency that you're seeing come through in the last couple of quarters.

The next question will come from Chris McGratty of Keefe, Bruyette and Woods.

Great. Just one on credit. It's been -- the question has been fairly limited on conference calls this quarter and throughout the quarter. Just, I guess, a check in on consumer health to consumer anything incremental you may be seeing? And then conversely on the commercial borrower demand for credit we talked about, but just any signs within the commercial book of weakening or normalization?

Yes. On the consumer side, it really is good. The delinquency trends are better than we modeled most months, really every month that we've seen now for all year across each of the portfolios. We're not seeing sign any -- we're not seeing any cohorts of clients, whether you break it by FICO or other ways to look at higher or lower income levels. We're not seeing any of the trends in any of the cohorts change really at all, certainly not anything meaningful. And so I think it's supportive of a good second half of the year when you think about sort of delinquencies and charge-offs. And so I think that's really good. And that's supported by the strong employment picture that we see more broadly, and we've seen good wage growth to counteract some of the inflationary issues that we've had. And so overall, you're seeing really good performance on the consumer side.

On the commercial side, same. Really, there's no systemic issues that we're seeing come through the portfolio. There's always individual idiosyncratic issues you might see with an individual borrower. But overall, we're seeing really good credit performance. I think people are still being very cautious about big investments. They still have more liquidity in most cases than they did maybe historically pre-COVID days. you're not seeing people make big investments in terms of hiring lots of people, but you're also not seeing people fire a lot of people, at least in -- from what we can tell in our book. And so I think overall, I think people are managing their liquidity and managing their overall balance sheets quite well on the commercial side. And so again, we have not seen anything that would suggest there's a change to that at this point.

The next question will come from David Chiaverini with Jefferies.

So you mentioned about the markets business asset growth should slow in the second half. Is that a function of this business getting to your comfort level? And then from there, the market's business asset growth should be in line with overall balance sheet growth?

No. It's not necessarily that. I think when you think about what happened pre asset cap, we really had to constrain that business. And so the financing balances that we added starting in the second half of June last year, was at a pace that is just not sustainable forever. And so it really was the reemergence and the reentry, I guess, in some cases, into sort of the financing activity that we had just more broadly across that business. And so you'll see it just start to more -- get to kind of more of a natural growth rate over the next couple of quarters. And then we'll see, and then we'll decide how fast it goes from there based on the opportunity set is there. But -- but it really -- the pace you saw was really a reflection of us coming out of the asset cap and being able to deploy balance sheet at a pace that was just rent than normal.

And just as a reminder, because we haven't mentioned this in a while that when we had to live with the asset cap, we reduced the balance sheet in markets more significantly than any other place in the company because we didn't want to limit things like consumer loans, consumer deposits and things like that. And so a lot of what we're seeing is just kind of a return of the balance sheet that they had originally had, and we'll have a normal pace of growth going forward.

And as I mentioned in my commentary, we're up about 200 -- $200 billion since the end of 2024. So that's a good clip, I think, over the last 18 months.

Got it. That's helpful. And then shifting over, I was curious about adviser hiring. Can you talk about the competitiveness and the pipeline you're seeing there?

Yes. I mean adviser, getting really good advisers and teams of advisers has always been competitive, and I think continues to be competitive. We're very disciplined about our approach to that. We don't overpay. We have not changed our deal to recruit advisers in a while and don't plan to. So we may miss out on some teams if that's the case. So what we try to make sure that we're providing us the right platform with the right capabilities to attract these advisers, and I think that's really resonated.

And if you look at the last 3 quarters, we've had close to, if not record recruiting in terms of the amount of business they bring. So think about it as like revenue that's coming on to the platform over the last 3 quarters -- each quarter for the last 3 quarters. And so it's been quite good to see those advisers. And yes, attrition is a record low for us in terms of attrition that we're seeing across the adviser space. And what's good about the types of advisers we're attracting is they bring really good investment business they also bring the need for banking, which is both deposits and lending, which I think really rounds out the profitability of the business that's coming on the platform, which helps improve the margin of that business over a longer period of time. And so the team has done a really nice job attracting the right types of advisers and the pipeline that we've got is quite good in terms of looking at the rest of the year.

The next question will come from Vivek Juneja of JPMorgan.

Can you hear me?

Yes, we can. Yes.

Charlie, Mike, sorry, just stepping back on NII. We're stepping away even just from them. both you and Mike said at conferences in the second quarter, you were very confident about the $50 billion NII. And today, you've gone to $50 billion plus or minus seems like a little bit of a shift. Any color on what's driving that? Is that a shift? What's driving that little shift?

No shift at all. The $50 billion, plus or minus, is exactly what we said in January and exactly what we said in the end of the first quarter. And what I said at Morgan Stanley, the conference and others. And so I think no shift at all, and we're very confident.

No intention to shift anything. Our guidance is the same, and we feel confident about it.

Okay. Good. That was an important clarification. Commercial loans, your period end growth slowed a little bit. Any color on what's driving that? Do you expect that to pick up again? And then what would be the driver of that anything that can...

Yes. Look -- look, the period-end number is driven by lots of factors, Vivek. You had some seasonality through the quarter. You saw some tariff-related refund-related paydowns. But there's nothing that I would highlight as sort of a change in overall sentiment that is impacting the clients. And as I said earlier, I think on the consumer side, you're going to -- we expect to see more growth in auto and in card, I think you'll see home lending be stable. And then I think you'll see some growth in commercial portfolios in the second half of the year.

And the last question for today will come from Gerard Cassidy with RBC Capital Markets.

Can you guys share with us on credit. Obviously, your credit quality is very strong. The industry is experiencing really good credit in this period. Are you seeing any signs of risk taken by your competitors in terms of underwriting in the commercial loan area or it could be in consumer. And if not, what are you looking for as we go forward for some aggressive underwriting that could lead to issues in the next credit cycle?

Yes. Let me take a stab at it. And Mike, you can either agree, correct me or not, I think on the consumer side, we would say not really. What we see is kind of consistent underwriting versus the people that we compete with. Everyone kind of comes and goes sometimes and times are good, but not a lot on the consumer side. I think on the wholesale side, it is a very, very different story. And that's where you see the deployment of significant amounts of capital, not just from banks, from nonbanks, and there is a wide range of risk that people are taking in the lending activities. I kind of try to allude to this in my remarks. We are staying true to who we are in terms of what our risk tolerances are in the context of a growing franchise.

But when you look at whether it's things in data centers, some of the strategic transactions that are being done out there. There is -- there are more risk assets being created on the wholesale side. And there's a lot of capital out there that's there to support that. And we're doing the pieces of the transactions that we're comfortable with that have the credit profile that were used to underwriting, and there are others that are willing to take more risk than we are.

And just as a quick follow-up to that answer, Charlie, on the consumer, is there any way you guys measure or can capture the nonbank consumer lenders. And I know that there's not primarily your customer because they tend to be a higher risk customer. But is there any way of making sure that there's another second derivative effect on your better quality consumer customers?

Well, I mean, I'm not sure -- I make sure I'm following this. I think when it comes to the consumer credit that we're extending, we're making our own credit decision with every single loan based upon everything that we know including looking at bureau information and things that they might have away from us to the extent we can see it. And so that's wholly within our control, and we understand that. We do see some of the activities in the nonbank universe through what we do on the wholesale side in terms of who we finance. We've talked about this last quarter. It's good information to have, but we're also selective about who we're lending to and -- because not everyone in that space has the same risk tolerances.

Understood. And then just as a last final -- final question. I know this is probably hard to answer. AI has been just so powerful to the U.S. economy in terms of capital expenditures. You mentioned data centers, of course. Is there any way of getting your arms around of second derivative exposures to the AI industry for Wells? So that -- I think you or many of your peers have direct data center construction loans. But I'm just wondering that if this when this boom slows down, is there some fallout that we could see potentially down the road on the second derivative of the suppliers or other folks that it's not as clear maybe today that they have that kind of exposure in their business models?

Yes. I mean, listen, I think when you look at the exposures that are being created to help finance the build-out. I mean you're absolutely right. There are different types of things that are being financed, right? There's core and shell, there's power, there are chips and there are whole series of things that go into the data center. And we underwrite those different pieces of those financings very differently because we rely on different types of different types of credit support for those to be paid off. And it's very, very different lending to a chip maker that has 80% margins where we get paid back in 1.5 years versus lending to someone else in the supply chain who it's going to take 15 years to get paid back or 10 years to get paid back and hope that the LLM provider who's renting that space is going to be there. And so there are -- and so that is the complication that everyone is working through in terms of who we lend to. And that's when I say that there are different kinds of risks that are being created here. And we're working to stay within the lane of the risks that we understand. We're confident not just that we understand it, we'll obviously get paid back and different people have different risk tolerances. And that's always been the case.

All right. Thanks, everyone. We appreciate the time.

All right. Up next, we have Wells Fargo. I'm delighted to have with us today Mike Santomassimo, Wells Fargo's Chief Financial Officer. Mike, thanks so much for joining us.

Yes. Thanks for having me.

All right. Mike, let's get right into it. Wells is a broad view into the economy across consumers and corporates. As you look across the businesses today, what are you seeing in the environment? And where have the biggest changes in client behavior been over the past few months?

Yes. Thanks. And my guess is you're going to hear a lot of the same from a lot of people today. But when you look at it, you're not seeing a lot of change in behavior over the last few quarters. And people probably are maybe over using this word resilient, but it's been very stable, very resilient, very good activity levels across really all of the businesses, which is really good to see.

On the consumer side, people continue to spend in May across our debit and credit card spend, it was up 9% year-on-year. That includes the impact of gas being higher across that portfolio. That's a little under $1 billion of incremental spend sitting in there. So consumers are spending probably 45%, 50% more on gas than they were more than a couple of months ago, but that's all sort of within there. But we're not seeing any real changes in the other aggregate categories of any substance. The employment picture across the country is still quite good. We're certainly seeing a little bit of strength now in the last couple of readings maybe start to reemerge there. And that's translating into really good credit performance across all the portfolios.

So it's a little bit better than we model each month, not a little bit worse. And so that -- and that's been a continuing trend now for a while. On the commercial side, there's been lots of caution still there, I think, across the commercial banking client base. People are still a little hesitant to make a big investment or overextend themselves too much on building inventory. I think they want to see sort of what happens with the overall environment. So that -- again, that may -- that translates into good credit performance across the board. And so I think overall, like the picture is still quite good. And I think even as you look at rising debt levels, income is keeping up. And so the ability to pay and kind of the debt-to-income ratio is actually in quite good shape when you look across most clients and then obviously, you have a little bit of dispersion between lower income, higher income folks. I think lower income, definitely struggling a bit more, living a little more paycheck-to-paycheck. But if you've got any investments or other liquidity, I think you're doing quite well relative to the history.

So let's dig into the business and let's stop there with the consumer and consumer banking and lending. You've talked about rebuilding the growth engine in the consumer bank after several years of being under the asset cap. As you look across the franchise today, where do you think the biggest opportunity still exists and what actions do you think you need to take to get there?

Yes. Look, I think there's opportunity really across all of the core things we do through the branch system or through the consumer bank. And you look at our checking account growth, which is something that's lagged in the past. And so we reintroduced all of our incentives plans over the last couple of years. We're starting to see that take effect across the branches, but we still have a ways to go to get to kind of full productivity there.

So I think that's going to be a big opportunity as that continues to ramp. I think if you look at net checking account growth now, we're up almost every quarter year-on-year for the last 11 or 12 quarters. And so I think that is continuing to sort of get the pace and start to become much more meaningful, I think, than it was. I think you're seeing good growth in our credit card sales through the branches as well. We saw an uptick in the middle of last year through the branch system that has kind of sustained itself. We have a little bit of variability quarter-to-quarter, but that productivity out of the branch system is quite good and great to see come through. And then we have the opportunity to provide wealth management services to the affluent client base and that gets serviced out of the branches as well.

We call that Wells Fargo Premier. So it's combining banking and wealth management together. We combine that into the consumer segment in the beginning of this year or in the first quarter. And so I think you're going to see really good growth from those investment assets coming on to the platform as well. And if we can do a good job on the wealth side, that usually brings more deposits and lending business into the picture for those clients as well. And so we're really excited about really across the board that opportunity. And we're seeing that pick up as we go over the last few quarters or a year. But we have a long way to go, I think, to get to kind of full productivity across the branches. And so that should provide some good growth for a long period of time.

Great. So hope I thought on wealth because I do want to dig in there, but maybe to round out the conversation on the lending side. On credit card, you've noted that earlier vintages from the new products launched in 2021 are beginning to mature and contribute more to the profitability of the business. Can you talk about how the earnings profile of the card business evolves over the next few years as these vintages season?

Yes, sure. We're really happy with the progress that business is making. So just as some of you may remember, it was almost a complete rebuild in terms of the product set. So we've launched 13 products over the last number of years, every go-to-market card is a new card that we launched in the last 5 years. And so we've seen really good progress now as I go, we probably have a couple more to come over the next year or so, and so we'll see how those get rolled out. But if you look at the earliest vintages, you're really starting in 2022.

We had a little bit of the first active cash card got rolled out in the latter part of '21. So 2022 is sort of like your first real vintage. So the '22, '23, '24 vintages are all profitable this year and '24 has got a little more maturing to do over the next year or 2, but we're seeing really good profitability. It's right on top of the business case and the modeling that we've done. And then the credit performance there, as I mentioned earlier, is actually better than what we would model not worse. And it's still -- those vintages are like 60% new clients -- 60% existing clients, 40% new clients to the bank and so really good progression. And then you've got the '25 and '26 vintages, which are a little bit bigger. As I mentioned, we've seen really good uptake in sort of originations. I think originations were up 20-plus percent last year. We expect more growth this year. So those will mature over the next couple of years. And so we're transitioning from the acquisition of these new vintages being a drag on profitability to contributing positively to profitability this year, and that will start to build as we go over the next couple of years. And so progressing exactly as we would have thought and generating good returns.

On average, how long does it take these vintages to fully mature?

Two to 3 years and some of the earlier vintages maybe a little bit faster, but 2 to 3 years is sort of what the average is.

Got it. All right. And let's talk about auto lending. You're becoming somewhat a full-spectrum lender again on the auto lending side. What does that mean in practice? How far down the credit spectrum are you comfortable going at this stage?

Yes. Yes. Look, it's full in quote, right? So it's -- we're not trying to be a lender to every part of the credit spectrum within the auto business. We spent a couple of years kind of reworking some of the servicing, the credit underwriting and the modeling that we do in that business. And so you've sort of -- you saw us reenter that sort of earlier last year, and we've seen some really good growth now over the last year plus.

Part of it is also the partnership that we signed up with VW and Audi in the U.S., and that's contributing quite nicely to it as well. But when you look at the portfolio, the primary focus is still on prime customers. 70% of the book is 700-plus FICO. 80% is 660-plus FICO. And so in terms of the new originations. And so I think you're still -- still the primary focus is there. And we're seeing that marginal return -- the return of that marginal new customer be exactly kind of where we thought it would be as we look forward. And at the same time, we're investing in all of the dealer services that we provide to sort of the big dealer networks to make sure that we're getting the right mix of businesses. And so -- so I'd say it's -- we're expanding a little bit in that business, but certainly not trying to go too deep down into the credit spectrum.

Got it. All right. Let's talk about wealth. Wealth Management has quietly become one of the stronger momentum stories within the company. You just spoke about initiatives like Wells Premier. What do you think has changed most meaningfully inside that franchise over the last 18 months or so?

Yes, it's really been a progression now for a number of years as we've been investing in the people, the technology, the products across that business. And if you think about, we've got really 3 primary channels that we go to market. One is what I referred to earlier, which is that Wells Fargo Premier, which is going after the opportunity that's for the client service out of the branch system. We've got roughly 2,500 advisers in the branches already across the network and you're starting to see those flows really start to ramp. And as I mentioned, that will bring much more deposits and lending business with it as we do a better and better job there.

We've got the kind of core adviser, financial adviser channel that others have as well. And I think there, the focus has been on really 3 or 4 things. One is if you go back 6, 7 years ago, we had a lot of attrition there. That's all stemmed. We've got really low attrition there. And we've really been able to recruit some very significant teams and a whole bunch of great advisers into that channel over the last few years. And when you recruit the right advisers, you're not only bringing like the investment assets, you're bringing lending, you're bringing banking, you're bringing alternative. And so you're bringing a whole bunch of the things that drive profitability in that channel. And I think that's what we're really excited about as you see those teams come on and sort of ramp up. We've also been investing in technology there. We just finished the rollout of a completely modern sort of adviser workstation across all the whole footprint that we've got. And we've been investing in sort of the banking lending products. We still have a lot of opportunity to get better penetration in the lending side of that business, no matter how you want to measure that. There's a lot of opportunity to do more there across the client base. And then really the last channel there is the independent advisers.

As many as you know, but that's the fastest-growing channel in the wealth management business here in the U.S. We're the only of our normal peer -- general peer set that big bank peer set that can service those independent advisers. And we're really starting to see the recruiting from not only the traditional wire houses, but also some of the independent providers come onto that platform this year. And so we're excited about the growth there. So hopefully, you'll see more growth come through this year.

All right. Perfect. Maybe on the business side, let's round out the discussion with -- on the corporate and commercial side. You've described a dynamic where your financing balances and you expect some of the broader wallet share to follow over time. Can you talk about where you're starting to see that broader wallet share capture come through?

Yes. And if you look at like the markets business, trading business, if you look at it relative to where we ended 2024, which is really after that point is we're really, really started to see some of the growth in the balance sheet come through. The balance sheet is up roughly $180 billion since then. -- call it, 60% of it is in financing balances, roughly.

Roughly 20% of it is in kind of the trading side and another 20% in sort of the lending that we do out of that business. And so you're seeing sort of really good progression. And on the financing side, the biggest piece of that are things like treasury repo and other repo that we do to provide the financing that many of these clients need and as you can imagine, there's -- the bigger clients drive, call it, the top 25 or 50 clients sort of drive a big portion of sort of those financing balances. And what we're seeing there is financing revenues up, returns are good in that business. But we're also seeing the trading side of it also increased quite a bit, right? So if you look at the first quarter as an example, versus a year ago, so first quarter '26 versus first quarter '25. Equity and fixed income revenues are up 15% or 20%, respectively.

Total Markets revenue is up 21% and you're seeing sort of that business come through as we sort of grew the overall balance sheet. And as our CEO said a couple of weeks ago, we expect to have a good quarter this quarter with kind of mid-teens growth in the markets business year-over-year as well. And so we're seeing sort of that benefit. And if you go client by client and you look at the top 10 clients, 9 out of the top 10 are doing a lot more with us, one isn't. And so we'll have a -- we'll figure out if we're going to keep providing those balances to that client or not, right? And so that's part of the natural progression that you'll have with these businesses.

Most of it will play out the way you thought, and you'll make decisions to sort of reallocate balance sheet as you go. But the financing business we're doing is very high quality, low risk, high return driving that other behavior that we want to see across that -- those client bases across all the other businesses that we have in market. So we feel really good about the progression. And we're still in the early phases of seeing some of the business come on as you have to ramp up with those clients over time.

So low risk, high return, clear momentum and lots more to come.

Right.

All right. Perfect. Okay. So then on the investment banking side, you've hired roughly, I think, 100 senior investment bankers over the last several years. You're seeing those market share gains come through as well. Where are the biggest opportunities across the franchise today think about advisory, ECM, leverage finance, sponsor coverage, I guess, where should investors most focus?

Yes. Look, we're really pleased with the quality of people we're getting. We're really pleased that we're getting them from really everywhere across the street, boutiques, big investment banks, and so people are attracted to the platform. I think when you look at it, not just only by product, you also look at it by sort of the client base as we cover, we have a big opportunity to continue to do better in our -- covering our commercial banking clients. They generate somewhere between $2 billion and $4 billion a year, and we're continuing to see that in investment banking fees. And we're continuing to see that market share increase each year, but still more to do there.

When you look at it by product, certainly the equity capital markets and advisory side are places that we know we can do better. We have a strong debt capital markets business, but still across both investment-grade and leveraged finance as we do better on the advisory side, we'll also do better on the acquisition finance side. So there should be opportunity really across the product set. But we're really excited about what we can do in the commercial banking client base. You'll definitely see some more activity across large corporates and some sponsor activity, but it should be spread across the products. But I think you'll as I said, I think the advisory and the equity capital markets side should be those places that you see more opportunity over time.

And anything else on the commercial banking side and where you're seeing strong traction there? Anything else you need to do there?

Yes. I mean, look, I think we've got great national share in the commercial bank, but there are a lot of markets across the U.S. where we don't have that same share. And so we prioritized about 20 markets right now. Some of them are big markets like New York and Chicago and other places. Some of them are smaller across the country, but all places that have significant wealth and significant business creation. We've added a couple of hundred bankers across the last couple of years to go after that opportunity. If you look at the new client acquisition results that we've seen now for a number of quarters, they're up 20%, 30%, 40% over year-on-year in terms -- depending on when you look at it. And so we're seeing some of that activity really come through.

It's across the board in terms of lending, deposits, treasury management business. And so -- and then in some investment banking business as well, not only sort of advisory and sort of the debt side, but also rates, effects and other sort of activity that we can sort of help them with across the board. And so we're pretty excited about the opportunity there. And we're seeing some of the results come through and the new clients that are getting added to the platform.

Right. Perfect. On the lending side, one of the other, I guess, debated areas has been the growth in the NBFI exposures you spent a lot of time and give us a lot of detail at earnings around the exposures there. Where do you continue to see some of the best risk-adjusted opportunities in that business today? And what's the outlook for that business?

Yes. Look, I think as we talked about at earnings in April, we feel really good about the exposure that we have there. It's a very granular book, right? It's not one thing. There's many things that sort of underpin that. I think the protection you get the way the structures work and the way we go about underwriting them, I think, is -- gives us the confidence that the risk-adjusted returns are there. And I think you'll go through like waves in terms of where the opportunity is. But the biggest parts of the portfolio are still going to be the capital call and subscription finance facilities that we provide to the biggest private equity funds and the like. And then we've got a big business that supports the private credit space, what we call corporate debt finance. And again, I think you'll see at different points in time, you'll see sort of the growth rates move around there a little bit, but we think there's still a lot of opportunity to serve the best clients there.

So let's pivot over to deposits and NII. Since the asset cap was lifted, you've gone from being one of the most consumer funded large banks to now seeing much faster growth in the commercial interest-bearing deposit side. And I guess that is weighing on NIM a little bit. So how should investors think about the longer-term returns and the longer-term implications of this transition?

Yes. Look, I think the short answer is this business is a really good business. These are commercial customers across the commercial bank and the corporate investment bank, primarily. You also see some interest-bearing in the consumer side. But really, you're talking about the commercial businesses that drive most of the growth there. And the marginal profitability of this business is very high. It generally brings with it a whole bunch of other stuff that we do with customers, whether it's lending, treasury management, FX, rates and other things that we can do with these customers. And it should drive really strong profitability over a really long period of time in that business.

And if you now take a step back and say, okay, well, why is it growing so much faster now? It's because we had to stop growing it while we had the asset cap. And if you go back into 2021, 2022, we actually had to push a lot of it off. So -- and during that time, we pushed probably $0.5 trillion of balances off and didn't participate in some of the growth that the rest of the industry saw there. And so some of the -- the bulk of this is coming from existing clients that have other relationships that are bringing more to us, which is really good to see. And some of it is coming from new relationships as we get the traction I talked about earlier in the commercial bank or even in the corporate investment bank. And it all comes with other fee-based businesses around the treasury management, as I mentioned, or other markets activity. And so it actually should be a really good thing and drive really good profitability over a long period of time. And you'll see the mix change a little bit in terms of the deposit base, but that's okay, right? Because it will really drive some really good growth in those commercial businesses.

As we think about those broader relationships coming in with the deposits I guess how long does it take? Does it happen concurrently to take a few quarters or years to deepen the relationship?

Some of it happens right away, and some of it grows over time as they transition other -- some of those fee-based businesses away from others. And some of it's episodic, depending on how -- what they need in terms of the FX and rates and other things. And as you -- and as some of the lending facilities or the revolving credit facilities they have, those obviously have some timetables to them as they sort of look at moving those things around.

Got it. Okay. And then let's talk about NII. You maintained your NII outlook even as the market has repriced to fewer Fed rate cuts. The belly and the long end of the curve are also higher now. I guess walk us through what has changed both positively and negatively underneath the hood on NII since January. And if there's any update you'd like to share there, would love to hear them.

Yes, sure. So first, we're very confident in our $50 billion target that we have for this year or guidance that we gave for this year. And I think, obviously, you'll see that, you'll see the quarterly growth in NII that sort of underpins that as we go. I think when you look at some of what's happened -- you've certainly seen a different expectation for rate cuts. We had 2 or 3 and sort of in the guidance, but they were really back-end loaded. And so that's a positive, a modest positive for the banking book, now that like rates are effectively flat for the year.

It's a modest negative on the market's NII as that's a liability-sensitive business. And so you have some offset there. So the net-net of it is actually a relatively small impact for us relative to the guidance we have off of the base of a $50 billion number. So it's relatively small. And then when you look at what's happening across the rest, you have loan growth performing well. That grew 4% quarter-on-quarter in the first quarter. And so that is looking like it's going to be potentially a little bit better than what we had modeled as we go through the year, but we'll see.

Obviously, there's things like tariff refunds, there's some seasonality there. And so there's a lot of things that we got to sort of watch and sort of see how that progresses, but that could be a positive relative and be a modestly -- modest positive to net interest income as we sort of look in the year. And then you have the deposit side. And as we talked about, we're having a lot of success growing interest-bearing deposits. That's actually running a little bit better than what we would have thought. So that obviously has a little bit of a compresses NIM there a little bit. And on the noninterest-bearing side, we're seeing very stable balances there. We had -- we assumed they would grow a little bit. That still may be the case. But at this point, we're assuming they're going to be more stable, particularly given sort of the higher for longer rates. But overall, it's actually performing quite well in terms of what we're seeing across the deposit side.

We're not seeing like pricing -- like more pricing pressure really across the board. We're just having a lot more success on the interest-bearing side and noninterest-bearing are stable. And so net-net of it ends up being -- we still feel very confident in sort of the $50 billion number that we put out there. And then when you look at the quarter for this quarter, you're obviously going to see a step up in NII. We expect that, that underpins sort of what I talked about in terms of the overall forecast. And as I mentioned in the first quarter, you'll see a modest impact on NIM as we go into the quarter, likely 3 or 4 basis points in terms of compression there as you sort of see the mix there change a little bit. But again, that's kind of what we expected to see. And so we feel overall really good about like the trajectory we're on across the NII space.

Okay. So I guess rates slight positive earning asset balances, clear positive on both the loan side and the deposit side. And then we have some pressure on NIM as we get into the second quarter? And then how should we think about it from there?

We'll see. Like we'll give more guidance as we go in -- at earnings. But I think we -- as we said in the first quarter, that compression moderates.

All right. Perfect. Great. And then you brought up deposit pricing, and there's been this growing discussion out there on AI-driven cash optimization and what that might do to cause the pricing over time. How are you thinking about that impact right now?

Look, I mean, look, there's a lot going on in the space. You've got stable coin. You've got tokenized deposits, you have like legislation happening, a whole bunch of things that are out there. And there's certainly going to be a role for some of these things, like stable coins when you think about cross-border activity or even tokenized deposits and cross-border activity, there'll certainly be a role there.

I think when you think -- start thinking about like AI more broadly, I think when you look at the core piece of our deposit base, which is that consumer deposit account, the vast majority of those are first under $250,000, average balance is a lot smaller. There's a whole bunch of operating cash that sort of you get to some like stable balance there pretty quickly. And so it's not clear that like you're going to see a lot of impact from that anytime soon. Some of these genic sort of ideas, at least anytime soon. And so we're not seeing any kind of behavior shifts as we speak. And I think you'll -- clients have a lot of opportunity if they wanted to optimize cash more, but I think you're going to find very quickly that you get to some pretty stable balances there.

Got it. All right. Maybe we should move to expenses. The -- you've reduced head count for more than 20 consecutive quarters now. You're simultaneously investing in a number of growth initiatives. How should investors think about the balance between the efficiency gains that you're seeing and the reinvestment that you need to make on the next few years.

Yes. Well, I mean, look, we've done a lot on the efficiency side already. But the good news is we still have a lot to do. And it just takes time to sort of get at it. And I think newer technology like AI sort of helps you maybe get things deeper, faster than maybe possible a couple of years ago.

So we still have a lot of opportunity to drive efficiency over the next number of years. And that's where we start the conversation with everybody across the businesses every time we talk about it, right? There's a huge amount to do across every area of the company still we'll make decisions on sort of where we want to invest. But as you've seen over the last number of years, we've been able to sort of find a pretty good balance between driving efficiency and the investment side. And that's certainly the mindset that we bring as we sort of look over the next year or two.

So maybe bringing it to this year, you've spoken about, I think, your expense guidance is about $55.7 billion for the year. Are there any updates to that?

No change. I feel really good about it.

All right. Perfect. So I'm going to come to the room in just a second to see if there's a quick question. But let's talk a little bit about reserves. We spoke about the seasoning card book, momentum on both the card and auto side. Some of these loan balances do come with higher reserves, I guess, how should people think about reserves going forward?

Well, look, as I said, like the good news is the credit performance is quite good, right? So I don't anticipate like shifts in any major shifts in overall coverage -- but as loans grow, you're going to have -- they bring allowance, right? And so -- and obviously, depending on which category grows more like they bring some allowance with it. And so that's not always -- it seems like a lot of financial modelers seem to forget that fact that as loans grow, you have to add allowance, but the way the accounting works. But I think we don't expect any change -- any significant changes in coverage ratio because credit has been quite good.

Got it. All right. Are there any questions here in the room? All right. Maybe let's talk about capital here with CET1 ending the quarter at about 10.3%, it's already within your target range. Obviously, there's capital accretion coming from the earnings side as well. And there's the Basel endgame proposals. So I guess when you're thinking about capital deployment here, how are you thinking about balancing capital return versus growth in investments from here?

Yes. Look, I mean, the first priority is always going to be supporting clients and growing organically with clients. And I think the good news is we've got plenty of capital to do that, right? And and we're generating a lot more as we sort of look forward. And so we have the opportunity not only to support clients and participating growth, but also give more back to shareholders. And so we'll find that balance as we go. And then obviously, we go through the same process each quarter in terms of thinking about the growth opportunities, think about any of the risks that are there including the volatility in rates and then sort of we buy back.

We haven't been shy in terms of buying back stock over the last number of years. And so the same process as we sort of thought about it going forward. And we'll see where the rules shake out, ultimately, I think comments are due on the 18th, if I recall properly. And so we should hopefully, the regulators will be able to work through that pretty quickly and get those rules finalized. Like we're not thinking they're going to be in place until 2028, but let's see, hopefully, they're going finalized quickly.

Anything specific you're focused on as we approach the end of the common period?

There's a whole bunch of like small things that are part of proposal. We're going to comment through the trades with a lot of the other banks. But I don't think there'll be anything super surprising that comes out of that.

Got it. All right. Perfect. So Mike, maybe to wrap up, you're already on the path to the 17% to 18% royalty target, which you've laid out. A lot of it is executing on the opportunities that you've already invested in. So as you look at the businesses, which of the drivers do you think is most underappreciated and I guess, in terms of the contribution of getting wells to that next level of returns, where should investors be focused?

Yes. I mean, look, we're -- we feel great about the ability to get there in a reasonable time period. And I think the good news is there's like a lot of different paths to get there. We're not over reliant on any one thing and I think when you look across a lot of the returns we're starting to see on the investments, and you saw this in the first quarter results with originations in card and auto up a lot.

You've seen the card -- we talked about the card business -- we've seen the improvement in the investment banking side, which is obviously fee -- high-margin fee-based revenue. And we talked about wealth. We talked about all the growth we're starting to see sort of in the consumer base more broadly. Those are the things that will drive us to the return. And then you complement that with like really good, strong expense discipline. And I think we feel like we've got a lot of different ways to sort of get there, and like I said, in a pretty reasonable time period. And so we feel very confident about that. And as we've said over and over, we don't think that's the end. We think there'll be opportunity to continue to improve overall returns from there once we get there.

All right. With that, we're out of time. Mike, thanks so much for joining us.

Thank you.

Excellent. Okay. Exactly 4:30. Ready to go. All right. Great. Hi, everybody. Thanks for wrapping up the day with us. I'm Ken Usdin, the large-cap banks analyst at Autonomous. Really happy to end the day here with Charlie Scharf, the Chairman and CEO of Wells Fargo. Charlie has been the CEO of Wells since 2019. He became the Chairman of the Board last year as well, add on that title. And as we'll discuss, the past year has been a really important one at the company. In fact, a year ago, we were sitting here a week before the long-standing asset cap got removed a week after we talked at the SEC. So really happy to have you back to discuss the evolution of the company in the year since. Just as a reminder, everyone can put in questions on the Pigeonhole app. And Charlie, thanks again for being here.

Thanks for having me. Great to be here.

Great. So let's start off just big picture. It's been quite a year and 5 months. There's a lot of things going on in the world and in the industry. Maybe just level set us on your expectations for where we are in the economy. You see a lot of data inside the company. Where are we today? And where do you think we're headed in terms of the macro factors that we should consider for a while?

Well, listen, I think you're probably hearing much of the same from all of us who have these large data sets, which are things are still extremely, extremely strong. Really hard to find pockets of weakness in the actual results. Put aside surveys of how people are feeling for a second, but when you look at consumer spend, consumer spend is actually even stronger than it was a couple of weeks ago, a couple of months ago. People are spending more on fuel, they're not spending less on other things, and they're actually spending some more on some of those other things.

It's not at the expense of delinquencies because delinquencies are flat to down across almost all of our products. And savings rates are still really strong across both deposit products and investment products. So you add that all together, that paints a pretty, pretty good picture of where things stand. Now it's true that it's differentiated across different wealth levels. That's not new. But it's not really spreading, but it's also not getting better for the lower end. So all in all, things are extremely strong relative to the consumer.

And on the business front, it is more of the same, which is businesses are still financially very, very strong. When you talk to them, they're nervous, they say they're not growing inventories and things like that as much as they might otherwise do if they had more confidence in what the next 6 months were going to look like. But when you actually look at just deals that they're doing, when you look at normal course business, there is loan demand, and they're doing interesting strategic things. And their overall performance is still relatively strong.

So you add that all up together just in the normal banking business, things are really good. And I'm sure you've talked about markets and the investment banking business, and things are extremely strong there. So just paints the current picture of things are really good.

What can change that? Oil being higher for longer, oil will be higher than people probably initially expected. But if there is an end to the war in sight and there's an expectation that oil will come down, that will have less of an impact away from just the consumer in terms of how it filters through all of the products and services certainly around this country because when it comes to consumer spend, oil is only 5% or 6% of the spend. So you add that all together, and again, there are lots of events that can happen in the world. But just relative to what we see in the business, things continue to do really well.

Yes. Do you think this is kind of an adjustment to a new normal where uncertainty is the day to day, and therefore, companies and consumers are less fazed when a real dramatic downturn comes?

I think, I mean there's no question. I think part of it is just the state of the world, part of it is the administration, part of it is just there's more volatility, and that's something that we'll likely be living with for a long period of time. So the question is what are the trend lines as opposed to what are you seeing in any individual period? And again, I think when you come back to it, as long as people feel good about the ultimate direction regardless of what these spikes that we see in terms of news, that will be okay.

Yes. Yes. So a year ago, again, we sat here a week before the asset cap removal, which is a milestone for the company, having dealt with it for several years. To start with, a year later, talk to us about how different it feels inside the company a year later?

It's remarkably different. I think when you have an asset cap and you've had it for a long period of time, just imagine what it's like having to talk to your clients about that, whether you're talking to individuals, you're talking to businesses. When you're -- we were in a position to have to push deposits away, let alone not accept new deposits on the corporate side, we couldn't be aggressive about growing consumer deposits because of the asset cap and because deposits bring cash with it so those are impacted by the asset cap as well, and just the overall morale of not being able to compete on a level playing field, even though you're being judged by the same standards. So yes, the asset cap is lifted, but it's also all the other consent orders have been lifted. I think it was 13 from the time I got there. And so now we're in a position to be able to compete without the restraints that we've had in the past.

So everyone across the company is focused on growing, I'll describe it as intelligently, sustainably, in a way that makes sense for the company over a long period of time. So people feel really good about the reputation of the company and what we've been able to accomplish. But I think they all sit and look at the opportunities that we have and say, this is a great company that should win in the marketplace. And now we can do what we need to do to actually capture that value.

Yes. And how would you mirror that from the external side? How -- what's the client reception been to that change?

I think, listen, the clients have been, I mean, remarkably understanding through the -- through some of our most difficult times. Again, when you go to -- when you're a bank and you go to a client, you say, please take your deposit someplace else. That's a hard conversation to have. And so when we look at what's been happening over the last 6 months or so since the asset cap has been lifted, we've been able to attract a lot of those deposits back which helps solidify and broaden these relationships that we have.

And I would say that in general, I know this is going to be -- it sounds like a generalization, but people are rooting for us. They want other choices. They want other large banks to be able to be there to help support them with all the things that we do. And so extremely receptive to doing more with us over time.

Yes. Got it. And so as we've gone through the first 5 months of the year, the stock, even after this kind of restart for the company, has underperformed a little bit. And the feedback that we get from investors is a combination of profitable growth question, sustainability of NII, NBFI that's come up and M&A. So there's a lot of things that have been out there. So if we can talk through them, why don't we start on the growth side? So you've talked a lot about just the growth path in some of your different businesses. Why don't we just tick them off a little bit and just kind of talk about your biggest avenues?

Sure. I guess let me start with when it comes to how we feel about the opportunities that we have, like, we feel as good as we have ever felt about our opportunity to grow, to increase our return on tangible common equity and to take share in all of our businesses. Full stop. End of story. With the exception of mortgage because we're not looking to take share in the mortgage business. And nothing has changed. In fact, we probably have higher conviction than we've ever had that those opportunities are still there.

When you go through the businesses one by one, we have a great consumer banking franchise, which, as I alluded to before, we were in a position for extended period not to aggressively grow. Again, when you have an asset cap and you can't bring on deposits with the cash associated with it, every deposit that we brought in the consumer business meant we had to free up room elsewhere for it. So we had to be very, very careful about working to grow that franchise.

Now that those shackles are off, it is all about spending more money on marketing. It's hiring bankers. It's retooling our incentive plans. It's updating our products. We are starting to grow our net checking accounts in a meaningful way that we hadn't grown for a very long period of time. And when you look at all the things that we have to offer relative to our deposit products, our payments products, our lending products of all types, our investment products that we have because of the 12,000 advisers we have, there are only a couple of us that are able to do that. And so now we have the ability to actually use that to actually grow relationships, to grow deposits and bring these other things along with it. And you're starting to see that in the results.

And so when we think about what proof points do we look at to say that the growth is going to be there, it starts with active check accounts. It starts with active engagement and products and balances and loans and cards and all those things come along the way. So we feel really great about the trajectory that we have in that business. And we're still very early on in what we think the opportunity is.

Our commercial bank, there, we've actually been at it a little bit longer in terms of figuring out where we can grow without stressing the balance sheet. We've been targeting areas that we think are ripe for success. One is offering our corporate investment banking products into our commercial banking clients. And we've seen real success there. Most of that is fee-based. And we probably -- we should be making $1 billion more a year out of that business. I mean, not -- we're not talking $50 million, $100 million, we're talking $1 billion when you look at what our middle market customers pay the Street, if we were just to get our fair share, not even all of it.

We're looking at where we have underpenetration across the country because we haven't invested over the past bunch of years, and we've added over 150 bankers in markets, and those bankers are just starting to become productive. So you see it in terms of the deposit growth we've seen in the business, the loan growth in the business, it's really starting to come through.

Corporate Investment Bank, we've been talking about. That's a business we've been focused on because we had these significant lending relationships and significant treasury management relationships and just very underpenetrated in fee-based products. So the opportunity to do more with higher returns is really meaningful. And so focused on equity capital markets, debt capital markets, covering the sponsor communities, our M&A franchise, and you see meaningful increases in our market shares across almost all of those products. Our revenue growth has been extremely strong, and we've got a long, long way to go.

And same things on the market side. On the market side, we were always in some of the core basic products on the market side, very focused on corporate flows because of the corporate relationships that we've had. We've been building out institutional capabilities. And as we see the opportunities there, again, we're just at the beginning. And when we think about -- when you look at what our results were last quarter, we're talking mid-teens-ish growth in revenues. And when you look at this upcoming quarter, we would expect the same across both our total markets revenues as well as our investment banking business. So real proof points there.

And then we have our wealth business, where we would expect low double-digit revenue growth in the upcoming quarter in the wealth business, stabilization, and now growth of the adviser base.

So we just look at all these things and every one of them is a slightly different story. Every one of them is starting to have real growth today. And this is in an enterprise where we think we can continue to achieve that growth with little or no expense growth just because of the opportunities that we have to continue to drive efficiency in the company.

So the premise for us and why we feel so good about the future is we look at all of these businesses, we say they should all be growing faster than they were growing when I first got to the company, we're starting to see it in all these businesses. And the simple equation of growing revenue faster than expenses in -- with the right level of risk-weighted assets is all accretive to ROTCE. So that kind of lays out the path for why we think we'll just continue to make progress and increase that number.

And one of the things that's happened as you've embarked on the restarting the growth is that some of the initial growth is a little bit lower net interest margin than the company, and then there's a little bit of a...

Just hold on a second. Can I stop you for a second because that's a little bit of the talk track that's out there. So let's just be really clear. When you -- when we look at where we've been growing the company over the last, call it, 2 to 3 years, we've been very focused on growing businesses that didn't require balance sheet. And so we've been growing our card business, we've been growing our M&A franchise, we've been growing our underwriting franchise. When you go through all these business, and those are very high-returning businesses, high ROA businesses, even though I'm not sure that's the right way to think about the business, but certainly high ROTCE business.

More recently, because we've had the capacity to increase the balance sheet, what we've done is we've said we had actually gone to our markets folks when we had our balance sheet constraints, and we said, you guys have to free up balance sheet, stop financing a bunch of clients, and we've been adding that back.

The actual financing of clients is not high ROA. You can make 20, 25 basis points on it, but it is a reasonable ROTCE business, and you do it because you expect to get more trading flow from those customers, which doesn't always happen like in that same day you advance the lending credit. It builds over a period of time. So when you look at our NIM, it's compressed NIM a little bit, but it's not hurting ROTCE. And if we continue to execute the way we think we can execute, it should be absolutely accretive to our ROTCE goals which, I think, is the right way to think about a financial services company.

Yes. And so then the follow-up to that is then, with that as the base point then, there's a little bit of a time lag, right? But when you initially offer some balance sheet and then you get the other stuff from clients, how does that -- how will we see that emerge and evolve?

I think you see it -- you should look to see it in 2 places. Number one is, you should expect to see revenue growth more quickly. So if we're extending balance sheet to someone like, again, what we're saying is we might not get all of the revenue that we would expect, but we do -- when we sit in the business review like we did this morning with the CIB and we look at how we expect to use the balance sheet, like, we expect to be paid for the balance sheet usage day 1, not over time. We expect to get a reasonable level.

The question is when do you get the outsized returns because all of the other things will come. And I think that's where -- what we want to be able to show you is the ROTCE going up more dramatically over time in that business as it becomes a bigger portion of the business and we get paid for it. But again, I want to be clear, we expect -- you should expect to see it in revenues and returns day 1. Even if there's a little bit of NIM compression, the question is, is it a good business to do on a standalone business? And is it accretive to the earnings and returns of the company?

Got it. Okay.

And just to be clear, because if it's not, we're not going to do it. I mean, it's like -- we're not in the business of just extending balance sheet to counterparties and not getting paid for it. And what we found is people are absolutely willing to pay for it.

Got it. Understood. So talking about the second point then, so on net interest income and net interest income growth, can you talk about the key drivers to getting to the $50 billion plus or minus goal that you have set out for [ 2026? ]

Sure. Yes. So we gave guidance of around $50 billion for NII. We still feel very comfortable with that. And when you look at the pieces of it, it's pretty straightforward for us because most of it is not markets related. About $2 billion of the $50 billion is markets related. So most of it is non-markets related. So it's our lending, deposits, investment portfolio, et cetera.

And so when we came into the year, we were assuming that there would be, call it, mid-single digits loan growth. When you look at the first quarter alone, we grew loans 4%. So we would say, let's not project that 4% every quarter for the rest of the year. But we're seeing good loan demand. And we're not changing our underwriting criteria to grow loans, right? These are -- we're growing loans in businesses that we know where we think we understand the credit, where we think we're the attractive lender for different reasons in different parts of the business. Most of them are relationship oriented on the wholesale side, and we're growing our card business and the auto business. And so as I said, the assumption was mid-single digits. We're doing a little better than that, but we'll see how the rest of the year turns out. So there could be some upside there.

On the deposit side, I would say also mid-single digits. We've assumed in our $50 billion that a significant amount of it would be interest-bearing because that is what you bring interest-bearing deposits on for the relationship then over a period of time, you attract more and more of the noninterest-bearing.

And just as a reminder, I've said this multiple times, we've had to push away these interest-bearing commercial deposits as part of the asset cap. So we're just -- we're bringing them back on, so our deposit mix has -- since the asset cap became more consumer weighted, it will now return to something that's more normalized as we bring those deposits back on. But they're deepening the relationships. And again, they're balance sheet users, and so we would expect to get paid for it. So again, kind of mid-single digits and maybe playing out kind of very much within our assumptions there.

And then you look at just the overall rate cycle. And what we've said is when we gave the guidance, it assumes a couple of rate cuts. That doesn't look like the world is believing that, that's going to play itself out. But expectations change all the time, as we know. And as it gets later in the year, it becomes less impactful on this year's NII but certainly could be more helpful towards the end of the year and as we go into next. So hopefully, that gives you a sense for when we think about where we are on that, the confidence that we have and the reasons why.

Yes. And you mentioned the remixing of the deposit base based on bringing back some of those commercial borrowers. You guys have one of the lowest cost retail deposit bases. And how does that work through in this higher-for-longer environment that you mentioned in terms of being able to kind of protect that low-cost deposit franchise?

Yes. Listen, I think it's a great question, and there's no easy answer to it other than we've been through cycles more recently. And those that are the most price-sensitive react early on. And then you've got like the stragglers of those that are -- that decide to become rate sensitive and decide to take action. So it's something that we've got to look at. It's one of the reasons why when you go through what I said about NII, you might feel better about it than our guidance. But what you -- but this issue is something that we're not exactly sure how it plays itself out. And so it gives us a little bit of comfort there.

Okay. Third topic then, NBFI and credit. So underlying asset quality, very strong. As you mentioned, the economy holding in very well. And you put good context on -- with your disclosures around the portfolio, private credit, NBFI. You had that one loss in the first quarter. Conference call commentary sounded good about the book in general. How would you reinforce that comfort in that portfolio as time moves up -- moves along?

Sure. Listen, I think obviously, for -- because of the increase in just private credit broadly, not just direct lending, but all the different pieces of private credit that exist out there and where the financing is coming from and a lot of the noise, we wanted to try and be as transparent as we could about where our exposures were. And so for those of you that haven't had a chance to look, I encourage you to go back and look at our last quarter's earnings presentation where we provided fairly extensive detail on what makes up all those pieces of exposure because they're all very, very different. It's everything from warehouse lending for an auto finance company to lending to a capital call facility. And so the credit -- the credit risk is very different in all those things.

I would say all of the things that are embedded in there are things that we've done for a long period of time. We have not -- again, just like I said earlier, we have not changed our underwriting criteria to chase volume. A lot of the growth that we see is because of the volume that exists in the marketplace, we believe the business that we're doing is not representative of the industry overall, but the higher quality business because we've been doing it a long time and we're clear about the loans that we want to make and not want to make. And when you go through each one individually and look at what the attachment points are and how much loss there has to be, it's very, very well protected. So again, we'll continue to provide the disclosures. We'll talk about the credit performance so you can see it, but we feel really good about what we have there.

Yes. And as the company begins on the growth path again, how do you make sure that you don't drift on underwriting? And so you said you won't do bad business that you aren't interested in. But companies that grow faster are typically put in the -- watch out for underwriting. So how do you maintain that discipline? And how is that driven through the risk organization?

I think the -- as big a company as Wells is, we're really not a complicated place, which is actually really helpful, meaning we are predominantly U.S. When you look at just where our business is, 95% of our revenues come from the United States. When you look at the places where we extend credit, it's the credit card business, it's the auto business, it's core commercial banking, it's asset-based lending. I mean, it's a lot -- it's the traditional businesses in which we operate.

And the things where we're focused on growing are predominantly in the same relationships, in the same asset classes with the same credit standards that we always have, but now we've got the ability to actually do more than -- because we were eliminating -- because we were limiting what we were able to do in the past.

So I've talked about this. We've grown our credit card business substantially since we got to the company, not by changing credit criteria, but by introducing 13 new products that all have better product propositions, better customer service than we've ever had, extremely competitive out there. And because they're really great products, we get positive selection.

The credit -- the credit profile of our borrowers is slightly better than it was pre that. And that's not on average. We're looking at tails as well. So we look at all those things, the people who run credit in the company are the same people that have run credit in the company for a long period of time. It's something that we are well aware of that we've done for a long period of time. And when we think about all the things we want to evolve and change, the credit culture of the company is not one of them. And so we're just -- continue to be focused on extending credit the way we've extended credit.

Yes. Okay. And then the fourth topic of interest on the M&A front. So with the asset cap off, regulatory constraints are lower, you're below the deposit liability cap. You've got room to grow. You've got plenty of excess capital. The concept of Wells being a potential acquirer has come up in the last 6 months or so. As you think philosophically about inorganic opportunities, how do you prioritize potential additions to the franchise? What are nonstarters? How do you just think about the go/no-go...

So just to be clear, it's come up not because we brought it up, because everyone asks about it. And what I say is when people ask us about doing deals, I say like the -- like you asking about it and me answering it, that's more conversation than we have about it internally. We are very, very focused on taking advantage of the organic opportunities that we have. We are incredibly excited about the ability to grow within a franchise that has been unable to grow in many of the things that we've done. So that is, first and foremost, where we're putting all of our attention.

Number two, I would say, having been around for a long time and been involved with a lot of companies that have done a lot of deals, one of the things that, like, I've just learned over and over and over again, both looking at things that have gone well and things that haven't gone well, is, like, you better know what you're doing when you do it. And know what you're doing means that you run a really great business where you have really strong returns, you've proved to the marketplace, you can grow. And we're still in the process of doing that.

So the idea of us going out and the fear that we're going to do something that's sizable in the banking space, it's not the way we think about it. We think about it like, hey, we -- to be in a position to do that, you got to earn the right to do that. And we've not. I mean, not -- we haven't even come close to earning the right to do that. So I would say, like, that's actually not a bad place to be because we think we've got so much opportunity in the existing franchise, but you kind of put those things together and just go, it's just like not on our list of what we're thinking about. It's just not.

Got it. Okay. Let's talk about different topics then specifically about costs, about AI, about how you're bringing this through the company. So AI's got the potential to change the overall profitability of banking overall. How do you think through the opportunities and the challenges as you incorporate it as every bank is into the tech ecosystem and...

And what are the payoffs?

Yes.

Because I think when we -- so when we think about -- let me just talk about expenses first and then talk more broadly about AI.

Yes.

So because, again, when you think about, like, where we are as a company, we think one of the great opportunities that we have is we're at a very different place than a lot of other people. There are a lot of -- most of the people we compete with have been, like, at it for 10, 15 years of getting better and better, becoming more efficient, figuring out where to spend money, where not to spend money. That's not who we've been.

Who we've been is a company that actually wasn't good at expense discipline for a long period of time. Then we had all of these issues where we were forced to spend a lot of money, gigantic amounts of money, over $2.5 billion a year to actually fix a lot of these things. And concurrently, we've been looking at where can we unpack a lot of the processes, where can we look at multiple platforms and things that exist for us to figure out how to become much, much more efficient. And so we are far from done with that before AI even comes along.

And it's -- we don't -- I don't like to draw a lot of attention to it. But we've gone from -- since I joined the company, I think 275,000 people to 205,000 people. And I think of our assets, we sold a couple of businesses, I think that was 4,000 people. So we've done this in a way where we're actually improving the performance of the company, better customer service, higher returns, higher growth because we're just eliminating all of the wasteful things that have happened inside the company. We want to do as much through normal attrition as we can. And we would say just on that journey, like, we're far from done, like, not even close.

If you sit down with the operating committee or the people who report to them and say, are we a really well-run company? Are we really efficient? Have we gotten to everything? They say, absolutely not. It's like peeling an onion back.

You saw what you saw. We got a lot of the saves we got. Now we're to that next level, and it's all those things we can continue to do. So when we think about how we allocate our dollars, our expense base is down, but we have cut something like $15 billion of expense out of the place, but we added something like $8 billion or $9 billion back in new investments in things like bankers, marketing, building infrastructure to support some of these things.

And so when we look at how we're thinking about the expense base of the company, the conversation literally is, there's one conversation that says every part of the company, area by area, how can we do more with less? And then what are all the things that we want to do to spend to grow the business. And it could be anything from, as I said, technology, to just people, coverage bankers, investment bankers, relationship managers in the commercial bank, all the way through to things like advertising.

And so those are -- and then the question is, what are those -- where do those net to? And I would say -- and I talked about this before. We are conscious of the fact that we have to prove to people that when we make investments, that they're going to -- that you, as analysts or shareholders, will actually see that. So we don't just sit here and say we're going to spend every single last dollar that everyone wants to spend. We prioritize it. We have looked at the overall expense levels. We feel good about where we're investing, but we have targeted intentional restraint on the overall expense base?

But at the same time, I would say, I don't think there's anything that we're not doing that we should be doing because of the way we think about that. That just forces us to become even more diligent about freeing up resources so we can invest more. And as we sit here today, we still have that same thought process. We still believe lots of room to generate efficiencies out of the company, and that gives us more room to increase the level of investment without increasing the expense base of the company.

And as I said, that's before AI. And we think about AI in 3 different buckets. We think about how we use the tools and what that means for our own ability to become more efficient as well as our ability to provide better what we do, better products and services for our customers. We think about the impact of AI on our customer base because we lend a lot of money, we have a lot of -- we do a lot of things for people, and so just like if private equity investors are thinking about how AI is going to impact business that they're investing in, we're very actively thinking about what that means for the risk that we take and also where we should be doing more, not just where we should be doing less.

And then the third piece, which is obviously the most complicated, which is just how does -- how can it ultimately change our business model? And is that a plus or a minus in terms of how we react to that? So 3 very, very different buckets.

First bucket, I would say, there's a lot of debate on what it means for employment with AI. And I just -- I find it very surprising when really smart people take one side or the other. They sit there and they say, it's not a threat to employment or they sit there and say, it's a huge threat to employment, right? It's just -- it's so obvious to me, looking at the way we're using AI inside the company, it is both of those things. And the risk is that those -- that they're not totally aligned in terms of the same people and the timing of it.

And so when we look at the money that we're spending to develop tools today, it is going to result in us being able to do things much more efficiently than we do today. We know that. We see that. We're planning for it every step of the way. And by the way, it doesn't take a lot of investment dollars to get these opportunities. So historically, you had to go spend a huge amount of money in order to build technology to get efficiencies out of it. The amount of money it takes to build an agent is relatively small. So that's not a driver of any material increase in expenses. It's more a question of how much can we do at one point in time.

But we're looking at -- I mean, every area of the company, you can start in audit and you can go through testing and go through what the automation should be in terms of testing versus humans doing that. You can look at legal, you can look at contracts, you can look at patent filings. You can look at pitch books in the investment bank that are automated. You can look at credit memos. I mean the list goes on and on about the places where we've got the opportunity to become much more efficient with the AI tools. And so that is something that we think will actually be super helpful for us.

How much of that actually results in pure margin or return expansion is to be seen because people do it, there's a lot of competition out there, and you'll share some of that. But it is certainly a net positive to how we think about the overall expense base in the future.

And then there's the opportunities just to be able to do more. And so yes, we're going to hire more people over time who either have the skills to build models or will be able to use the tools that we're building, do a better job servicing customers because people don't go away in this, right? There's a substantial ability to use these tools to put our bankers and our call center reps and people in a position to do a better job for their customers.

So we've got this mismatch that as a country, we're going to have to deal with. And we're very actively thinking about how do we retrain, how do we get ahead of that. But that is certainly a risk that exists more broadly. But for us, it's a real opportunity.

Yes. And just coming back to one point that you mentioned that you purposely kept a restraint on the overall level of expense growth. How do you get to the point where you feel like flattish is the right number?

It comes down to because the way we do the process is we don't set the artificial constraint out at the beginning, we say, let's get as much efficiency as we can out of the place and then let's make the full list of all the places that we want to invest, and ultimately, either myself, with Mike Santomassimo, who is the CFO, we do it with the operating committee, we literally go through, we prioritize all those things where we think they've got either the highest return or the smartest thing to do for our customers. And then we draw a line that says, like, that's the amount we're going to do. And then you look at the things that fall below the line. And literally, we go and we talk about it, how do we feel about not doing that or how do we feel about doing it a little bit more slowly.

And what you just -- what you find very naturally is that, first of all, there's only so much you can do at once. So there is a natural limit to how much you can invest wisely. And so having it below the line doesn't mean you're not going to do it. It might mean you're going to start it in the second half of the year instead of the first half of the year. So those are the kind of trade-offs.

And by the way, it's no different than your own life. We talk about that all the time. I mean, you can wake up in the morning and say, you want to go buy the following 5 things in your life. But you say, I'm not going to do them all today. I can't do them all today. Even if I got them, I probably wouldn't be able to enjoy them as much. So you prioritize and you figure out where are those things.

I will say, if we thought that it was the right thing to do for the company to spend more money and to have a different outcome on net expenses, we'd be really thoughtful about it, but we would do it. But we just think given how much we're investing and the opportunities we have for savings, we're just lucky enough not to be in that position. So whatever revenue growth we have come through the company, when you have little or no expense growth and you've got real revenue growth, it's a pretty good outcome for the future.

And you mentioned that this is still plenty of opportunity ahead early going. And obviously, there are still opportunities across the company, just got out of this 8 years of building this enormous risk and control function. Hopefully, some of which will become more efficient over time, not that you're going to drop the ball on that or move backwards on it. But what are the biggest pockets where you still see the opportunity set to take out some of that incremental cost?

So when we -- I mean, when you look at what we're doing, I mean, literally, it's everything from multiple call center platforms, multiple testing functions across the company. I mean, literally, it's things like that. And we've done things up to this point. But those -- just given the scope of the company and the amount of redundancy that existed, there's still things just like that.

Got it. Okay. Let's talk a little bit about the capital side and talk about returns. So the recent proposals for Basel III and the G-SIB surcharge, you talked about potential for a 7% reduction in RWAs. How do you feel about the package of rules as presented, the benefits that you expect to get and any anticipated changes that might happen as we get to the final rule?

Yes. Listen, I think what the Fed has done with the other regulators is hugely important because what they did is they didn't just decide what they want the answer to be and then solve for it. They spent a lot of time doing a lot of work to support what changes needed to get made. And I personally feel really good about where they've come out.

Every company will have a slightly different opinion. Everyone will look at their own profile and say, well, this might not be fair, that might be -- not be totally fair. But in the scheme of all the things that had to go, I think that they have handled the most important things that are the most significant. And what it's going to allow most of us to do is to be able to do more business that we should be doing.

We're going to be able to lend more. We're going to be able to use our balance sheet in ways that make sense. We'll be able to compete more with the nonregulated institutions. And I think all things being equal, [ Spark ] business done within the regulated community is actually a good thing, not a bad thing. And so I've got tremendous respect for not just the outcome that they got to, but the process that they went through to get there.

Yes. Yes. And as it relates to Wells, do you think at some point, when everything is finalized and done, you've got an internal goal 10% to 10.5% on CET1. You're kind of right in the middle of it right now. The reg requirement, as it stands now, is 8.5%. That's a big buffer, a big comfortable buffer. And you continue to be able to grow the balance sheet, return capital, et cetera. Over longer periods of time, is that still the right zone? Or do you think there might be some room?

I think, first of all, we're going to have to -- the way the capital rules get implemented is either 1 or 2 things: Either risk-weighted assets can come down; or the actual capital percentage requirement can change. And so for us, the fact that our RWA is going to come down, those targets might not change, but what they apply to -- but you get to the same answer in terms of how much excess capital you have.

And so under those measures, certainly, we will have more excess capital than we have today. And so that -- for us, it's just degrees of freedom as we look at the growth prospects that we have versus shareholder return. And I think we've tried to be very, very prudent, both when we had the asset cap, but even now, post asset cap, where, I think, we bought about $4 billion of stock back last quarter, where we want to run at a comfortable capital level, where we're protected for bad things that can happen, but recognize that there are limits to that. And so we're either going to deploy it effectively to use for our customers where we're going to get paid for it and it's going to add to the conversation about increasing the returns of the company or we'll return it to shareholders in the shorter term because we generate plenty of capital, and we'll be able to build balance sheet over a longer period of time.

Right. Right. And one of the points you hit on earlier was the direction of travel for your ROTCE over time, right, and roadway ahead. So last fall, you put out a new target medium term, 17%, 18%. You didn't put an explicit time frame on it. And as we kind of get talked about earlier, initially, very well received, but then there's been a little bit of skepticism about how long it might take to get there. So there's the we will get there, and then there's the when do we get there? I'm just -- how do you still think about your...

Answer to that question. I mean I just -- our investors are, like, really smart people, right? And so like why would it make any sense for us to put a specific date on something when we don't know the credit environment, we don't know the interest rate environment, we don't know the markets. I mean, we do live in a -- both a volatile and a cyclical business. And so you just got -- and the way the world works is if we say something, we want to deliver it. And so we just don't have the ability to put that level of precision on it. But you should see consistent improvements in ROTCE period by period by period.

And again, what we've said is, and I think -- I'm not sure you said this, but that was before the changes in capital. And what we've also said is that's not the destination for us as a company. That is another waypoint along the way towards what we think we should be able to attain. And it's just simply looking at our business mix, business by business, what the return should be.

So again, when you think about a business where we've got a reasonable revenue growth fueled by loans, deposits and noninterest revenues, which, I think, grew 8% last quarter on a year-over-year basis and you do that without any kind of meaningful expense growth or very, very little expense growth in a reasonable credit environment without taking a lot more risk so you're not deploying capital below the level of returns that we've seen, we are going to wind up with increased ROTCE.

Yes. All right. And then so maybe just to wrap up, Charlie, just any summary thoughts, any points we didn't hit on that you think are important to touch on?

I mean, I think -- listen, I think, hopefully, what's coming through is just how good we feel about the opportunities. And it's not lost on us about the stock price performance. It's -- what that means for us is that we got to make sure that we're really clear about why we feel good about the opportunities in front of us. We don't feel any worse today than we did when the stock was 10 points higher.

In fact, as time goes on, I said we think we have more and more conviction. And so -- but what we are very focused on is to make sure that you all know how committed we are to continuing to drive the improved results and that we've got to work to continue to explain why we feel as good about the opportunities and recognize they've got to see it, right?

We've always said this, right? When we first started our journey of return -- of saying we're going to increase returns, we were returning 8%, right? We didn't say we're going to get to 17% or 18%. We've given way points along the way because we want to make it reasonable. We want to -- we want you to see that we do what we say we're going to do and then continue to raise the bar. And so that's the way we think about it. We believe that we've got a great hand, but we also believe that we've got to show everyone that's the case. And hopefully, you see it in the results today along the way, and you'll continue to see it and it will play itself out.

Great. All right. With that, please thank -- join me in thanking Charlie for joining us today.

Thanks, Ken. Appreciate it.

Welcome, and thank you for joining the Wells Fargo First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that today's call is being recorded.

I would now like to turn the call over to John Campbell, Director of Investor Relations. Sir, you may begin.

Good morning. Thank you for joining our call today where our CEO, Charlie Scharf; and our CFO, Mike Santomassimo, will discuss first quarter results and answer your questions. This call is being recorded.

Before we get started, I would like to remind you that our first quarter earnings materials, including the release, financial supplement and presentation deck are available on our website at wellsfargo.com. I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8-K filed today containing our earnings materials. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings and the earnings materials available on our website.

I will now turn the call over to Charlie.

Thanks, John. I'm going to provide some brief comments about our results and update you on our priorities. I'll then turn the call over to Mike to review first quarter results in more detail before we take your questions.

Let me start with our first quarter financial highlights. We saw continued positive impacts from the investments we've been making with diluted earnings per share increasing 15%, revenue increasing 6%, loans growing 11% and deposits up 7% compared to a year ago. Revenue growth was driven by a 5% increase in net interest income and an 8% increase in noninterest income. Our consistent focus on investing across all of our businesses helped contribute to broad-based revenue growth, with each of our operating segments increasing revenue from a year ago.

Consumer Banking and Lending revenue grew 7%, and Commercial Banking revenue grew 7% as well. Within our Corporate and Investment Bank, we saw an 11% increase in bank revenue and a 19% increase in market [indiscernible]. Wealth and Investment Management grew 14%. While expenses increased driven by higher revenue-related expenses, we remain focused on expense discipline. At the same time, we're increasing our investments in areas like technology, including AI as well as in advertising, while continuing to execute on our efficiency initiatives, which has resulted in 23 consecutive quarters of head count reductions.

With revenue growing faster than expenses, pretax pre-provision profit grew 14% from a year ago. Credit performance remained strong, and our net charge-off ratio was stable from a year ago at 45 basis points. Given that nonbank financial lending has generated a lot of interest lately, Mike will do a deep dive into that portfolio later in the call. But I will say we like the risk return profile of the portfolio, given our deep understanding of the collateral, the diversification across both clients and asset types and structural protections in place. And finally, we returned $5.4 billion to shareholders in the first quarter including $4 billion in common stock repurchases, while continuing to operate with significant excess capital.

Turning to the progress we made during the quarter on our strategic priorities. Last month, we closed our final outstanding [ consent ] order, bringing the total to 14 terminated since 2019. We are incredibly proud of the hard work and unwavering commitment that was required to reach this milestone and understand the importance of sustaining our risk and control culture. With this work behind us, we are now focusing more fully on accelerating growth and improving returns. We are seeing momentum across many business drivers, which we highlight on Slide 2 of our presentation deck. Let me share some of them, starting with our consumer franchise. In the first quarter, we launched 2 new travel-focused reward credit cards available exclusively to new existing premier and private wealth clients. Over the past 5 years, continued enhancements to our credit card offerings have driven higher purchase volume and loan balances, which were both up from a year ago.

New account growth remained strong, increasing nearly 60% from a year ago, driven by higher digital and branch-based openings. We also had continued strong growth in our auto business, originations more than doubled from a year ago, benefiting from being the preferred financing provider for Volkswagen and Audi vehicles in the United States as well as our methodical return to broad spectrum lending. Importantly, credit performance has remained strong and in line with our expectations. We have continued to invest in marketing to help drive new primary checking accounts and consumer checking account openings increased over 15% from a year ago. While this momentum is encouraging, we are not yet growing accounts at the pace we expect to over time.

As customer expectations evolve, we continue to modernize our digital offering, complementing our in-person service with seamless mobile experiences. The momentum continued in the first quarter as mobile active users surpassed 33 million. Zelle transactions increased 14% from a year ago. And Fargo, our AI-powered virtual assistant reached over 1 billion customer interactions less than 3 years since its launch. We had continued momentum in our Wealth and Investment Management business with client assets growing 11% from a year ago to $2.2 trillion. Company-wide net asset flows accelerated in the quarter, reaching their highest level in over 10 years.

Turning to our commercial businesses. In Commercial Banking, we continued to hire coverage bankers to drive growth, and we are seeing the early signs of success with higher new client acquisition as well as loan and deposit growth. Average loans and deposits both grew by approximately [ $5 billion ] in the first quarter, demonstrating accelerating momentum. We are also continuing to grow our banking and markets capabilities while not significantly changing the risk profile of the company. We continue to invest in senior talent to improve client coverage and broaden our product capabilities in investment banking. These investments helped by 13% revenue growth from a year ago. While market conditions can change, the outlook for investment banking remains strong, and we entered the second quarter with a strong pipeline driven by M&A and equity capital markets. We continue to grow our markets business amid a mixed and volatile trading environment, with revenue up 19% from a year ago. Client sentiment is cautious, but engaged as macro and geopolitical uncertainty has increased and clients have largely shifted to a more selective and defensive posture. Finally, we completed the sale of our railcar leasing business at the beginning of the quarter. We have now substantially completed our efforts to refocus and simplify the company by exiting or selling 12 businesses since 2019.

Let me now turn to the future. I want to start by highlighting what we are watching in the economic data. The U.S. labor market continues to cool in an orderly but uneven fashion with few signs of systemic stress. Layoff activity remains contained. Weekly job [ book ] claims reinforce this picture and are not signaling labor stress. The unemployment rate dipped to 4.3% in March, but this continues to reflect slower rehiring and longer job searches not renewed labor market strength. Despite slowing employment momentum, U.S. economic growth has held up. The U.S. consumer remains resilient in the aggregate, but increasingly bifurcated to need the surface. Spending has held up into early 2026, despite slower job growth, supported by higher income households, steady wage growth for incumbent workers and continued access to credit. However, confidence indicators and underlying balance sheet trends point to rising stress for less affluent consumers. Upper income consumers continue to benefit from elevated equity prices. Home equity and cash buffers accumulated earlier in the cycle, allowing discretionary spending remain firm. By contrast, lower income households are more exposed to higher interest rates and energy prices. Financial markets have absorbed these cross currents with resilience, but we expect continued volatility driven by geopolitical headlines and outcomes as well as the unfolding impact of higher commodities prices.

Turning to what we are seeing from our customers. The financial health of consumers and businesses remains strong. Consumers are spending more than a year ago, which includes spending more on gas, but they haven't slowed spending on everything else. [ Guest ] represented 6% of our total debit card spend and 4% of our total credit card spend before the rise in oil prices. They now represent 7% and 5% of debit and credit card spend. Note that these numbers are higher to low-income households. We have seen historically that it often takes consumers several months to reduce their spend levels on other categories to adjust for higher oil prices. And while we don't know the exact timing, we would expect to see the same in the second half of the year. We also expect that higher energy prices will impact other goods and services. The duration and severity will be driven by the level and duration of higher oil prices.

The ultimate impact on credit performance is not yet clear given the uncertainties I just mentioned, but the strength across our consumer portfolios, including lower charge-offs, and improved early-stage delinquencies in our auto and credit card portfolios from a year ago, provide time for consumers to adjust their behaviors. Having said that, at this point, it's likely there will be some economic impact based on what's already occurred, but there are both risks and potential mitigants, so it's hard to predict the ultimate impact. middle market and large corporate clients earned in a similar position. They've been resilient and balance sheets are strong, but they tell us they're approaching the remainder of the year cautiously. As we grow our balance sheet, we are cognizant there are risks that we do not yet see in our data and will respond accordingly.

Putting all of this together, it's likely energy prices will have some impact on the economy, but we feel good about where our customers and our company stand today. We have managed credit well over many cycles and are well positioned to support our customers and navigate a variety of economic scenarios.

Turning to the recently proposed capital rules. We appreciate that the work our regulators have been doing is based on analysis, interagency coordination, public comments and a focus on reforms that unlock economic potential. Importantly, the proposals are designed to maintain a strong and resilient banking system that allow the industry to support the flow of credit and help grow the broader economy. We continue to work through the details but view the proposals as a constructive step in supporting our role in serving households and businesses. If the proposals do not change and based on our current balance sheet composition, we estimate that under the new rules, our risk-weighted assets could decrease by approximately 7%. Regarding the GSIB surcharge under the current proposal, we expect to remain around 1.5% for the foreseeable future, even as we continue to grow.

In closing, we delivered solid financial results in the first quarter that were consistent with our expectations. We have clear plans in place and are focused on driving continued organic growth and increasing returns across the franchise using our broad set of capabilities. We're executing on our plans, and I'm encouraged by the momentum we have built and continue to have confidence that we can continue to deliver stronger results in all of our businesses.

I'll now turn the call over to Mike.

Thank you, Charlie, and good morning, everyone. Since Charlie covered the key drivers of our improved financial results and the momentum we are seeing across our businesses on Slide 2, I will start my comments on Slide 3. Our first quarter results included $135 million or $0.04 per share of discrete tax benefits related to the resolution of prior period matters. Income taxes also benefited from the annual vesting of stock-based compensation and the amount of the benefit in the first quarter was similar to the amount in the first quarter of last year.

Turning to Slide 5. Net interest income increased $601 million or 5% from a year ago and decreased $235 million or 2% from the fourth quarter. Most of the decline from the fourth quarter was driven by two fewer days in the first quarter. The reduction also reflected the full quarter impact of the rate cuts in the fourth quarter of last year on our floating rate loans and securities. This decline was partially offset by higher market net interest income higher loan and deposit balances as well as continued fixed asset repricing. I also want to explain a 13 basis point decline in net interest margin from the fourth quarter. As expected, the largest driver of the decline was the growth in the balance sheet in the markets business. As we have highlighted in the past, while the majority of these assets are lower margins, they also have lower risk and are less capital intensive and our ability to support this client activity should lead to more business.

Second is the growth in interest-bearing deposits and other short-term borrowings and lastly, the impact of lower interest rates. When we provided our full year guidance last quarter, we anticipated some margin contraction for these reasons, and I would expect additional margin compression next quarter. I will update you on our full year net interest income expectations later in the call.

Moving to Slide 6. We had strong loan growth with both average and period-end loans increasing through the fourth quarter and from a year ago. Period-end loan balances grew 11% from a year ago and exceeded $1 trillion for the first time since the first quarter of 2020. Average loans increased $87.8 billion or 10% from a year ago, driven by growth in commercial and industrial loans as well as growth across our consumer portfolios except for residential mortgage.

Turning to Slide 7. Last quarter, we provided more detail on our financials accept bank's loan portfolio. Today, I want to build on that by giving you an even deeper look into the portfolio's composition and risk profile. I will be anchoring my comments on how these loans are reported in our 10-Qs and 10-K, which we think is a better way to understand our portfolio. We also report loans to non-depository financial institutions in our call reports. Since we often get questions on how these disclosures differ, we have included a reconciliation in our appendix to illustrate the differences. At the end of the first quarter, financials except bank loans totaled approximately $210 billion or 21% of our total loan portfolio. While our financial success bank category is large and has been growing is comprised of many different types of lending and collateral. We've been making these types of loans for many years, and we typically have broader relationships with these institutional clients. As well as with any loan portfolio, there are inherent risk, but we are comfortable with our exposure based on the profile of borrowers, the diversity of collateral, our historical loss experience and our underwriting practices and lending structures. The lending structures and overall risk management are executed by specialist groups with expertise in accessing and structurally mitigating the risks associated with these types of customer products and collateral.

Our underwriting reflects the specific risk profiles of counterparty as well as our assessment of the collateral. These loans are generally secured with advanced rates that provide significant margins of protection against expected losses during periods of stress and the lending structures often include structural protections as collateral performance deteriorates. This portfolio has delivered strong credit performance over time. In the first quarter, this portfolio had $237 million of nonaccrual loans or 11 basis points of total loans.

Before I walk you through the two largest categories of this portfolio to give you a better understanding of what type of loans are included, and how we mitigate the risk. Let me briefly highlight the two smallest categories. The needs of these categories track with the types of underlying collateral. Real estate finance, which is commercial real estate mortgage loans and residential mortgage warehouse lending and consumer finance, which includes auto, credit card and other consumer lending. In real estate finance, the portfolio is diversified by collateral site and a structural protections, which may include collateral approval rights. In consumer finance, we have diversified collateral structural protections, including concentration limits.

Turning to Slide 8 in our largest category, asset managers and funds, 85% of these loans are originated in our fund finance groups and our predominantly subscription facilities, also known as capital call facilities provided to large private equity and private credit funds with established track records where we have long-standing relationships. The funds use these facilities provide flexibility and liquidity when making investments with repayments supported by the investors committed uncalled capital. This is secured lending backed by a diversified pool of limited partner commitments with no individual fund making up more than 1.5% of total commitments. We lend at advance rates that provide significant margin protection against investors failing to fund and the lending agreements include a security interest over investor capital [indiscernible] and the funds right to issue capital calls, including the ability to directly make them ourselves. From a risk perspective, these structural protections have resulted in a portfolio that has demonstrated very strong credit performance.

The next category is commercial finance, which is the category, where we tend to get the most questions. As you can see on Slide 9, we have broken up this category into 5 different loan types that are originated across both our corporate and investment banking and commercial banking businesses. I'll cover corporate debt finance on the next slide. So let me start with the next largest component, which includes supply chain and other specialized industries, which are originated in commercial banking and our loans to large and established clients with diversified pools of receivables. These loans are secured by accounts receivable and margins against the borrowing base.

The next component is commercial asset-backed securities, which are originated in corporate investment banking. These loans are primarily declines that lease aircraft containers, railcars and equipment and are managed by experienced teams, who understand these industries, we typically maintain control for what assets qualify as collateral, regulatory monitor the collateral values and have the ability to require additional collateral or debt pay down if asset values defined.

Next is the component we labeled as other. This includes broadly syndicated loan warehouses originated in corporate and investment banking, where we are providing secured lending against portfolios of corporate loans, typically in advance of selling the liabilities and a collateralized loan obligation takeout.

Finally, asset-based lending, which is the smallest component. These loans are originated in commercial banking and primarily include secured lending to asset-based lenders. The collateral supporting these loans is diversified and is in areas where we have direct lending experience. We have eligibility criteria with concentration limits as well as ongoing collateral monitoring.

Slide 10 provides more detail on corporate debt finance loans made in the corporate investment banking, which includes the majority of our private credit lending. While the demand for these types of loans has grown over the past few years, the structural features of these deals have largely remained the same. We are underwriting both the counterparty and the underlying collateral with over 98% secured by first lien loans across diverse industries. We have over 3,100 unique obligors and the average obligor concentration in an individual facility is less than 2%. These volunteer structure to an AA equivalent credit rating. In addition, nearly all structures include the ability to approve, which assets are included in the facility and revalue assets to drive deleveraging of credit performance weekends. The weighted average effective advance rates to less than 60%, which means that, on average, the portfolio of loans in the facility, not individual loans, would absorb approximately 40% loss before we would recognize a loss. These structures provide significant protection and as a result, this portfolio has demonstrated strong credit performance. However, we continue to monitor this portfolio closely as the markets evolve. I've provided a lot of details with the main points, I want to leave you with regarding our financials except bank's portfolio are. While this portfolio has provided an attractive risk return to many economic environments, there are risks associated with any lending we do. However, we feel comfortable with this portfolio for many reasons, including we have decades of lending experience, a deep understanding of the collateral and experienced underwriters. We maintain diversification across both clients and asset types, and we restructure the loans with protections designed to limit downside risk.

Turning to deposits on Slide 11. Average deposits increased $7.7 billion or 6% from a year ago, with growth across our consumer and commercial businesses and in corporate treasury. We achieved this growth while reducing average deposit costs by 15 basis points from a year ago as rates declined and with lower interest-bearing deposit yields across all of our businesses.

Turning to Slide 10 (sic) [ Slide 12. ] Noninterest income increased $696 million or 8% from a year ago. We had growth across most of our business-related categories, particularly in areas where we have been investing, including higher investment advisory fees and brokers' commissions as well as card and investment banking fees.

Turning to expenses on Slide 13. Noninterest expense increased [ $403 million ] or 3% from a year ago. The majority of the increase was driven by higher revenue-related compensation expense, primarily in Wealth and Investment Management, which, as I'd like to remind you is a good thing as these higher expenses are more than offset by higher noninterest income. We also had higher advertising and technology expense driven by the investments we are making in our businesses to generate growth. These higher expenses were partially offset by the impact of efficiency initiatives. Noninterest expense increased $604 million compared to the fourth quarter, which included higher severance expense and an FDIC special assessment credit of approximately $200 million. Our expenses in the first quarter included approximately $700 million of seasonally higher expenses, including payroll taxes, restricted stock expense for retirement eligible employees and 401(k) matching contributions.

Turning to credit quality on Slide 14. While the markets have reacted to macroeconomic uncertainty, our actual credit performance in the first quarter remained strong. Our net loan charge-off ratio was stable from a year ago and increased 2 basis points from the fourth quarter. Commercial credit continues to perform well, and we are not seeing signs of systemic weakness. Commercial net loan charge-offs increased modestly from the fourth quarter to 24 basis points of average loans. Lower commercial real estate losses were offset by higher losses in our commercial and industrial portfolio driven by a single fraud-related loss in the real estate finance category in the financials except bank's portfolio. After this issue emerged, we reviewed the portfolio and believe it was an isolated incident.

Consumer net loan charge-offs increased modestly from the fourth quarter to 78 basis points of average loans, reflecting seasonally higher credit card losses. Compared to a year ago, consumer net loan charge-offs declined 8 basis points with improvements across our consumer portfolios as well as continued net recoveries in our residential mortgage portfolio. As Charlie highlighted, consumers are resilient, we continue to closely monitor our portfolio for signs of weakness, but have not observed recent deterioration or meaningful shifts in trends.

Nonperforming assets as a percentage of total loans were stable with the fourth quarter and declined modestly from a year ago. The modest increase in our allowance for credit losses for loans was driven by higher commercial and industrial and auto loan balances, largely offset by lower allowance for commercial real estate office and credit card loans. As we highlighted last quarter, if loan growth remains strong, all else equal, we have to continue to add to the allowance to support higher loan balances.

Turning to capital and liquidity on Slide 15. Our capital levels remained strong with our CET1 ratio of 10.3%, within our stated 10% to 10.5% target range and well above our CET1 regulatory minimum plus buffers of 8.5%. We repurchased $4 billion of common stock in the fourth quarter and common shares outstanding were down 6% from a year ago. We continue to have excess capital to support clients and to repurchase shares.

Moving to our operating segments, starting with Consumer Banking and lending on Slide 16. Of note, to better align branch-based activities, the financials associated with Wells Fargo Premier clients that primarily receive wealth management and financial planning services in our consumer bank branches are now included in consumer, small and business banking results instead of wealth and investment management. Prior period results have been revised to reflect this change. Consumer Small and Business Banking revenue increased 9% for the year ago, driven by lower deposit pricing, higher deposit loan balances as well as growth in noninterest income. Credit card revenue grew 5% from a year ago due to the higher loan balances driven by higher purchase volume and new account growth. Home Lending revenue declined 9% from a year ago, third-party mortgage loans serviced for others was down 18% from a year ago as we continue to reduce the size of our servicing business. While originations increased from a year ago, loan balances will continue to decline the rate of reduction has slowed and should continue to moderate throughout the rest of the year. Auto revenue increased 24% from a year ago due to higher loan balances and auto originations more than doubled from a year ago.

Turning to Commercial Banking results on Slide 17. Revenue increased 7% from a year ago, driven by higher revenue from tax credit investments and equity investments. Loans grew 4% from a year ago, with broad-based growth from new and existing customers. As a reminder, the growth rate was impacted by the business customers that were transferred to consumer banking and lending in the third quarter of last year Absent this impact, the growth rate would have been 7%.

Turning to Corporate Investment Banking on Slide 18. Banking revenue increased 11% from a year ago, driven by higher loan and deposit balances and growth in investment banking revenue. Commercial real estate revenue declined 21% from a year ago, reflecting the gain from the sale of our commercial mortgage servicing business included in our results last year. Markets revenue grew 19% from a year ago, driven by the higher revenue across most asset classes, reflecting disciplined balance sheet usage, supportive market conditions and higher customer activity. Average loans grew 23% from a year ago with strong growth in markets and banking.

On Slide 19, Wealth and Investment Management revenue increased 14% from a year ago, driven by growth in asset-based fees from increased market valuations as well as higher net interest income due to lower deposit pricing and growth in deposit and loan balances. As a reminder, the majority of win advisory assets are priced at the beginning of the quarter, so second quarter results will reflect market valuations as of April 1st, which were down from January 1st, but up from a year ago.

Turning to our 2026 outlook on Slide 21. So far, our net interest income for 2026 is largely playing out as expected, and we are retaining our guidance of $50 billion, plus or minus of net interest income this year. As I pointed out earlier, we had strong customer engagement in the first quarter with growth in both loans and deposits as we continue to transition back to growth, which we have supported with investments in marketing and bankers. In addition, similar to last year, we expect net interest income to grow over the course of the year. Looking at the key drivers of NII, excluding markets, starting with loans, our outlook was based on average loan growth of mid-single digits from fourth quarter 2025 to fourth quarter 2026. Average loans grew 4% in the first quarter from the beginning of the year. And if demand remains strong, average loan growth could be higher than mid-single digits in the double mid-single-digit increase we had previously assumed. We have also grown deposits. And as we said when we provided our outlook last quarter, much of the growth was from interest-bearing deposits, particularly in our commercial businesses. As a reminder, when the asset cap is in place, these deposits were limited and now that has been lifted, we are successfully growing these deposits. While they are higher costs, they are important to our strategy of deepening relationships with our clients, we expect this trend to continue throughout the year. We have also successfully grown interest-bearing deposits in our consumer businesses. And while we are enhancing marketing and increasing activity in the branches to drive stronger, low-cost checking account growth, balances in the accounts are smaller than commercial balances it can take longer to grow.

If interest rates stay higher for longer, we will have to monitor deposit mix trends to see if there's any impact on noninterest-bearing deposits which could put some pressure on net interest income, excluding markets. In terms of interest rates, our outlook assumed 2, 3 cuts by the better reserve, the market currently expects fewer cuts, which all else being equal, is positive for NII, excluding markets. However, interest rate expectations are constantly changing. The rate cuts we assume were expected to occur later in the year. So if we get fewer cuts, it would be beneficial but would only have a modest impact on this year's net interest rate expectations. Also, longer-term rates are currently a little above the expectation at the beginning of the year but have been volatile year-to-date, so that could be a small positive if rates remain elevated. In terms of market NII, as we all know, it is always hard to forecast, but even harder in a dynamic macroeconomic environment like the one we are in now, higher rates could result in lower markets NII from what we expected at the beginning of the year. But as of now, our expectation of approximately $2 billion in 2026 seems appropriate. Regarding our expense outlook. First quarter expenses were in line with our expectations, and therefore, our guidance is unchanged, and we still expect 2026 noninterest expense to be approximately $55.7 billion.

In summary, our improved first quarter financial results reflect the continued momentum across the company. We delivered broad-based revenue growth with increases in both net interest income and noninterest income from year ago. We've maintained strong credit discipline, group loans and deposits, return capital to shareholders and maintained our strong capital position. I'm encouraged by the growth we are seeing across key business drivers in both our commercial and consumer businesses and excited to continue building on this momentum to deliver even better results going forward. We will now take your questions.

[Operator Instructions] And our first question will come from John McDonald of Truist Securities.

Mike, I was hoping you could give a little more color on the estimated impact of the new regulatory proposals. I think you said your initial estimate is a 7% decline in RWA. Could you give us a sense of the breakdown there between credit risk RWAs and what's driving any potential improvement there as well as your initial uptake on op risk and market.

Sure, John. Thanks for the question. If you just take the big broad categories, market risk isn't a big driver. It's not moving much for us in the proposal. So it's kind of flattish. Op risk is going to go up, and for sure, much less than we thought from the original proposal. And really, the big decline is on credit risk, and that's given the nature of our portfolio. So you see the biggest driver in the credit risk portfolio is getting the the benefit for investment-grade credits, both public and nonpublic investment-grade credits. That's going to be the biggest driver in the commercial loan space. And then you do get a significant benefit on the mortgage portfolio and to a lesser degree, on auto and a couple of other portfolios. And that's how you get to about 7% decline overall. And obviously, you didn't ask about it, but also on GCIB, it feels like we'll be around where we are, plus or minus a little bit depending on how the proposal plays out for a period of time. given sort of the recalibration that was done there. So net-net, overall, very constructive for us. And and seems like it's heading in the right direction and allows us to continue to do really smart things to support clients across all the portfolios.

Okay. And then on a related note, the outlook for ongoing NIM compression, presumably continues to weigh a bit on ROA, return on assets. So just kind of wondering how does that interact with your goal of improving the ROTCE towards your medium-term goal? Do you expect to be able to lower the TCE because of these passive changes and the mix in your balance sheet?

Yes. So there's a lot in there. So let me try to unpick some of it. So as we came out of the period when the asset cap was in place, we knew that the place that we were going to see the growth first is in repo. All -- for the vast majority of it's treasury repo, and then there's other aspects to it, but -- so low ROA, low risk, good returns. And it then allows us to do much more with those clients as we provide them what they think of as a valuable financing capacity. And so I think as we go through this period, you're going to see ROA come down. As that sort of stabilizes, matures, we get a little further in this growth period. That will start to moderate, and you'll start to see it either stabilize or start to grow as we start to add in that other other business activity that we expect to see. And on the other stuff...

And it shouldn't be dilutive to ROTCE.

Yes. No, I was going to get there. And I think we're starting to see some of the onboarding come to conclusion. Some of them are in process, some of the clients that are going to do more with us as a result of the financing, takes time to ramp up. They do testing with you. And so we're starting to see that come through, whether it's prime, other trading that they do with us and across the number of the asset classes. And so you'll start to see that incrementally get added into the mix overall. And I will point out that we are seeing some of it, right? Markets revenues are up 14% -- 19%, sorry, from last year. So we are starting to see some of that come through. And as Charlie noted, we expect to grow the markets business in the context of also improving overall returns to the company. And don't believe it will be dilutive or get in the way of us getting to that 17% to 18% return.

We're either going to get the increased flows at a strong ROTCE or not can use the balance sheet for it. And we're very confident at this point that we will get the returns for it based on the conversations and the things we've seen with our clients so far.

You're just saying there's a lag in terms of adding the customers and then building up the business, whether it comes in NII or fees.

Yes, it takes a while to -- it takes a while to sort of do the onboarding with a lot of the brand name clients that you'd all recognize. It generally comes in and kind of chunks along the way once you're on boarded. But the -- all of it is going pretty smoothly right now, and we're expecting to start to see more and more of that come through over the coming quarters. So you'll see that incrementally come in each quarter.

The next question will come from Ken Usdin of Autonomous Research.

Mike, I was just wondering if you could follow that point that you talked about and John mentioned about the NIM going forward. Is it just a mix of assets that you're seeing in terms of on the commercial side related to our markets business versus commercial. Can you just kind of talk us through what you're seeing in terms of earning asset mix going forward and the types of loans, and if that's what's weighing on the NIM?

Yes. Yes. Sure, Ken. On the NIM, what you really saw are three things in the quarter, and I'll go back to a little bit of what I said, but maybe try to add a little bit more color on top of it. First is you saw the impact of this growth in the market's balance sheet impacting sort of the NIM. And again, that's not going to grow at the same pace forever. And so you'll see that moderate. We're getting some netting benefits now as it gets bigger. And so you'll start to see some of that come through in a little bit of a different trajectory potentially as you look at the coming quarters. You see interest-bearing deposits grow, so they become a bigger percentage of the overall deposit mix. And that's exactly what we expect to be seeing right now. As we came out of the asset cap, those -- we knew that, that was the place that we were going to be able to grow first. So they become a bigger percentage of the overall mix of the pie. And it's great to see that like commercial clients across the commercial bank and the corporate investment bank are moving business, in some cases, back to us that we had pre at some point, pre-asset cap and and the engagement has been really, really good. And those deposits are priced where the market is, which is competitive, but not -- we're not leaning in on price to grow there. And then you got a little impact from rates coming off the back of the fourth quarter. And so while you'll see a little bit more compression from the first two drivers, it will be less as we go into the second quarter. And again, that will start to moderate as we go, and we see other parts of the balance sheet grow, and we see repo growth be kind of the trajectory slow there a little bit. When you look at the loans side of things, while there's always a little compression happening across different pockets of the portfolio, that's not the place that's sort of driving sort of the NIM compression there. We are seeing. It is a competitive environment for loans, but we're not seeing irrational things, and we're not chasing irrationally tight spreads across the loan portfolio just to see growth. And so I think that's really important to note.

Great. And a follow-up on your point you made about taking a deeper look through the finance portfolio and thinking that, that one-off item was a one-off. Can you just talk us about kind of like what you went through there, and thank you for all the color you gave on those extra slides. And so kind of your relative confidence that you kind of caught that one got caught and that the rest of the book looks pretty good underneath it. And any kind of comment on just any migration you might be seeing, if at all? It sounds like it's pretty benign.

Yes. Yes. Look, I'll reiterate that was like a fraud situation. And so what we did is we took all of the lessons we saw coming off the back of that individual circumstance and sent teams into all the clients, particularly in kind of the European portfolio and did an in-depth review of all of the things that you would expect in terms of the procedures within the firm with a lot of perfection that we have across the different portfolios. And spent a lot of time and effort across the different teams. We brought in independent people. We brought in independent teams. So we've done a lot of work to kind of revalidate processes. And then as you do in these things, you sort of follow the money trail, and you trace back all the flows that you expect to see coming through the different bank accounts. And at this point, as I said, we feel confident that was isolated event.

The next question will come from Scott Siefers of Piper Sandler.

So really appreciate the extended disclosures on the NBFI exposure. And then it looks like the credit performance overall risk profile certainly seem to be holding up. I guess, in a sense, NBFI reminds you a little of where we might have been with office [indiscernible] a few years ago, not necessarily just like the actual quality. But in that for most banks, just doesn't have the potential to do meaningful damage yet generates so much distraction that a lot a few years ago, just sort of decided it wasn't worth to participate in like that. [indiscernible] given the distraction of costs from other good things that were going on. I wonder if you can maybe just add a thought or two about sort of with NBFI, how you balance sort of the good quantitative risk reward against just the qualitative aspects of the amount of airtime it consumes, and how that discussion kind of goes, if at all?

Yes. I mean -- this is Charlie. Thanks for the question. Listen, first of all, I would -- I think it's totally, totally different than CRE exposure. When you look at the risk characteristics of a CRE loan and what our protections are, what the attachment points are, all that other kind of stuff. When you go through a lot of the stuff Mike walked through in terms of the different pieces of lending we have here, really, really bad things need to happen for us to lose money in most of these portfolios, and we can go deeper and talk about some of these things to the extent you want to do it. So to the point that we feel really, really good about the way these things are structured, the client selection we have that stands first and foremost. I would say at this point, I think that we have two -- I would kind of take your question and put it into two different categories. Number one is we're not reacting today relative to where we're lending to the amount of airtime that's getting. Over time, we do have to be thoughtful about how large any one asset class should be, whether in terms of who the borrowing base is and things like that. So those are the types of conversations we're very much engaged in as we are in everything that we do to make sure as a company, we've got the right kind of diversification. And so hopefully, by providing the kinds of disclosures we did here, and we'll continue to make sure that we're as transparent as we can so that investors will feel as good about what we're doing as we do.

All right. Perfect. And then secondly, so I guess -- and I think we've all been surprised at how well lending momentum has performed year-to-date for the industry, particularly on the commercial side. It certainly seems to be the case for you all as well. And if anything, Mike recomment sounds like it's feeling better about how the full year could play out. Maybe just a thought or two about what it would take for customers to start to pull back on some of their borrowing plans just given all the volatility macro concerns, et cetera. It's just been kind of confounding to see how well trends have held up. So I would be curious to hear your thoughts.

Yes. No, it's an interesting point. And maybe I'll come back to -- I think I might have said this in the script, but like we're not actually seeing like utilization increase in people's revolvers yet. So a lot of the growth that we've been seeing is coming either -- we saw some growth in nonbank financial space. We saw some growth from new clients we've added and some other drivers that sort of then spread across the commercial book. But what we haven't really seen is that increase in the utilization yet of revolvers. And so it's not necessarily that like we expect, given what's happening that we'll see a pullback. It could be quite the opposite if people start to get more comfortable you could see some growth actually come from like the core commercial banking, middle market-type client who has been somewhat cautious now for the better part of a year plus waiting to kind of see how the environment develops. And so I think it's actually maybe -- probabilities are maybe more weighted that way than sort of a pullback just given we haven't seen a lot of utilization increases so far.

The next question will come from Ebrahim Poonawala of Bank of America.

I guess I just wanted to follow up very big picture, Charlie and Mike. The path to the 17% to 18% ROTCE is looking quite tough given what's happening with the margin? And I totally get the repo book growing the deposit mix on interest-bearing, all of that makes sense. But as we think about and I think as investors think about the stock, and think about how realistic it is that over the next, let's say, year or two Wells can be a 17% to 18% ROTCE company, like that feels a bit tough I'm not sure if you agree and maybe that 2-year time line was super aggressive, and it's not your time line. It's -- those are my words, but I would love some context around that, and how you're thinking about this today?

Yes, it's Mike. Maybe I'll take a shot, and thanks, Ebrahim. We're actually really confident in the path to get to from where we are roughly 15% to kind of 17% to 18%. And I think if you go across some of the key drivers, and I won't necessarily probably could be exhaustive, but I'll try to get to some of the key ones. And if you think about where we are on the consumer side, we've got our credit card business that we've talked about now a lot for a while. We've seen really good growth across originations and balances, but it hasn't contributed a lot to profitability given the upfront cost of marketing and some of the allowance that you have to put up. And as long as we get the credit box, correct, which we believe we do, given sort of the performance we're seeing, it's just a matter of time for that more meaningfully contributes to the profitability. And you'll start to see a little bit of that this year. As the earliest vintages mature. And as more vintages mature, that will start to incrementally come in into the P&L. So that's sort of the big driver, too. On the consumer side, as we continue to grow sort of the wealth business, Wells Fargo Premier offering that offers wealth management advice to the branch system. That's going to continue to have fees that come in that are very high returning. And we're seeing really good flows coming to that in business. We've got roughly 2,500 advisers across the branch system already. And that momentum is just built -- just really building. And then as we increase productivity in the branches and grow the core checking accounts, again, I think you've got a lot of growth drivers across the consumer side of the business. If you then look at the wealth business, we've talked a lot about the momentum that we're building there. And as that business just grows through improving just naturally improving the net flows we're getting, the recruiting we're seeing, you're going to see contribution from that business as well. And then on the commercial side, in the commercial bank, we've been adding a couple of hundred -- roughly a couple of hundred commercial bankers over the last 18, 24 months. We're really starting to see some of that get some traction as we add new clients. And a bunch of the loan growth we're seeing in the commercial bank is actually driven by those new clients come in. And as we add in payments and deposit work with them. And then in the corporate investment bank, the investment banking stuff, they're doing a great job of making incremental progress, but we've got a long way to go still to continue to monetize the investments we're making and -- but we see really good progress quarter after quarter in terms of the deals we're involved in. And then as you sort of look at the rest of the CIB, I think as we talked about the markets business, that will be a contributor. And so we're not overly reliant on any 1 thing to get us there. And as we continue to have better good expense control that we've talked about and sort of Charlie mentioned earlier, and we continue to optimize capital, and we talked about sort of how that's playing out through Basel III. So I think when you add it all up, actually, there's a bunch of different paths to get us to that 17% to 18%, which should give you a lot of confidence that it's achievable in a reasonable amount of time. And then as we've said when we rolled it out, like we think that's not the end, right? We think there's more to do once we hit that.

Yes, this is Charlie. Let me just add a couple of things. Mike was very complete in what he said, and I agree with all of it. Just to be clear, we feel as confident as ever in that. There is absolutely nothing that has changed. And I also want to point out that this is a good thing, which is we don't have a business model where points of view like that should change quarter-on-quarter, okay? That's not the kind of business that we're building. The only thing that would have these dramatic changes is if we thought we got something very wrong, or if there was some huge event out there that we missed. And none of that is the case. So the question for us is, are we building the underlying organic growth of the businesses, business by business, and the reason why we have the confidence that we have is because we're seeing these KPIs across every one of our businesses growing in a reasonable way. We don't want to grow too quickly, but we want to start making sure that we're seeing this consistently business by business and that -- and listen, and we understand, and we think this is good that we're transparent about this, that we have room to improve performance in every one of these businesses. And the things that we're doing, we're very confident and will ultimately lead to increased profit, faster growth and higher returns. And as we said, nothing has changed from last quarter or the quarter before that in terms of how we feel about that.

That is very comprehensive. Just one quick follow-up. On and off, there's a lot of chatter on what wells could do on M&A and banking and wealth. I'm not sure there are too many financially attractive deals available today, given where the stock trades give us a mark-to-market on how you're thinking about deals. I appreciate the bar is high, but I think it will be helpful to hear your thoughts again on how you're thinking about inorganic growth, yes.

It's funny. We spend more time answering questions. And this isn't just about your question, obviously, we get this everywhere. We spend more time answering the questions about it than we do actually think about doing deals. We are focused on organic growth. We think we have a differentiated opportunity versus all the people that we compete with because of where we've come from being so constrained and match that with the quality of the business and the opportunities that we have. We are entirely focused on that. and it doesn't mean that we won't look at smaller things. And I always say, you can't say never is never, but we're not spending time on it. We're not focused on it. This is the opportunity that we're focused on, and we feel really great about it.

The next question will come from Erika Najarian of UBS.

On the Basel III end game estimate, the 7% RWA decline, I guess all else being equal, were calculating that would give you about 80 basis points of net new excess capital. I guess a couple of questions, Mike. Is that sort of the right way to think about it? And if so, combined with the GCIB of 1.5% and assuming you sustain sort of the floor on SCB, Wells would be at a minimum of 8.5%. And contemplating all of that, what is sort of the -- would you run this company at lower than 10% CET1?

Yes, Erika, we're not at the point where we're going to put a new target out. Like we got to see how this gets finalized. We've got -- it's going to be a year plus probably before it gets implemented and lots can change. And so we're still going to stick with the 10%, 10.5%.

Yes. But let me just -- listen, I think there's no magic to 10% to 10.5% in the future if our capital requirements change, and there's no floor at 10%. As Mike said, we don't want to put the cart before the horse and start talking about something before it's finalized. Things can change, but when these rules are finalized, we will look at what our requirements are. We'll have the conversation about how much excess do we want to run now that there's more certainty in some of these things and then make a decision. And so the trajectory is very favorable for us. We just don't want to get ahead of ourselves and say we're going to change where we're running at this point before things are finalized. But directionally, there's a place to go here.

Got it. Just wanted to just add clarity to the Rose discussion given the positive direction on the denominator. And just my follow-up question is just thinking about this -- all the net interest income questions another way. So you reported a year-over-year increase in net interest income of 5% and despite 20 basis points of year-over-year net interest margin compression. And Mike, if we think about year-over-year net interest income growth of about, let's say, at the same pace, let's say, 4% year-over-year. Clearly, some balance sheet driven, maybe a little bit stability in the NIM in the second half of the year. We get to that $50 billion plus or minus. Is that the right different way to think about it rather than just thinking about the quarterly cadence?

Well, let me give you some of the drivers underneath it, and then maybe see if that sort of gets at what you're trying to get at, Erika. Obviously, all of what you sort of quoted in terms of what you saw this quarter is right. And as you sort of look to how we get from where we are to sort of the $50 billion plus or minus. What we're expecting to continue to see throughout the year is we continue to expect to see loan growth each quarter. And if you break that down a little bit and you go into the consumer side of the house, mortgages should stop declining. You'll see growth from the first quarter in card the first quarter has got some seasonality baked in coming off the back of the holiday season in the fourth quarter. So you'll see growth there. And we expect to see continued growth in the auto portfolio. So overall, consumer loans continue to grow throughout the year. You've got our growth in deposits that we expect to see, again, largely interest-bearing. We're not relying on any significant growth in noninterest bearing as we go through the year. And that will build up over time as we're more and more successful growing sort of checking accounts or that growth in noninterest-bearing well. And then we have -- the other side of it is also we haven't assumed that we've got a big deployment in securities. If we see we've got good amount of excess cash. We could do more in securities as well to pick up some extra NII. And then you got like really the path of rates. And as I said in my script, if rates do stay higher for longer than people expect at the beginning of the year, that alone will be a net positive. And then we just got to see how that sort of plays out across all the other variables. Do we see a little bit more change in deposit mix or other drivers that are underneath it. And ultimately, I think we have a really achievable path to $50 billion. And if all works out, it could be better than that, depending on how it all plays out through the rest of the year. And then obviously, the markets-related NII will swing around a little bit depending on sort of where the ultimate path of rates goes, but largely offset on the fee side. Does that help?

Yes, very helpful.

The next question will come from John Pancari with Evercore.

Just on the expense topic. I know you saw about a 3% year-over-year increase. You cited the investments in technology and advertising, or we saw some ongoing business investments, including in technology and other areas. Would you say -- and I know you're confident in the 55.7% guidance, can you talk to us about any pressures there that that you're seeing that may move you off that target? Or just if you can maybe give us some more detail on your confidence in attaining that target despite running somewhat pressured levels in the near term here.

I mean the only real pressure that we see would be revenue-related expenses to the extent in our asset and wealth business, that we generate higher levels of revenues, and we've got commissions that are tied to that. Everything else, we're continuing to track relative to what we thought in the guidance. And by the way, our the revenue-related comp, we still think is tracking to that, so have relooked at that. But nothing has changed relative to our views on how -- where we think overall expenses looking out. And again, I just want to reiterate that it's a continuation of the story that we've been talking about for quite some time now, which is we're increasing the level of investment in the areas that we think are important to do for the franchise, and we're driving efficiencies in other parts of the organization. And we still see the opportunities to do that and contain the expense base while we're able to grow the revenues and increase pretax pre-provision.

Yes. And John, your question might have implied that there's like pressure relative to consensus. But in reality, we're actually exactly where we thought we'd be relative to the guidance we gave. And so we feel really, as Charlie said, confident about like what we've given. And the bulk of the increase that you saw year-on-year, the roughly $440 million of increase, the bulk of that is really the revenue-related comp and win. The rest of it is very small on a net basis across the rest of the whole company. So we feel good about the guidance we have.

Got it. All right. I appreciate it. And then separately, on the additional NBFI disclosures, I appreciate the detail and appreciate the quantification of the BDC exposure, it looks like about $8 billion. Can you maybe help us frame the broader private credit exposure, if you could help size that up? And any impact of regulatory input around this. I know clearly, the regulators have stepped up, there were increase around the area as well. So any changes expected as a result of the ongoing discussions on that front?

Yes. I mean the short answer on the last piece is no. We're comfortable with our exposures, and that's where the conversation starts. I think and I mentioned, but I'll kind of read go through it, like the majority of our private credits, those are sits in that corporate debt finance bucket, which is on Page 10 of the [Audio gap] $6.2 billion of it. That's the vast majority of the exposure.

The next question will come from Manan Gosalia with Morgan Stanley.

One clarification on your response to Erika's question. Just given the clarity on the capital rules, you're suggesting that the bias would be to eventually take down the 10% to 10.5% CET1 target, right? So in other words, as you get the benefit of the lower RWAs, the excess capital you free up would be something available to deploy quickly?

What we said was that we are running our excess today based upon today's capital rules. And when the capital rules get finalized, we will reevaluate what that is and evaluate how big a buffer we think we need at that point in time, period end of story. And if our RWAs go down, then that's a positive. And we've got to think about what's going on in the environment at that point in time what we're comfortable doing. But directionally, it's constructive for us relative to how much capital we ultimately need to hold.

Yes. And all else equal, if our CET1 percentage goes up as a result of lower RWA, that gives us more capacity to deploy to support clients or return to shareholders.

Yes. I mean, yes, I mean we're confusing RWAs capital requirements and dollars of excess capital. And so it's going to come down to how much of that dollar excess there is and how we expect to use it.

No, that's clear. I appreciate that. And then maybe as a follow-up, as we get some of these changes that that benefit the mortgage banking business, both on originations and on servicing. Is there anything that wells would do maybe to lean in? And is there more long-term opportunity for either of those businesses?

I think we're very comfortable with the plan we have in our home lending business today, which is focusing on people who are broader clients within the bank. As I've said this in the past, it's not just the capital levels that drive our desires in this business. It's the operational risk that's embedded in there. It's the reputational risk. It's -- there's a -- relative to making mistakes, foreclosing on behalf of others. When you're following the rules and whatnot. And so there's just a certain level of sizing that we're comfortable. And we don't see that changing at this point.

And on the servicing side, the capital rules aren't really changing much other than a removal of a penalty rate if you get too big. So that doesn't change much there on the service side of the capital side.

The next question will come from Gerard Cassidy of RBC Capital Markets.

Mike, can you share with us, when you look at your loan loss reserves, maybe the scenario waiting was this quarter with the evolving macro risks that are out there, of course, with the hostilities in the Middle East? And how that might have affected the way you guys address the reserves this quarter?

Yes. Sure, Gerard. For a while, we've had a significant weighting on our downside scenarios, and that weighting hasn't changed. But every quarter, the scenarios changed a little. And in this quarter, if you look at unemployment rate, just as one example, the peak unemployment rate went up 4 basis points as a result of our scenarios, I went up to a little over 6%. So 6 and 1 basis point to be exact, is sort of the peak unemployment rate. And so when we look at all the different scenarios, as we know today, based on what we think can happen as a result of what we're seeing we think the scenarios cover anything that's sort of probable at this point. And so -- and then across the other variables moved around a little bit, but not a lot. And so we've maintained that significant downside weighting, and then we'll keep it that way at this point for the quarter, and we think that's appropriate for where things stand.

Very good. And then as a follow-up, possibly for you, Charlie. You talked about your organic growth, this is what you're focused on. I think you mentioned you finally closed on the rail deal and obviously, all the regulatory orders, with the exception of the one for BSA are behind you. So putting that one regulatory order off to the side, can you share with us just this organic growth. Everybody is obviously pulling the [indiscernible] in the same direction. Are we going to see it really start to materialize more in the consumer side, commercial side. What are you guys seeing when you focus on this organic growth over the next 12 to 24 months?

Hi, Gerard, it's Mike. I'll try to take that and Charlie can chime in. I think we're starting to see it everywhere. And if you go back to Page 2 of the presentation that we put out today, we tried to just summarize some of the key things that we're seeing or grow each of the businesses. If you look on the Consumer Banking and Lending segment, checking accounts, up 15 -- new checking accounts openings up 15%. Credit card accounts up 60%. Auto originations up 2x what they were last year. In the CIB, we saw revenue -- banking revenue up 11%, markets up 19%. Our share was stable but good growth in equity capital markets in the investment banking side. In wealth, we continue to have really strong recruiting across the different channels and client assets up 11%, revenue up 14%. We saw good loan growth in that business. We saw good deposit growth in that business. And then lastly, in Commercial Banking, we're seeing the benefit of the investments that we've been making now for the last couple of years really come through with both loans and deposits up and even better new client originate new clients that we're adding to the platform, up substantially from where they've been in prior years. And look, these things take time. We're not claiming victory in any way. We've got a lot more to do to improve the performance across each of these businesses. But a lot of that organic activity is coming through in the numbers, and you can see it in many of the metrics that we put out.

The next question comes from Chris McGratty of KBW.

Mike, on the NII, I just wanted to split [indiscernible] for a moment, if you don't mind. When you talk about the fluidity of the cuts and the forward curve and 2 to 3 cuts last quarter and maybe nothing now, how much of an impact does it have on the fourth quarter exit run rate? I guess it's more of a jumping off question for '27?

Yes. I mean, look, obviously, that's going to have a bigger impact for next year as you point out in this year. So where we end the year will matter a lot more as we go into 2027, and you can annualize it. And I think when you look at our Q, and you see sort of the sensitivities there, that's like a good enough way to start to mention sort of what it means for a full year, particularly coming out of like fourth quarter. So I would start there with your modeling. But obviously, any changes in the forward curve are going to have a little bit of an impact this year, but not super big because they were all back weighted.

Okay. And my follow-up, the 7% reduction in risk-weighted assets, I'm interested. I know you didn't publicly comment before it was out there, but was that better or worse than you thought you might see from the proposals?

We don't know. It's hard -- like we had a bunch of stuff we made up like anticipating what we might see, but as others have put, like it's a 1,200 paid proposal. So any of those estimates we had going into it were kind of meaningless.

Listen, I think the areas that we benefit from are all the areas that we had commented on, and we believe they've got it right. Do we think the thing is perfect, and they've gotten everything exactly right. No. But it's direct -- it was actually sort of where we thought.

The next question will come from Vivek Juneja of JPMoran.

Mike, just a quick clarification given the when I think cost going on and then the call is going on long so I want to keep you, the service -- the private credit exposure, the once you give the majority of it is in the consumer -- sorry, the commercial debt finance of $36 billion. So...

In fact, that is all private credit exposure, and it is the vast majority of our private credit exposure is the $36 billion. And then the BDCs are a subset of that.

And the next question will come from Saul Martinez of HSBC.

I'm sorry to beat a dead horse with the net interest income. But NIIX markets was only up 2% year-on-year. If I look at loan growth, excluding markets lending, it was up 8%. Deposit growth has been good. And I guess -- so it does seem like you are seeing some core margin pressure there. And I just wanted to ask if you have a little bit more color on what is driving that? Is this competitive dynamics in deposits? And I guess, are you competing on -- in terms of pricing on lending and deposits, or is there a risk that you're pricing loans and deposits in a way that is sacrificing returns in order to offer growth?

Thanks, Saul. So rates is driving it. Number one, interest rates coming down year-on-year sort of driving, as we saw rate cuts last year. We're seeing growth in the interest-bearing deposit side, noninterest-bearing are slower to sort of grow as we sort of build the checking account growth that we've talked about in the call. And then on the lending side of things, we're not on the consumer side, we're not seeing compression there. Spreads are in a little bit on loans across like some of the commercial side, but nothing super significant. And we're not out there competing on price to try to grow the balance sheet. So you're seeing all those things sort of come through in the underlying results, which is exactly kind of what we thought would be happening as we sort of rolled out the guidance in January. So largely nothing that's unexpected to sort of come through. And your point on like competition on pricing and deposits, we're not seeing like competition on pricing. That's not what it is. We're just growing some of the interest-bearing stuff faster than noninterest-bearing, but it's all at rates that are within where we thought they would be.

And we -- and if we do a good job, as Mike just alluded to a couple of times, we should be growing the noninterest-bearing further down the line as we bring on more of these relationships and have more balances here to work with customers, both on the consumer side and on the business side.

Got it. Okay. And I guess on reserving, maybe a follow-up to the earlier question. Your reserve rate for C&I is about 1%. It's been about 1% for a while. NBFI is obviously a big part of that. I'm curious, it sounds like the NBFI portfolio generally has a lower loss content than the balance of the book, maybe correct me if I'm wrong, are -- do reserves reflect that? And I'm curious if there's been any change in in your view of loss content in that -- in those portfolios and which would influence how you're reserving for those folks.

The -- no change in sort of our thinking as we look forward in terms of loss content, and most of those portfolios, there's been virtually nothing for a longer period of times.

Yes.

The allowance is lower and not changing materially at this point.

And our final question will come from David Chiaverini with Jefferies.

So I wanted to start on the capital markets outlook and the pipeline. Can you frame the outlook following a strong first quarter here?

Yes. Look, I think we still expect that the financing markets are sort of wide open still. So we still expect to see a lot of activity on the debt side. both investment grade and sort of leverage finance. And so there's plenty of money on the sidelines to sort of be put to work there. And that's certainly been the case for a while. I think on the equity capital market side, you've certainly seen some delay in IPO activity in the latter part of the first quarter, assuming some of the volatilities of size or stabilizes, you may see some of that start to come back. There's certainly a pipeline of companies sort of waiting to go. And then in the meantime, you've definitely seen a lot of activity on the convert side and other parts of the ECM wallet. But -- so overall, I'd say the pipeline and the expectation is still to see a pretty active rest of the year.

Great. And then shifting over to your credit card account growth, which is very nice to see good growth, very strong. What is the drivers behind that? Is it more rewards, more marketing, better rate. What are some of the drivers there?

It starts with really good, compelling, simple products. And I think since -- in the last 5 years, the team has replatformed every product that we had in the market. Starting with our active cash card, which is a very simple 2% cash back value proposition and then added a series of products over -- since then. And I think what we've seen is that we've had really good reception from both existing and sort of new clients to the bank for what are very easy to understand compelling products. And then over the last 3 quarters, we've seen an uptick in originations as our branches become more productive in terms of helping customers get the right card, and we've also seen an increase in customers come to us directly looking for the cards as the awareness and the size of the portfolio...

Awareness, it's pending on -- its advertising, both targeted and were general. We're increasing the amount of advertiser doing both in the card business and the broader consumer business. And so that plus more of the targeted things we're doing in the digital space is driving increases there. So it's a combination, as Mike said, of just the products we have but us getting better and better at targeting originations. And our credit quality is still really strong.

All right. Thanks, everyone, for the questions. We'll see you next time.

Thank you all for your participation in today's conference call. At this time, all parties may disconnect.

All right, everybody. Welcome again back into the room. So we have up next in -- a big day for banks, the Senior Executive Vice President and CFO of Wells Fargo, Mike Santomassimo. Mike, welcome.

Great. Thanks for having me.

Absolutely. So maybe we'll just kick off at the top of the house. Again, we find ourselves in a cross current of geopolitical uncertainty, tariff policy, but at the same time, it feels like corporates are feeling good to start the year, deregulation across sectors, potential for lower rates. So maybe let's start with how your consumer, corporate, institutional and wealth clients are considering these factors as they think about activity levels in '26?

Yes. No, look, I think as you look at the start of the year, and it's really been a continuation of what we've seen now for a number of quarters. Activity levels are really good. Spend on the consumer side is up year-on-year every week, consistent in terms of the percentage increase that we're seeing. Categories move around all the time. But overall, like that spend across debit, credit, very, very consistent, which I think supports this really strong growth that we're seeing overall in the economy.

Credit performance is still very good. We're not seeing signs of any systemic deterioration at all, across the consumer or the commercial portfolios. And so overall, delinquencies are great. Performance is great. Spend is really good. So it sets us up for a pretty good year, it looks like on the consumer side.

On the commercial side, it's pretty similar. Now what you're not seeing still in the commercial banking client base is this big investment cycle yet. People aren't utilizing the revolvers more significantly than they had. It's still -- the utilization rates are still low on a historic basis. So I think that's an opportunity as people continue to get more and more comfortable with where the economy is going over the next couple of years.

But there, again, we're seeing good credit performance, good activity levels overall, no systemic issues popping in the portfolio across any of the areas. And so I think it sets us up for a pretty good year. And then you couple that with really strong markets, a little bit of volatility here and there on the equity market side, but very strong markets overall. And I think -- so that everyone is feeling like it should be -- the activity levels should continue into this year. And that includes investment banking side. It includes all of what we're seeing across really most of the client base.

So refocusing back to Wells Fargo specifically, other than, of course, growing your balance sheet, how has your strategy shifted, if at all, since the lifting of the asset cap? And of course, you've seen the growth in trading assets, but maybe talk about specific businesses or desks where your mindset on balance sheet allocation may have really shifted post asset cap lifting?

Well, the strategy hasn't changed at all. And a lot of where we're seeing growth are the areas that we started investing in 4, 5, 6 years ago. On the consumer side, it's places like card, it's in our retail footprint across the core consumer banking space. On the commercial side, it's in places like investment banking, the markets business. So now that we've got the flexibility to grow the balance sheet, you're starting to see some of that actual growth come through. But it's really no different than what we laid out over the last number of years, and we've been talking about the last couple of years.

On the market side, which is the place -- was the business by far the most impacted by the asset cap, what you've seen so far in large part is growth in a lot of the financing trade financing business that we have across there across. Mostly fixed income, but other asset classes as well in that business. And really, that's the place that you'll -- you should expect to see grow first. It's all high-quality collateral. It's very low risk, low RWA, good returning business. And it ends up being the thing that helps you then build the other activity with those -- with that client base. And that will come over a period of time.

But I think we're very pleased with what we're seeing come through so far across those businesses. It's been pretty widespread across the client base. It's been pretty much focused on a number of places across the markets business. And it's exactly what we expected to happen as we came out of the asset cap and started to see some growth.

So speaking of growth, your outlook for mid-single-digit average loan growth in a 4Q '26 versus 4Q '25 time frame would imply end-of-period loan growth of 3.5% in '25. The H8 data has recently implied that the large bank group is one standard deviation above seasonal. So seasonal trends, so things are a little bit better. Given the dynamic that you specifically have in card and auto and what you just laid out on commercial, what continues to be the drag on total loan growth for Wells? And should we consider some conservatism maybe baked into that number?

Well, I think let me tell you what we're seeing across the portfolios, and then we're hopeful that we'll do better than what we laid out, but I'll walk you through each of the portfolios. On the card side, as we said, we're seeing good growth there, and it's been pretty consistent now for a while. It's really driven by the newer products that we've launched over the last 3 or 4 years. And I think that continues.

And we did -- we saw a good uptick in new account origination in the credit card business in the second half of last year. And so hopefully, that will continue into this year and continue to support sort of good growth there. And we're very pleased with what's going on there. And I think you'll see some more new products come this year, focused on some of our wealth management client base and some other pockets that we've got there.

In the auto business, if you go back now, take a couple of steps back a few years ago, we very much focused on prime, super prime part of the business, while we sort of reinvested or invested in our underwriting capabilities to make sure that we were very comfortable with the way we were going about becoming a little bit more of a full spectrum lender.

I say that like a little more full spectrum. I wouldn't say we're going all the way down into deep subprime in any way. So it's really just coming down a little bit in the credit spectrum there. You couple that with bringing on the Volkswagen, Audi preferred partnership that we have with them in the U.S. And you're seeing really good growth in the auto business now over the last 2, 3 quarters. And we're seeing -- we're really liking the momentum that we have there. So we should expect to see some growth continue overall in that business.

The one place that's not growing much in the consumer side is the mortgage business. So we've seen some decline in that over time. That decline should moderate and be relatively flat throughout the year. And so that's really what's happening there. And I think depending on sort of how things shape up on the consumer side, you could see a little more, a little less depending on -- in each of those categories, depending on how things play out for the year.

On the commercial side, you've seen really good growth in the Corporate and Investment Bank, and you've seen some growth mainly from new clients in the Commercial Bank. Like I said before, we're not seeing a lot of utilization from the increases in utilization from the Commercial Banking client base yet. And so if that starts to pick up, that would be a positive relative to overall expectations that we set. But we're seeing like good healthy growth there in that business.

And over the last 2 or 3 years, we've been adding hundreds of commercial bankers in local markets around the country and some focus on some industries like health care or technology and other places. And we're starting to see really that investment pay off with an increase in new account -- new client growth over last year and then coming into this year. So that's what's driving there. And so we'll see if things are -- if that investment cycle really starts to pick up in that client base, we should see higher growth there, but we'll see.

And then on the corporate investment banking side, what you're seeing there is some growth in the nonbank financial space, but also some growth across like a broader set of clients. In the nonbank financial space, it's areas that we've been in for a long time and are very good at. Our capital call facilities and fund finance that we deal with large private equity, private credit managers and then a whole bunch of other asset classes there that you've seen grow over the last couple of years.

And then -- but you're seeing some good growth across a lot of the other asset classes, which is a good sign that some of those other sectors -- clients in those other sectors are really starting to make some investments and borrow, which I think should hopefully be a good sign as we go later in the year. So are we being conservative? Who knows? But I think overall, like the signs -- the momentum is good. We're comfortable with like the risk appetite we've got. And depending on how the year plays out, it could be a little better.

So maybe just to follow up on the investment cycle for your commercial bank clients. The speaker before you was very bullish on the stimulative effects of the Big Beautiful Bill and how it could stimulate the CapEx cycle. Do you feel from what you're hearing from your commercial bank clients, is that really going to be a factor in terms of the CapEx cycle?

Yes, I think it matters for sure. And I think it's a net positive. But I think remember, people had to deal with a lot in the second half of last year. You had some tariff noise. You had some supply chain stuff you had to work on. You had -- people were still a little uncertain where the overall economy was going and was there going to be a little bit of a slowdown or not.

And so I think as those things are a little bit more in the rearview mirror and people can then refocus their energies on those growth initiatives. And I'm sure others are saying this, too. You're going to see more activity like M&A and other -- across a bunch of different sectors. And that's all part of that investment cycle, I think, as you look across that client base. And so assuming like the economy overall continues to have some good momentum, I think you'll see more of that happen. And I think the bill's certainly is part of that.

Does the OCC extinguishing the leverage loan limits that they put in place in 2013, does that have any meaningful impact or notable impact for how you're thinking about what you put on the sheet?

Look, it definitely matters. Is it going to be -- is it going to change the growth rate of loans by like significant amounts, like probably not, like in the short run. But it does matter a lot. And I think it helps us be much more competitive in a bunch of situations that we're very comfortable with the risk. We've known clients for a very long time, and it allows us to compete and really keep that client or grow with those clients in a very different way. And so I think it does -- it certainly does matter.

And I think just broadly being able to have more flexibility, more freedom to kind of set your risk appetite, really work with clients you've known for a very long time. And a lot of those clients, keep in mind, are like commercial banking style clients. And in a lot of cases, we've known these clients for decades and decades. Every client -- every commercial banking event I go to, there's a client that says, 20 years ago or 30 years ago or 10 years ago, you were there as a bank to really help support us. And so these are clients that we've known forever. And I think it does help us be much more competitive there and gives you another quiver in your tool kit.

So I think the progress that you've made in the results in your Corporate and Investment Bank or your CIB has been sort of the most telling piece of evidence that you guys were growing underneath the asset cap, right, that your strategy hasn't really changed. And 2026, again, with a very bullish figure on capital markets for 2026. So maybe let's just start with banking. Given your starting point, should we assume that you can continue to grow higher than what the wallet growth is going to be in 2026? And in terms of advisory versus ECM versus DCM, where are your strengths currently biased?

Yes. I mean that's certainly the goal is to keep growing market share. And I think we've been able to do that now for a couple of years and really start to grind that up over time. And if you take a little bit of a step back in investment banking, what we've been doing now is executing a strategy we set out 3 or 4 years ago, which is just very simple in terms of making sure you got the right people covering the right clients. You got the right types of folks on all of the product areas, including M&A, advisory, equity and debt capital markets and with sector expertise across them.

And what we've done is we've hired roughly 100 or so senior folks across the investment bank. And we're starting to see that -- those new folks together with the base of folks that have been around a long time, really start to see the results come through in terms of more deals that we wouldn't have been on in the past. It's both across the Corporate and Investment Bank, but also the Commercial Banking client base as well, where there's lots of activity that we just weren't taking advantage of in the past.

And so the goal is to continue to see more progress. And I think the most visible way you see that progress is through market share and wallet share increases. And when you look across each of the product areas, like we feel like we can compete with anybody. We're continuing to add people in different subsectors across the main industry groups. And we've been super pleased with all of the folks we've been able to recruit from really all over the place.

And I think they really -- the platform and the growth story and being able to build the business from what already is -- has a business that has some scale to it is very much resonates with all the people we've brought in. And so we've been really, really, really happy with that progress. And I think the goal is to continue to build that up and become first top 5, and then we'll see where it goes from there in terms of overall share.

And speaking of the markets business, I'm sure the same concept will be applicable. One of your G-SIB peers noted that trading or markets rather should grow 2x GDP. Do you agree with that? And again, can you contextualize sort of where the market share wins could be maybe by product?

Yes. Look, it's hard to like come up with an exact number. But like for us, the opportunity is big in markets. As I said earlier, that was a business most constrained by the asset cap. We just couldn't do basic things to help support clients across basic financing needs, which leads to other activity with folks. And I think we feel really good about the opportunity there. And I think when you go talk to clients, they want -- it's a competitive marketplace, but they want more providers and more firms that can support them. And we're seeing really good uptake from all the brand names across the wallet in the street that are there.

And I think we've seen some really good evidence that, that demand is there. I've talked about our FX business in the past. But you look at our FX business, we built it from a -- basically only doing FX for corporate payment flows. We systematically sort of built out like an institutional side of it, and we hit record volumes every quarter now in that business. And you can sort of take that same playbook that we've had there and apply it to rates, apply it to some of what we're doing on fixed income financing. You've got the equities business.

And again, we're focused mainly on U.S.-based clients and then supporting them where we need to outside the U.S. So it's a bit of a different comparison point and maybe some of the others, but we're seeing really good places. And even in one of our smaller businesses like our commodities business, it's really built off the back of our corporate franchise. And so we're relatively -- we have really good share in some odd things within commodities, but it's really based on like the Commercial Banking and Corporate Banking business that we do across the country. And so -- and it naturally -- it's just a natural extension of what we do for a lot of those clients.

And so we feel really good about the progress. You'll see, as I said earlier, what you've seen so far is a lot of financing activity that's grown the balance sheet so far. And then you fill in and you monetize that financing activity by doing a whole bunch of other things with clients. That takes a little bit more time to kind of come through the P&L, but we're very confident that the team is executing really well on that.

So before we move on for markets, I do want to clarify something that you were trying to point out on the earnings call. You said you expected to grow total markets revenue in 2026. Maybe could you walk us through expectations for both the NII component and the fee income component?

Yes. The markets revenue is like a favorite topic for a lot of people. And we like to break it apart between net interest income and fees. And when you're in an environment where either rates are going up or rates are going down, you have geography changes between fees and NII. And so sometimes that can distort things a little bit in terms of if you're looking at accounting line items.

But when you look at the overall business, we expect markets revenue to grow year-on-year. That will mean higher NII, lower fees, all else equal. But if -- let me back up. If revenue was flat year-on-year, you would see a geography change of higher NII, lower fees. But we're saying overall, revenue should grow. How much we'll see, right? A lot of that's going to be based on the volatility that's there and the activity levels in the overall market. But we're very optimistic about what we're seeing there, and I think we should see the overall revenue continue to grow there.

Okay. And so just to follow up, if markets revenue is growing, then the fee component could be flattish potentially?

Potentially.

Okay. Just switching to the consumer side on deposits. Charlie has been publicly saying that you should grow faster than market over time here as well. I think there's a big theme to this fireside chat. And you have recently talked about new net checking account growth stronger in '25 versus '24. Could you contextualize this a little bit more?

Sure. As part of what we had to do to fix the regulatory issues and in particular, the sales practice issues that were there as a company. We needed to kind of tear down all of the incentive systems and all of the mechanisms you used to grow in the consumer bank and rebuild them all. And so what you saw for a number of years was just not a lot of growth in the consumer business. And you can see that from a lot of the public metrics that are out there across different areas.

And at the same time, because of the asset cap, we weren't out there proactively doing a lot of digital marketing or other -- we're really trying to grow aggressively in the consumer business for a number of years. So starting, I don't know, 18 months, 2 years ago, we started to reintroduce all that stuff, new incentive systems with all the right controls around them, more rebuilt sort of the marketing capabilities using a lot newer technology, better -- different people and a whole bunch of things as we sort of invested in that.

And so what you're starting to see is the benefit of that come through in better checking account growth. And this year, our 2025 was up a bunch relative to where it was the year before. That was up a bunch from the year before that. A lot of it was driven by what we were doing in the digital space and the branch system is starting to kind of come up to speed in terms of the productivity that we expect to see there. And so we expect that to continue to grow.

And I think as the branch system continues to become -- get to the level of productivity that we expect, you'll start to see that be a more meaningful contributor to it. And then we'll ultimately see sort of how we look relative to the other big banks. But we're seeing really good progress there over the last 2 years, and I expect that to continue into this year.

So sticking to the consumer, maybe let's talk a little bit about card. Again, you've shown some really great successes on the growth front. And of course, many investors know about the economics of card, particularly when you're building it from the ground up, right? The profitability is back-end loaded, so to speak. When do you think pre-provision profit in card can start improving more meaningfully as you sort of lap the marketing, the promos?

Yes. So we've replatformed every product that we had. And that -- the early ones got launched in late -- second half of '21 really and then more meaningfully in 2022. And so you start to see the maturation of those vintages in about 3 years. And so you'll start to see the early vintages mature now into this year. And so you'll start to see that impact grow starting now and into over the coming years.

And I think when you look at what we've seen so far across those vintages, it's doing exactly like what we thought it would. The credit box is very strong. And in most cases, the -- in really all the vintages that we've put on, the credit profile looks as good or better than the kind of the back book that's been there a long time.

So the credit performance has been really good. Delinquencies on the margin are a little bit better than we modeled still month after month. Credit performance has been really good. Spend levels are up. And so overall, we're seeing kind of exactly what we thought we'd see by -- through those vintages, and they start to more meaningfully compound over the next couple of years, but you'll see some of that increase starting this year.

So in terms of where you play in the spectrum, obviously, there's a lot of competition for like the high spenders and affluent. Are you competing there? And are you continuing to market to your deposit base? Or given the asset cap lift, are you starting to expand out?

Yes.

I did see Super Bowl commercial.

Yes. Yes. It was only in certain markets, by the way. We're still -- we didn't do a whole national commercial to.

It was in Miami.

I'm too cheap, I guess. I think the -- there's a couple of bunch of stuff in there, so make sure I capture it all. But when you look at the originations, it's still about 60-40 roughly directionally in terms of existing clients, new clients. So we are adding a lot of new clients to the mix each year as we go. And so -- and that's been a relatively consistent sort of percentage for a while.

We're not trying to go like to the Uber high end. I think there's a ton of opportunity for us to participate more from where we are. And then as I mentioned earlier, launch some new products geared towards our wealth management clients both in the branch system, what we call Wells Fargo Premier, sort of that affluent customer and then the higher-end wealth management or private banking type customer. So you'll see more products come out there this year, but we're not necessarily trying to go all the way up.

When you think about the opportunity we have, we still have a lot of opportunity on the existing client base. There's still over 10 million customers within the existing -- within our footprint, within our consumer bank that fit exactly in the credit box. And it's just a matter of continuing to market and make sure we've got the right product for each of those folks.

We've improved a lot of how the experience looks in the branches, too. So you're preapproved in a lot of cases when you're walking into a branch now. That wasn't always the case. And so there's a lot of tactics that we've put in place to increase that penetration, and we're seeing some good results there.

And then as we have more products that fit the bill, I think that opportunity set gets bigger and bigger. And so there's a lot of opportunity still there, but we're seeing really good take-up in the digital space, too. And what you saw in the second half of last year at our credit card originations is really 2 things.

One, better performance in the branches. So we saw a big uptick in new sales coming out of the branches using a lot of the things I mentioned in terms of the tactics that we put in place for the branch employees. And then we saw a lot of people coming directly to wellsfargo.com or our digital properties, which is a great way to do it because you don't have to pay that third party as you're marketing. And so we saw really good uptake in kind of the 2 most cost-effective channels, which tells you you're getting some good traction, I think, overall with the value prop on the cards.

So let's talk about WIM since you did mention that. So during the quarter, you said a couple of things. Total hires increasing, attrition declining and net asset flows accelerating in the second half of '25. What are the key growth priorities here for Wealth in '26, particularly as the momentum has shifted underneath the surface?

Yes. I mean you really got to look at it by channel. So there's -- we've got a few key channels in the business. First is what we call Wells Fargo Premier, I mentioned earlier. This is focused on the folks in our -- that get service out of the branch system. So we've got a couple of thousand, 2,500 or so advisers sitting in the branches already. And they're working with clients that have roughly $250,000 and above, either with us or away from us. There's something like 8 million -- 6 million to 8 million customers that probably have something like $6 trillion to $8 trillion or away from us.

And so there's a huge opportunity to better serve those customers. And if we can do a good job on the wealth management side of that equation, they will bring -- the data would suggest they'll bring 2x the banking and lending wallet as well. And you're seeing the momentum really pick up in the second half of the year in terms of new flows coming on to the platform from that channel. And so we're really excited about that piece of it. And there's only a couple of us that really have that opportunity across such a scaled platform.

In the private client channel, which is kind of the traditional sort of adviser channel, attrition is as low as it's been. We're recruiting great teams from all over the place, which has been really good to see. And they're not little, small mom-and-pop teams in a lot of cases. They're really big, scaled teams that are growing and really want our platform, our balance sheet to do interesting things on the lending side with their clients as well. And so we're seeing good momentum there across the board. And there, we're continuing to focus on more alternatives, banking lending penetration and really helping make the advisers more and more productive so they can grow on the platform.

And then the other part, which the last channel, which is unique to us is really servicing the independents. Fastest-growing channel by number of advisers by far across the industry. It leverages everything we do across those other 2 channels. There's very little incremental investment needed to support those advisers. And what was great to see in the second half of the year is we're starting to recruit people directly off some of the other platforms, whether it's an independent firm or sort of the traditional wirehouse type style platforms. And that's -- it's still a little early days to kind of see that really build, but we're starting to actually see people come direct into that, which is encouraging.

And so I think really across the board, good things are happening in each of the channels. And I think we should be able to continue to see flows pick up as we go.

I think it's very telling of the "New Well story." That we only have less than 10 minutes left, and we're just getting to expenses. So you talked on the earnings call about further headcount reductions in '26. Where are you guys in terms of your headcount efficiency journey? Clearly, there's been a lot of hope from investors that you'll take those regulatory remediation expenses and then you could use that for growth driving expenses. Those that you did mention on the call that the remediation expenses will be slower to trickle out. So maybe just unpack all of that for us.

Sure. Yes. Look, we've done a lot in the last 5-plus years. I think we've saved roughly $15 billion of saves. We've reinvested most of that in -- back into the products, platforms, people serving clients. We have -- we've taken headcount down. I think it's 21 or 22 quarters in a row, down significantly from 70,000 from where we started at the peak in 2020. And when you look at the company, we still have a lot more to do. And that's before you even get to the benefits of things like AI. And it just takes time to do it in a thoughtful, rational way.

But across almost every part of the company, there's still more to do to make things as efficient as they should be, and we're focused on it. And outside of the personnel costs, there's also still more real estate to go. I always tell people, we've got a couple of buildings for sale in different cities. So if you're interested, call. But like it takes time to get -- to really work down real estate footprint. It takes time to get -- work down some of the third-party spend. And there's just more to do there. And I think there should be less people for the size and volumes that we have today going through the company.

You then add AI on top of that, and I think that allows you to do much more, much different set of activities. A lot of what we're doing this year doesn't really rely on AI. I think you'll see more benefits from AI coming in the coming years, maybe as you start to exit this year into next year and beyond. But I think that unlocks a whole bunch of different opportunities that may not have existed sort of in the past.

So we're -- so we think we've got a lot more to do and are continuing to focus on it. On the regulatory spend, we've added a lot of people and a lot of spend to manage the risk and control infrastructure that we've built out. And I think as you look at what we did, we started the journey 6 years ago. And so now if you take a step back and look at what we've done, there's going to be -- of course, there's going to be ways to make it like more streamlined, more efficient, more automated. Maybe there was a little duplication of things in certain pockets to sort of get through aspects of it.

And now it's a matter of really being thoughtful about how you go through an exercise to relook at that so that you keep all the benefits of what we've done and you look for those ways. And so that's why it just takes some time to do that. And so that will happen over a bit of a longer period of time. But don't get lost in the fact that we've got a whole bunch of other stuff to do, right? And so we've got 200,000-plus people. We added 10,000 to do the risk and leg work. There's -- we still have 195,000 people to sort of -- and the activities that they do to focus on and really get more efficient, plus all the other spend categories that I mentioned. So there's a lot more still to do.

So before I ask about capital, I did want to reask the M&A question in a different way. As you know, this has really picked up as a topic in the fourth quarter of last year. It's really very interesting actually. And we hear it totally loud and clear that the hurdle rate for Wells to grow inorganically is very, very high. At the same time, the window for G-SIB to grow inorganically, particularly now could be narrow. How does leadership balance those 2 considerations?

Well, different way to ask it, same answer. So I think when you look at the platform we've got, like we have a really enviable position, right? We've got scale in all of our key businesses. We feel no pressure at all to like do acquisitions to grow. We've got a tremendous amount of organic opportunity to grow in every single one of the businesses in the best market in the world to do that. And so the bar is high.

And obviously, you'll -- if something special came about, like we'd look at it, but the bar is high, and we'd have to really make sure as Charlie and others and I have said a couple of times now is like it really has to be something that really enhances the value of the overall franchise in a pretty significant way. But we're focused on really growing organically, and we'll see where it goes.

Great. And before I ask another question, I just wanted to make sure the folks in the room know that if you scan the QR code and you submit the question, I'll get in this iPad here, but we also have the old-fashioned way of the mic. So you have opportunities abound.

So just quickly on capital. As your asset cap was in place, your G-SIB surcharge fell to 1.5%. As you grow, it could obviously potentially move up to 2% at some point. How does that impact your thoughts on your target level for capital, CET1 in particular and the buffer that you want to maintain over and above the reg minimum?

We've got a big buffer already. And so -- and any change is like a couple -- is years in the making, right? And plus you have the changes to the rules that could impact that. So I think in the short...

You mean the G-SIB recalibration?

Yes. Yes. Yes, the Fed is working on both Basel III and then looking at the G-SIB recalibration. And so we'll see where it goes. In the short run, it's not impacting anything we're doing. And I think we've got a lot of excess capital to continue to support growth and continue to support clients. And so I think that's a good place to be.

And then just finally, the lifting of the asset cap had a commensurate lifting impact on your valuation. Now that you're transitioning into a growth story, and that was very much resonated during this conversation, what are your key messages that you'd like to leave investors as you embark upon this next phase?

Yes. Look, we're a very different company than we were 5 or 6 years ago. And I think we're excited about like the opportunity to grow. And it's all everywhere that we're growing -- it's the strategies that we set 3, 4, 5 years ago, and we've been preparing, we've been investing. We've been making sure that we continue to have all the right people, the right technology, the right products that we've got to offer.

And so every single one of the businesses has opportunity to grow. And we've kind of closed the chapter of simplifying the place, right? We closed the last divestiture just in January with our railcar leasing business. And so we've done everything we've set out to do to set ourselves up for the environment we're in now and post asset cap. And now it's just down to execution.

And I think we're excited, and we think we've got the right team. We've got the right position across every one of the businesses, and we're excited about just going after it. And it's just -- it's as clear as it can be in terms of the things that we need to do to get there. And I think the great part is it's like resonating. And we're seeing -- we're starting to see it really come through the results in a really, really significant way across each of the businesses. And I think there's just a lot of opportunity from here to grow. And so it should be an exciting time for us as we go over the next few years.

That's great. So we may have time for one question in the audience, if anyone has it. We do have mics as well. All right. That was a very clear message Mike. Thank you so much for joining us.

Thank you.

Thank you.

Welcome to today's session. [Operator Instructions] Please note that today's call is being recorded. I would now like to turn the call over to John Campbell, Director of Investor Relations. Sir, you may begin the conference.

Good morning, everyone. Thank you for joining our call today where our CEO, Charles Scharf; and our CFO, Michael Santomassimo, will discuss fourth quarter results and answer your questions. This call is being recorded.

Before we get started, I would like to remind you that our fourth quarter earnings materials, including the release, financial supplement and presentation deck are available on our website at wellsfargo.com. I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8-K filed today containing our earnings materials. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can be found in our SEC filings and the earnings materials available on our website.

I will now turn the call over to Charlie.

Thanks, John. I'm going to provide an overview of our 2025 results and update you on our priorities. I'll then turn the call over to Mike to review fourth quarter results as well as our net interest income and expense expectations for 2026 before we take your questions.

Let me start with our 2025 highlights. Our strong financial results reflected the significant momentum we're building across the company. Our net income increased to $21.3 billion and our diluted earnings per share grew 17% from a year ago. Our continued investments in our business helped drive revenue growth with fee-based revenue up 5% from a year ago. This growth was broad-based with increases in both our consumer and commercial businesses. Much of the investments we have been making have been funded by our disciplined approach to managing expenses. We had positive operating leverage in 2025, and we continue to have opportunities to generate efficiencies. Our ongoing focus has resulted in 22 consecutive quarters of headcount reductions, with headcount down over 25% since second quarter 2020.

Since the lifting of the asset cap, we've been growing our balance sheet, and our assets grew 11% from a year ago including broad-based loan growth and higher trading assets to help support our markets businesses. We also grew deposits with higher balances in both our commercial and consumer businesses. Credit performance was strong and net charge-offs declined 16% from a year ago. The economy and our customers remain resilient, but we continue to closely monitor our portfolios for signs of weakness.

In addition to tracking credit metrics in our loan portfolios, such as early-stage delinquencies, we also monitor consumer behavior more broadly to help us understand consumer health. For example, we look at things like checking accounts with unemployment flows, direct deposit amounts, overdraft activity and payment outflows and we've not observed meaningful shifts in trends. Our capital levels remain strong, while returning $23 billion of excess capital to shareholders. During 2025, we increased our common stock dividend per share by 13% and repurchased $18 billion of common stock. Given we have many opportunities to grow organically, we currently expect share repurchases to be lower in 2026. We will continue to focus on optimizing our capital levels as we manage to a CET1 ratio of approximately 10% to 10.5%.

Let me turn to the progress we've made throughout the past year on our strategic priorities. The removal of the asset cap by Federal Reserve was a pivotal moment for the company. This milestone combined with successfully closing 13 regulatory orders since 2019 underscores the significant progress we've made in transforming the organization. We are incredibly proud of our success and understand the importance of continuing to build on that work and sustain the culture that supports it. While executing on our risk and control initiatives, we simultaneously worked to position the company for stronger growth and improved returns.

Let me walk you through how these actions are improving our business drivers, beginning with our consumer business. We have been investing in our credit card business since I joined Wells Fargo and our focus has been driving strong outcomes. We opened nearly 3 million new credit card accounts in 2025, up 21% from a year ago. Credit card balances were up 6% from a year ago. And importantly, we've maintained our credit standards. After 2 to 3 years of absorbing the upfront costs of our new products, we are beginning to see the early vintages contributing to profitability. Our auto business returned to growth in 2025 with stronger origination volumes and 19% growth in loan balances from a year ago. Our results reflected growth across our portfolio including benefiting and becoming the preferred financing provider for Volkswagen and Audi brands in the United States in the spring of last year. The auto business goes through cycles, and we have intentionally scaled back growth in recent years.

With the investments we have made to improve our capabilities, we are now well positioned to methodically return to broad spectrum lending. Importantly, we're focused on making sure we have the right level of profitability in this business not just growth. We have made good progress in transforming and simplifying the Home Lending business. Over the past 3 years, we've reduced headcount by over 50% and the amount of third-party mortgage loans serviced by over 40%, including reducing the servicing portfolio by $90 billion in 2025 alone. We are continuing to reduce the size of this business while focusing on serving our bank and wealth management customers, which will help improve profitability.

Within consumer, small and business banking, we had stronger growth in net checking accounts in 2025 than last year driven by digital account openings and an increase in marketing. We continue to refurbish our branches, completing approximately 700 branches in 2025. Over half of our network is now refurbished and we are on track to complete the remaining branches over the next few years. We continue to make enhancements to our mobile app, including making it significantly easier to open accounts. And in 2025, 50% of our consumer checking accounts were opened digitally. We grew mobile active customers by $1.4 million in 2025, up 4% from a year ago.

Wells Premier are offering to serve our affluent clients, continue to build momentum in 2025. We increased the number of licensed bankers and grew branch-based financial advisers by 12% from a year ago, with a focus on increasing the number of bankers and advisers in the locations where we have the most opportunities. Premier deposit and investment balances grew 14% during 2025. This remains a significant area of opportunity for us. We also had continued momentum in our Wealth and Investment Management business with total hires increasing, attrition declining and net asset flows accelerating in the second half of 2025.

Turning to our commercial businesses. In the Commercial Bank, while we are the market leader with strong returns, we still have plenty of opportunities for growth. We have hired 185 coverage bankers over the last 2 years with over 60% of the bankers hired in 2025. We are starting to see early signs of success from these hires with higher new client acquisition as well as loan and deposit growth. We also continue to be focused on providing investment banking and markets capabilities with fees from providing these capabilities to our commercial banking clients growing over 25% in 2025.

[ Overland Advantage ], our strategic partnership with [ Centerbridge Partners ] has enabled us to better serve our Commercial Banking customers with a direct lending product and since inception, we have helped our clients raise approximately $7 billion in financing. As I highlighted on our last call, our goal is to be a top 5 U.S. investment bank. We grew our share in 2025, and we're confident that we can continue to make progress over time by using our competitive advantages including our long and deep relationships with large corporate and middle market companies, a complete product set, significant existing credit exposure, strong risk discipline and the capacity to support our clients through cycles.

In M&A, we're winning increasingly bigger and more complex assignments. We advised on 2 of the largest M&A deals of 2025 increasing our announced U.S. M&A ranking to 8th in 2025, up from 12 in 2024. We entered 2026 with our deal pipeline meaningfully greater than it has been at any point in the last 5 years, although market conditions can always change. And with the lifting of the asset cap, we've been able to utilize our balance sheet to accelerate growth in our trading businesses, including increasing trading-related assets by 50% in 2025 to accommodate customer trading flows and financing activities. While many of the assets have been added recently are lower margin, they also have lower risk and are less capital intensive. Our ability to support this client activity increases engagement and should lead to more business.

In summary, our strong performance in 2025 reflects the meaningful progress we've made to transform Wells Fargo and our actions position us for continued higher growth and returns. Our ROTCE increased to 15% in 2025. To put this in perspective, when we first started talking about increasing our returns in the fourth quarter of 2020, our ROTCE was 8% and we set a goal of reaching 10%. Once we establish that goal, we raised our target to 15%. As we discussed on last quarter's call, we have a new medium-term ROTCE target of 17% to 18%. While both the path and the timing to achieve our target is dependent on a variety of factors, including interest rates, the broader macroeconomic environment and the regulatory environment, we are confident that we can reach this goal by maintaining our expense discipline, realizing the benefits of our investments to drive stronger revenue growth and further optimizing our capital levels.

As a reminder, 17% to 18% is not our final goal, but another stop along the way to achieving best-in-class returns by business and ultimately, our returns should be higher than this target. I want to end by thanking everyone who works at Wells Fargo for their hard work and dedication last year. Their unwavering commitment to our customers and to our transformation is what positions us to become a best-in-class company. I'm excited about our momentum and look forward to building on our success as we enter the new year from a position of strength.

I will now turn the call over to Mike.

Thanks, Charlie, and good morning, everyone. We are in $5.4 billion in the fourth quarter, up from 6% from a year ago. Diluted earnings per common share was $1.62, up 13% year-over-year, and excluding the severance expense, our diluted earnings per share was $1.76.

Fourth quarter included $612 million of severance expense, primarily for actions we will take throughout 2026. We also had severance expense in the third quarter for a total of $908 million in the second half of 2025. As Charlie highlighted, we have reduced head count every quarter since the third quarter of 2020 and we continue to have opportunities to further streamline the company and become more efficient.

Turning to Slide 4. Net interest income increased $381 million or 3% from the third quarter driven by higher market NII. Net interest income, excluding markets, increased $167 million from higher loan and deposit balances as well as fixed asset repricing partially offset by changes in deposit mix. I will update you on our expectations for 2026 net interest income later in the call.

Moving to Slide 5. We had strong loan growth with both average and period-end loans increasing from the third quarter and from a year ago. Period-end loans grew 5% in the third quarter, the strongest linked quarter growth since the first quarter of 2020 when we had COVID-related growth. Average loans increased $49.4 billion or 5% from a year ago, driven by growth in commercial and industrial loans, in Corporate Investment Banking as well as growth in Commercial Banking. As you can see on this slide, one of the industry categories driving commercial loan growth has been financial [indiscernible] banks. While it is often referred to as one category, it's actually fairly broad. In our 10-Q's and K, we have traditionally broken down these loans in 4 types: lending to asset managers, commercial finance, consumer finance and real estate finance.

Let me walk through each of these categories briefly to give you a better understanding of what they include asset managers and funds. The biggest piece of this category as well as the driver of most of the growth is from our fund finance group, which is largely subscription or capital call facilities for alternative asset managers, targeting larger funds with strong investment track records where we have long-standing strategic relationships and that are generally backed by a diversified pool of limited partner commitments to the fund.

Within Commercial Finance, the biggest piece is our corporate debt finance business, which is secured lending to asset managers and private equity funds that is typically backed by middle market and broadly syndicated loans. We underwrite, approve and monitor the performance of each underlying loan. Consumer Finance, the smallest category lends to clients engaged in auto lending, credit card issuers and other types of consumer lending. Finally, the real estate finance portfolio includes both secured lending to mortgage REITs and private equity funds that originate or purchase commercial real estate mortgage loans and secured lending to asset managers and specialty finance companies backed by agency residential mortgage loans and residential mortgage-backed securities.

Since this portfolio has been growing, we are now providing additional detail by category earnings rather than just in our 10-Q filings as we've done in the past. While this type of lending has picked up across the industry recently, we have made these kinds of loans for many years, they are generally secured and have features to help manage credit risk, such as structural credit enhancements and collateral eligibility requirements as well as collateral advance rates that generally get us to the equivalent of investment-grade risk. Given these features and our experienced underwriting these loans as well as the collateral that supports them, we have found this type of lending to offer an attractive risk return.

Now turning to consumer loans, which also grew from a year ago with growth in auto, securities-based lending and wealth and investment management and credit cards. While residential mortgage loans continued to decline driven by our strategy to primarily focus on our bank and wealth management customers, the rate of decline slowed.

Turning to deposits on Slide 6. Average deposits increased $23.9 billion from a year ago as growth in consumer and commercial deposits more than offset declines in higher-cost corporate treasury deposits. We achieved this growth while reducing average deposit costs by 29 basis points from a year ago, with lower interest-bearing deposit yields across all of our businesses.

Turning to Slide 7. Noninterest income increased $419 million or 5% from a year ago. Our results a year ago included losses from the repositioning of the investment securities portfolio as well as strong results from our venture capital investments. We grew fee-based revenue across multiple of our business related fee categories, including 8% growth in investment advisory fees and brokerage commissions our largest category, driven by growth in asset-based fees reflecting higher market valuations and wealth and investment management.

Turning to expenses on Slide 8. Noninterest expense declined $174 million from a year ago. Let me highlight the primary drivers. We had lower FDIC assessment expense, lower operating losses, and we benefited from the impact of efficiency initiatives. Partially offsetting these declines was higher revenue-related compensation expense, primarily in Wealth and Investment Management, driven by strong market performance. We also had higher advertising and technology expense driven by the investments we are making in our businesses to generate growth. I would note that while our fourth quarter 2025 expenses included the $612 million of severance expense I highlighted earlier in the call, severance expense was slightly lower than a year ago.

Turning to credit quality on Slide 9. Credit performance remained strong. Our net loan charge-off ratio declined 10 basis points from a year ago and increased 3 basis points from the third quarter. Commercial net loan charge-offs increased 4 basis points from the third quarter, driven by higher commercial real estate losses predominantly in the office portfolio. Office valuations continue to stabilize and although we expect additional losses which can be lumpy, they should be well within our expectations. Consumer net loan charge-offs increased modestly from the third quarter to 75 basis points of average loans with higher losses in credit card and auto. Since there is seasonality in these portfolios, I would note that both credit card and auto losses were lower than a year ago.

As Charlie highlighted, we closely monitor our portfolio for signs of weakness, and consumers continue to be resilient as income growth has generally kept pace with increases in inflation and debt levels. Our nonperforming asset ratio declined modestly from a year ago and increased 3 basis points from the third quarter, driven by higher commercial real estate and commercial and industrial nonaccrual loans. The drivers of this increase were borrower specific, and we do not see any signs of systemic weakness across the portfolio.

Moving to Slide 10. Our allowance for credit losses for loans was relatively stable from the third quarter. Our allowance coverage ratio was down modestly and included a decline in the coverage ratio for our corporate investment banking, commercial real estate office portfolio to 10.1% in the fourth quarter.

Turning to capital and liquidity on Slide 11. Our capital levels remain strong with our CET1 ratio at 10.6%, down from the third quarter but well above our CET1 regulatory minimum plus buffers of 8.5%. We added approximately 45 basis points from earnings, which was more than offset by approximately 40 basis point reduction from common stock repurchases and an approximately 45 basis point decline from risk-weighted asset growth. We repurchased $5 billion of common stock in the fourth quarter. Average common shares outstanding were down 6% from a year ago and have declined 26% over the past 6 years.

Moving to our operating segments, starting with Consumer Banking and Lending on Slide 12. Consumer Small and Business Banking revenue increased 9% from a year ago, driven by lower deposit pricing and higher deposit and loan balances. Home lending revenue declined 6% from a year ago due to lower net interest income from lower loan balances. Credit card revenue grew 7% from a year ago from higher loan balances and an increase in card fees. Our new account growth has been strong and approximately 50% of our loan balances are now from the new products we've launched since 2021. Auto revenue increased 7% from a year ago due to the higher loan balances with auto originations more than doubling from a year ago. The decline in personal lending revenue from a year ago was driven by lower loan balances and loan spread compression.

Turning to Commercial Banking results on Slide 13. Revenue was down 3% from a year ago as lower net interest income was partially offset by growth in noninterest income driven by higher revenue from tax credit investments and equity investments. Average loan balances in the fourth quarter grew $4.6 billion or 2% from the third quarter, driven by higher client activity.

Turning to Corporate and Investment Banking on Slide 14. Banking revenue declined 4% from a year ago, driven by lower investment banking revenue and the impact of lower interest rates. I would note that while investment banking revenue declined in the fourth quarter, it was up 11% for the full year. Investment banking revenue will vary from quarter-to-quarter based on the timing of when deals close, so looking out over a longer time frame in a more meaningful way to see the momentum we are generating in this business.

Commercial real estate revenue was down 3% from a year ago, driven by the impact of lower interest rates, reduced mortgage banking servicing income resulting from the sale of our non-agency third-party servicing business in the first quarter of 2025 as well as lower loan balances. Markets revenue grew 7% from a year ago, driven by higher revenue and equities higher commodities related revenue from increased market volatility as well as higher revenue and structured products. Average loans grew 14% from a year ago and 6% in the third quarter with growth in markets and banking driven by new originations as utilization rates on existing facilities were relatively stable from the third quarter.

On Slide 15, Wealth and Investment Management revenue increased 10% from a year ago, driven by growth in asset-based fees from increased market valuation and as well as higher net interest income due to lower deposit pricing and the growth in deposit and loan balances. Underlying business drivers continue to show momentum in the fourth quarter with growth in loan and deposit balances as well as growth in total client assets, which benefited from the market valuations as well as net asset flows. As a reminder, the majority of wind advisory assets are priced at the beginning of the quarter, so first quarter results will reflect the higher January 1 market valuations.

Turning to our 2026 outlook on Slide 17, we provide our expectations for net interest income. We reported $47.5 billion of net interest income in 2025, and we currently expect total net interest income to be $50 billion, plus or minus, in 2026. Additionally, for the first time, we are providing our net interest income expectations for our markets business. We also enhanced our disclosures related to this activity in our financial supplement by providing more details on trading assets and liabilities on Pages 6 and 7 and including disclosures in the Corporate & Investment Banking segment on Pages 14 and 15 as well as providing net interest income, excluding markets on Page 27. We believe these disclosures will provide additional transparency and insight.

As you know, we've been investing in the markets business. And while it is still a relatively small contributor to our total net interest income, its contribution has grown and it can cause volatility in our NII outlook given changes in interest rates and other market factors. We currently expect markets NII to grow to approximately $2 billion in 2026 driven by lower short-term funding costs and balance sheet growth, including increased client financing activities, which as Charlie highlighted, tend to be lower margin and lower risk assets but are accretive to net interest income. As a reminder, while markets NII is expected to be higher, this growth is expected to be partially offset by lower noninterest income. Our focus is on growing markets revenue, which we expect to increase in 2026.

Net interest income, excluding markets, was $46.7 billion in 2025, and we currently expect NII, excluding markets to be approximately $48 billion in 2026. Key assumptions used for our expectations include 2 to 3 rate cuts by the Federal Reserve in 2026 with 10-year treasury rates remaining relatively stable throughout the year, which would be a modest headwind to NII. However, this expected headwind should be more than offset by loan and deposit growth as well as continued fixed asset repricing. Average loans are expected to grow mid-single digits from fourth quarter 2025 to fourth quarter 2026 driven by growth in commercial, auto and credit card loans, all else equal, our provision expense would increase in 2026 as we set outside reserves to support this expected loan growth.

Average deposits are also expected to grow mid-single digits over this period with growth in all of our operating segments, with stronger growth in interest-bearing versus noninterest-bearing deposits. We currently expect net interest income, excluding markets to decline in the first quarter due to the impact of 2 fewer days. Ultimately, the amount of net interest income we earned in 2026 will depend on a variety of factors, many of which are uncertain, including the absolute level of interest rates, the shape of the yield curve, deposit balances, mix and pricing, loan demand and the ultimate mix of activity and volatility in markets.

Turning to our 2026 expense expectations on Slide 18. We continue to focus on efficiency as we simplify the company for our customers' employees while at the same time investing for the future. Following the waterfall on the slide from left to right, our noninterest expense in 2025 was $54.8 billion. Looking at the next bar, our assumptions do not include significant additional severance for 2026, which would result in an approximately $700 million decline in severance expense. We expect revenue-related expenses in 2026 to increase by approximately $800 million in our Wealth and Investment Management business. As a reminder, this is a good thing as these expenses are more than offset by higher noninterest income actual revenue-related expenses will be a function of market levels with the biggest driver being the equity markets. Our outlook assumes the S&P 500 will be up modestly from current levels, but clearly, the ultimate performance of the market is uncertain.

We expect our FDIC assessment expense to increase by approximately $400 million in 2026 driven by expected deposit growth and the absence of the approximately $200 million special assessment credit that reduced FDIC expense in the fourth quarter. We expect all other expenses to increase approximately $300 million in 2026 with the impact of efficiency initiatives more than offset by higher investments in other expenses. We expect approximately $2.4 billion of gross expense reductions in 2026 due to efficiency initiatives. We successfully delivered approximately $15 billion in gross expense saves since we started focusing on efficiency initiatives 5 years ago, and we continue to believe we have opportunities to get more efficient across the company.

There are 3 primary expense drivers that we expect will more than offset the gross expense saves in 2026. First, we expect approximately $1.1 billion of incremental technology expense, including investments in infrastructure and business capabilities. Second, we expect approximately $800 million of incremental other investments, including in the specific areas highlighted on the next slide. And finally, we expect other expenses to increase by approximately $800 million including expected merit and benefit increases as well as performance-based discretionary compensation. Additionally, other expenses reflect approximately $400 million of lower expense following the sale of our railcar leasing business in the first quarter of 2026. However, this benefit will be offset by a reduction in noninterest income.

Putting this all together, we currently expect noninterest expense to be approximately $55.7 billion in 2026. And as a reminder, the first quarter personnel expenses are seasonally higher and are expected to be approximately $700 million.

On Slide 19, we provide our key areas of focus for our 2026 investments across the company. And in summary, our results in 2025 reflected continued momentum in improving our financial performance. We generated strong fee-based revenue growth, maintain strong expense and credit discipline grew our balance sheet, returned significant amounts of capital to shareholders, retained our strong capital position and increased our return on tangible common equity. I'm excited about the opportunities ahead as we build on our momentum and further improve our results.

We will now take your questions.

[Operator Instructions] The first question will come from Scott Siefers of Piper Sandler.

Mike, I was hoping you could just expand a little on your thoughts on NII, particularly ex markets. It looks like 2026 should be basically flat with the fourth quarter annualized level despite the outlook for a pretty good loan growth. It sounds like from what you said, that's mostly going to be a function of the rate outlook, but would just love to hear your expanded thoughts on sort of the puts and takes.

Yes. Sure, Scott. Thanks for the question. You do need to adjust for day count. So it's -- I mean it's a little bit up from when you annualize the fourth quarter. But as you said, you really got 3 things going on. You've got rates coming down, which will be a headwind for NII x-markets. And then you've got the continuation of deposit and loan growth coming throughout the year, and it's about a build as you go. And so the results will look better as you get towards the latter part of the year.

And at this point, the rate curve is -- our assumptions are pretty similar to what's in the forward curve at the moment. It's really 2 rate cuts with maybe another one right at the end of the year, which doesn't have much of an impact. And then you've got the loan growth that we've been seeing across the book. I would point out like some of the loan growth in places like cards will be coming in at either intro APRs or 0 rate as we continue to grow the book. But when you look at the rest of the portfolio, we're seeing good growth, and that should continue as we look through the year. So it's really just those 3 things.

When it comes to like deposits and pricing, we're not seeing anything different than what we expected to see as we come into the year on the commercial side. The betas are what we expected as rates have been coming down, the betas are high. We don't have -- we don't -- our rates on the consumer side are already -- have already been adjusted downward. And so and we're not seeing any substantial like change in trend relative to what we expected. So those are the drivers that go into it.

Perfect. And then I guess to the extent that you can, given how new this issue, I was hoping you could please maybe address sort of this increased volume around credit card rate caps, how you're thinking about this newer issue. It doesn't sound like it's affected your appetite for growth here at all, but I would just love to hear how you're sort of framing that internally.

Well, I think -- listen, I think, first of all, I think we all agree that the underlying issue of focusing on affordability which is people have been experiencing for some time, which we pointed out multiple times when we look at those who have less savings with us than others is a real issue. And so what the right response to that is, is something that we do think should be carefully considered. And so relative to what all this means for us, it's just -- it's too early to know because we're not quite sure what the ultimate actions, whether it's the administration or of Congress choose to go down, and that's something we hope to engage in. But we're very much aligned with trying to find solutions to help as many as we can and just do it in a way that doesn't have adverse impact.

The next question will come from Ken Usdin of Autonomous Research.

Guys, good morning. Good to see the expected balance sheet growth. One of the base is on how much you're going to continue to be able to -- or desire to grow the lower NIM over spread type of assets and RWA growth vis-a-vis your buyback opportunities and your use of CET1 capital. Can you just kind of help us understand how you're thinking through those trade-offs? And when -- and what's the balancing act between the types of balance sheet growth that you're aspiring to as you think through the overall balance sheet mix?

Yes. Sure, Ken. I'll take a shot at that because there's a few pieces that I'll try to disaggregate for you. When you look at what's happening in the markets business and adding some of the lower ROA financing repo trades I think that -- those don't attract a lot of capital or RWA because the collateral that sits behind them, right? So a lot of treasury collateral and other general collateral that sits there. And so -- and those are an important piece of the puzzle as you look to do more across the client base in the markets business. And so you'll see that grow throughout the year, for sure. But again, it doesn't attract a lot of capital to bring with it.

What you're seeing across the rest of the balance sheet is growth in loans. And I think those bring varying degrees of capital depending on what they are. And even when you look at some of the growth that we've seen in the nonbank financial space, again, given sort of the way they're structured and given the collateral is behind them, they don't necessarily attract as much capital as a regular way, commercial loan. And so I think as we look at the opportunity there, we want to be able to support clients across the broad spectrum of businesses we have. We're going to continue to focus on the consumer side in the card space and in the auto space where we think we -- within our risk appetite there.

And then I think on the commercial side, we'll continue to be very thoughtful about what we go after. But just to point out something we've said a lot is our risk appetite really hasn't changed and we're not looking to change that in a significant way. But now that the asset cuts gone, we've got more opportunity to continue to do more with clients. And that should create this good virtuous circle where they do more fee-based business with us as well.

Let me just add a couple of things, if I can, Ken. First of all, just agree obviously, with everything that Mike said. But as we increase the financing that we do in markets business, our expectation of doing that is because we will wind up getting paid in other ways as well. And so that's not -- those don't happen concurrently, but it's something that we track by client to ensure that we're actually seeing that payoff. And we'll do our best to share that as time goes on. And that will determine ultimately how much we're willing to grow the financing business, right? The assumption is, as we've seen up until now that we do get paid for it. But the card is a little bit ahead of the horse on that one kind of period by period, we need to see that play out.

And then the only other thing I would add on what Mike said in terms of just the rest of the balance sheet, just to be really clear is this is not an either/or for us at this point, right? We have significant opportunities to be able to extend loans and use our balance sheet for customers and to continue to buy stock back. We're not -- on the margin, we're making the trade-off decision but just given the amount of capital that we generate, the amount of opportunity that we have on both is significant. And so it's a good problem to have because is in the past, all we could do is buy stock back because we were limited in what we can do for clients.

Now we can do both, but there's significant capacity and as you well know, we're still above what we've said our targeted range of capital should be. And we've also said that our targeted range still has significant buffers on top of the regulatory buffers, and that's something that we'll evaluate as the regulators finalize the capital proposals and the other things that we would be able to step back and say, okay, what do we think that means for us going forward, but it's all positive for us to have flexibility.

And Charlie, my follow-up just on that last point, [ 106 ] exiting the year and you mentioned you have the 10, 10.5 range outlook. Does that mean that you're also comfortable guiding towards the lower end, which would still give you a lot of buffer to your earlier point?

Yes. I mean, look, we gave a range, Ken, of 10%, 10.5%. And so that would mean we're comfortable operating in the range, right?

The next question will come from Ebrahim Poonawala of Bank of America.

Good morning. I just want to follow up. I think there's -- so I completely appreciate what you're saying in terms of focus on profitability while you're growing the businesses. Like we heard JPMorgan talk about investing in businesses and investing capital where the returns are probably sub-17%.

I think maybe, Mike, Charlie, to the extent, I think that's one concern that you hear persistently over the last few months is how do you grow the business while improving the ROTCE capital leverage aside maybe if you don't mind, double-clicking on some of the expense and the efficiency initiatives you laid out on Slide 18. And I think you mentioned that even beyond 2026, you see that, just trying to get a better sense of the outsized efficiency opportunity that Wells has to achieve that ROTCE while delivering superior growth.

Yes. Let me just start out, Mike, and then I'll hand it over to you for like some real facts. But just what we have been doing -- I mean, what we're talking about doing is a continuation of what we have been doing, right, which is we believe that we continue to have opportunities going forward. And if you look at what we've been able to do, we've cut $15 billion of expenses out of the company. Our -- as we've said, we a couple of years ago, we had increased our regulatory expenses by $2 billion to $2.5 billion on an annual basis. And our expenses have come down.

And so if you look at what that difference and all that is, that is a significant amount of money that we've been able to use to reinvest to position ourselves for growth. And that's very much of the way that we continue to think about what we want to accomplish here, which is we think we have more tools on a going-forward basis to get more efficient than we've ever had and especially with AI. And we're going to continue to figure out what we think the right trade-off is to reinvest those savings into driving growth inside the company as we've done in the past.

But as we think about what we've done to be able to increase the returns of the company it is either -- what we've done is we've reduced the expense base of the company while we've grown revenues. And so there's not a lot of rocket scientists to what we're trying to accomplish here, it's more of the same. And we feel like we're in a great position to both use the benefits that we get by driving increased efficiency to contain any expense growth at this point and to see the benefits of those investments come through to increase revenue growth.

And Ebrahim, maybe I'll just point out some things we saw in 2025 that sort of go at what Charlie said. The credit card business new accounts up 20% year-on-year. Auto lending balances up 19%, loans in the commercial side, up 12%. Growth in Investment Banking, 12% investment banking fee growth, win fees up significantly. And then if you look at it over a slightly longer time period, you also see trading up substantially.

And so a lot in banking -- and so a lot of what Charlie talked about is coming through in the results while we're getting more efficient. And I think as we've said a number of times, but also in sort of the prepared remarks is that we're just getting started in terms of really realizing the opportunity we have across each of the businesses.

That is helpful. And I guess maybe just a separate question on capital. M&A comes up a lot in the context of well rightly or wrongly now. And I appreciate you're going to be disciplined and you should be looking for sort of strategic opportunities. But just remind us when you think about M&A, either Wealth Management or bank M&A, just how you're thinking about it what do you think makes strategic sense where it would not be a distraction from what you're trying to achieve organically?

Yes. I mean, I'll start with probably the most important thing is, which is we feel no pressure to do any M&A whatsoever in any of our businesses because we feel so good about the quality and the completeness of our franchise is -- and the opportunities that we have. And not everyone is in that position, and we feel blessed to be in that position. But as you point out, it's wrong not to say we would never think about something. We, of course, would think about anything that made sense.

But I would just say the bar would be high for us, both in terms of what we would expect financially, and it should be something that would have some kind of material -- make us materially more attractive for investors. So we're not just looking to buy things for the sake of buying things. In fact, it's just the opposite. We spend our time focused on driving the organic opportunities that we have.

The next question will come from John McDonald of Truist Securities.

Mike, one follow-up on the NII. Does the growth in markets NII that you expect in '26 have a trade-off in the trading fees? Or maybe said differently, the base of trading fee revenues in '25 looks like about $5.1 billion? Is that a good starting point that you feel like you can grow off of? Or is there any kind of trade-off with markets NII?

Yes. No, John, it's a good clarification. And I tried to address that in my remarks, but there is a trade-off the growth in NII is partially offset by a reduction in the fee line, not entirely, but partially offset by the fee line given the dynamic we have in terms of overall growth. But as I said in the remarks, if you look at overall revenue, overall revenue, we expect to grow in the markets business this year. And you should see some normal seasonality in there as well, right, where you see a low point in the fourth quarter, and you see a little bit of a snapback in the first quarter. And so I think you'll see some of that -- you'll see that normal pattern. But overall, revenue in the markets business, we would expect to be higher.

Yes. So to that point, we do disclose that, and so we would encourage everyone to look at disclosure and as you project forward to think about that number as opposed to just the pieces because it will -- the mix will change depending on the rate environment.

Yes. And maybe just pulling back then, just thinking about total revenues, you've got the NII growing maybe about 5% this year. Are you thinking about total revenue growth also in kind of that mid-single-digit kind of growth category, and you've got 1% to 2% expense growth and a couple of hundred basis points of operating leverage this year?

That's not a number we guide to, John. But -- and obviously, in the markets business, it's going to be a function of what we see throughout the year in terms of the opportunity set that's there, the volatility and all the right caveats that go there. But we would expect the overall to be up, and we'll see by exactly how much.

Yes. Just listen, just -- we're not trying to be coy and not give you something that we think we should be giving you. But it's just the reality is a significant number of the items that are embedded in noninterest income, are highly dependent on the world and on the markets, which as we know can be very, very volatile whether it is the trading numbers or the revenue items related to our wind business.

And so we're long-term believers that those -- that the underlying business grows that we can take share, and so we would expect to see growth in those numbers. We just want to be really careful about providing any kind of guidance in any way, shape or form that boxes any of us in relative to our inability to predict that.

Okay. Great. Fair enough. And Mike, one quick follow-up on the commercial nonperformers. It did move up. You mentioned it in the opening comments. Any more color on just what drove that? It's off a low base, but lost content or any thoughts about the drivers there?

Yes. A couple of thoughts. I mean, look, I mean, if you look at it over a long time period, the number can be quite volatile like period-to-period. So I wouldn't read too much into that. There's really nothing systemic that we're seeing come through. And when you really look back at nonperforming assets, they're actually not a very good predictor of loss. And the vast majority of them are performing both on principal and interest. And so it's some individual names that sort of move around quarter-to-quarter, but nothing systemic as you sort of look at it that we can see.

The next question will come from Betsy Graseck of Morgan Stanley.

A couple of questions, follow-up here. One is just on the markets commentary that we were discussing earlier around its lower ROA business. Can you talk to us about how you're thinking about the impact on ROTCE? And is there a limit to which you would go because if it's dilutive to ROA, it's dilutive of ROTE, I realize that regulatory capital is low. But [ GAAP ] capital still there. So help us understand how you're navigating that? How large are you okay? With it becoming?

Yes. Betsy, I don't anticipate it's going to have any kind of negative impact on where we think returns go. The returns given the nature of it, the returns are fine, and it's not going to be going to have be dilutive relative to the overall returns of either the segment or the overall company.

And as Charlie mentioned, the financing opportunity that you get through doing this -- kind of the -- or the additional opportunity you get by providing financing capacity to clients should start to build more meaningfully over time as well that sort of builds up the kind of the full set of revenues for each of those clients.

And Betsy, if I can just say a couple of things. Just number one is we are not going to grow our trading business in any kind of outsized way, which would have a negative impact on our ability to produce the kind of returns that we want and you would expect. So there's nothing outsized in our minds about where that goes. I think we're starting from a low base. So it looks like it's -- it sounds like it's significant, but it shouldn't be significant to the impact to what we can produce as a company.

And the other thing I would point out is a big part of why we're in the markets business, it's not for the sake of just making money and trading on its own. These are corporate relationships and these -- in which we have a broader set of business activities and as you grow your secondary business, it helps with your primary business. They're very, very much related. And so as we think about returns, we are very focused on returns overall and specifically ROTCE and weather going to see it or will slow it. And again, just the size is relative to like who we are not relative to what everyone else is out in the marketplace and we are driven by where we intend to move the firm from an overall return standpoint.

Okay. That's helpful to understand how you think through that. And then just separately, when I think about -- first of all, loan growth accelerating this quarter, very nice to see and heard all of the commentary around how you're expecting trajectory from here. Charlie, I had a question just on what kind of kind of loan growth firm credit quality should we be anticipating as you build out this loan growth over the medium term. The reason I'm asking the question is before the asset cap, before GFC Wells was very well known as a full spectrum lender, both on the consumer side and in the corporate side as well, SMBs, a lot of middle market et cetera. And so I'm -- where are you looking to take the organization as you have the opportunities to lean into growth?

So yes, so if we separate the business into the wholesale side and the consumer side for a second, where we are going on our wholesale credit business is no different from where we've been, specifically in the commercial bank. The business -- the risk appetite that we've had continues to be the same level of risk appetite. And what we're focused on is getting stronger in geographies where we have more opportunity, where there are more opportunities to grow and grow with the clients in the rest of our business. So there, it is more of a market share gain than any kind of change in where we're looking in terms of what the credit opportunity is.

On the CIB side, we have done more to support our corporate client base. But again, very, very focused on not taking risks that go beyond the way we've thought about risk appetite as a company. So very, very consistent there. When we look at our consumer businesses, I put it like there are different phases. There's the way we operated historically, where we were historically, we were very, very good at credit. In different businesses, we were more of a full-spectrum lender across different segments, but more weighting towards the higher FICO customers, as we've gone through the last bunch of years is we've had to focus on different things and there have been different economic circumstances there, it's been much more focused on the higher credit quality.

So I would say the opportunity for us, and we referred to this when we talk about our auto business specifically, is to be more full spectrum but not in a way that materially changes what you've ever thought of us as. In fact, it's probably much more of way you've thought about us in the past. So again, just go back to what the North Star is, is that we're very, very focused on returns in places like the auto business in order to get the right returns being a full-spectrum lender is helpful, but we're not going to do it in a way that creates a tale of risk in our lending book which is not consistent with how we think about our risk appetite.

The next question will come from Erika Najarian of UBS.

Just one follow-up question. You mentioned $800 million in higher revenue-related expenses for the year and considering the S&P up a little. I'm just wondering in this period of what Charlie mentioned, not putting in a box, is the expense number of 55.7 contemplating a pretty robust capital markets environment that the investors are expecting?

Erika, this is Mike. The $800 million is exclusively in our Wealth Management business. And that -- and that is based primarily on sort of where the overall equity market will land. And we do expect it to be up modestly from where it is today. I think more broadly, we do include in that -- in the bottom of our expense expectation slide in the other category, there is performance-based compensation included there, and that would include anything we expect for the market, and we do expect to have a pretty active market this year.

The next question will come from Steven Chubak of Wolfe Research.

So I wanted to ask on the assumptions underpinning like the '26 NII guidance, specifically around loan and deposit growth. You guys saw a really nice acceleration in some of the balance sheet KPIs to close out the year. Lending and deposit growth both grew mid-single digits sequentially. That's essentially the level of growth that you guys are contemplating for the full year for '26, so it does imply a pretty meaningful deceleration. And I recognize mid-single-digit growth is nothing to scoff add.

But just what informs the slowdown? Is that a function of conservatism? ADO sources of lending strength in the fourth quarter or something else?

Yes. Steve, look, I think you got to be careful to extrapolate from 1 quarter and you can see quite some seasonality that's in there. So in our Commercial Bank as an example, there's some trade finance type loans that are seasonally there at year-end. It's a lot of roll down a bit in the first quarter. So there are some elements that sort of -- that offset it. And it can be pretty volatile quarter-to-quarter in terms of the growth you see there.

But what I would say is like what we're not -- and I try to get this across in the remarks, what we're not assuming is some like big broad-based increase in utilization across the commercial bank. So there could be more loan growth if we start to see utilization rates tick up. There's lots of factors that could drive it higher from what we have there. But I think as we sit here today, we think this is an appropriate place to be based on all of what we're seeing.

Okay. Great. And then for my follow-up, Charlie, I did want to ask on the 17% to 18% ROTCE target. So it's pretty clear based on our investor conversations that no one is really questioning the potential for the franchise to get to the 17% to 18%. You even noted that's not the extent of your longer-term ambitions but you've been reluctant to commit to timing. It does appear that's driving a wider range in terms of earnings expectations. I was hoping you could just contextualize what are some of the milestones you're looking for or areas where you might need better visibility in order to get sufficient comfort to offer a more explicit time line for that 17% to 18%?

Yes. Come on -- I mean let's just be a little reasonable here. Like you're all very smart people right? And you traffic in the same world that we traffic in, which is we don't know what the credit environment will be over the next 1, 2, 3, 4, 5 years. We don't know what the interest rate curve is going to be. We don't know what the market levels will do. And so asking for a very specific time line where there are just a huge amount of variables that impact that end result it's just not a -- certainly -- we don't think it's a smart thing for us to be able to predict because we don't know those things.

But what we've said historically is what we continue to say, which is those things can be volatile. Those things will go up or down. But what we're focused on is ensuring that we are building a business which will drive higher revenue growth reasonable expenses where we see the payoffs for the investments that we're making. Very, very focused on ensuring that we're getting the right returns for what we're doing. And so as you see the underlying growth metrics that we pointed out in our remarks that you'll be able to tie that to the underlying revenue captions, and look through the impact of volatility.

And so as we grow accounts, as we grow balances, as we grow market share, you see it coming through revenue, you see control of expenses it will be -- like is it a straight line in these businesses, which is why we want to stay away from putting any specific time frame on it. But we've also been tried to be helpful in saying, it's not what's midterm, meaning it's not tomorrow, but it's also not over an extended period of time. And we know that we should be able to show you that we're making progress to get there, and you should feel like it's possible. And we've shown up to this point that we've been able to do that. And hopefully, you'll see that in the underlying results in you'll have the confidence that will have the confidence that it continues. But you'll either see it in the results or you won't.

All right. Well, Charlie, your peers do provide a time line. So I don't think it's an unreasonable expectation for us to ask for that. If I understand your perspective, there is a lot of uncertainty.

If I could just squeeze in one more. Just you listed various sources of efficiency initiatives in the slides, you're making good progress there. You didn't explicitly mention how much of that reduction in the excess regulatory cost of 2% to 2.5% is contributing to some of those efficiency gains. So just wanted to understand how much relief should come from that this year? Is that should also drive incremental efficiency gains beyond 2026, which informs that improvement in returns you just alluded to?

Steve, it's Mike. Yes, we continue to work to streamline and bring better technology to some of what we've implemented over the last number of years. So I'd say there's a little bit of impact from that in the efficiency work this year but that will likely continue to come over a slightly longer period of time.

And I would just kind of also reinforce just on the efficiency stuff. It's like there's -- there's no new silver bullet here. It's continuing to peel back the onion in each of the areas, drive better automation, reduce real estate costs, reduce third-party spend. And so -- so there's hundreds of things that happen across the company in any given quarter to sort of help drive that. But we would expect to be able to continue to optimize some of that over a slightly longer time period, but there is a little bit of impact this year.

The next question will come from John Pancari of Evercore ISI.

Mike, just on the margin dynamics for the fourth quarter. I know your loan yields declined by about 19 basis points linked quarter. Can you maybe give us a little more color of the driver? How much of that was -- I know you cited the trade finance dynamic, maybe securities lending and the markets business. Curious what really were the bigger drivers behind that? And maybe if you can kind of dovetail that into how you think about the underlying margin trajectory as you look at 2026, given these dynamics?

Yes. No. On the loan side, the biggest driver is rates coming down, right? So you've got a big variable rate portfolio there on the commercial side. So that's going to be the biggest driver. In some of the areas, it's very competitive. And so you see a little bit of spread compression across some of the commercial book as well, but the biggest driver in the sequential quarter is going to be rate.

And then when you just look -- as we come into next year, as we said, you'll be growing a little bit of some of the lower ROA exposures. So that will have an impact on overall margin. And then you'll also have rates coming down again this year if the forward rates materialize. And so -- and then you -- then that will be offset by new activity that we put onto the books and some of the fixed asset repricing, particularly in the securities portfolio.

Got it. Okay. And then one follow-up, just related to that on the deposit side. Maybe if you could help us update us on your deposit gathering strategy overall. I know you cited the mid-single-digit deposit growth for '26. Maybe can you talk about the mix shift that you would expect between interest-bearing and noninterest-bearing. And what businesses do you see driving the bulk of growth? It looks like you saw a pretty good leg up in your deposit volume through the wealth management business, for example, this quarter. So I just want to see if we can get some color there in terms of the businesses that are driving the growth.

Yes. No, it's going to be a bit of each of them, and I'll kind of go through each. But on the Wealth Management side, it's continuing to focus the lending and banking products, bringing focus to those across the adviser base that we've got. And that will -- and we're seeing good uptake there. And so that will continue to grow. Won't be a straight line, but it -- but we do expect to see some growth in the wealth business. Now that we can compete more effectively with the asset cap on, on the commercial side, you're seeing good loan growth there.

And on the commercial side, those are going to be mostly interest-bearing, even though there'll be some noninterest-bearing component of it with it. And so that's why in my remarks, I said, you'll see a little bit more interest-bearing than noninterest-bearing because you'll see more growth on the commercial side. And then on the consumer side, it's just continuing to see better execution across both our digital marketing and branch channels to drive more checking account growth and deposit growth there. So it's really going to be a function of executing across each of the businesses there.

The next question will come from Matt O'Connor of Deutsche Bank.

I was wondering if you could just talk about the environment for commercial real estate, broadly speaking. I mean you mentioned on credit obviously past the work. You have a lot of reserves. You could have some lumpy losses. But the industry and you grew loans for the first time in a really long time this quarter. And there's just been a lot like anecdotal kind of articles out there in the media talking about parts of CRE kind of coming back. So just wondering how meaningful recovery you guys think this could be and how well levered you are to that?

Sure. I'll take a shot. And if you look at the commercial real estate book, excluding office for a second, just put that to a side and I'll come back to it. There's been good demand there for a while across a lot of different sectors, whether it's multifamily, industrial, data centers on and on. And so -- and the fundamentals there haven't shifted that much as we go into this year. So we do expect to see some continued demand come through in some of those subsectors.

I think when you look at office, I think there's where you're definitely seeing stabilization in valuations. But you do have a bifurcation there between really good office space, kind of newer Class A or better space in vibrant cities that are doing really well and demand is up substantially. And you can see that just even through some of the CMBS market executions that have happened over the last number of months. And then -- and then I think on the older inventory and older stock, I think things have stabilized there. And we continue to work through that portfolio. But I think overall, if you look at everything other than kind of the older office stock, there seems to be good demand and activity levels.

The next question will come from Saul Martinez of HSBC.

I just have one as well. Totally get the reluctance to give specific revenue guidance. And as you indicated, a number of the fee line items are tied to market conditions and can vary. But I'm curious what -- if you can just give us some color on what your expectations directionally are for some of the major fee lines, deposit fees, investment advisory, card fees, trading IP.

And part of the reason I ask is that if you do look at some of these lines deposits, advisory cards, they're tracking at mid- to high single-digit growth. banking. There's reasons, obviously, for optimism there, and you mentioned trading, you expect to grow even with some of the headwinds from the offset to trading-related NII. So it does feel like there is reason to be optimistic here. But just curious if you can -- maybe just give us some color on how to think about these line items and what some of the major drivers are that could move them one way or another.

Yes, sure. So if you start with the biggest one, which is investment advisory and other asset-based fees, that's really going to be driven by how the markets hold up.

In the short term.

In the short term, yes. And I think as long as the equity markets hold, which is the bigger driver, you also have some impact on fixed income markets there as well. If rates come down, you get a benefit as asset prices go up. But you will see the equity markets in the short run, drive that the most. So as long as we have a pretty stable growing market there, I think you should be able to model that relatively easily in the jumping off point, this year is much better than where we entered last year. So that -- I think that's what you're alluding to.

When you look at then deposit-related fees and card fees, I'll kind of lump them together. It's really going to be a function of just the overall macro picture in the economy. And at this point, what we're seeing and what's happening across the consumer base is just very consistent activity. And so I think as long as that continues, that should support those fee lines. And between the 3 of those, that's over half of the fee line just right there alone.

And then I think Investment Banking fees, it appears like I think everybody thinks that we're going to have a pretty active deal make, both on the M&A side, but also sort of the maybe even more active equity capital markets outlook as well. And so -- and then the debt market, I think, has been holding up quite well over the last couple of years. And so assuming that's the case and given our investments, we should be able to continue to grind out share gains as we go over time.

And then the last one I'll sort of maybe highlight is just trading. Again, we talked about it earlier, but you will have an impact of rates come down, you'll have higher NII in the markets business, lower fees, but we should continue to be able to grow overall revenues in the markets business. So I think as long as the kind of macro picture sort of holds, then it should be quite constructive for a lot of the fee lines as we look at them.

The next question will come from Chris McGratty of KBW.

Mike, on the consumer deposit growth, just to follow back on the prior question. It was about 1% year-on-year. I'm interested now that rates have come down and excess liquidity has kind of been pulled. Like is this a GDP or GDP plus opportunity for deposit growth over the medium term?

Yes. I mean, look, I think for us, it's now that we're able to kind of more aggressively in a much more front-footed way, deploy marketing and get our branch system to be more productive, hopefully, over time, we'll be able to see outsized growth there. But I do expect that we'll -- that will not be kind of a linear path up. But I do expect us to see some growth in the consumer deposit base. And I think you'll start to see that relationship between deposits and GDP start to move in sync again hopefully over time. It's been a lit bit...

Like remember, our -- we believe based upon who -- what the franchise is and the benefits that we bring that we should be able to grow faster than the market over time. And we're working hard to reinvigorate the business, which was really hard hit by all the issues that we've been that we've gone through, not just the actual cap itself, but like how it limited the things that we could do internally. And so that's something that you build up over a period of time. But we think the opportunity is to be able to, over time, grow faster than the market and to take share in a profitable way.

Great. And then just coming back to the -- I think you said 185 coverage bankers over the past 2 years. Is the pace of -- or the opportunities for hiring '26 greater or less? Is it slowing? Any coverage kind of company question there.

It's about the same per year.

Which, again, I would just say, as we think about it, these efforts that we have underway, these are multiyear plans where we've looked at whether it's geographies, industry coverage within our CIB is what you want to accomplish in a year, you want to see the payoff and then we'll keep going. And so we still see materially more opportunities to grow in both the commercial bank and the corporate investment bank as well as in our consumer banking system for a whole bunch of different reasons.

And the final question for today will come from Gerard Cassidy of RBC Capital Markets.

Guys, when we take a look at your average balance sheet on Slide 7 in the supplement, you show that you've had some nice growth, obviously year-over-year in the balance sheet. And the funding of that, you've had real good strong growth in the Fed funds purchase and short-term borrowings on a year-over-year basis. Can you share with us you're thinking the strategy of using that source of funding to grow the balance sheet as we go forward and what the outlook could be for this going in 2026?

Yes, Gerard, that's just funding the growth in the markets business, very similar to the way the other investment banks do it. So there's nothing too exciting there, to be honest. And when we came out of -- and I think we mentioned this maybe coming out of the second quarter, we did move some funding to the repo line that we had internalized while the asset cap is in place. And so this is just normal funding of the markets business.

Very good. And then just a quick follow-up. You talked a lot about the success you're having in investing in Investment Banking and markets and you just commented about the hiring if it's about the same or more challenging. When you look at the team on the field, I think there was a Financial Times article, Charlie, talking about some areas that you may want to add to. But when you look at this team, are you 75% there in terms of you got all the people you need? Or where do you stand on both markets and then Investment Banking?

I would say, well, first of all, I think what's really important is just the quality of the people that we've hired, not just the numbers. And so I didn't say that before. But what our team has done just a great job of attracting some of the most talented people from great institutions out there that have just done a great job of building talent. So we're not just focused on growing the numbers. It's about the quality and then making sure that we're seeing the payoff.

Listen, I think it's -- I don't really want to put a percent number on it because it's a journey. And we've seen -- as we've added resources this year, it's so much a moving target because other companies aren't standing still either, and they've grown their resources as well. And so I think let's just -- we'll try and provide a little bit more context as time goes on to give you a sense. But I'm just kind of going to leave it at that, that we think the opportunity to continue to add resources to see the continued growth is as strong as it's ever been for us.

All right. Thanks, everyone. We appreciate the questions. We'll talk to you next time. Bye.

Thank you all for your participation on today's conference call. At this time, all parties may disconnect.

Okay. So good morning, everybody. Welcome to the 36th Goldman Sachs Annual Financial Services Conference. Delighted that you can all be with us here this morning. There's about 1,000 clients that are attending this event. That's up 10% compared to last year. And there's 125 companies participating. We just added up the market cap. It's almost close to $6 trillion of market cap, which is obviously ahead of where we were last year.

I am delighted to welcome Charles Scharf to kick off the conference. Charlie needs no introduction. He is Chairman and CEO of Wells Fargo. He has presented at this conference every year since you have been CEO. And actually, you've kicked off this conference pretty much every year. So I guess this is a tradition, and we really, really appreciate you being with us this morning.

So maybe we can just start off with a discussion about the macro backdrop. You've been very consistent in saying that the consumer remains resilient, that spend trends have been steady. What have you seen in the fourth quarter? And at a high level, what are you expecting in terms of corporate and consumer behavior next year? And any thoughts on the path for the trajectory of the economy as we head into '26?

Sure. Well, thanks for having me. It's great to be here. Listen, it's just a lot more of the same. And there's not any real new news here. Other than what I always continue to say is kind of what you see on TV in terms of what the concerns are and what we see in terms of the data are 2 very different things. The consumer continues to spend delinquencies are probably marginally better than they were last time we spoke or last time we talked publicly about it.

Deposit balances are strong. Investment balances are strong. Now consumers are making very active decisions on what they want to spend money on. So you do see material swings period-over-period in terms of whether they're spending in retail stores, where they're spending on travel. So it's very, very hard to predict from our standpoint what different categories are going to do well. But when you look at it, the overall spend levels continue to be extremely strong, probably a touch higher in the first couple of weeks since the holidays, just barely touch on a year-over-year basis. So that bodes really well for the holiday season and again, very consistent with what we've seen. There's still this divergence between the more affluent, the less affluent. Nothing is new there. Nothing has changed. It certainly isn't spreading to any real extent. And spend patterns seem very, very consistent across age groups, across geographies and things like that.

When we look at -- on the commercial side, our middle market customers also continue to do quite well. They are seeing the impact of tariffs. I've said this in the past, they're encouraged long-term by what tariffs will mean for them to be able to be competitive, but it has created pressure for them in the shorter-term. Certainly looks like it's held back hiring on their part and some level of investment in things like inventories and whatnot and very much focused on their own costs. So as opposed to really investing for growth at this point, while they have to readjust for what the tariffs mean for their cost base, they've been preserving margin by focusing on cost. But relative to what we see in terms of just overall credit, very, very strong losses that we see are very idiosyncratic to an individual company or something like that. And then the same thing in the large corporate segment. So overall, when you look at it and then you all know what market levels are, things are pretty good for us.

Got it. And just a quick follow-up. This bifurcation between higher-end spending versus lower end. How is that progressing? Is that stable? Or is that gap getting wider in any way?

As best we -- remember, we don't have a lot of credit extended at that level. So as best we can tell, it's still relatively stable. Okay. So just one thing, you asked about like how we're thinking about the future. When we think about where the future -- how this is all going to play out, just kind of state the obvious, which is for the consumer, it's going to come down to employment and level of wages. And so even though you do see some pressure on employment, the majority of what you see are new jobs not being created. And so folks who are our clients continue to have employment, wages continue to look like they're outpacing inflation for our customer base. And so that's going to be the thing that we're always going to be looking at to determine whether we feel good or bad about the future. And so as best we can tell, there looks like there's a degree of stability at this point, although we can talk about what that means for the longer-term with things like AI. And then on the commercial side, if there are lower rates as we look out over next year, that should bode well for people's willingness to borrow and invest.

Okay. We'll come back and talk about some of that in a few minutes. But let's talk about your strategic priorities. Obviously, a very important year for Wells Fargo with the asset cap now being lifted. So maybe you can talk about your strategic priorities, how have those evolved since the asset cap is being lifted? And what are the milestones and metrics you think investors should be most focused on from here when it comes to Wells Fargo?

Sure. So it's one of these things where we look back over these last 6 years. And just to remind everyone, when we look at the performance improvement that we've had in the company, right? We've gone from something like an 8% ROTCE to 14% or 15%. We come to forums like this, people never sit there and say, well, we know that you can't really compete on a level playing field with everyone else because of the asset cap. That has been the reality, right? And when you look at what we do as a company, the majority of what we do is traditional bank activities, where we take deposits, we lend, we have inventories for clients, and we've not been able to grow that the way other people have been able to grow.

So when we think about what we've been able to accomplish over these last 6 years, we've had a lot of focus on growing our nonbalance sheet businesses. So whether it's in the corporate investment bank, whether it's in the credit card business, which has used some balance sheet, but it also drives spending and things like that. And in our wealth business, we're now able to compete on a much more level playing field with everyone else. So we've been unable to take large corporate and middle market deposits the way we otherwise would have. In fact, we pushed a lot of that outside of Wells Fargo over the past bunch of years. We've not proactively gone out and tried to build the deposit base in the consumer businesses because of the caps that we've had to operate. And so with those things gone, we can now compete on a much more level playing field. So as we look forward to the future, it's an incredibly exciting time for us, right? We did update our these -- our ROTCE targets to 17% -- between 17% and 18%, which is the next logical progression not the end state, but another stopping point along the way.

And in the environment that we're in where we can actually invest and grow all of our businesses, which we're incredibly happy with the franchises that we have, we think when we look at every one of our businesses with the exception of, I would say, with the exception of our home lending business, we have opportunities to grow profitability based on both returns and higher growth and just competing.

So you mentioned the ROTCE target, the 17% to 18%. I think when we do a benchmarking, it looks like returns lagged the most in the consumer bank. So can you spend a couple of minutes talking a bit about why that's the case, what you're doing to attract new customers in the consumer bank maybe some of the work you're doing to improve the profitability of the branch network. But ultimately, is there any reason to believe that you shouldn't be able to get to best-in-breed returns in the consumer business over the next 3 to 5 years?

The answer to that question is no, there's no reason at all. In fact, I would expand it even further, which is when we look at every one of our business segments, all 4 segments that we report publicly, there's nothing that we think stands in the way of having returns and growth equal to the best-in-class, whether they're the large banks or other people we compete with. And that's because we feel so comfortable with the scale we have, the quality of the franchise and our ability to invest. So -- and it's absolutely true in the consumer business. The one thing I just -- I'll mention is when you look at the returns of our consumer business, it's really not being dragged down by the consumer banking business.

We're not growing in the consumer bank as quickly as we want because of what I said before, but the returns are strong. Where the returns are subpar, is in the home lending business, where we're still transitioning to a much more -- much smaller business with higher profitability and our credit card business, where we've been investing significantly over the past 4 or 5 years. And we're just starting to get to the point where the early vintages of the new products are starting to contribute towards profitability. In the credit card business, because of the upfront cost that you have, you don't -- you lose money for the first 2 or 3 years. And so that's actually been a drag on the returns of that segment.

But as long as your balance levels, your spend levels, your credit quality is playing out the way you assumed it would be in your models, you know you've got the profitability that's going to start showing up.

So let's talk about some of those growth initiatives on the consumer side. And there's 2, I think, that are really impressive. The first is the card business and then second, auto. So within card, maybe you can talk a little bit about how profitability is tracking relative to expectations as that book seasons.

And I think that the second linked question is it does feel as if a lot of your peers are really leaning into growing the card business? It does feel like the competitive environment is definitely stepping up. What are the initiatives that you're pursuing to remain competitive from a growth perspective in cards?

Sure .We've been focused on identifying this as a strategic priority when I got to the company, and we've retooled almost everything in the card business, starting with the management team, but all the way down through when we first got to the company, our lead products were American Express products. Now they're Visa and Mastercard. We renegotiated the network agreements, which allowed us to invest more into the products. We've rolled out, I want to say, 11 new products since we've been there, which when you look at the product proposition we have, they're as good as everything in the marketplace and leveraging the brand that we have with the great product, what you find is you get positive credit selection, not negative credit selection. We haven't compromised credit quality at all. And so everything that I've said continues to play out exactly the way we would expect. And to answer the question, the performance is right on top of the way we model things. So we feel really great about what we have been able to build.

There is a lot of competition in the marketplace. And the reality is we do think that scale really matters, right? There are those that have scale. We think we have enough scale both in terms of what we get because of the knowledge and the view of the Wells Fargo brand across the country as well as what we can drive in terms of efficiency and delivering the products that we can compete with everyone out there. We do believe that the branch channel that we have is a real competitive advantage. If you asked us how we're doing at delivering cards through branches, we'd say not even close to as good as we can be. So significant opportunity. We had a significant increase in new cards in the third quarter that you saw above the second quarter. And that was from direct channels. So not going through third-party providers. It was either through our own marketing, our branch channel.

So we have these competitive advantages and again, there's no -- this is a -- it's a business where if you've got the brand, you've got the product, you've got customer service, you price things properly, you'll win. And so we feel really good about the ability to continue to compete and grow the business.

And then the auto side is the other area that we've seen a pickup. And I think you've had a couple of really important partnerships come on stream and that's increased originations. How are you thinking about the trajectory of growth in the auto business heading into next year?

Yes. The auto business, we've always said we're going to be very careful to focus on returns over growth, right? That's a business that does go in cycles, competition goes in cycles. You need to figure out when the right time to really compete is and to do more business and when to do less. So there have been times in the past where we've scaled back originations because of pricing in the marketplace. And where we sit today, we've been able to believe we take some share but again, focused on making sure that we've got the right overall level of returns. We've -- we're now the primary provider, the preferred provider for Volkswagen and Audi in the United States, which is a great win. They used to do it themselves, and we now do that for them. That is a totally different proposition than just going out and having relationships and competing loan by loan against everyone out there who's providing things. These are where you usually have subvention from the manufacturer. So you have a real relationship with the manufacturer, creates a different kind of relationship with the dealer, and you're generally first in line to actually win.

And so things like that are very interesting for us. If we could do more of those, we would look at things like that. And again, I think we feel good about what we've done, and we're going to continue to make sure that it's got the right level of profitability, not just growth.

Okay. So let's talk about the other growth initiative, which has been the corporate and investment bank. I think on our numbers, you've added at least 120 basis points of investment banking fee share over the last 5 years. More recently, you've been involved in a number of very high-profile financing. I think the recent one is the largest investment-grade bridge financing. I think that's been done by a bank. So congratulations on that. Can you talk a little bit about the outlook for the capital markets business? But then also talk a little bit about your ambitions from a longer-term perspective in terms of market share in that business?

Sure. Yes. Listen, I think -- I feel great about the progress we've made in the Corporate Investment Bank. It has been a very, very focused effort to look at what strengths Wells Fargo has and what we could build around it. The world is -- history is littered with companies that have tried to build investment banks and have failed because they've done it without a real competitive advantage. They've done it by hiring the wrong people at the wrong pace and focused on doing the wrong business. And there have been a select few that have gotten it really right. And when we look at the reasons why we think we can compete in the marketplace, it's because we understand those things. And first and foremost, we have great competitive strength, which is we've got this broad set of corporate relationships that we built over a long period of time where we lend to them, we do their cash management business.

We've got relationships with sponsors because of our real estate business. And when you look at what we do, we lend in the U.S. as much as anyone else out there, and we just haven't built all of the other businesses around it. So we've had a very, very focused effort where we've looked at what industries we're strong in, who are the big fee payers. We've looked at our customer base, both in terms of large corporate and middle market and said, where are they paying fees to the Street and where can we build around that. What we found is that -- we're a very attractive place for bankers to want to come work because of everything that we have to offer. This is -- we have a $2 trillion -- there are only a select few of us that have a $2 trillion balance sheet that can do the Netflixes or we did the largest at the time, it was the largest noninvestment-grade bridge to a company called Quikrete. It's an amazing platform to have.

And when you have the commitment to invest in a methodical way, industry by industry, product group by product group, what you find is that you get, again, just like in the credit card business, positively selected, you do the right kind of business not the business that the other people don't want to do, but the business that you can actually compete with. And what we found is that people want providers like Wells Fargo. They want other choices out there. They like doing business with us. They value the relationships that we have. And if we can show up with credible people with credible capabilities, we can compete with anyone out there. And so our aspirations are to continue to grow that way very methodically. I mean we've been able to create this kind of growth without standing up and saying, we're going to be losing money for the next bunch of years while we -- it hasn't been the case. We've been doing it piece by piece, watching the people that we've been hiring, the people we promoted internally create that share.

It's profitable share. When you look at the fees of the company and you look at what we've been able to generate. And so our goal is to be top 5 and then continue to go from there. I'm not as concerned about the timeframe. It's going to be very methodical. And it's both in the investment bank and it's in the trading businesses, again, where we have relationships with investors and corporates, and it's building around a client-centric flow-based business.

Okay. So let's talk about the loan growth picture kind of in aggregate for the firm. You've seen this improvement on the consumer side in card and auto. I think on the commercial side, it's lagged a little bit. So maybe you can talk a little bit about how demand is tracking in the quarter? And do you see room for an acceleration in commercial loan growth heading into next year?

Yes. Listen, I think commercial loan growth has picked up a little bit. Not significantly, but you do see -- we saw some more loan growth in the third quarter that we saw in the first half of the year, which is what we had hoped for. We see that continuing into the fourth quarter. But as I said before, commercial customers are still being careful about their overall inventory levels and their willingness to invest. You do see a lot more strategic activity as people think about in this kind of environment how they can accelerate growth through things other than organic growth, some of which we participated in the financing of others that have happened through the private credit space. And so we would expect that level of cautiousness to continue. And then you get to the point where they have more certainty on tariffs, they have figured out how to build their models, their profitability models with this higher level of cost of goods sold.

And at that point, we'd expect to see some more level of investment. So as we look forward between that and lower rates, we would expect to see some level of increased lending as we go into next year, but it has been picking up, albeit slowly.

I mean just as a quick follow-up, the OCC just lifted their restrictions on some of the levered lending within the banking system. Does that have much of an impact in terms of how you think about loan growth heading into next year or your appetite to originate and hold those types of loans?

Yes. Listen, we think it's extremely helpful and extremely prudent. I mean when you look at the guidance that's been out there, they've -- when they put out guidance, First of all, I think when you look at the way different firms follow guidance, it's not always consistent. And I think given what we have been through over the past bunch of time, we've probably been on the more conservative end of how to follow guidance. So to some extent, we were a little competitively disadvantaged because of that. But it also -- what they basically said is that we want you to determine what your acceptable risk levels are. As you know, they've got a lot of requirements on us to make sure we're thinking about risk the right way. And to the extent that things fit into our risk appetite and it's well controlled, then we should be able to lend.

And so there have been -- there's a lot of lending that has happened, which is now outside of the banking system that as we've talked about. This is the fact that we can now compete for loans that we weren't able to offer before is an opportunity for us. It's not -- doesn't mean that the private lending market is going to change dramatically because those products are different. They're structured differently. They're priced differently. The speed is very, very different. But certainly, some of that can be done inside the banking sector because the guidance has been taken back.

So let's talk about the other side of the balance sheet in terms of funding the growth. I think you've seen growth in deposits year-on-year now for the last 3 quarters, which is very encouraging to see. So 2 questions. The first is, how are you thinking about deposit growth heading into next year. But secondly, and I think far more importantly, how should we think about your ability to get back to your deposit market share levels kind of pre asset cap, which were obviously considerably higher?

Sure. Listen, as I said before, I think we've been operating in an environment where you can't grow deposits. I mean that is -- that's the reality of where we've been operating. And so as I said, we actually proactively went to corporate customers and said, please take your deposits elsewhere because of other things that we've had to actually manage the balance sheet. And we've not been proactive in terms of looking for consumer deposits. And so that is different today. And so when you look at what we're doing in the consumer bank, we have -- we're far more active in terms of our marketing. When you look at what we're doing inside of our branches, we're creating the atmosphere of wanting to grow in ways that we hadn't historically.

When we look at what we're doing in terms of our products, the way we're pricing things -- we are kind of regenerating the engine that our competitors have had of looking at the competitive advantages that we have to attract more customers in bringing in active checking, savings alongside of it, investments alongside of it, lending products alongside of that, but to create a much more material growth engine than we've been able to operate within in the past 6 or 7 years.

So how that plays out, that plays out over a period of time. But we do think when you look at the competitive advantages that the large banks have, we're able to provide better products priced differently if we choose to do so than other folks because of the efficiencies we have. The level of investments that we can make, they're all very real. So when you see other people come up here, there are a couple of us that have the scale that are perfectly happy with the franchises that we have. And most of the others would love and need to be bigger to be able to compete with a bunch of us. And so the fact that we compete on a level playing field with the other large banks out there makes us feel really good about what that future is but it's not going to be something which is going to be -- we're not going to go from here to here overnight. It allows us to grow, hopefully faster than the industry and continue to take share back.

I mean, is there a target deposit share number that you're thinking about or you think that we as analysts and investors should think?

No, we're not thinking about it that way. I think what -- it's a little bit like we've talked about ROTCE, where you want to just -- first, you've got to -- I think it's -- I think we want to be able to show you all that we can deliver and that we can start taking share back. And then once we get there and we start showing we can take share back, we can talk more about where we ultimately want to get to. But it's a little bit like the world is our oyster now. There's no -- our ability to take share at this point is dependent on our ability to execute with the competitive advantages that we have. Where that stops? That's not today's issue.

Okay. So let's talk about efficiency. You've taken out $15 billion of gross saves over the last 5 years. And I think what that has translated to is this really impressive ability to really fund some of these growth initiatives without really seeing much growth in the expense base. So a couple of things. The first is, can you talk a little bit about the efficiency agenda from here. Talk a bit about the ability to continue to self-fund investment, but also talk a little bit about AI use cases. And frankly, just how big a deal it is as you think about your ability to improve the efficiency?

There's a lot in there. So first of all, I think we feel -- and our expense base is down since we've gotten into the company. While we've had to spend -- we've said this in the past $2 billion to $2.5 billion more annually because of the regulatory work. And so that means that we've been able to -- we've increased the level of investment significantly because we've reduced $15 billion gross. And so as we think about what the future holds, let's put AI to the side for a second. Our mindset is very similar to what it's been, which is -- we've gone from 275,000 people to 210,000 people or so. And we're not as efficient as we should be without the benefits of AI. And a lot of it is just the continued examinations that we do as you peel the onion back of looking at where those opportunities are to actually do things more efficiently.

So we continue to believe that we can fund increased level of investments in the company, whether it's technology investments, whether it's marketing, whether it's increased bankers in the corporate bank, which we've talked about in the commercial bank, which we haven't talked about, which we've also been increasing the level of investment in without significantly impacting the overall expense base of the company. People always ask us now, does that mean like for next year how to think about the overall expense levels. And we'll talk about that when we get to the end of the year because we're going through our budgeting process, but we've got a lot of degrees of freedom to make decisions on the direction of travel. And so we understand that investors want to see continued progress in the financial performance of the company. We do believe that our returns should be higher. But I think we feel good about the fact that we continue to have opportunities to drive efficiency, which will allow us to increase the level of investment.

And if we can prove that those investments will generate higher returns and faster growth, then we'll make those. And if not, well, we can slow them down and prove them over a period of time. So we've been very, very conscious of what we got the ability to do, but we've got to show people that, that's the case.

The AI conversation is an interesting one. And I've said this, I do find it very -- when people say that whether AI is an opportunity to drive significant increases in efficiency and what it's going to do potentially to headcount. It is extremely significant. And anyone who doesn't say that is just either doesn't know what they're talking about, most people do, but they're afraid to say it. because no one wants to stand up and say that we should have -- we're going to have lower headcount in the future. It's a difficult thing to say. Now it doesn't mean that it's going to happen next year, and it doesn't mean that it's going to happen in every area of the company, right? When you look at what we've been doing inside of Wells Fargo, we've rolled out these tools, Gen AI tools within our engineering workforce. We're 30% to 35% more efficient in terms of writing code today.

We've not reduced the number of people we have coding today, but we're getting a lot more done. That's real efficiency. That's really significant. There are other places out there where we're going to be able to look and figure out how we're going to be able to do with less people. And then we're going to make the decision on does that mean we can invest more in certain areas or not. But anything that we do, you've got to look at and say, you've got the capability to do something because of large language models Agentic AI in ways that are very, very different today. And it doesn't matter whether it's compliance, whether it's legal, whether it's call centers, whether it's pitch books in investment banking, credit memos in the commercial bank. These are all opportunities to do things much, much more efficiently with AI that humans have been doing.

Now it's not going to totally replace humans, but it does create an opportunity to do things significantly different. Again, I don't think this is going to -- it's not next year in terms of what it's going to mean, but these are things that we're all building capabilities for that are going to start to roll out over a period of time. We're going to be very careful about doing things in a way that are very responsible. We're trying to be very thoughtful about what it means for retraining workforces, use attrition as our friend. But it's a reality. And I think it's a positive reality, but we've all got to be focused on what it means for the future. When we think about just overall levels of efficiency, I just want to remind people just to follow us on a quarter-to-quarter basis. As we've gone through the budgeting process and even pre-AI, we do expect to have less people as we go into next year. And so we'll likely have more severance in the fourth quarter than we've had in the first part of the year as we just planned for a lower cost base.

Okay. So let's talk a little bit about capital. You've obviously got a lot of excess capital. Obviously, regulatory reform is yet to come, I guess, to a degree. So maybe you can talk a little bit about the path to the 10% to 10.5% CET1 target that you set out from an organic growth versus capital return perspective. And I think it would also be very useful just to get your updated thoughts on the dividend and the dividend payout ratio and the trajectory for that, just given the significant improvement in the profitability of the firm?

Yes. I mean we do have a significant amount of excess capital. We've reduced the target level from 10% to 10.5%. Our first choice would be to be able to invest in growing the customer-related business that will happen over a period of time. And so the fact that we live an administration which is more friendly and we think more analytically based in terms of determining what the right levels of capital are for banks that will have the ability to deploy more capital than we would have otherwise been able to employ in the past. But we also believe there's only so much excess capital we should keep. And so we want to have a conservative balance sheet. 10% to 10.5% is still, we think, very, very conservative. And so we are going to buy stock back as we've been doing. We bought back about $5 billion of stock back so far this quarter. We're not indifferent to the stock price. So we're going to be thoughtful about in the shorter-term, what that looks like, and that will help determine on a quarter-by-quarter basis what those trends will look like.

And we want to consistently grow the dividend as we grow the earnings capacity of the company. So we haven't changed our view of what the dividend payout ratio should look like, but we would expect the dividend to continue to grow on a consistent basis. But we'll prioritize it that way, which in terms of opportunities to grow organically at first, consistent dividend increases and use buybacks to return excess capital.

And then in terms of inorganic growth and acquisitions, how are you thinking about that? You obviously are out of the asset cap. Obviously, it's a favorable regulatory regime, it seems from an M&A perspective. How should we think about your appetite to engage in M&A as a way of accelerating what I think is already a very good organic growth story?

Yes. I think you should -- I mean, listen, the way we think about it is, I think, first and foremost, what we don't -- we come in every day with a big smile on our face because we don't feel the need to do anything. We think we've got so many opportunities to grow the franchise as I've talked about, and the fact that we have complete franchises in all of our businesses today, we feel no pressure to do anything. And that's a great place to be between that and the constraints that we've had in the past, first and foremost, that is where we're spending the majority of our time. It's about creating the organic growth engine inside the company, which is justified by the quality of the franchises that we have. Now that doesn't mean that we're not thinking about M&A. I think when you have an environment like this where this administration is open to it. We -- they haven't been open to it in the past. We've had our hands tied. You don't -- we're not going to ignore it. But it means your hurdle rates should be very, very high.

So the only reasons why we would do things would be a combination of very strong financial impact of doing something, but it also has to be strategic. Like we have no interest in doing something which could just add a little bit of earnings to the company, could be a little bit of a distraction, could be a bigger distraction than a little bit of distraction, create risk and take our mind off the great opportunities that we have. So we would think about it but would have to have very strong financial returns, make us strategically more interesting for investors and not get in the way of the organic opportunities that we have. And so those are very, very high hurdles that we take very seriously.

And again, you've got to think about them because you've got the opportunity. But the driver of our conversations internally are predominantly the organic opportunities that we have.

Okay. With that, sadly we're out of time, but Charlie, fantastic having you here this year and look forward to doing it again next year. Thanks a lot.

Thanks, everyone.

Good morning, everyone. Thank you, Gerard, for that introduction. And thank you all for being here. My name is Dick Manuel. I'm an equity research analyst at Columbia Threadneedle Investments. I'm happy to be joined on the stage by Mike Santomassimo, CFO of Wells Fargo. Thank you, Mike, for being here.

Yes.

Great. So let's just jump in on the third quarter earnings call. You increased your ROTC target from 15% to 17% to 18%. As part of that discussion, you wanted each of the businesses to achieve best-in-class returns. So I was thinking we could walk through them, and let's start with the Consumer Bank, where the gap of the current returns is probably greatest relative to your ambitions. So on the consumer and small and business banking, can you update us on the progress you're making in developing more of a sales culture since the OCC lifted the consent order last year, and talk about, what else there is in terms of opportunities to improve the returns?

Sure. Yes. Let me give a little bit of backdrop on the targets, and then I'll come back to the business itself. And so if you rewind the clock a little bit and you go back to kind of where we started the journey in the beginning of -- end of '20, early 2021, we were at 8% as a company. We had sort of -- we had set our targets at 10%, 15% sort of along the way. And when you look at where we are year-to-date, third quarter, pick your time period, we're effectively there, right, at the 15%. And so it felt like the right time now that the asset cap has gone, and we're at that target we set that we needed to kind of reset expectations around where we think we should be able to get to over a reasonable time period. And really, the thinking hasn't changed at all over the last 3, 4, 5 years, and how we're going to get there. And we've said over and over that we know there's no reason that each of our segments can't get to best-in-class returns. And I think that's still the goal across each of them. And so that's kind of the path we've laid out here. And I think when you look at the consumer business, and it's really consumer banking and lending that drives sort of that segment. There are a few things that are the key things that sort of get there -- get us there to the improved return. First, we've got to continue to see the card business mature. So we've replatformed every product we have out in the market. We've invested a lot into that business over the last 5 or 6 years, and we're starting to see that mature. So it's just a matter of time now. We feel really good about the credit box. We feel really good about the originations. So it's just a matter of time for that to continue to mature. And it takes 2 or 3 years early -- for vintages to -- new vintages to mature in the card business. And so we're starting to see those come through the P&L, and you'll see that more and more over the next couple of years. We've got to finish the work we started on the mortgage business. And that really is rightsizing that business, reducing the complexity, improving the profitability and the returns as we go. And we've got a little bit more left to do there. Our servicing business is down roughly 1/3 from when we started this journey. We've reduced a lot of the expenses in that business, but we've got a little bit more to do. We just executed a sale of additional pieces of -- really complex pieces of the servicing side. So it will just take some more time to kind of work that out. And then we've got to get the scale out -- the scale benefits out of our branch system, improving the productivity of all the bankers, improving the profitability in some cases of some of the branches. And those 3 things sort of really, really drive it. So that comes back to like the sales culture piece of what you were talking about. And the business -- when we got the sales practice consent over many years ago, we had to kind of strip everything down to the studs in terms of how that business was run. And over the last couple of years, we've reinstituted incentive plans, reinstituted P&L branch profitability reporting that goes with it. And that's really been in the last 12 to 18 months that started to roll out across the branch system. And those things take a little bit of time to really get working in the way you want across such a big business, and we're starting to kind of see some of those results come through. It's only one quarter, but in the third quarter, we did see really good originations of credit cards, as an example. And a lot of that was driven by what we saw coming out of the branches. The other biggest piece was people coming directly to wellsfargo.com or our digital properties versus us having to go to third parties to originate new accounts. And so we're starting to see both people come back to us directly to sort of get those products. But we're also seeing the productivity of the branches start to really really pick up. And I think that will build on itself over time. So we're still in the early days of really seeing that come through, but we're starting to see it more consistently now across the country, but we've got like string together a number of quarters to kind of really be confident that it's where we want it to be, but we're starting to see that come through now. And that's a huge focus for all of us to really make sure that we get that culture right. And hopefully, you'll start to see it come more meaningfully through the P&L over the coming quarters.

That's super helpful. How about on the auto side within the consumer lending. You've seen some new momentum there. You've got the VW-Audi partnership. Could you maybe comment on how the -- where you play in terms of the credit box there, and how you feel about kind of growing into that area given sort of the slight tick up that we've been seeing in auto and other places and some niches?

Yes, sure. Over the last probably 3 to 5 years, we've been principally like a prime and super prime lender. And while we were -- over that time period, we were investing more into our -- the credit underwriting capabilities and other dealer servicing and a whole bunch of other aspects of it so that we can become slightly more of a full spectrum lender. I hesitate to sort of go because we're not going that far down in subprime, and it's not that big of a piece. But we've started to go a little bit towards down the credit spectrum there. And the returns are really good. If you do that well, the returns are great. You might see charge-offs tick up over time a little bit, but that's -- but the returns come with it. And so we're still in the early days of really doing all the testing and getting all the data that we need to be -- to kind of do that in bigger size, but you'll see that sort of gradually grow over time. And we've added the VW-Audi relationship and went operational in May -- roughly May, June time frame. And we're starting to see that like tick up. Obviously, there's issues in the environment with tariffs and other things that cause like different changes maybe in individual carmaker sales. But overall, the relationship is going really well. And we're seeing tick ups across both the volume we thought we'd get it from VW-Audi, plus the rest of the book is doing well. And you can see the credit performance there has been really good. And it's not -- and it's been very consistent now for a number of quarters. And so we feel really good about our ability to continue to expand slightly there on the credit spectrum and then continue to make the returns better and better in that business.

Just circling back to kind of the sales culture. Just -- could you give a sense of how receptive the the employee base is to it, like were they thirsty for the changes that you put. And like you mentioned that there's been an uptick in card. Is that like a proof point for you?

Yes. I mean most people want to win, right, and want to do more and want to -- and so I think -- yes, I mean I'd say there's always going to be some small population of people where change is harder. But yes, I think it's been very well received. And -- but it takes time to kind of get it, operating more consistently across the whole set of branches, but it's been received really well.

Great. So let's turn to the Commercial Bank, where you already kind of have best-in-class returns there, but are there still opportunities in your mind to increase the returns there? What's going on there?

Yes. I think the returns could get a little bit better in the Commercial Bank, but it's really about growth. The business should be bigger. And although we've got good national share in that business, there's tons of markets that we don't have the share we should have, where we've got real sizable presence. And so there's roughly 15 to 20 markets across the country that we've kind of focused on, where we've been adding bankers now for the last couple of years. We've added a couple of hundred commercial bankers over the last couple of years in a bunch of different markets, going across the different size clients, it could be, what we think of, as like emerging middle market customers, health care technology verticals. And so there's a number of areas that we've been adding, and we've been really happy with the quality of people that we've been able to attract into the platform. And so I think it's really about growing the overall size of that franchise, and you'll likely see a little bit of return improvement, too. But but it really is about growth there. And I think that's where the focus is.

Great. So then let's swing to the Commercial Investment Bank. You're actually already generating near best-in-class peer returns. Given your size, that's pretty impressive desires to grow there and to be bigger. Will that put pressure on the returns as you grow there? Like how does that sort of play out? Is there a dip and then it rises and I guess, I'm thinking the trading business is, but also you have aspirations in the investment bank. How do the returns play with your growth asset?

Yes. Yes. I mean, look, where we sit today, the mix of business is a little bit different depending on who you're comparing us to, right? And a little bit more lending maybe for us, a little less markets. And so there's lots of nuances to sort of where we sit today. But when you look across the growth opportunities that we have both in investment banking, commercial real estate and in the markets business, we should be able to grow that business and protect the returns. And if you think about the investment banking side is a good example, we have a lot of exposure out to people already. So it's not about like this massive increase in lending or deployment of balance sheet there. It's really about getting paid more for the things we're doing, and that comes with high-return fee business. And so you should see bigger improvement and bigger contribution from the investment banking business that is a positive from a return perspective. And then you might have like others that offset it a little bit, but we should be able to grow each of those businesses and protect the overall return of CIB because of the mix of what we've got and plus where we're coming from on a lot of the fee-based businesses, where we just haven't -- don't have the share that we should over a long period of time. And that's why we've been investing now. It's been 3-plus years now where we've been just methodically investing in places like investment banking where we're adding coverage product people that go after each of the sectors, and we're going to continue to do that. Now you look at places like technology, there are subsectors underneath there that are the focus as we go into next year, health care, biotech, some subsectors in the industrial space, a few people in places like M&A and some of the product areas, but it's just methodically sort of continue to invest there to broaden sort of the fee pool that we're covering. And that should really help improve the returns on the investment banking side and then you can grow the other side as well and protect the overall return of the business.

Got it. All right. So then that brings us to the Wealth business, where you have a unique position, I would say, in the way that you're structured. It seems like it's early days as far as capturing the potential in that business overall. What are you focused on there? How -- maybe you could just touch on a little bit of history of how the wealth business played during the difficult time of the consent orders and like how the -- how it's playing out now as we come out the other side?

Yes. Well, I mean, it's clear that the wealth business was very much impacted by some of the reputational issues the company had. The advisers can -- are pretty mobile, right? They can move their business from firm to firm at different points in time. And so you saw that -- you saw the increased attrition happened for a number of years -- a few years ago. But where you -- look -- where we are today is very different. We've spent a lot of time both investing in the capabilities that we give advisers. We've obviously fixed a lot of the issues around the regulatory space. And so now we're seeing attrition that's actually quite good and very low relative to what we saw in the past. We've been able to recruit really good teams onto the platform. And so I think we're largely past all of that stuff. Now it's really about making sure that we're executing in each of the channels. And if you look at where the opportunity is, it's really 3 buckets of Wealth business. One is the what we call, Wells Fargo Premier, this is the focus on going after the affluent customers. I think customers that have $250,000 and above out of our branch system. There's millions of those customers that probably have something like $6 trillion to $8 trillion held away from us that we think we can go after and help manage. That's -- we've got a couple of thousand advisers already sitting in the branches. It's somewhat concentrated in like something like half of the branches, so it's not completely in every far field place. But -- and so that's starting to really build some traction. We launched it maybe 2 years ago with different products. We've been adding people. We've been adding sort of management focus on it. And you're really starting to see the flow -- investment flows start to come through that business. And when you -- when we do a good job on the investment side for that customers, the data would say they bring something like 50% more deposits and lending business to us as well. So it does create this virtuous cycle that sort of helps us continue to grow that overall relationship. And I think we're just starting to see sort of that ramp, and I think that will go on for a long period of time. The second piece is the kind of the core adviser channel, like our private client channel, and there, that's where you saw most of the attrition in the past. And as I said, that's kind of stemmed. We're probably having one of our best quarters -- certainly the best quarter in a while and maybe the best year in a while of recruiting into that platform. And we can see -- we see every big team that moves now across like the industry where 5 years ago that wouldn't have been the case. So we're adding people that are not only big producers on the platform, they're also the type of producer that does more alternatives, does more banking, does more of the things that we think ultimately help us improve the margin of that business over over time, and you can see that in the underlying data. And there, it's not about returns. It's about the margin. And there what really drives margin improvement over time is continuing to do more lending. If you look at our loans per dollar of asset per adviser, whatever metric you want to use, it doesn't matter, we're under where others are -- significantly under where others are, in some cases. The rate environment doesn't help when you're trying to use securities base -- securities lending -- base lending, but so as rates sort of come down a little bit, that will be an enabler as well. But we're starting to see a little bit of growth there. I think you saw that in the third quarter, where we saw a little bit of growth coming out of the Wealth business. And so as we do a better job on the lending side and the banking side, that will improve the margin and sort of really create more holistic relationships. And the other piece there is alternatives, as I mentioned, continuing to do more and more there. And then the last piece, which is unique to us, which is the independent channel. Now the great part is, it leverages the full platform that we do for everything else. So the incremental investment is not big. And so it leverages the scale we've got. And I think that's the fastest-growing market in any way you want to measure it by advisers in the country. And so it gives us an ability to not only let our advisers that are going to transition to be independent, have a place to land. But we're starting to now recruit people from other platforms. And that was never really a focus of -- recruiting was never really a focus in that channel, and so we're starting to see people coming from other wire houses, other independent providers and so that will -- it's still like very early to see that really play out. But I think that's an area that you'll see the number of advisers grow hopefully much more significantly over the coming years.

How big is that, Mike, in terms of whatever metric might be in your head like either advisers or...

It's probably the smaller piece of three. It is the smaller piece of three.

Got it. Okay. So let's rotate into talking about expenses and efficiencies. You guys have been doing a great job maintaining expense discipline. Where do you still see opportunities to drive some expense savings across the business. And where do you see the efficiency ratio sort of trending if we were to look out a few years?

Lower.

Lower?

Lower.

Okay. Lower.

I'll come back, I'll come back to that. See -- hopefully, that's helpful. The -- look, the short answer on like where we think there's more efficiency is everywhere. It really is...

Everywhere?

Everywhere. I sort of -- our Head of IR is here, I sort of joke with him that may be the only place that can't get more efficient is Investor Relations because it's like 5 people. But everywhere else, like across the company, there's more we can do to get more efficient. Some of it is technology enabled, and some of it's just not, right? And we've gone through this period over the last 5 or 6 years where we've had to do a lot of things to fix the regulatory issues we've gotten. But we also have tried to make sure people know like we've got to walk and chew gum at the same time. Like we've got a -- we've got to continue to drive efficiency in everything we do. And by the way, it improves the client service that we give to clients every day, too. It makes us faster, makes it more efficient, it comes in the form of new tools for our branch people to open accounts that take fractions of the amount of time it took in the past. It comes in automation of operational processes. We've got our digital assistant and our consumer app, that helps. And so there's a whole series of things that you sort of look at and say everywhere should get a little bit more efficient. AI is going to help make that even move faster and deeper than maybe you thought in maybe 3, 4, 5 years ago. And if you then sort of just take a look at what we've done, like we've gone from 275,000 people to roughly 210,000 people in the last 5 years. We've taken that 15 -- through the end of this year, it will be roughly $15 billion of gross saves. And we've reinvested that back into -- most of that back into the businesses. So it really does sort of enable us to continue to get more efficient, reinvest it back to sort of improve the growth profile as we look forward. But it's like it's everywhere still. And I think if you -- although we've done a ton, it's like every day, every week, every month, we come in sort of looking for more of those opportunities. And there is no silver bullet. It's like hundreds and hundreds of projects at any given time, that sort of drive it. And it really just takes some time, right, to do it in a way that's sustainable, the way that does -- that improves sort of like the customer experience in a lot of cases, as I mentioned before. And so I think we still get a lot of opportunity. And it's not just people, it's real estate, it's third-party spend. We continue to work down sort of excess real estate we've had for a number of years. So we've got some buildings for sale. If anyone's interested, call me later. But so -- but we've got plenty of opportunity to continue to drive that.

Great. Yes, it sounds like there's a long way to go on that, and you've already...

I didn't answer your question on efficiency ratio. On the efficiency ratio, look, it will be a bit of an output, right? So -- and if you look at -- if we can get to a place where our returns are best in class, across each of the businesses. You can do the math and see what that equals from a -- everyone will have a slightly different view, but that will be a lower efficiency ratio, and it should get to kind of near best-in-class. At the same time, we improve returns.

Great. All right. Let's swing into the topic of capital. You've talked about targeting a 10% to 10.5% CET1 ratio. I think we're around 11. Now how fast do you think that we get to the target, but then how do we get there as well because we're talking about growing a little bit the balance sheet now that you're out of the asset cap and -- versus just returning it to shareholders? How might will you think about the mix between those, how fast in the mix?

Yes. Well, I mean the good news is we've got a lot of capital -- a lot of excess capital. And so that positions us very well as we sort of come into this environment where we can grow again. We can deal with whatever like macroeconomic risks are there, and then we can continue to return capital back to shareholders. And so as we're in this mode of beginning to grow again, obviously, that's going to be the first priority to support clients and support that growth. And then as we go through any -- every quarter, like we look at all the different kinds of risks that are out there that could impact us, whether it's rates or other kind of geopolitical or bigger macro risks. And then hopefully, what you've seen now over the last 5-plus years is that when we feel like we've got more than enough to deal with those things, we return back to shareholders. And you can see the share counts down in 20-something percent over the last number of years. And I think we've bought back something like $12 billion so far this year. We've said what we think we'll do this quarter. It will be similar to what we did in the third quarter. So how fast we'll get there? We'll see. But I think we've got a lot of flexibility to do all the things we need to do, which is a really good place to be.

If you look at the target, the 10% to 10.5% vis-a-vis the required minimum, which I think is 8.5%, that's a lot of capital there. What would it take for you to start moving the target down closer to what the required is? Like are there signposts along the way. Obviously, there's a lot of changes in the air with respect to some of the capital requirements coming out of D.C. But is there anything in particular that is a selling post for you?

Well, again, it comes back to what I -- what we just talked about, which is we want to make sure that we continue to support the growth ambitions and support clients that we have. And so we'll continue to make sure that we've got plenty for that. And I think depending on how fast we think we'll actually grow over the coming quarters, that will drive how much we keep. And obviously, you got to be thinking multiple quarters ahead to sort of think about what -- where you should be today. We do have all of the capital rules still in a bit of flux. So it would be helpful to have that be solidified or to kind of get finalized. We just got some clarity or some additional disclosure, I should say, and clarity may be the wrong word. We got additional disclosure on some of the stress testing changes that are going to happen over the next year or two. And then we expect that we'll start to see the outline of what capital rules should look like as we get into early next year. So those will be really good inputs into helping us decide exactly where we want to run over a little bit of a longer time period.

Are you optimistic about the potential changes materializing and making a material impact on the way you think about that buffer?

Yes. I think we're very optimistic that capital rules will get finalized. And I think the stress testing work, the leverage -- the supplemental leverage proposal, those are all good signposts that they're going to execute on the things they said they're going to execute on. And then when you start looking at the rest of the capital rules after those, you've got the GCIB score changes. And then you've got Basel III getting finalized. And I think based on what we've heard, the principals at the Fed and the other agencies say, it feels like it's moving in a reasonable direction, that should hopefully end up in a place that like everyone feels comfortable with. And I think when you look at our business model, it aligns pretty well to where you start looking at where -- how they're going to think about like where the real risk is, right? So whether it's investment-grade credits, public or private, it feels like things like the mortgage book get looked at in a more reasonable way. And there's a whole bunch of changes that feel like they'll start to manifest themselves. So we're very optimistic that it will end up in a reasonable place, and it will actually get done.

Great. Fingers crossed there. So in answering my question about capital and the timing of it coming from the 11% down into your target range. One of the things that you mentioned was the macro backdrop, and you read that and figure that into your thinking there. How do you feel about the macro environment, the health of the consumer? What you're hearing from the many businesses that you guys thought you have such a good perspective on what's going on with the lifeblood of the economy. What do you think?

Yes. We'll start on the consumer side. The trends are just consistent from what we've seen now, very stable, consistent. And when you look at what's happening underneath that, the lower-end wage earner has definitely been -- it's been struggling for a while, that's not changing. It's not getting worse, though. And as long as the employment picture stays still pretty constructive, that -- there's no reason to think that won't continue at this point. And if you look at over a longer period of time, last 3 to 5 years, you'd say wages have largely kept up with inflation, and that's why -- and so as long as people have jobs, then I think that's been -- people have been kind of moving along there. And as you go off the wealth spectrum and income spectrum, things look pretty good. People still have more liquidity. If they have investments, they're still doing much better. You look at credit card payment rates, they're still higher than what we would have modeled at this point. Delinquencies are better than what we would have modeled and not getting worse, maybe getting a little bit better. And then when you look at the activity levels that underpin that, it's super. It's very consistent. Growth year-on-year every week across debit and credit card spend. And categories move around. It's hard to draw individual. We have this debate a lot, trying to find like trends or themes and so individual company or merchants move around, individual categories move around a lot, week to week, but the overall trend has been very consistent now for a long period of time. And so that, I think, bodes well for -- as we look at the coming at least couple of quarters, and it's been very stable, and we're not seeing any sort of signs of any systemic stress coming out of the portfolios we've got, whether it's card, auto, and certainly, on the mortgage side, you've seen home prices have gone up so much over the last few years that it would be hard to imagine anything significant happening there from a credit perspective. And so it feels very, very good. On the commercial side, again, credit performance has been quite good. And we're not seeing a lot of systematic issues sort of pop out of that portfolio either. Again, the individual companies might have issues in individual places, you might see some stress at times, but nothing that's sort of consistent across the portfolio. I still think there's a lot of caution though in that client base where they're still not exactly sure how to deal with all of what's coming at them, right? So whether it's tariffs or the impact of like supply chain changes they have to make or -- on the other side, it's with the new tax changes around depreciation, do they make the investment, do they -- and so there's a lot of forces that sort of are causing them to say, okay, I've got to be really thoughtful here, right? I don't want to overextend myself. I don't want to add too much inventory. I don't want to make a big investment I'm going to regret later. And so that's why you're just not seeing utilization in the Commercial Banking type customer increase at all. And that's been still pretty consistent. Now as more time goes by, like people adapt and they change supply chain, they change -- they sort of figure out a way through it. But I think that just takes a long time -- much longer than I think people give -- think it should, but it just takes some time for the people to work through that. And I think as time goes by and as people have more confidence that the broader economy is still going to hang in there, and they're going to see a light at the end of the tunnel, I think you'll start to see more of that investment happen, but it just hasn't really happened yet. And I don't -- it's hard to know exactly like what the catalyst is going to be to change that. Now that's helpful from a credit perspective. It just -- it impacts like loan growth, but that's okay. And so I think it's probably pretty pretty reasonable if you're sitting in their seat to kind of operate that way at this point. And it's like across the board in terms of types of industries and types of clients that we hear pretty consistent feedback about.

Great. Thanks for that perspective. I'm going to bounce to a question on NBFI. There's been a lot of...

Yes, you're getting the hook by the way for some reason I'm not sure.

Oh, all right. George giving me that.

Yes, I don't know, he's giving you...

Are you giving me...

I don't know. No.

Are you giving me...

I'm not, I'm not. [indiscernible] we can talk about.

No, it'd just be great before we open it up to the questions from the audience. Just what is your perspective on some of the news that we've been reading about pressure in that part of the market. I mean, it's -- you guys are one of the bigger players overall in the broad categories. You've been in some of those for years and years. So it would be great to start to hear what your thoughts are on what's been in the news and any changes that you're making in response to some of the mishaps that others have been experiencing.

Yes. Look, I think it's hard to draw lots of conclusions from a few individual issues. So I would be really careful to do that. And I think when there are issues in the market, of course, you should look at it and say, okay, how does that impact our portfolio. And so we've done a lot of that to say, are there pockets of the portfolio we should sort of look at? And we haven't found anything that we're concerned about. And when you look at our portfolio, the biggest piece of that continues to be what we do for big private equity firms around capital call facilities and other lending there. And in that business, we really focus it on brand names, bigger players, not new entrants and sort of have been in that business for a very long period of time, and we feel really good about like the risk that's embedded in that portfolio and the return we get for it. And then you start looking at other parts of the portfolio. We do provide financing to private credit firms that lend against end to middle market customers. We've got a very disciplined approach there where we go loan by loan to understand sort of what the credit picture is. We've got something like 2,800 or 3,000 loans in that portfolio that we underwrite every one of them. We get kind of an investment-grade single A kind of attachment point when we do there. So again, we think the structure is sound and the underlying credit is quite good. And then the rest of it ends up being across a number of different asset classes. So overall, we feel really good about the risk. But when there's issues in the market, you -- everybody should sit back and go, okay, how do I think about what's happening? And how do -- how does that impact our portfolio. And we've certainly done that, but have not found anything that we're uncomfortable with or things that we should change.

Great. That was super helpful. So with that, I'm going to open it up to questions from the audience, if there are any.

Betsy?

[indiscernible]

Yes.

Yes, we'll repeat it.

Repeat it, yes.

Yes, yes. So the question is around like how do we think about the credit spectrum that will lend into the auto business. Like -- as I said, like we're largely a prime lender, but there's a little bit -- as you go down the credit spectrum a little bit, you got to be really thoughtful about it, but the returns are quite good if you do it well. And so it's still going to be a pretty small piece of the overall picture for us. But it is something that we think is important to make sure that we're providing kind of a fuller set of capabilities to dealers that we deal with, because they really want somebody that's going to help them across a slightly wider spectrum of customers, but it's a pretty small piece of the overall picture.

And you're ramping it up with some gradual...

Yes, you do normal testing into that market. But even when we're fully ramped, it will end up being a pretty small piece of the overall portfolio.

We have a couple more minutes, [ Julie? ]

Maybe take that. All right.

Given that you're still hiring, what's the hiring environment like there? And what do you think your biggest strengths are? And what are you less focused on in the investment bank?

Yes. So we've actually been very pleased with what we've been able to do from a hiring perspective this year, and we've got some really high-quality people. And the good part is there, it's from everywhere, from boutiques, bigger players. And so we've been quite pleased with the quality of folks there. And we don't see that changing. It's a competitive market, but it's always a competitive market. And so you got to be thoughtful about how you go about it. And when you look at our -- what we can do there, when you look at the opportunity we have there, first, you got the commercial bank customers. Our commercial bank customers generate billions of dollars of fees, probably somewhere between $2 billion and $4 billion of investment banking fees over a long period of time, and we were capturing a really small percentage of that. And so that's opportunity number one, is to get a bigger percentage of that. These are customers we've known for decades in a lot of cases and continue to kind of cover those more proactively. Then when you look at the broader set of large corporates and other institutional players, it's just being very selective about like which sectors we're going after. And I think we've already got a strong corporate banking, strong lending franchise, strong capabilities in commercial real estate and other sectors. And so we're leveraging all the things we do across the rest of whether it's the corporate investment bank or the firm to really drive more activity there.

What are you less focused on?

What are we less focused? Well, I mean, we're focused in the U.S. We're not trying to be like everything to everybody globally, number one. And we're staying within a risk appetite that we're very comfortable with. So you won't see us sort of going super deep on the credit side.

Great. Yes. There's a mic right behind you there.

Mike, you talked about the commercial bank being more of a -- like a growth opportunity and sort of some pockets where you maybe didn't have the penetration you wanted. Could you just sort of expand upon some of the places where you do see the better growth opportunities, either geographically, or if it was a mix issue, et cetera?

Yes. I mean it's literally 20-or-so markets across -- including a couple of subsectors like health care, technology companies, so some pockets of the West Coast when you're going after there places like Boston and the health care side, New York City. And so there's a number of geographies across the country with then an overlay of health care and tech as two verticals that over pin it.

Great. I think that's it for us. Thank you very much, and join me in saying thank you.

Welcome, and thank you for joining the Wells Fargo Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note that today's call is being recorded.

I would now like to turn the call over to John Campbell, Director of Investor Relations. Sir, you may begin the conference.

Morning, everyone. Thank you for joining our call today where our CEO, Charlie Scharf; and our CFO, Mike Santomassimo, will discuss third quarter results and answer your questions. This call is being recorded.

Before we get started, I would like to remind you that our third quarter earnings materials, including the release, financial supplement and presentation deck are available on our website at wellsfargo.com.

I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8-K filed today containing our earnings materials. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings and the earnings materials available on our website.

I will now turn the call over to Charlie.

Thanks, John. I'm going to use my time slightly differently today on the call and talk very briefly about the quarter, then I will spend more time talking about our growth opportunities. What is different with the lifting of the asset cap, our capital levels and how we see our path to higher returns over time. I will refer to the presentation posted on our website. I'll then turn the call over to Mike to review third quarter results in more detail before we take your questions.

Let me start by saying we're very happy with our third quarter results. The momentum we are building across our businesses drove strong financial results, with net income and diluted earnings per share, both up from a year ago and the second quarter. Our results benefited from the investments we have made in prior years and we are now on a path to grow more broadly with the lifting of the asset cap. Revenue increased 5% from a year ago, with growth in both net interest income and strong fee-based revenue.

I pointed out the investments we've been making in our businesses on prior calls and the early signs of the positive impact on our results and the benefits were cleared this quarter with investment banking fees increasing 25% from a year ago. Loan growth accelerated in the third quarter, increasing from both the second quarter and a year ago. Our credit performance was strong and continued to improve, and we increased our capital return, raising our common stock dividend and doubling our share repurchases from the second quarter.

I want to spend the rest of my time today addressing the topics I mentioned earlier. First, a refresher on what our management team has accomplished since late 2019. We have talked much about our success in closing 13 regulatory orders and the removal of the asset cap by the Federal Reserve, and I want to reiterate the importance of continuing to build on that work and sustain our new culture.

But I want to shift the conversation by reminding everyone that while we are incredibly proud of our success, we have worked in parallel to transform and reposition the company by changing our business mix and how we manage the company, and this has resulted in significantly improved returns and margins.

Wells Fargo, without the regulatory constraints and with the changes we have made, is a significantly more attractive company than what we were several years ago, and we believe this positions us for continued higher growth and returns.

I'm going to be referring to the slides from our presentation deck, starting with Slide 3. We love the fact that we are a U.S. focused bank that benefits from the strength of our nation's economy and markets. More than 95% of our revenues are from U.S. consumers and U.S.-based companies. Our global presence exists because of the strength we have in this country. And while we have opportunities to grow our wholesale businesses outside the U.S., our primary opportunity and focus is growing all businesses domestically. The U.S. is and will continue to be the most attractive market in financial services and is a U.S.-focused bank, we will continue to benefit from the strength of the U.S.

Scale matters and, as you can see on Slide 4, we have it in all of our businesses. In many of our businesses, such as consumer banking, wealth management, corporate banking and commercial banking, we are top 3. In these businesses, there is generally a gap between the top 2 or 3 and the rest of the market. In other businesses, such as credit card, investment banking and markets, while we're not top 3 yet, we have enough scale to compete with the top 3 and have competitive advantages that we think support the ability to increase our share profitably.

Turning to Slide 5. We have simplified and refined our business mix by selling or scaling back to many businesses. We sold or exited businesses that generated approximately $5 billion of annual revenue but these businesses were either not poor or did not produce high enough risk-adjusted returns over time, and we have targeted our investments in areas with higher growth and returns. While the asset cap constrained our ability to grow loans, deposits and security financing and inventories, our strategic review uncovered areas across the company where we had room to invest to serve consumers and businesses more broadly and build our fee-based revenues without the need to grow the balance sheet.

Moving to Slide 6. We have made progress diversifying our revenue mix and growing fee streams and now consistently see the benefits of our refined business mix and strategic investments. Several of the businesses we have invested in are listed on this slide, and revenue from these businesses alone increased almost $5 billion since 2019. More importantly, we can now more aggressively and broadly pursue growth in other areas of the company.

As you can see on Slide 7, we have also improved returns by reducing expenses. But at the same time, we've increased our investment in risk and control, infrastructure and our strategic growth initiatives. In total, expenses have declined $3.6 billion since 2019. And just a reminder that I have said that we spent approximately $2.5 billion more on control and regulatory work in 2024 than when I arrived at Wells Fargo. By the end of this year, we expect to have achieved approximately $15 billion of gross expense saves, and this has funded the large increases in spend to make us a better and stronger company and allowed us to reduce overall expenses.

Savings have come from across our businesses, but let me highlight just a few examples. Our head count has declined from a peak of approximately 276,000 in the second quarter 2020 to approximately 211,000 in the third quarter 2025, down 24% with head count reductions [indiscernible] quarter for 5 years. I want to note that this was not driven by business sales or outsourcing, but in fact, real improvement in our efficiency. We've also significantly reduced how much we spend on professional and outside services as well as nonbranch real estate.

Turning to Slide 8. We have made progress in proving returns, with a goal to achieve best-in-class returns for each segment over time. In the fourth quarter of 2020, our ROTCE was 8% and we wanted to put a stake in the ground by setting what we thought was an achievable higher return goal of 15%. We said that this was not our final aspiration and would relook at it after we achieved it. We've made significant progress and are approaching this goal. And while we are proud of our progress, each of our lines of business still have the opportunity to improve further. All should eventually have returns comparable to our best peers, who continually to invest for the long term.

And as you can see on this slide, this is not the case in all lines of business. Our progress will continue to come from both continued efficiencies and the higher revenues driven by our investment in growth. Given our progress and the lifting of the asset cap, we believe now is the time to update our return goal and describe our aspirations.

First, our aspirations. To be the top U.S. consumer and small business bank and wealth manager providing industry-leading deposit, loan, investment and payments products. Also to be the top U.S. bank to businesses of all sizes with the goal of being the top 5 U.S. investment bank. We expect all of our businesses to eventually generate returns and growth equal to our best competitors, while continuing to invest for the longer term.

We have the scale necessary in all of these businesses today. We have a strong and disciplined management team that has proven they can execute on our priorities. And with the regulatory constraints lifted, we have more degrees of freedom to grow and achieve our goals.

Let me now talk about what has changed since the asset cap was lifted on Slide 9. I have consistently said that the lifting of the asset cap would not be a light switch moment where we would immediately expand the balance sheet significantly and change our risk tolerances. Instead, I've said that it would remove the constraints that we have had to grow our balance sheet-intensive businesses and allow us to compete more effectively, as I just outlined. Having said that, we are now beginning to use this increased capacity and have started to grow our balance sheet.

Our total assets at the end of the third quarter were over $2 trillion for the first time in the company's history. We have grown our trading-related assets in the Corporate and Investment Banking, which are up 15% since the end of 2023. This is a client-focused flow-based business where we serve corporate and institutional investors, most of which have broader relationships with us. We expect this growth to continue as we continue to onboard new clients and accommodate customer trading flows and financing activity without significantly increasing our risk profile. We have not actively grown consumer deposits and we both limited at a times reduced commercial and corporate deposits due to the asset cap.

Within consumer and small business banking, we are now focused on reaccelerating checking account growth through enhanced marketing and expansion of digital account openings. Average deposit balances have now grown year-over-year for 3 consecutive quarters. We are also investing in our branch network and remain on track to have over half of our branches refurbished by the end of this year. Total consumer check account openings and branch-based credit card openings grew during the first 9 months of 2025 compared to a year ago.

We have highlighted in the past the biggest opportunity in our consuming lending business as credit cards. We've been making enhancements to our product offerings over the past several years, which has started to increase the size of our credit card portfolio and new accounts grew 9% during the first 9 months of 2025 compared to a year ago. We are focused on better penetrating the consumer and wealth management client base and are seeing progress.

Just as a reminder, growing credit card portfolios are a drag on earnings and returns until approximately the third year before starting to add to earnings. Over the life of the portfolio, they have strong returns as long as spend, balances and credit results are in line with expectations, and this is consistent with what we are seeing. So we are confident that this will become more accretive to our results.

Within Commercial Banking, with the asset cap lifted, we are now focused on growing deposits through our Global Payments and liquidity business through targeted calling efforts, and improved product and digital capabilities. More broadly, we've targeted 19 high-density markets for growth where we have less market share than other parts of the country.

While our hiring is not complete, we have hired 160 coverage bankers over the last 2 years and are beginning to see increased production from this new group. We have also been investing to grow our corporate and investment bank. We're using our competitive advantages, including decades long, deep relationships with large corporates and middle market companies, a complete product set, significant existing credit exposure, strong risk discipline, and the capacity and resilience to support our clients and invest through cycles.

We have driven growth through investments and talent. Since 2019, we have hired over 125 managing directors across corporate and investment banking. These investments have translated into real growth. In Investment Banking, we have gained over 120 basis points of share in the U.S. since 2022, the most of any investment bank. In M&A, we are winning increasingly bigger and more complex assignments.

We recently advised Union Pacific's $85 billion acquisition of Norfolk Southern, the largest announced deal of 2025 so far. When you look more broadly at the industrial sector, of the top M&A transactions that have either been announced or closed in 2025, Wells Fargo has advised on half of them to help drive growth in our Wealth and Investment Management business, we launched Wells Fargo Premier, helping us to better serve our affluent clients. We are starting to see benefits with net investment flows into premier up 47% during the first 9 months of this year.

The opportunities remain significant. We estimate that our existing bank customers have trillions and assets at other financial institutions and we are not fully meeting the lending, deposit and payment needs of our existing wealth clients. And in our wealth advisory channels, we've been investing to improve the adviser and client experience, including making improvements to our independent platform, which has helped to increase adviser retention and the quality of the financial advisers we've been able to recruit. Adviser attrition has declined every quarter this year.

And you can see on Slide 10 that we are now targeting a 17% to 18% ROTCE over the medium term, and managing to a 10% to 10.5% CET1 ratio. We believe our ability to grow the balance sheet after years of the asset cap constraint, the opportunities I've discussed to grow in each of our businesses and our excess capital position should be catalysts for continued improved returns over time.

Our new ROTCE target is obviously dependent on a variety of factors, including interest rates, the broader macroeconomic environment and the regulatory environment. This is not our final goal but another stop along the way to achieve best-in-class returns by businesses and ultimately, our returns should be higher than this target. Our confidence in reaching this range is driven by several factors, including our commercial businesses are already achieving industry-leading returns, but will be more sizable as we continue to benefit from our growth investments.

Our consumer businesses are currently generating returns below the industry. We've made good progress on transforming and simplifying our home lending business and the remaining actions should generate a higher return business than we see today.

I spoke earlier of the negative impact on our financial results of growing our card business in the early years of investment. But as these vintages mature, we expect our card business to drive increased returns. In addition, as we now seek to grow consumer, small and business banking, we increased returns in this business should also contribute to higher returns. Many of these opportunities to drive higher returns through our business are distinctive to Wells Fargo, given the constraints [Audio Gap]

Turning to Slide 15. Net interest income increased $242 million or 2% from the second quarter, driven by one additional day in the quarter, higher loan and investment securities balances and fixed rate asset repricing which was driven by the turnover of debt securities, residential mortgage loans and auto loans. While we grew net interest income, the net interest margin declined 7 basis points from the second quarter driven by growth in lower-yielding trading assets as we deployed more balance sheet after the lifting of the asset cap to support our strategy of growing our markets business. Excluding the impact of the markets business on our net interest margin, would have been flat from the second quarter. Given the growth in our business, we plan to start breaking out markets net interest income next year. I will update you on our expectations for full year net interest income later in the call.

Moving to Slide 16. Both average and period-end loans grew from the second quarter and from a year ago, and we had the strongest linked quarter growth in period-end loan balances in over 3 years. Average loans increased $18.4 billion from a year ago, driven by growth in commercial and industrial loans in our corporate investment banking business. Securities-based lending and wealth and investment management, credit card and auto loans also grew while residential mortgage loans declined.

Total average consumer loans grew from the second quarter after declining for 10 consecutive quarters as growth in auto and credit card loans more than offset continued declines in residential mortgage loans, driven by our strategy to primarily focus on our existing customers. Average deposits declined $1.8 billion from a year ago as we reduced higher cost of corporate treasury deposits by $37.5 billion, which more than offset deposit growth in our businesses. The growth in average deposits from the second quarter reflected an increase in corporate treasury deposits as well as growth in Wealth and Investment Management and Corporate and Investment banking.

Turning to Slide 17. Noninterest income increased $810 million or 9% from a year ago. Our results a year ago, including losses from the repositioning of the investment securities portfolio. We had strong growth in the areas where we have focused our investments, including Wealth and Investment Management and investment banking. You can also see the momentum we are building in driving higher fee-based revenue when you look at our results versus the second quarter.

Noninterest income increased 4% as growth across all business-related fee categories more than offset a decline in other noninterest income from the second quarter, which included a gain associated with our acquisition of the remaining interest in our Merchant Services joint venture.

Turning to expenses on Slide 18. Noninterest expense increased $779 million or 6% from a year ago. Let me highlight the 3 primary drivers. First, as I highlighted earlier, we had $296 million of severance expense in the third quarter. Second, we had $220 million of higher revenue-related compensation expense, predominantly in the Wealth and Investment Management business driven by strong market performance. Finally, we had higher technology and advertising expenses driven by the investments we're making in our businesses to help drive growth.

Turning to credit quality on Slide 19. Credit performance remained strong and continued to improve. Our net loan charge-off ratio declined 9 basis points from a year ago and 4 basis points from the second quarter. Commercial net loan charge-offs were stable from the second quarter with lower losses in our commercial and industrial loan portfolio, largely offset by higher commercial real estate losses. Office valuations continue to stabilize, and although we expect additional losses, which could be lumpy, they should be well within our expectations.

Consumers continue to be resilient as income growth has generally kept pace with increase in inflation and debt levels. Consumer net loan charge-offs declined $58 million from the second quarter to 73 basis points of average loans with improvements across all of our consumer portfolios with the acceptance of auto. Nonperforming assets declined 2% from the second quarter, driven by lower commercial real estate nonaccrual loans.

Moving to Slide 20. Our allowance for credit losses for loans declined $257 million from the second quarter, driven by a lower allowance reflecting improved credit performance and lower commercial real estate loans, partially offset by higher commercial and industrial, auto and credit card loan balances. Our allowance coverage for our corporate investment banking, commercial real estate office portfolio declined from 11.1% in the second quarter to 10.8% in the third quarter.

Turning to capital and liquidity on Slide 21. We maintained our strong capital position with our CET1 ratio at 11%, well above our new CET1 regulatory minimum plus buffers of 8.5%, which became effective in the fourth quarter. We repurchased $6.1 billion of common stock in the third quarter. Given that we are now managing to a CET1 ratio of approximately 10% to 10.5%, we continue to have capacity to repurchase shares, and we currently expect fourth quarter repurchases to be roughly in line with the third quarter. During the first 9 months of this year alone, we have reduced average common shares outstanding by 4% and they've declined 24% since 2019.

Moving to our operating segments, starting with Consumer Banking and lending on Slide 22. Consumer, Small and Business Banking revenue increased 6% from a year ago, driven by lower deposit costs and higher deposit and loan balances. Results also reflected the transfer of approximately $8 billion of loans and approximately $6 billion of deposits related to certain business customers previously included in the Commercial Banking operating segment. Home Lending revenue increased 3% from a year ago due to higher mortgage banking fees. We continue to reduce head count in this business, which has declined over 50% since the end of 2022 as we have simplified the business and reduced the amount of third-party mortgage loan service for others by 36% over the same period.

Credit card revenue grew 13% from a year ago and included higher loan balances and card fees. While we had strong new account growth, adding over 900,000 accounts in the third quarter, up 49% from a year ago, benefiting from the strong digital engagement and better production in the branches. Auto revenue declined 6% from a year ago due to loan spread compression from previous credit taking actions, but increased 6% from the second quarter, driven by higher loan balances.

Auto originations more than doubled from a year ago and loan balances have grown for 2 consecutive quarters, reflecting the benefit from being the preferred financing provider for Volkswagen [indiscernible] vehicles that began in the second quarter as well as growth in the rest of the portfolio. The decline in personal lending revenue from a year ago was driven by lower loan balances.

Turning to Commercial Banking results on Slide 23. Revenue was down 9% from a year ago as lower net interest income due to the impact of lower interest rates and lower deposit loan balances was partially offset by growth in noninterest income driven by higher revenue from tax credit investments and equity investments. Average loan balances in the third quarter declined $7.1 billion or 3% from the second quarter, reflecting the transfer of the business customer accounts to consumer small and business banking.

Turning to Corporate and Investment Banking on Slide 24. Banking revenue grew 1% from a year ago, driven by higher investment banking revenue with strong performance across leveraged finance, equity capital markets and M&A. Our results benefited from the favorable market as well as the investments we've been making to help increase our market share. Commercial real estate revenue was down 13% from a year ago, driven by lower loan balances, the impact of lower interest rates as well as reduced mortgage banking servicing income resulting from the sale of our non-agency third-party servicing business in the first quarter.

Markets revenue grew 6% from a year ago with growth across most asset classes. Average loans grew 8% from a year ago and 4% from the second quarter. Growth reflected higher balances in markets and banking driven by new originations as utilization rates were relatively stable.

On Slide 25, Wealth and Investment Management revenue increased 8% from a year ago, driven by growth in asset-based fees from increased market valuations as well as higher net interest income due to lower deposit pricing and growth in deposit loan balances. Underlying business drivers showed solid momentum from the second quarter in adviser recruiting, net asset flows, loan and deposit balances and total client assets. As a reminder, the majority of [indiscernible] advisory assets are priced at the beginning of the quarter, so fourth quarter results will reflect the higher October 1 market valuations.

Slide 26 highlights our corporate results. Revenue increased year-over-year, largely reflecting losses we had a year ago from the repositioning of the investment securities portfolio.

Turning to our 2025 outlook on Slide 27. Starting with net interest income, we still expect net interest income for full year 2025 to be roughly in line with full year 2024 net interest income of $47.7 million. Fourth quarter net interest income is expected to grow from the third quarter to approximately $12.4 billion to $12.5 billion. The drivers of the expected growth in the fourth quarter include continued loan growth, particularly in our commercial credit card and auto portfolios as well as the benefit of the growth we had in the third quarter, continued repricing of fixed rate assets at higher rates, including the investment securities portfolio and higher markets net interest income.

Turning to expenses. At the beginning of this year, we expected our full year 2025 noninterest expense to be approximately $54.2 billion. We currently expect our full year 2025 noninterest expense to be approximately $54.6 billion and fourth quarter to be approximately $13.5 million.

There are 2 primary drivers for the increase in our full year expectation. First, approximately $200 million of higher severance expense than we expected at the beginning of the year, we had assumed approximately $100 million in severance expense in the 2025 guidance we provided at the beginning of the year. And as we highlighted, we had $296 million in the third quarter. As we finish our budget for 2026 and plan for our efficiency initiatives next year, we could have additional severance expense in the fourth quarter that is not included in our outlook.

Second, approximately $200 million of higher revenue-related compensation expense, predominantly in Wealth and Investment Management due to strong market performance in the second half of the year. As a reminder, this is a good thing as higher expenses were more than offset by higher noninterest income.

In summary, our improved financial performance in the third quarter reflected the consistent progress we've been making on our strategic priorities. Compared with a year ago, we had strong growth in net income and diluted earnings per share increased revenue by 5%, including growth in net interest income and fee-based revenue across both our consumer and commercial businesses, continue to execute on our efficiency initiatives, improved credit performance and reduced common shares outstanding by 6% and increased our dividend. These efforts helped improve our return on tangible common equity to 15.2% in the third quarter. And as Charlie highlighted, we believe we have an achievable path to a return on tangible common equity of 17% to 18% in the medium term.

We'll now take your questions.

[Operator Instructions] And our first question comes from Ken Usdin of Autonomous Research.

Just one clarification. I just wanted to wonder. Your new 17%, 18% medium term, you have a general range of how far out you're thinking for that?

Not really.

Yes. I mean, Ken, I think it's obviously longer than a year, but like it's a reasonable time frame. I think when you look at sort of medium term, the...

Yes. Maybe I'll just circle back on that. I think just one of the things and I said it in the remarks, we want to be a little careful about is it obviously is dependent on a bunch of things. So I want to make sure that people take that into account. We've got this substantial amount of excess capital. So depending on how the timing with which we choose to manage that can impact it. And then it's continued positive results in the business. And so I think it's not next year, but we're not looking at any extended period of time either. And also note the comments in there that it's not our final destination relative to our targets either.

Yes. Yes. Appreciate that. And second question, just, Mike, can I ask you if you allude for a little color on the fourth quarter NII ramp? You mentioned the fixed repricing. Can you talk to us about like what you're still getting on what parts of the book on that fixed repricing? And then secondly, just -- do you expect markets NII to be a meaningful helper to that? And just -- I know you're going to give us more disclosure on that next year, but any help to kind of just help us understand the third to fourth ramp a little deeper would be great.

Yes. Sure. Ken, I'll try to do that. So just -- if you look at the drivers -- 3 or 4 things that are sort of driving the increase from Q3 to Q4. First is overall markets NII going up. Part of that is driven by some lending that's in there. Part of that is driven by a bunch of actions that we've taken as we've grown the business and you get the benefit as like as rates start to come down on the front end, we've got higher coupons in bonds in like the mortgage book as an example. We're doing more hedging off balance sheet and on balance sheet and some of the asset classes, some of our commodity balances are coming down, which are dragged NII.

So there's a number of things that are sort of -- that underpin the market piece, but that is a component of it. You then get the benefit of the loan growth we saw in the third quarter plus some more that we expect to see in the fourth quarter.

And then you really then -- you get like a little bit of everything else, including the fixed asset repricing that you get there. Part of that is in the securities portfolio, which you can see the AFS yields continue to grind up quarter-on-quarter. You get a little bit of that in the auto book and some of the other portfolios.

The next question will come from Ebrahim Poonawala of Bank of America.

Just 2 questions. One, I think, Charlie, you mentioned $15 billion of expense saves, which were used to fund investments. I think as we think about the ROE improvement from here. Just remind us where the opportunities are, either on head count rightsizing of technology, automation of processes, like how big is the opportunity on the cost save side that would allow you to continue to invest the way you have while driving improved efficiency, if you could sort of put some framework around that.

Ebrahim, it's Mike. I'll take a shot and Charlie can chime in if he's got anything to add. I think when you think about just the efficiency agenda, as we keep saying over and over, I think we still think there's a significant amount to do across the company. Some of that is people-related and head count related, and you can see our head count just gradually and coming down quarter after quarter after quarter. And we still have more to do there as you start to continue to automate more processes. I think AI sort of helps on some of that for sure. But you'll see that, I think, just continue to get more and more efficient over time on the headcount side.

And then there's a whole bunch of other stuff outside of the headcount, whether it's third-party spend, technology coming off over time, you've got more real estate costs coming down. So there's a whole significant amount of things that sort of will continue to kind of grind down over time. And then I think each year, we'll decide on the investment side of how much we want to redeploy back into investments based on our ability to execute there. And we'll give you sort of guidance as we go.

But the efficiency work is definitely part of continuing to drive returns up. Outside of the efficiency, though, it's really getting the benefit of the investments we've been making across each of the business, investment banking cards, the rightsizing of the mortgage business, wealth management continuing to grow and the rest of them.

And then as Charlie said in his remarks, it's optimizing capital levels as well. And I think when you add all that stuff, there's multiple paths to get there. And I think we just got to continue to execute on all the things that we've laid out.

That's helpful, Mike. And I guess just on capital. So you talked about the fourth quarter buybacks. And could you give us a perspective on just inorganic growth, like it was interesting like you emphasized being a U.S. bank and such in terms of your focus, it often comes up that could Wells do an M&A on wealth or global investment banking? And I'm not saying one is right versus wrong but would love to get your perspective if you think there are inorganic opportunities that would allow you to kind of accelerate some of these growth strategies in any of the businesses?

Well, I guess, I would start with -- we certainly have opportunities to think about things that we wouldn't have thought about in the past. And so it's always incumbent upon us to think about are there opportunities that would be additive to the strategy that we've laid out. What I would say is that anything that I think we would consider at this point, we would think about in the context of what we've described this company as and what our strategy is. So it wouldn't be about going into something totally different. It would be asking the question, does it help us get stronger in the businesses that we've said that we want to pursue.

But I would say that like what is -- we spend almost all of our time thinking about or the organic opportunities that we have, given how constrained we have been and our ability to think differently about those things now. So that certainly, I think, is the thing that we get most excited about, but we'd be wrong not to think about the inorganic things, but I just want to make sure we're not overthinking that at this point.

The next question will come from John McDonald of Truist Securities.

I was wondering, Mike, if you could give some more color on loan growth, which seems to have good momentum. Specifically, you mentioned not having as much drag from some areas like CRE and auto and some of it seems like the front book momentum as well. Maybe you could give us a little color there and how much the build-out of the investment bank might be creating balance sheet opportunities, too?

Yes. Thanks, John. Look, I think starting on the consumer side, you're seeing less of a drag from residential mortgage coming down, and so that's certainly helpful. And I think that will continue to likely decline in terms -- the pace of decline there, I think, likely continues to get better. And you're seeing really good growth in card and auto. And for the first time in a while, we saw overall consumer loans grow on a linked-quarter basis. and we're seeing really good traction both on the card space and in auto. So I think hopefully, that will continue. So that's good.

On the commercial side of things, you still see a little bit of a decline in the commercial real estate book. We're seeing the office portfolio, in particular, pay off each quarter. I think we're down roughly 1/3 from just a couple of years ago in that portfolio. And so that's a good thing, I think, in that case. But we're seeing good demand across a lot of the other portfolio. So I think over a slightly longer period of time, you'll start to see that overall grow again.

And then in the C&I space, I think what you're seeing is a couple of things. One, we are seeing some growth across the CIB space, particularly in some of the nonbank financial loan categories, we're seeing growth there. But we're also seeing growth in a lot of the other sectors, which is really good to see it be broad-based coming across the kind of general banking book there.

What we're not seeing is growth in the commercial bank yet. And really, that's just because the utilization rates and the revolvers continue to be pretty stable now for a number of quarters. I think that likely picks up over time as people continue to gain more confidence that the economy is going to end up in a really -- in a good place and some other factors there, rates start to come down, help as well. So we're seeing good growth despite still not seeing that utilization pick up in the commercial bank. So hopefully, that will be a good enabler for more growth as we go into next year.

And then maybe a follow-up, specifically on credit card. Are you seeing new customers to the banking card? Or are they mostly growth in existing Wells Fargo customers?

Both. And I think depending on the week, it could be 50-50, 60-40. The majority are still existing customers coming through, but there are a lot of new-to-bank customers coming through there. And I think you may have noticed in the supplement, we did see a big uptick in card originations this quarter relative to last quarter. And the really good part about that is that that's coming out of our branches and coming from our own digital properties, so wellsfargo.com. So it's really good to see that the majority of that growth is actually coming from our own assets, which obviously is the lowest cost way to originate stuff and usually has pretty good credit, self-selection here in terms of credit profile. So overall, we're pretty happy with what we're seeing there, and it's bringing both new customers and sort of deepening what we're doing with the rest of the base.

And just to remind you of what we said in the past. But tacking onto this quarter, what Mike said is important, which is like it is continued really good execution inside of the broader bank relative to who the card business is pursuing and not focused on -- we focused on continued strong credit performance as part of what this -- like we're not chasing credit to get growth in accounts or growth in receivables.

The next question will come from Scott Siefers of Piper Sandler.

So I wanted to start on credit. So all the indicators are excellent. I was just hoping you could expand a little on your thoughts on the overall health of the consumer. And then just within there are just sort of more emerging concerns on auto, in particular. I know you all have been working to become more of a kind of more fulsome lender, how are you feeling about sort of the credit box? So maybe broadly thoughts on the consumer and then how it trickles down to you all in particular?

Sure. I'll start, Mike, and then you can pick up. It's one of these things that we have very little to say that's different from what we said last quarter. And it's because the performance of the consumer is just very, very consistent. Consumer spend kind of week after week is up the same amount that we've seen over the past bunch of months on both credit and debit. If fuel prices go up, then you see less discretionary spending and vice versa. And we don't see any meaningful changes across different affluence levels. And again, we don't have any real subprime to speak of in our books. So it might not be representative of necessarily what everyone else might see out there but we just see a lot of consistency.

In fact, when we look at it, payment rates are better as opposed to even flat or worse. Deposits remain strong. And so when you look at it, you see really strong credit results. You see strong consumer spend and stable deposits and those things just kind of paint a picture of a consistently strong consumer, even though what you read about is -- it would lead you to believe that they're being more cautious, our results just say that there's a high degree of consistency there without any real pockets of [indiscernible].

On the corporate side, we do see consistency in terms of, especially, as Mike pointed out, middle market companies being cautious, whether it's not replacing people, not building inventories as they want to see the whole tariff outcome play out and anything on the broader market.

And then specifically in the auto business, the answer for us is we don't see any real change in our results. As we talk about becoming a broader spectrum lender, the volumes that we do, the credit levels below what we would have done in the past are very small, but are performing as we would have expected. So no negative surprises there at this point.

Perfect. Okay. And then Mike, just on the NII, I definitely appreciate all that color. I think a lot of your focus was sort of on the asset side, whether it's repricing or volume or what have you. Just curious about sort of what you're seeing and expecting on the deposit cost side now that the Fed is in sort of this round 2 of easing.

Yes. I mean I think on -- if you start on the commercial side, the betas are -- we still expect them to be quite high, and that's been the experience -- that's been the experience so far and no reason to think that's not going to be the case as we go through the rest of the year and into next year. On the consumer side, rates went up less, right? So the betas are going to be lower just by definition. But we're not seeing any -- we're not seeing any meaningful competition that's pushing pricing up for sure. And so I think you'll see that grind down a little bit as we go through the year. But -- so pretty much as we expected so far.

The next question will come from Erika Najarian of UBS.

My first question is a bit of a 2-parter, Mike, on the efficiency agenda towards the 17% to 18%. The first, you mentioned third-party spend in your prepared remarks, I think that year-to-date, it's about $3.3 billion, annualizing of $4.4 million, unchanged from last year. I guess the first question is, is that an opportunity to fund future sort of more revenue-related comp or initiatives? And second, it's clear the momentum in [indiscernible] trading and even card, but I'm wondering, as we think about WIM and sort of a sub-20 pretax margin, obviously, your peers are higher than that. I'm wondering if that's an opportunity as well as you march towards 17% to 18%? And should we be thinking about that pretax margin improvement on the revenue side or the expense side?

Okay. There's a lot there. I guess if I don't hit it all, just remind me. Maybe I'll start at the end first. On Wealth Management margins, there's certainly an opportunity to improve our margins in Wealth Management. And if you think about what drives margins in that business, it's actually doing a lot more banking and lending business with customers. That's -- that's one of the priorities that the team has had now for a while is to continue to do more. And if you look at our lending per dollar of assets or however you want to look at the penetration of lending in that business, it's well below where our peers are on really any way to measure it. So I think as you sort of look at that business, that's certainly going to be one of them.

Second is continuing to make the advisers more productive. That could be through more alternatives products or other tools that we give them to continue to grow their books. So there's a whole bunch of initiatives that underpin some of that. But we do expect to see a margin improvement in that business, and that will contribute to overall returns as we look forward.

And then just broadly on efficiency and the professional services, some of that -- some of the professional services line is driven by volumes in places like markets, think market data and other pieces of it. But there is opportunity to continue to get more efficient across the number of vendors we use, there was still cost for completing some of the regulatory work this year. And so there's a whole number of things that will continue. But professional onsite services is definitely one of them.

But as I said earlier, there's hundreds of projects that are ongoing at any given point that drive the efficiency work that we're doing. Some of that is going to be the third-party spend, but a lot of it is also going to be continuing to rationalize some of our own costs around real estate, continuing to drive automation, which not only saves us money, but improves client experience in most of what we do. And so there's a whole range of things that I think will drive that efficiency agenda over time.

Great. And my second question, unfortunately, it's not any less complicated. But in the previous 2 peer calls this morning, NDFI came up as a significant topic. And Wells has clearly been a big player here for a very long time, no issues. This is a little bit of a deja vu from a call, John will probably recall this from 5 years ago. And I mean I'll ask the question the same way I asked JPMorgan for both you, Charlie and Mike. NDFI is clearly a sort of a broad swath, a broad definition, what questions should investors be asking banks in terms of assessing NDFI exposure and risk as it relates to future credit quality?

And second, should investors be concerned about SSFA in terms of its role in allowing NDFI when wrapped in different structures to have an RWA that could be well less than 100%?

Yes. Maybe I'll take a shot and then I'm sure Charlie may have a view as well. I think, Erika, it first starts with understanding what the exposures are, not all lending to non-bank financials is the same, right? And it's not all credit equal. And so for our portfolio, it really is the biggest -- by far, the biggest piece of that is lending that we do to the big private equity firms and providing capital call facilities through our fund finance group. And I think if you look at -- we very much focus that lending on the big established players, which obviously reduces potential issues that you have when you lend in that area. And it's all pretty plain vanilla stuff that we do for that.

And then when you start going down below that, the next piece is the lending we do against middle-market loans or commercial loans there. And really, our teams been at this for a long time. They have a really good track record. We underwrite every single loan. We don't lend against portfolios at large. We underwrite all of them. So we underwrite 2,500 to 3,000 loans as an example in that business. And really have a good perspective on what's happening across a pretty broad borrower base there, and that informs how we do underwriting.

We're cross-collateralized against if there's any issues with individual loans that get marked regularly. And so I think that we feel really good about the kind of risk return profile that sits on that book. And then the rest of it is spread across a whole multitude of different asset classes, whether it's consumer-oriented receivables, vendor finance, supply chain. And so when you really unpick each component of it, you really need to make sure that you understand sort of the risks that are embedded in there and that you're managing it appropriately.

And I think the regulatory capital framework is just one of those inputs into making sure you're thinking about how much capital you need and how comfortable you should be relative to the underlying risk that sits there.

Great. I'm sure I have a lot of follow-up questions, but I'll save it for my follow-up call with IR.

The next question will come from Betsy Graseck of Morgan Stanley.

So thanks for the update on the ROTCE trajectory from here. Two-part question. One is on the trading, you indicated, look, NIM came down because trading leaned into trading, makes a ton of sense. I'm wondering, do you feel trading is maxed out relative to your risk profile and what you're interested in doing and what your client demand is? Or is there more that we should expect you're going to be leaning into trading same pace QQ or year-on-year? Or is it slowing from here?

Well, I don't think we're going to get into exact pacing, but I think we still have a lot of opportunity across the markets business. Some of that will be in financing trades. And so a lot of what you saw in this quarter was us putting on financing trades with customers, a little bit of real trading inventory and growth there. And I think we've got a lot of opportunity to do more of both of those over a period of time, kind of all within the risk appetite that we have.

Okay. And then on the $2 billion of compliance expenses that you initially had to spend, has all of that come out? Are you now back to what you would argue as normalized level of expense run rate for that piece of the business? Or is there more to go there?

No, no. I think as Charlie said in his remarks, we are spending more now than we did before he got here. And that cost is still in the run rate. And as we've talked about over many quarters now is like over a long period of time, a longer period of time. We'll continue to look for ways to optimize that spend. A lot of what we built was built with plans that we put together 5 plus years ago at this point. And I think as we look at them today, there's plenty of ways that we can make it more efficient, whether it's through different use of technology or redefining different aspects of a process. But some of that just takes time for us to get out in a reasonable way.