Financial Overview. John Shrewsberry Senior EVP, Chief Financial Officer. May 20, Wells Fargo & Company. All rights reserved.

Transcription

1 Financial Overview John Shrewsberry Senior EVP, Chief Financial Officer May 20, Wells Fargo & Company. All rights reserved.

2 Strong results since 2012 Investor Day Topics Results 1Q12 versus 1Q14 (unless otherwise noted) Net Income - Record EPS every quarter, up 40% Loan growth - Total loans up $59.9 billion, or 8% Core loans up $90.1 billion, or 14% Liquidating loans down $30.2 billion, or 28% 10% of loan portfolio vs. 16% as of 1Q12 Deposit growth - Average deposits up $162.3 billion, or 18% 130% of average loans vs. 119% Deposit costs of 11 bps down 9 bps Credit costs - Net charge-offs declined 66% - Reserve releases (1) totaling $4 billion (1Q12 through 1Q14) Capital return - $22.6 billion in gross capital returned to shareholders (1Q12 through 1Q14) Quarterly dividend increased 36% Repurchased 277 million shares (1Q12 through 1Q14) Strong Performance Relative to 2012 Targets (1) Provision expense minus net charge-offs. Financial Overview 1

3 Strong performance relative to 2012 targets Efficiency Ratio (1) ROA 1.57% 1.60% 60.1% 57.9% 59% 1.31% 1.30% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 ROE 55% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Payout Ratio (2) 14.35% 15% 65% 48% 55% 50% 33% 34% 12.14% 12% 14% 25% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Represents target ranges presented at 2012 Investor Day. (1) Efficiency ratio defined as noninterest expense divided by total revenue (net interest income plus noninterest income). (2) Payout ratios provided are both on a gross and net basis. Gross payout means common stock dividends and repurchases, and net payout means common stock dividends and repurchases less issuances. Dividends and share repurchases are subject to Wells Fargo board and regulatory approvals, and other considerations. Share issuances may vary based on business and market conditions, as well as other factors Net Payout Gross Payout Financial Overview 2

4 Environmental considerations: After extended low rate environment, rates began to transition higher, while still at historically low levels Improving credit performance Strong housing market with mortgage refinances slowing after peaking in 2012 Evolving regulatory framework for capital levels, CCAR, liquidity Slow but steady economic growth: real GDP~2% Political uncertainty Financial Overview 3

5 EPS performance since 1Q12 Diluted Earnings Per Common Share $0.75 $0.82 $0.88 $0.91 $0.92 $0.98 $0.99 $1.00 $1.05 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Financial Overview 4

6 Long-term performance, across cycles 10+ years of Volatile Rates, Unemployment and GDP Wells Fargo Net Income ($ in billions) % 8.00% % % 2.00% % % -4.00% (1) Slope of the Yield Curve Unemployment Rate Real GDP Growth 0 Wachovia merger (2) (1) Slope of the yield curve is the 10-year Treasury less the 3-month Treasury. (2) Acquired Wachovia on December 31, Full year 2008 net income was impacted by an $8.1 billion (pre-tax) credit reserve build, including a $3.9 billion (pre-tax) provision to conform both Wells Fargo s and Wachovia s credit reserve practices. Financial Overview 5

7 Wells Fargo s model creates durable long-term advantages Strong distribution and leading market share in key financial products Diversified and balanced revenue sources Large and low cost deposit base Relationship focus and cross-sell capability Comprehensive risk discipline Capital strength Deep culture and the right team Financial Overview 6

8 Strong performance vs. peers: Balance Sheet growth Ending Loan Growth (FY12 vs. FY13) 8.5% Average Deposit Growth (FY12 vs. FY13) 7.5% 5.2% 5.2% 5.0% (1) 6.3% 5.3% 3.0% 2.2% 4.0% 3.0% 1.5% PNC USB WFC BAC C JPM -0.4% WFC JPM USB PNC BAC C Total loan growth Core loan growth (1) Source: SNL. (1) Core loan portfolio growth excludes the runoff from non-strategic/liquidating portfolios. Financial Overview 7

9 Strong performance vs. peers: Asset productivity Revenue to Average Assets (FY13) 5.8% 5.5% 5.2% 4.1% 4.1% 4.1% WFC USB PNC C BAC JPM Source: SNL Financial Overview 8

10 Strong performance vs. peers: Efficiency ratio Efficiency Ratio (1) (FY13) 73.0% 77.8% 53.0% 58.3% 60.5% 65.1% USB WFC PNC C JPM BAC Source: SNL. (1) Efficiency ratio defined as noninterest expense divided by total revenue (net interest income plus noninterest income). Noninterest expense and our efficiency ratio may be affected by a variety of factors, including business and economic cyclicality, seasonality, changes in our business composition and operating environment, growth in our business and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters. Financial Overview 9

11 Strong performance vs. peers: Net charge-offs Net Charge-offs / Average Loans (FY13) 1.62% 0.56% 0.57% 0.63% 0.81% 0.86% WFC PNC USB JPM BAC C Source: SNL. Financial Overview 10

12 Strong performance vs. peers: ROA and ROE Return on Assets (FY13) Return on Equity (FY13) 1.65% 1.51% 15.8% 1.37% 13.9% 10.8% 0.75% 0.73% 8.4% 6.9% 0.53% 4.6% USB WFC PNC JPM C BAC USB WFC PNC JPM C BAC Source: SNL. Financial Overview 11

13 Strong performance vs. peers: Capital return Gross Capital Returned (Dividends and Repurchases) (FY13, $ in billions) WFC JPM USB BAC C PNC Common Stock Repurchased Dividends on Common Stock (Reported) Source: SNL. Financial Overview 12

14 Strong performance vs. peers: Total shareholder return (1) Total Shareholder Return YTD 1 Year WFC 10.3% 36.7% PNC USB BAC JPM C KBW Bank Index Source: Bloomberg. (1) Total shareholder return means increases (decreases) in common stock price plus dividends issued on common stock. Assumes dividends are reinvested. YTD as of 5/7/ Year as of 12/31/2013. Financial Overview 13

15 Investor and analyst topics Investor Day 2014 Pace of loan growth Net interest income and NIM considerations Noninterest income strength after mortgage refinance cycle Expense and efficiency opportunities Credit cost trends net charge-offs and reserve levels Financial targets Financial Overview 14

16 Loan growth Period end Loans Outstanding ($ in billions) Period-end loans up $59.9 billion, or 8%, since 1Q12 - Commercial loans up $35.5 billion, or 10%, driven by strength in C&I and foreign - Consumer loans up $24.4 billion, or 6%, on broad-based growth Core loans up $90.1 billion, or 14% Liquidating loans down $30.2 billion, or 28% 1Q12 1Q13 1Q14 Core loans Non-strategic/liquidating loans (1) Key takeaway: Expect to grow loans at a rate faster than U.S. GDP growth. Expect continued commercial/ consumer balance. (1) See page 20 of our 1Q14 Quarterly Supplement for additional information regarding the non-strategic/liquidating portfolio, which comprises the Pick-a- Pay, liquidating home equity, legacy WFF indirect auto, legacy WFF debt consolidation, Education Finance-government guaranteed, and legacy Wachovia commercial & industrial, commercial real estate, foreign and other PCI loan portfolios. Financial Overview 15

17 Net interest income and NIM considerations Net Interest Income (TE) (1) ($ in millions) Average Earning Asset Mix ($ in billions) 11,058 10,675 10,832 $1,135 $1,364 5% 4% 16% 3.89% 3.49% 3.20% 19% 4% 4% 19% 1% Fed Funds Trading Securities MHFS 68% 60% Loans 1Q12 1Q13 1Q14 1Q12 1Q14 Net Interest Margin (NIM) Earning assets grew while composition shifted towards liquid assets NII down only modestly despite NIM decline, reflecting earning asset growth and lower funding costs Key takeaway: Continue to target growth in NII. Well positioned for rising rates. (1) Tax-equivalent net interest income is based on the federal statutory rate of 35% for the periods presented. Net interest income was $10,888 million, $10,499 million, and $10,615 million for 1Q12, 1Q13, and 1Q14 respectively. Financial Overview 16

18 Noninterest income diversification Noninterest Income ($ in millions) 9% 3% 12% $10,748 $10,760 $10,010 4% 4% 5,291 5,066 2,618 2,480 6, Other Fee Income Total Mortgage Production Total Trust & Investment Fees 15% 11% 8% 34% Deposit Service Charges 12% 2,839 3,202 3,412 Trust and Investment Fees 34% 1Q12 1Q13 1Q14 Noninterest income well diversified - Mortgage production as a percent of total fee revenue declined to 6% in 1Q14 from 24% in 1Q12 and 23% in 1Q13 Card Fees 8% Other Banking Fees 11% Mortgage Banking 15% Insurance 4% Net Gains from Trading 4% Net Gains from Equity Inv. 9% Key takeaway: Expect mortgage production revenue to stabilize. Remain well-positioned for non-mortgage fee growth. Pie chart data is for 1Q14. Other Noninterest Income (1) 3% (1) Other noninterest income includes net gains on debt securities, lease income, life insurance investment income and all other noninterest income. Financial Overview 17

19 Expense and efficiency opportunities Noninterest Expense ($ in millions) Disciplined expense management across the company 12, % 12,400 11, % 57.9% Noninterest expense down $1.0 billion from 1Q12 Efficiency ratio improved 220 bps from 1Q12 Key takeaway: Continue to target efficiency ratio of 55% - 59% 1Q12 1Q13 1Q14 Efficiency Ratio Financial Overview 18

20 Credit cost trends charge-off and reserve levels Provision Expense and Net Charge-offs % % % 1Q12 1Q13 1Q14 Provision Expense Net Charge-offs Net charge-off rate ($ in billions) Nonperforming Assets (1) ($ in billions) Credit quality has significantly improved since 1Q12 - Provision expense down $1.7 billion - Net charge-offs down $1.6 billion - NPAs down $7.8 billion Key takeaway: Expect continued strong credit results. Reserve releases expected to continue, absent significant deterioration in the economy Q12 1Q13 1Q14 Nonaccrual loans Foreclosed assets (1) days and 90 days or more past due and still accruing, and nonperforming loans, include held for sale loans reported on Balance Sheet. Financial Overview 19

21 Current environment considerations Expect economy to grow slowly, yet steadily, presenting opportunities for Wells Fargo - Housing remains strong, but expect home price appreciation to moderate - Employment levels improving While well positioned for rising rates, our diversified model positions us to adapt to a variety of environments Regulatory environment requires continued diligence As competition intensifies, our long-term risk discipline remains integral Financial Overview 20

22 Financial targets Efficiency Ratio 55-59% ROA 1.30% % ROE 12% - 15% Net Payout Ratio (1) 55% - 75% Targets depend on the overall economic, interest rate and evolving regulatory environment and assume continued annual revenue and earnings growth over time (1) Net payout means common stock dividends and share repurchases less issuances. Dividends and share repurchases are subject to Wells Fargo board and regulatory approvals, and other considerations. Share issuances may vary based on business and market conditions, as well as other factors. Financial Overview 21

23 Summary Solid performance from 1Q12 vs. WFC targets and peers Successfully managed through transitional periods in interest rates, housing and the economy Continued to enhance product capabilities and competitive positioning Grew relationships and cross-sell across the franchise Maintained risk discipline Returned more capital to shareholders and targeting further increases Financial Overview 22

24 Biography Financial Overview 23

25 John Shrewsberry Senior Executive Vice President, Chief Financial Officer John Shrewsberry is the chief financial officer responsible for Wells Fargo s financial management functions including controllers, financial reporting, tax management, asset-liability management, treasury, corporate development and investor relations. John is also responsible for Wells Fargo s investment portfolios as well as the company s corporate properties functions and strategic planning. John serves on the Wells Fargo Operating, Management, and Market Risk Committees and is based in San Francisco. A 20-year veteran of banking and investing, John served as head of Wells Fargo Securities from 2006 through May 2014, where he was responsible for investment banking, capital markets, institutional fixed income, equity, and derivatives sales and trading, investment research, and a credit-intensive principal investment portfolio. From 2001 through 2005, he was the group head of Wells Fargo Commercial Capital, the successor to a commercial finance company he co-founded that became part of Wells Fargo in Previously, John worked at Goldman Sachs and Credit Suisse First Boston in the principal finance areas. He started his career as a Certified Public Accountant at Coopers & Lybrand. John earned his B.A. in economics from Claremont McKenna College, in Claremont, CA, and an MBA from the Yale School of Management. John currently serves on the board for the Committee on Capital Markets Regulation. Committed to serving the communities around him, John also serves on the boards of the Robert Day School of Economics and Finance, the Yale School of Management and is active with the Juvenile Diabetes Research Foundation. Financial Overview 24