Financial Overview
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Financial Overview John Shrewsberry Senior EVP, Chief Financial Officer
May 20, 2014
© 2014 Wells Fargo & Company. All rights reserved.
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% • •
Deposit growth
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
- 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.
Wells Fargo 2014 Investor Day
Financial Overview 1
Strong performance relative to 2012 targets Efficiency Ratio
ROA
(1)
1.57%
1.60%
60.1%
59% 1.31%
1.30%
57.9%
55%
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q12
1Q14
2Q12
ROE
3Q12
4Q12
1Q13
2Q13
3Q13
Payout Ratio 14.35%
4Q13
1Q14
(2) 65%
15% 55% 48%
50% 34%
33%
12.14%
1Q12
12%
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
25%
14%
2011
2012
Net Payout
2013
Gross Payout
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.
Wells Fargo 2014 Investor Day
Financial Overview 2
Environmental considerations: 2012 - 2014 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
Wells Fargo 2014 Investor Day
Financial Overview 3
EPS performance since 1Q12
Diluted Earnings Per Common Share
$0.88 $0.75
1Q12
$0.91
$0.92
4Q12
1Q13
$0.98
$0.99
$1.00
2Q13
3Q13
4Q13
$1.05
$0.82
2Q12
Wells Fargo 2014 Investor Day
3Q12
1Q14
Financial Overview 4
Long-term performance, across cycles 10+ years of Volatile Rates, Unemployment and GDP
Wells Fargo Net Income ($ in billions)
25
10.00% 20
8.00%
6.00%
15
4.00% 10
2.00% 5
0.00% -2.00%
0
-4.00% (1)
Slope of the Yield Curve
Unemployment Rate
Real GDP Growth
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, 2008. 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.
Wells Fargo 2014 Investor Day
Financial Overview 5
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
Wells Fargo 2014 Investor Day
Financial Overview 6
Strong performance vs. peers: Balance Sheet growth
Average Deposit Growth
Ending Loan Growth
(FY12 vs. FY13)
(FY12 vs. FY13)
8.5%
7.5% 5.2%
5.2%
5.0%
(1)
6.3% 5.3%
4.0%
3.0% 2.2%
3.0% 1.5%
PNC
USB
WFC
BAC
C
JPM
WFC
JPM
USB
PNC
BAC
C
-0.4%
Total loan growth
Core loan growth
(1)
Source: SNL. (1) Core loan portfolio growth excludes the runoff from non-strategic/liquidating portfolios.
Wells Fargo 2014 Investor Day
Financial Overview 7
Strong performance vs. peers: Asset productivity
Revenue to Average Assets (FY13)
5.8%
WFC
5.5%
USB
5.2%
PNC
4.1%
4.1%
4.1%
C
BAC
JPM
Source: SNL
Wells Fargo 2014 Investor Day
Financial Overview 8
Strong performance vs. peers: Efficiency ratio
Efficiency Ratio
(1)
(FY13)
77.8% 73.0% 65.1% 58.3%
60.5%
53.0%
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.
Wells Fargo 2014 Investor Day
Financial Overview 9
Strong performance vs. peers: Net charge-offs
Net Charge-offs / Average Loans (FY13)
1.62%
0.81% 0.56%
0.57%
WFC
PNC
0.86%
0.63%
USB
JPM
BAC
C
Source: SNL.
Wells Fargo 2014 Investor Day
Financial Overview 10
Strong performance vs. peers: ROA and ROE
Return on Equity
Return on Assets
(FY13)
(FY13)
1.65% 1.51%
15.8% 1.37%
13.9%
10.8%
0.75%
8.4%
0.73%
6.9% 0.53% 4.6%
USB
WFC
PNC
JPM
C
BAC
USB
WFC
PNC
JPM
C
BAC
Source: SNL.
Wells Fargo 2014 Investor Day
Financial Overview 11
Strong performance vs. peers: Capital return Gross Capital Returned (Dividends and Repurchases) (FY13, $ in billions)
11.44 10.37
3.91
WFC
JPM
USB
3.65
BAC
0.96
0.93
C
PNC
Common Stock Repurchased Dividends on Common Stock (Reported) Source: SNL.
Wells Fargo 2014 Investor Day
Financial Overview 12
Strong performance vs. peers: Total shareholder return (1) Total Shareholder Return YTD
1 Year
WFC
10.3%
36.7%
PNC
9.4
36.5
USB
0.7
29.6
BAC
-4.9
34.5
JPM
-6.4
36.7
C
-10.3
31.8
KBW Bank Index
-1.3
37.8
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 5/7/2014.1 Year as of 12/31/2013.
Wells Fargo 2014 Investor Day
Financial Overview 13
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
Wells Fargo 2014 Investor Day
Financial Overview 14
Loan growth Period–end Loans Outstanding ($ in billions)
766.5 108.2
658.3
1Q12 Core loans
798.4 90.8
826.4
Period-end loans up $59.9 billion, or 8%, since 1Q12 -
78.0
-
707.6
748.4
1Q13 1Q14 (1) Non-strategic/liquidating loans
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 $30.2 billion, or 28%
Key takeaway: Expect to grow loans at a rate faster than U.S. GDP growth. Expect continued commercial/ consumer balance.
(1) See page 20 of our 1Q14 Quarterly Supplement for additional information regarding the non-strategic/liquidating portfolio, which comprises the Pick-aPay, liquidating home equity, legacy WFF indirect auto, legacy WFF debt consolidation, Education Finance-government guaranteed, and legacy Wachovia commercial & industrial, commercial real estate, foreign and other PCI loan portfolios.
Wells Fargo 2014 Investor Day
Financial Overview 15
Net interest income and NIM considerations Net Interest Income (TE)
(1)
Average Earning Asset Mix ($ in billions)
($ in millions)
$1,135 11,058
10,675
10,832
16%
19%
4%
4%
19%
3.89% 3.49%
1% 3.20%
1Q13
1Q14
Fed Funds Trading Securities MHFS
68%
1Q12
$1,364
5% 4%
1Q12
Loans
60%
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 $10,615 million for 1Q12, 1Q13, and 1Q14 respectively.
Wells Fargo 2014 Investor Day
Financial Overview 16
Noninterest income diversification Noninterest Income
9%
($ in millions)
$10,748
5,291
$10,760
4%
Other Fee Income 6,764 Total Mortgage Production
2,618
2,839
2,480 572
3,202
12%
4%
$10,010
5,066
3%
Total Trust & Investment Fees
3,412
15%
34%
11% 8% Deposit Service Charges
12%
Trust and Investment Fees
34%
Card Fees 1Q12
1Q13
1Q14
Noninterest income well diversified - Mortgage production as a percent of total fee
revenue declined to 6% in 1Q14 from 24% in 1Q12 and 23% in 1Q13
Key takeaway: Expect mortgage production revenue to stabilize. Remain well-positioned for non-mortgage fee growth. Wells Fargo 2014 Investor Day
8%
Other Banking Fees
11%
Mortgage Banking
15%
Insurance
4%
Net Gains from Trading
4%
Net Gains from Equity Inv.
9%
Other Noninterest Income
(1)
3%
Pie chart data is for 1Q14. (1) Other noninterest income includes net gains on debt securities, lease income, life insurance investment income and all other noninterest income.
Financial Overview 17
Expense and efficiency opportunities Noninterest Expense ($ in millions)
12,993
Disciplined expense management across the company
Noninterest expense down $1.0 12,400
11,948
billion from 1Q12
Efficiency ratio improved 220 bps from 1Q12
60.1% 58.3%
57.9%
Key takeaway: Continue to target efficiency ratio of 55% - 59%
1Q12
1Q13
1Q14
Efficiency Ratio
Wells Fargo 2014 Investor Day
Financial Overview 18
Credit cost trends – charge-off and reserve levels Provision Expense and Net Charge-offs ($ in billions)
2.4 2.0
Credit quality has significantly improved since 1Q12 - Provision expense down $1.7 billion - Net charge-offs down $1.6 billion
1.4
- NPAs down $7.8 billion
1.2 0.8
1.25% 0.3
0.72%
0.41% 1Q12
1Q13
Provision Expense
1Q14
Net Charge-offs
Nonperforming Assets 26.6
($ in billions)
4.6
22.9 3.4
Net charge-off rate
(1)
Key takeaway: Expect continued strong credit results. Reserve releases expected to continue, absent significant deterioration in the economy.
18.8 4.1
22.0
1Q12
19.5
14.7
1Q13
Nonaccrual loans
1Q14
Foreclosed assets
(1) 30-89 days and 90 days or more past due and still accruing, and nonperforming loans, include held for sale loans reported on Balance Sheet.
Wells Fargo 2014 Investor Day
Financial Overview 19
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
Wells Fargo 2014 Investor Day
Financial Overview 20
Financial targets Efficiency Ratio
55 - 59%
ROA
1.30% - 1.60%
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.
Wells Fargo 2014 Investor Day
Financial Overview 21
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
Wells Fargo 2014 Investor Day
Financial Overview 22
Biography
Wells Fargo 2014 Investor Day
Financial Overview 23
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 2001. 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.
Wells Fargo 2014 Investor Day
Financial Overview 24
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