Q2 2024 Wells Fargo & Co Earnings Call

Welcome, and thank you for joining the Wells Fargo Second Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Operator: Earnings conference call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star one. If you would like to withdraw your question, press star two. Please note that today's call is being recorded.

After the speaker's remarks, there will be a question and answer session.

If you would like to ask a question during this time, simply press Star 1.

If you would like to withdraw your question, press star 2.

John Campbell: 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, Charlie Scharf, and our CFO, Mike Santomassimo, will discuss second quarter results and answer your questions.

Operator: This concludes today's conference. Thank you. All lines have been placed on mute to prevent any background noise.

Please note that today's call is being recorded.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1. If you would like to withdraw your question, press star 2. 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, Charlie Scharf, and our CFO, Mike Santomassimo, will discuss our second quarter results and answer your questions. This call is being recorded.

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

John M. Campbell: Good morning everyone. Thank you for joining our call today where our CEO Charlie Scharf and our CFO Mike Santomassimo will discuss second quarter results and answer your questions.

John Campbell: 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 wells fargo.com. I'd also like to caution you that we may make four 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 AK file today containing our earnings materials. Information about any non-GAAP financial measures reference, 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.

John M. Campbell: 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 risk and uncertainty. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8K filed today containing our earnings material.

Speaker Change: This call is being recorded.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8K file today containing our earnings materials.

Speaker Change: 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.

John M. Campbell: 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 Charlotte. Thanks, John.

Charlie Scharf: I will now turn the call over to Charlie. Thanks, John. As usual, I'll make some brief comments about our second quarter results and update you on our priorities.

Charles W. Scharf: As usual, I'll make some brief comments about our second quarter results and update you on our priorities. I'll then turn the call over to Mike to review our results in more detail before we take your questions. So, let me start with some second quarter highlights.

Speaker Change: I will now turn the call over to Charlotte.

Charlotte: Thanks, John . As usual, I'll make some brief comments about our second quarter results and update you on our priorities. I'll then turn the call over to Mike to review our results in more detail before we take your questions.

Charlie Scharf: I'll then turn the call over to Mike to review our results in word detail before we take your questions. So let me start with some second quarter highlights. Our financial performance in the quarter benefited from our ongoing efforts to transform Wells Fargo. We continue to generate strong, debased revenue growth with increases across most categories compared to a year ago due to both the investments we're making in our businesses and favorable market conditions, with particular strength in investment advisory, trading activities, and investment banking. These results, more than offset the expected decline in net interest income. Credit performance during the second quarter was consistent with our expectations.

Charles W. Scharf: Our financial performance in the quarter benefited from our ongoing efforts to transform Wells Fargo. We continued to generate strong fee-based revenue growth with increases across most categories compared to a year ago due to both the investments we're making in our businesses and favorable market conditions, with particular strength in investment advisory, trading activities, and investment banking. These results more than offset the expected decline in net interest income. Credit performance during the second quarter was consistent with our expectations. Consumers have benefited from the strong labor market and wage increases.

Charlotte: So let me start with some second quarter highlights.

Charlotte: Our financial performance in the quarter benefited from our ongoing efforts to transform Wells Fargo.

Michael P. Santomassimo: We continue to generate strong fee-based revenue growth, with increases across most categories compared to a year ago, due to both the investments we're making in our businesses and favorable market conditions, with particular strength in investment advisory, trading activities, and investment banking.

Michael P. Santomassimo: These results more than offset the expected decline in net interest income.

Charlie Scharf: Consumers have benefited from the strong labor market and wage increases. The performance of our consumer auto portfolio continued to improve, reflecting prior credit tightening actions, and we had network coverings in our home lending portfolio. While losses in our credit card portfolio increased as expected, early delinquency performance of our recent messages was aligned with expectations. In our commercial portfolios, losses continued to be driven by commercial real estate office properties, where we expect losses to remain lumpy. Fundamentals in the institutional owned office real estate market continued to deteriorate as lower praises reflect the weak leasing market and many large metropolitan areas across the country.

Michael P. Santomassimo: Credit performance during the second quarter was consistent with our expectations.

Charles W. Scharf: The performance of our consumer auto portfolio continued to improve, reflecting prior credit tightening actions, and we had net recoveries in our home lending portfolio. While losses in our credit card portfolio increased as expected, early delinquency performance of our recent finances was aligned with expectations. In our commercial portfolios, losses continue to be driven by commercial real estate office properties, where we expect losses to remain lumpy. Fundamentals in the institutionally owned office real estate market continue to deteriorate as lower appraisals reflect the weak leasing market in many large metropolitan areas across the country.

Michael P. Santomassimo: Consumers have benefited from a strong labor market and wage increases.

Michael P. Santomassimo: The performance of our consumer auto portfolio continued to improve, reflecting prior credit tightening actions, and we had net recoveries in our home lending portfolio.

Michael P. Santomassimo: While losses in our credit card portfolio increased as expected, early delinquency performance of our recent vintages was aligned with expectations.

Michael P. Santomassimo: In our commercial portfolios, losses continue to be driven by commercial real estate office properties where we expect losses to remain lumpy.

Michael P. Santomassimo: Fundamentals in the institutional-owned office real estate market continue to deteriorate as lower appraisals reflect the weak leasing market in many large metropolitan areas across the country.

Charlie Scharf: However, they still remain within the assumptions we made when setting our allowance for credit losses. We continue to execute on our efficiency initiatives, which has driven headcounts of decline for 16 consecutive quarters. Average commercial and consumer loans were both down from the first quarter. The higher interest rate environment and anticipation of rate got to continue to result in rapid commercial loan demand, and we have not changed our underwriting standards to chase growth. Balance growth in our credit card portfolio was more than offset by declines across our other consumer portfolios. Average deposits grew modestly from the first quarter, with higher balances in all of our consumers.

Charles W. Scharf: However, they still remain within the assumptions we made when setting our allowance for credit losses. We continue to execute on our efficiency initiatives, which has driven headcount to decline for 16 consecutive quarters. Average commercial and consumer loans were both down from the first quarter.

Michael P. Santomassimo: However, they still remain within the assumptions we made when setting our allowance for credit losses.

Michael P. Santomassimo: We continue to execute on our efficiency initiatives which has driven headcount to decline for 16 consecutive quarters.

Charles W. Scharf: The higher interest rate environment and anticipation of rate cuts continued to result in tepid commercial loan demand, and we have not changed our underwriting standards to chase broke. However, balance growth in our credit card portfolio was more than offset by declines across our other consumer portfolios. Average deposits grew modestly from the first quarter, with higher bounces in all of our consumer-facing licenses. Now, let me update you on our strategic priorities, starting with our risk control. We are a different Wells Fargo from when I arrived.

Michael P. Santomassimo: Average commercial and consumer loans were both down from the first quarter. The higher interest rate environment and anticipation of rate cuts continued to result in tepid commercial loan demand, and we have not changed our underwriting standards to chase broke.

Michael P. Santomassimo: Balance growth in our credit card portfolio was more than offset by declines across our other consumer portfolios.

Michael P. Santomassimo: Average deposits grew modestly from the first quarter with higher bounces in all of our consumer facing lines of business.

Charlie Scharf: Now let me update you on our strategic priorities, starting with our risk control work. We are in different Wells Fargo from when I arrived. Our operational and compliance risk and controlled build-out is our top priority and will remain so until all deliverables are completed and we embed this mindset into our culture, similar to the discipline we have for financial and credit risk today. We continue to make progress by completing deliverables that are part of our plans. We will continue to make progress by completing deliverables that are part of our plans. The numerous internal metrics we track show that the work is clearly improving our control environment.

Michael P. Santomassimo: Now, let me update you on our strategic priorities, starting with our risk control work.

Charles W. Scharf: Our operational and compliance risk and control build-out is our top priority and will remain so until all deliverables are completed and we embed this mindset into our culture, similar to the discipline we have for financial and credit risks today. We continue to make progress by completing deliverables that are part of our plans. The numerous internal metrics we track show that the work is clearly improving our control environment.

Michael P. Santomassimo: We are a different Wells Fargo from when I arrived.

Michael P. Santomassimo: Our operational and compliance risk and control build-out is our top priority and will remain so until all deliverables are completed, and we embed this mindset into our culture, similar to the discipline we have for financial and credit risks today.

Michael P. Santomassimo: We continue to make progress by completing deliverables that are part of our plans.

Michael P. Santomassimo: The numerous internal metrics we track show that the work is clearly improving our control environment. While we see clear forward momentum, it's up to our regulators to make their own judgments and decide when the work is done to their satisfaction.

Charles W. Scharf: While we see clear forward momentum, it's up to our regulators to make their own judgments and decide when the work is done to their satisfaction. Progress has not been easy, but tens of thousands of my partners at Wells Fargo have now worked tirelessly for years to deliver the kind of change necessary for a company of our size and complexity, and we will not rest until we satisfy the expectations of our regulators and the high standards we have set for ourselves.

Charlie Scharf: While we see clear, forward momentum, it's up to our regulators to make their own judgments and decide when the work is done to their satisfaction. Progress has not been easy, but tens of thousands of my partners at Wells Fargo have now worked tirelessly for years to deliver the kind of change necessary for a company of our size and complexity. We will not rest until we satisfy the expectations of our regulators and the high standards we have set for ourselves. While we have made substantial changes and have meaningfully improved our control environment, the industry operates in a heightened regulatory oversight environment, and we remain at risk of further regulatory actions.

Michael P. Santomassimo: Progress has not been easy, but tens of thousands of my partners at Wells Fargo have now worked tirelessly for years to deliver the kind of change necessary for a company of our size and complexity.

Michael P. Santomassimo: And we will not rest until we satisfy the expectations of our regulators and the high standards we have set for ourselves.

Charles W. Scharf: While we have made substantial changes and have immediately improved our control environment, the industry operates in a heightened regulatory oversight environment, and we remain at risk of further regulatory action. We are also a different Wells Fargo in how we're executing on other strategic priorities to better serve our customers and help drive higher returns over time. Let me highlight a few examples of the progress we're making in diverting revenue sources and reducing our reliance on net interest income.

Michael P. Santomassimo: While we have made substantial changes and have immediately improved our control environment, the industry operates in a heightened regulatory oversight environment, and we remain at risk of further regulatory actions.

Charlie Scharf: We are also a different Wells Fargo and how we are executing on other strategic priorities to better serve our customers and help drive higher returns over time. Let me highlight a few examples of the progress we're making for diverting revenue sources and reducing our reliance and net interest income. We are improving our credit card platform with more competitive offerings, which is both, which is important both for our customers and strategically for the company. During the second quarter, we've launched two new credit cards: a small business card and a consumer card. Since 2021, we have launched nine new credit cards and are almost complete in our initial product buildout.

Michael P. Santomassimo: We are also a different Wells Fargo in how we're executing on other strategic priorities to better serve our customers and help drive higher returns over time. Let me highlight a few examples of the progress we're making. We're diversing revenue sources and reducing our reliance and net interest income.

Charles W. Scharf: We are improving our credit card platform with more competitive offerings, which is important both for our customers and strategically for the company. During the second quarter, we launched two new credit cards, a small business card and a consumer card. Since 2021, we have launched nine new credit cards and are almost complete with our initial product build-out.

Michael P. Santomassimo: We are improving our credit card platform with more competitive offerings, which is important both for our customers and strategically for the company. During the second quarter, we launched two new credit cards, a small business card and a consumer card.

Michael P. Santomassimo: Since 2021, we have launched nine new credit cards.

Charlie Scharf: The momentum in this business is demonstrated by continued strong credit card spend and new account growth. We are not lowering our credit standards, but see that our strong brand and a great value proposition are being well received by the market. Building a larger credit card business is an investment, as new products have significant upfront costs related to marketing, promo rates, onboarding, and allowance, which drive a little profitability in early years. But as long as our assumptions on spend, balance growth, and credit continue to play out as expected, we expect the card business to immediately contribute to the profit growth in the future as the portfolio matures.

Charles W. Scharf: The momentum in this business is demonstrated by continued strong credit card spend and new account growth. We are not lowering our credit standards, but we see that our strong brand and great value proposition are being well received by the market. Building a large credit card business is an investment as new products have significant upfront costs related to marketing, promo rates, onboarding, and allowance, which drive little profitability in the early years.

Michael P. Santomassimo: and are almost complete in our initial product build-out.

Michael P. Santomassimo: The momentum in this business is demonstrated by continued strong credit card spend and new account growth. We are not lowering our credit standards, but see that our strong brand and a great value proposition are being well received by the market.

Michael P. Santomassimo: Building a large credit card business is an investment, as new products have significant upfront costs related to marketing, promo rates, onboarding, and allowance, which drive little profitability in early years.

Charles W. Scharf: But as long as our assumptions on spend, balance growth, and credit continue to play out as expected, we expect the card business to immediately contribute to profit growth in the future as the portfolio matures. We've been methodically growing our corporate investment bank, which has been a priority and continues to be a significant opportunity for us. We are executing on a multi-year investment plan while maintaining our strong risk discipline, and our positive momentum continues.

Michael P. Santomassimo: But as long as our assumptions on spend, balance growth, and credit continue to play out as expected, we expect the card business to immediately contribute to profit growth in the future as the portfolio matures.

Charlie Scharf: We've been methodically growing our corporate investment bank, which has been a priority and continues to be a significant opportunity for us. We are executing on a multi-year investment plan while maintaining our strong risk discipline, and our positive momentum continues. We have added significant talent over the past several years and will continue to do so in targeted areas where we see opportunities for growth. Fernando Rivas recently joined Wells Fargo as Co-CEO Corporate Investment Banking. Fernando has deep knowledge of our industry, and his background and skills complement the terrific team. John Weiss has put together. While we view our work here as a long-term commitment, we expect to see results in the short and medium term and are encouraged by the improved performance we've already seen with strong growth in investment bank fees during the first half of the year.

Michael P. Santomassimo: We have been methodically growing our corporate investment bank, which has been a priority and continues to be a significant opportunity for us. We are executing on a multi-year investment plan while maintaining our strong risk discipline.

Charles W. Scharf: We have added significant talent over the past several years and will continue to do so in targeted areas where we see opportunities for growth. Fernando Rivas, who recently joined Wells Fargo, is co-CEO of Corporate Investment Bank. Fernando has deep knowledge of our industry, and his background and skills complement the terrific team John Weiss has put together.

Michael P. Santomassimo: and our positive momentum continues.

Michael P. Santomassimo: We have added significant talent over the past several years and will continue to do so in targeted areas where we see opportunities for growth.

Speaker Change: Fernando Rivas, recently joined Wells Fargo, is co-CEO of Corporate Investment Banking.

Speaker Change: Fernando has deep knowledge of our industry and his background and skills complement the terrific team John Weiss has put together.

Charles W. Scharf: While we view our work here as a long-term commitment, we expect to see results in the short and medium terms and are encouraged by the improved performance we've already seen with strong growth in investment banking fees during the first half of the year. In our wealth and investment management business, we have substantially improved advisor retention and have increased the focus on serving independent advisors and our consumer banking clients, which should ultimately help drive growth.

Speaker Change: While we view our work here as a long-term commitment, we expect to see results in the short and medium term and are encouraged by the improved performance we have already seen with strong growth in investment banking fees during the first half of the year.

Charlie Scharf: In our wealth and investment management business, we have substantially improved advisor retention and have increased the focus on serving independent advisors and our consumer bank clients, which should have ultimately helped drive growth. In the commercial bank, we are focused on growing our treasury management business, and in bankers to cover segments where we are under penetrated, and delivering our investment banking and markets capabilities to clients and believe we have significant opportunities in the years ahead.

Speaker Change: In our wealth and investment management business, we have substantially improved advisor retention and have increased the focus on serving independent advisors and our consumer banking clients, which should ultimately help drive growth.

Charles W. Scharf: In the commercial bank, we are focused on growing our treasury management business, adding bankers to cover segments where we are underpenetrated, and delivering our investment banking and markets capabilities to clients, and we believe we have significant opportunities in the years ahead. And we continue to see significant opportunities for our consumer, small, and business banking franchise to be a more important source of growth. Let me give you just a few examples of some of the things we're doing here.

Speaker Change: In the commercial bank, we are focused on growing our treasury management business, adding bankers to cover segments where we are underpenetrated, and delivering our investment banking and markets capabilities to clients and believe that we have significant opportunities in the years ahead.

Charlie Scharf: And we continue to see significant opportunities for consumer, small and business banking franchise to be a more important source of growth, and we give you just a few examples of some of the things we're doing here. We continue to optimize and invest in a branch network. While our branch declined 5% from a year ago, we are being more strategic about branch location strategy. We are accelerating our efforts to refurbish our branches, completing 296 during the first half of this year, and are on track to update all of our branches within the next five years. As part of our efforts to enhance the branch experience, we are also increasing our investment in our branch employees and improving technology, including a new digital account of the experience.

Speaker Change: And we continue to see significant opportunities for our consumer, small and business banking branches to be a more important source of growth. Let me give you just a few examples of some of the things we're doing here. We continue to optimize and invest in our branch network.

Charles W. Scharf: We continue to optimize and invest in our branch network. While our branch count declined 5% from a year ago, we are being more strategic about branch location. We are accelerating our efforts to refurbish our branches, completing 296 during the first half of this year, and we are on track to update all of our branches within the next five years. As part of our efforts to enhance the branch experience, we are also increasing our investment in our branch employees and improving technology, including a new digital account opening experience, which has been positive for both our bankers and our customers.

Speaker Change: While our branch count declined 5% from a year ago, we are being more strategic about branch location strategy. We are accelerating our efforts to refurbish our branches, completing 296 during the first half of this year, and are on track to update all of our branches within the next five years.

Speaker Change: As part of our efforts to enhance the branch experience, we are also increasing our investment in our branch employees and improving technology, including a new digital account opening experience, which has been a positive for both our bankers and our customers.

Charlie Scharf: We continue to have strong growth in mobile users, with active mobile customers up 6% from a year ago. A year after launching Fargo, our AI Power Virtual Assistant, we have had nearly 15 million users and over 117 million interactions. We expect this momentum to continue as we make further enhancements to offer our customers additional self-service features and value-edited insights, including balance trends and subscription spending.

Charles W. Scharf: We continue to have strong growth in mobile users, with active mobile customers up 6% from a year ago. A year after launching Fargo, our AI-powered virtual assistant, we have had nearly 15 million users and over 117 million interactions.

Speaker Change: We continue to have strong growth in mobile users with active mobile customers up 6% from a year ago.

Speaker Change: A year after launching Fargo, our AI-powered virtual assistant, we have had nearly 15 million users and over 117 million interactions.

Charles W. Scharf: We expect this momentum to continue as we make further enhancements to offer our customers additional self-service features and value-added insights, including balance trends and subscription spending. Looking ahead, the overall U.S. economy remains strong, driven by a healthy labor market and solid growth. However, the economy is slowing, and there are continued headwinds from still elevated inflation and elevated interest rates. As managers of a large, complex financial institution, we think about both the risks and the opportunities and work to be prepared for the downside while continually building our ability to serve customers and clients.

Speaker Change: We expect this momentum to continue as we make further enhancements to offer our customers additional self-service features and value-added insights, including balance trends and subscription spending.

Charlie Scharf: Looking ahead, overall, the US economy remains strong, driven by a healthy labor market and solid growth. However, the economy is slowing, and there are continued headwinds from still elevated inflation and elevated interest rates. As managers of a large complex financial institution, we think about both the risks and the opportunities and work to be prepared for the downside while continually building our ability to serve customers and clients. The actions we have taken to strengthen the company have helped prepare us for a variety of economic environments, and while risks exist, we see significant opportunities in front of us.

Speaker Change: Looking ahead, overall, the U.S. economy remains strong, driven by a healthy labor market and solid growth. However, the economy is slowing, and there are continued headwinds from still elevated inflation and elevated interest rates.

Speaker Change: As managers of a large, complex financial institution, we think about both the risks and the opportunities, and work to be prepared for the downside, while continually building our ability to serve customers and clients.

Charles W. Scharf: The actions we have taken to strengthen the company have helped prepare us for a variety of economic environments, and while risks exist, we see significant opportunities in front of us. Our commitment and the progress we are making to build an appropriate operational and compliance risk management framework are foundational for our company, and we will continue to prioritize and dedicate all necessary resources to complete our work. We have a diversified business model, see opportunities to build a broader earning stream, and are seeing early progress in our results.

Speaker Change: The actions we have taken to strengthen the company have helped prepare us for a variety of economic environments. And while risks exist, we see significant opportunities in front of us.

Charlie Scharf: Our commitments and the progress we are making to build an appropriate operational and compliance risk management framework is foundational for our company, and we will continue to prioritize and dedicate all necessary resources to complete our work. We have a diversified business model, see opportunities to build a broader earning stream, and are seeing the early progress in our results. We have maintained strong financial risk disciplines and a strong balance sheet. Operating with a strong capital position and anticipation of the uncertainty, the stress test regime imposes on large banks, and the potential for increases to our regulatory capital requirements, resulting from volatile pre-finalization, as served well.

Speaker Change: Our commitment and the progress we are making to build an appropriate operational and compliance risk management framework is foundational for our company, and we will continue to prioritize and dedicate all necessary resources to complete our work.

Speaker Change: We have a diversified business model, see opportunities to build a broader earning stream, and are seeing the early progress in our results.

Charles W. Scharf: And we have maintained strong financial risk disciplines and a strong balance sheet. Operating with a strong capital position and in anticipation of the uncertainty the stress test regime imposes on large banks and the potential for increases to our regulatory capital requirements resulting from Basel III finalization has served us well. It also allows us to serve our customers' financial needs, and we remain committed to prudently returning excess capital to our shareholders. As we previously announced, we expect to increase our third quarter common stock dividend by 14% to $0.40 per share, subject to the approval by the company's Board of Directors at its regularly scheduled meeting later this month.

Speaker Change: And we've maintained strong financial risk disciplines and a strong balance sheet.

Speaker Change: Operating with a strong capital position, in anticipation of the uncertainty the stress test regime imposes on large banks, and the potential for increases to our regulatory capital requirements resulting from FOSIL III finalization, has served us well.

Charlie Scharf: It also allows us to serve our customers' financial needs, and we remain committed to prudently return access capital to our shareholders.

Speaker Change: It also allows us to serve our customers to the national needs.

Charlie Scharf: As we previously announced, we expect to increase our third quarter common stock dividend by 14% to 40 cents per share, subject to the approval by the company's board of directors at its regularly scheduled meeting later this month. We've repurchased over $12 billion of common stock during the first half of this year, and while the pace will slow, we have the capacity to continue repurchasing stock. I'm proud of the progress we continue to make and thankful to everyone who works at Wells Fargo.

Speaker Change: and we remain committed to prudently return excess capital to our shareholders.

Speaker Change: As we previously announced, we expect to increase our third quarter common stock dividend by 14% to $0.40 per share, subject to the approval by the company's Board of Directors at its regularly scheduled meeting later this month.

Michael P. Santomassimo: We've repurchased over $12 billion of common stock during the first half of this year, and while the pace will slow, we have the capacity to continue repurchasing stock. I'm proud of the progress we continue to make and thankful to everyone who works at Wells Fargo. I'm excited about the opportunities. I'll now turn the call over to Mike. Thank you, Charlie, and good morning, everyone.

Speaker Change: We've repurchased over $12 billion of common stock during the first half of this year, and while the pace will slow, we have the capacity to continue repurchasing stock.

Speaker Change: I'm proud of the progress we continue to make and thankful to everyone who works at Wells Fargo. I'm excited about the opportunities ahead.

Charlie Scharf: I'm excited about the opportunities ahead.

Michael Santomassimo: I'll now turn the call over to Mike. Thank you, Charlie, and good morning, everyone. That income for the second quarter was $4.9 billion for $1.33 per diluted common share. EPS grew from both the first quarter and a year ago, reflecting the solid performance in our fee-based businesses as we benefited from the market environment and the investments we've been making. We also continue to focus on driving efficiency across the company.

Speaker Change: I'll now turn the call over to Mike.

Michael P. Santomassimo: Net income for the second quarter was $4.9 billion, or $1.33 per diluted common share. EPS grew from both the first quarter and a year ago, reflecting the solid performance in our fee-based businesses as we benefited from the market environment and the investments we've been making. We also continue to focus on driving efficiency across the country. I will also note that our second quarter effective income tax rate reflected the impact of the first quarter adoption of the new accounting standard for renewable energy tax credit investments, which increased our effective tax rate by approximately 3 percentage points versus a year ago. This increase in the effective tax rate had a minimal impact on income since it had an offsetting increase in non-interest income.

Michael P. Santomassimo: Thank you, Charlie, and good morning, everyone. Net income for the second quarter was $4.9 billion, or $1.33 per diluted common share.

Michael P. Santomassimo: EPS grew from both the first quarter and a year ago, reflecting the solid performance in our fee-based businesses as we benefited from the market environment and the investments we've been making.

Michael Santomassimo: I will also note that our second quarter effective income tax rate reflected the impact of the first quarter adoption of the new accounting standard for renewable energy tax credit investments, which increased our effective tax rate by approximately three percentage points versus a year ago. This increase in the effective tax rate had a minimal impact on the income since it had an offsetting increase to non-interest income.

Michael P. Santomassimo: We also continue to focus on driving efficiency across the company.

Michael P. Santomassimo: I will also note that our second quarter effective income tax rate reflected the impact of the first quarter adoption of the new accounting standard for renewable energy tax credit investments.

Michael P. Santomassimo: which increased our effective tax rate by approximately 3 percentage points versus a year ago.

Michael P. Santomassimo: This increase in the effective tax rate had a minimal impact on the income since it had an offsetting increase to non-interest income.

Michael Santomassimo: Turning to slide four, as expected, non-interest income was down; net interest income was down 1.2 billion, or 9% from a year ago. This decline was driven by higher funding costs, including the impact of lower deposit balances and customers migrating to higher yielding deposit products in our consumer businesses, and higher deposit costs in our commercial businesses, as well as lower loan balances. This was partially offset by higher yields and earning assets. Net interest income declined $304 million, or 2%, from the first quarter. Given the higher rate environment, meat commercial loan demand, loan balances continued to decline as expected.

Michael P. Santomassimo: Turning to slide 4, as expected, net interest income was down $1.2 billion, or 9% from a year ago. This decline was driven by higher funding costs, including the impact of lower deposit balances and customers migrating to higher-yielding deposit products in our consumer businesses and higher deposit costs in our commercial businesses, as well as lower loan balances. This was partially offset by higher yields on earning assets. However, net interest income declined $304 million, or 2% from the first quarter.

Michael P. Santomassimo: Turning to slide four.

Michael P. Santomassimo: As expected, non-interest income is down.

Michael P. Santomassimo: Net interest income was down $1.2 billion, or 9% from a year ago.

Michael P. Santomassimo: This decline was driven by higher funding costs, including the impact of lower deposit balances and customers migrating to higher-yielding deposit products in our consumer businesses and higher deposit costs in our commercial businesses, as well as lower loan balances.

Michael P. Santomassimo: This was partially offset by higher yields on earning assets.

Michael P. Santomassimo: Net interest income declined $304 million, or 2% from the first quarter. Given the higher rate environment and weak commercial loan demand, loan balances continue to decline as expected.

Michael P. Santomassimo: Given the higher rate environment and weak commercial loan demand, loan balances continue to decline as expected. However, we saw positive trends, including average deposit balances growing from the first quarter, with growth in all of our customer-facing businesses, including within our consumer business. Customer migration to higher-yielding alternatives was also lower in the quarter.

Michael Santomassimo: We saw positive trends, including average deposit balances grown from the first quarter with growth in all of our customer-facing businesses, including within our consumer business. Customer migration to higher yielding alternatives was also lower in the quarter. This slowed the pace of growth in deposit pricing, with our average deposit cost up 10 basis points in the second quarter after increasing 16 basis points in the first quarter.

Michael P. Santomassimo: We saw positive trends including average deposit balances growing from the first quarter with growth in all of our customer facing businesses including within our consumer business.

Michael P. Santomassimo: This slowed the pace of growth in deposit pricing, with our average deposit cost up 10 basis points in the second quarter after increasing 16 basis points in the first quarter. If the Fed were to start cutting rates later this year, we expect that deposit pricing would begin to decline with the most immediate impact of new promotional rates in our consumer business and standard pricing for commercial deposits, where pricing moves faster as rates increase, and we would expect basis to also be higher as rates decline. On slide 5, we highlight loans and deposits. Average loans were down from both the first quarter and a year ago.

Michael P. Santomassimo: Customer migration to higher-yielding alternatives was also lower in the quarter.

Michael P. Santomassimo: This slowed the pace of growth in deposit pricing with our average deposit cost up 10 basis points in the second quarter after increasing 16 basis points in the first quarter.

Michael Santomassimo: If the Fed were to start cutting rates later this year, we expect that deposit pricing would begin to decline, with the most immediate impact of new promotional rates in our consumer business and standard pricing for commercial deposits, where pricing moved faster as rates increased. We would expect basis to also be higher as rates decline.

Michael P. Santomassimo: If the Fed were to start cutting rates later this year, we expect that deposit pricing would begin to decline, with the most immediate impact from new promotional rates in our consumer business and standard pricing for commercial deposits, where pricing moves faster as rates increase, and we would expect betas to also be higher as rates decline.

Michael Santomassimo: On slide five, we highlight loans in deposits. Average loans were down from both the first quarter of any year ago. Credit card loans continued to grow, while most other categories declined. I'll highlight specific drivers when discussing or operating segment results. Average deposits were relatively stable from a year ago as growth in our commercial businesses, in corporate funding offset declines in our consumer businesses, driven by customers migrating to higher yielding alternatives and continued to consumer spending. Average deposits grew 4.9 billion from the first quarter. Commercial deposits have grown from three consecutive quarters as we successfully tracked the client's operational deposits.

Michael P. Santomassimo: On slide 5, we highlight loans and deposits.

Michael P. Santomassimo: Credit card loans continue to grow while most other categories decline. I'll highlight specific drivers when discussing our operating segment results. Average deposits were relatively stable from a year ago as growth in our commercial businesses and corporate funding offset declines in our consumer businesses, driven by customers migrating to higher-yielding alternatives and continued consumer spending. Average deposits grew $4.9 billion in the first quarter.

Michael P. Santomassimo: Average loans were down from both the first quarter and a year ago. Credit card loans continue to grow while most other categories decline.

Michael P. Santomassimo: I'll highlight specific drivers when discussing our operating segment results.

Michael P. Santomassimo: Average deposits were relatively stable from a year ago as growth in our commercial businesses and corporate funding offset declines in our consumer businesses driven by customers migrating to higher yielding alternatives and continued consumer spending.

Michael P. Santomassimo: Commercial deposits have grown for three consecutive quarters as we've successfully tracked clients' operational deposits. After declining for nearly two years, consumer deposit balances grew modestly from the first quarter. We've seen outflows slow as many rate-seeking customers in wealth and investment management have already moved into cash alternative products, and we've successfully used promotion- and retention-oriented strategies to retain and acquire new balances in consumer small and business banking. These improved deposit trends have allowed us to reduce higher-cost market funding. The migration from non-interest-bearing to interest-bearing deposits was similar to last quarter, with our percentage of non-interest-bearing deposits declining from 26% in the first quarter to 25%.

Michael P. Santomassimo: Average deposits grew $4.9 billion in the first quarter. Commercial deposits have grown for three consecutive quarters as we've successfully tracked clients' operational deposits.

Michael Santomassimo: After declining for nearly two years, consumer deposit balances grew modestly from the first quarter. We've seen outflow slow as many rate-seeking customers and well-being investment have already moved into cash alternative products, and we've successfully used promotion and retention-oriented strategies to retain environment balances and consumer small and business banking. These improved deposit trends allowed us to reduce higher-cost market funding. The migration from non-intersparing to intersparing deposits was similar to last quarter, with our percentage of non-intersparing deposits declining to 26% to the quarter of to 25%.

Michael P. Santomassimo: After declining for nearly two years, consumer deposit balances grew modestly from the first quarter.

Michael P. Santomassimo: We've seen outflows slow as many rate-seeking customers in wealth and investment management have already moved into cash alternative products, and we've successfully used promotion and retention-oriented strategies to retain and acquire new balances in consumer small and business banking.

Michael P. Santomassimo: These improved deposit trends allowed us to reduce higher-cost market funding.

Michael P. Santomassimo: The migration from non-interest-bearing to interest-bearing deposits was similar to last quarter, with our percentage of non-interest-bearing deposits declining from 26% in the first quarter to 25%.

Michael Santomassimo: Turning to non-interesting, come on slide 6. Non-interesting come increased 19% from a year ago, with growth across most categories reflecting both the benefit of the investments we've been making in our businesses as well as the market conditions, as Charlie highlighted. This growth more than offset the expected decline in an interesting come with revenue increasing from a year ago, the sixth consecutive quarter of year-over-year revenue growth.

Michael P. Santomassimo: Turning to non-interest income on slide 6. Non-interest income increased 19% from a year ago, with growth across most categories, reflecting both the benefit of the investments we've been making in our businesses, as well as the market conditions, as Charlie highlighted. This growth more than offsets the expected decline in interest income with revenue increasing from a year ago, the sixth consecutive quarter of year-over-year revenue growth. I will highlight the specific drivers of this growth when discussing our operating segment goals.

Michael P. Santomassimo: Turning to non-interest income on slide 6.

Michael P. Santomassimo: Non-interest income increased 19% from a year ago, with growth across most categories reflecting both the benefit of the investments we've been making in our businesses as well as the market conditions as Charlie highlighted.

Michael P. Santomassimo: This growth more than offsets the expected decline in interest income with revenue increasing from a year ago, the sixth consecutive quarter of year-over-year revenue growth.

Michael Santomassimo: I will highlight the specific drivers of this growth when discussing our operating segment goals.

Michael P. Santomassimo: I will highlight the specific drivers of this growth when discussing our operating segment goals.

Michael Santomassimo: Turning this expenses on slide 7. Tech and quarter non-interest expense increased 2% from a year ago from my higher operating losses, an increase in revenue-related compensation, and higher technology and equipment expense. These increases were partially offset by the impact of efficiency initiatives, including lower salaries, expense, and professional and outside services expense. Operating losses increased from a year ago and included higher customer remediation rules for a small number of historical matters that we were working hard to get to kind us.

Michael P. Santomassimo: Turning to expenses on slide 7, tech and quarterly non-interest expense increased 2% from a year ago driven by higher operating losses and an increase in revenue-related compensation and higher technology and equipment expense. These increases were partially offset by the impact of efficiency initiatives, including lower salaries expense and professional and outside services expense. Operating losses increased from a year ago and included higher customer remediation accruals for a small number of historical matters that we were working hard to get behind us. The 7% decline in non-interest expense in the first quarter was primarily driven by seasonally higher personnel expense in the first quarter.

Michael P. Santomassimo: Earnings Expenses on Slide 7.

Michael P. Santomassimo: Second quarter, non-interest expense increased 2% from a year ago driven by higher operating losses and increase in revenue-related compensation and higher technology and equipment expense.

Michael P. Santomassimo: These increases were partially offset by the impact of efficiency initiatives including lower salaries expense and professional and outside services expense.

Michael P. Santomassimo: Operating losses increased from a year ago and included higher customer remediation accruals for a small number of historical matters that we were working hard to get behind us.

Michael Santomassimo: 7% decline in non-interest expense in the first quarter was primarily driven by seasonally higher personnel expense in the first quarter.

Michael P. Santomassimo: 7% decline in non-interest expense from the first quarter was primarily driven by seasonally higher personnel expense in the first quarter.

Michael Santomassimo: Turning to credit quality in slide 8, net loan charge-offs increased 7 basis points from the first quarter to 57 basis points of average loans. The increase was driven by higher commercial net loan charge-offs, which were up 127 million from the first quarter to 35 basis points of average loans, primarily reflecting higher losses in our commercial real estate office portfolio. While losses in the commercial real estate office portfolio increased in the second quarter, after declining last quarter, they were in line with our expectations. As we have previously stated, commercial real estate office losses have been and will continue to be wonky as we continue to work with clients.

Michael P. Santomassimo: Turning to credit quality, in slide 8, net loan charge-offs increased 7 basis points from the first quarter to 57 basis points of average loan. The increase was driven by higher commercial net loan charge-offs, which were up $127 million from the first quarter to 35 basis points of average loans, primarily reflecting higher losses in our commercial real estate office portfolio. While losses in the commercial real estate office portfolio increased in the second quarter, after declining in the previous quarter, they were in line with our expectations.

Michael P. Santomassimo: Turning to credit quality in slide 8, net loan charge-offs increased 7 basis points from the first quarter to 57 basis points of average loans.

Michael P. Santomassimo: The increase was driven by higher commercial net loan charge-offs, which were up $127 million from the first quarter to 35 basis points of average loans.

Michael P. Santomassimo: primarily reflecting hire losses in our commercial real estate office portfolio.

Michael P. Santomassimo: While losses in the commercial real estate office portfolio increased in the second quarter, after declining last quarter, they were in line with our expectations.

Michael P. Santomassimo: As we have previously stated, commercial real estate office losses have been, and will continue to be, lumpy as we continue to work with clients. We continue to actively work to de-risk our office exposure, including a rigorous monitoring process.

Michael P. Santomassimo: As we have previously stated, commercial real estate office losses have been, and will continue to be, lumpy as we continue to work with clients.

Michael Santomassimo: We continue to actively work to de-risk our office exposure, including a rigorous monitoring process. These efforts help to reduce our office commitment by 13% and loan balances by 9% from a year ago. Consumer net loan charge-offs increased 25 million from the first quarter to 88 basis points of average loans. Auto losses continue to decline, benefiting from the credit tightening actions we implemented starting in late 2021. The increase in credit card losses was in line with our expectations. As older vintages are no longer benefiting from pandemic stimulus, as more recent vintages and as more recent vintages are churned.

Michael P. Santomassimo: We continue to actively work to de-risk our office exposure, including a rigorous monitoring process.

Michael P. Santomassimo: These efforts helped to reduce our office commitment by 13% and loan balances by 9% from a year ago. Consumer Net Loan Charge-offs increased $25 million from the first quarter to 88 basis points of average loans. Auto losses continue to decline, benefiting from the credit tightening actions we implemented starting in late 2021. The increase in credit card losses was in line with our expectations as older vintages are no longer benefiting from the pandemic stimulus, and as more recent vintages mature.

Michael P. Santomassimo: These efforts helped to reduce our office commitment by 13% and loan balances by 9% from a year ago.

Michael P. Santomassimo: Consumer net loan charge-offs increased $25 million from the first quarter to 88 basis points of average loans.

Michael P. Santomassimo: Auto offices continued to decline benefiting from the credit tightening actions we implemented starting in late 2021.

Michael P. Santomassimo: The increase in credit card losses was in line with our expectations as older vintages are no longer benefiting from pandemic stimulus and as more recent vintages mature.

Michael Santomassimo: Importantly, the credit performance of our newer vintages has been consistent with our expectations, and we currently expect the credit card track up raise to decline in the third quarter.

Michael P. Santomassimo: Importantly, the credit performance of our newer vintages has been consistent with our expectations, and we currently expect the credit card shrug-off rates to decline in the third quarter. Non-performing assets increased 5% in the first quarter, driven by higher commercial real estate office non-accruals. Moving to slide nine.

Michael P. Santomassimo: Importantly, the credit performance of our newer vintages has been consistent with our expectations.

Michael P. Santomassimo: And we currently expect the credit card shrug-off rates to decline in the third quarter.

Michael Santomassimo: Non-performing athletes can be 5% for the first quarter, driven by the higher Merchor Real State Office, Non-Gules, moving to slide 9. Our allowance for credit losses was down modestly from the first quarter, driven by declines across most athletic classes, partially offset by a higher allowance for credit lift card loans driven by higher balances. Our allowance coverage for total loans has been relatively stable over the past four quarters, as credit trends remain generally consistent. Our allowance coverage for our commercial Real State Office portfolio has also been relatively stable at approximately 11% to the past several quarters.

Michael P. Santomassimo: Non-performing assets increased 5% in the first quarter, driven by the higher commercial real estate office non-accruals.

Michael P. Santomassimo: Our allowance for credit losses was down modestly from the first quarter, driven by declines across most asset classes, partially offset by a higher allowance for credit card loans driven by higher balances. Our allowance coverage for total loans has been relatively stable over the past four quarters, as credit trends remain generally consistent. Our allowance coverage for our commercial real estate office portfolio has also been relatively stable at approximately 11% for the past several quarters.

Michael P. Santomassimo: Moving to slide 9.

Michael P. Santomassimo: Our allowance for credit losses was down modestly from the first quarter, driven by declines across most asset classes, partially offset by a higher allowance for credit card loans driven by higher balances.

Michael P. Santomassimo: Our allowance coverage for total loans has been relatively stable over the past four quarters, as credit trends remain generally consistent.

Michael P. Santomassimo: Our allowance coverage for our commercial real estate office portfolio has also been relatively stable at approximately 11% for the past several quarters.

Michael Santomassimo: Turning the capital of liquidity in slide 10. Our capital position remains strong and our CET-1 ratio of 11% continues to be well above our current 8.9 regulatory minimum plus buffers. We're also above our expected new CET-1 regulatory minimum plus buffers of 9.8% starting in the fourth quarter of this year, and our stressed capital buffers expected to increase from 2.9% to 3.8%.

Michael P. Santomassimo: Turning to Capital Liquidity on slide 10, our capital position remains strong, and our CET1 ratio of 11% continues to be well above our current 8.9 Regulatory Minimum Plus buffers. We are also above our expected new CET1 Regulatory Minimum Plus buffers of 9.8% starting in the fourth quarter of this year, as our stress capital buffer is expected to increase from 2.9% to 3.8%. We repurchased $6.1 billion of common stock in the second quarter, and while the pace will slow, we have the capacity to continue to repurchase common stock, as Charlie highlighted.

Michael P. Santomassimo: Turning to capital and liquidity on slide 10.

Michael P. Santomassimo: Our capital position remains strong, and our CET1 ratio of 11% continues to be well above our current 8.9 regulatory minimum plus buffers.

Michael P. Santomassimo: We're also above our expected new CET1 regulatory minimum plus buffers of 9.8% starting in the fourth quarter of this year, as our stress capital buffer is expected to increase from 2.9% to 3.8%.

Michael Santomassimo: We repurchase 6.1 billion of common stock in the second quarter, and while the pace will slow, we have capacity to continue to repurchase common stock as Charlotte highlighted. Also, we expect to increase our common stock dividends by 14%, subject to quarter approval.

Speaker Change: We repurchased $6.1 billion of common stock in the second quarter, and while the pace will slow, we have the capacity to continue to repurchase common stock, as Charlie highlighted.

Michael P. Santomassimo: Also, we expect to increase our common stock dividends in the third quarter by 14%, subject to quarter. Turning to our operating segment, starting with Consumer Banking, landing on slide 11. Consumer, small, and business banking revenue declined 5% from a year ago driven by lower deposit balances and the impact of customers migrating to higher yielding deposit products.

Speaker Change: Also, we expect to increase our common stock dividends by 14% subject to court approval.

Michael Santomassimo: Turning to our operating segment, starting with consumer banking lending on slide 11. Consumer small and business banking revenue declined 5% from a year ago to provide lower deposit balances in the impact of customers migrating the higher yielding deposit products. Home lending revenue was down 3% from a year ago due to lower net interest income as loan balances continued to decline. Credit card revenue was stable from a year ago as higher loan balances driven by higher point of sale volume due to account growth was offset by lower other fee revenue. Auto revenue declined 25% from last year due to lower loan balances and continued loan spread compression.

Michael P. Santomassimo: Lending revenue is down 3% from a year ago due to lower net interest income as loan balances continue to decline. Credit card revenue was stable from a year ago, as higher loan balances driven by higher point-of-sale volume and new account growth were offset by lower other fee revenue. Auto revenue declined 25% from last year, driven by lower loan balances and continued loan spread compression.

Speaker Change: Turning to our operating segment, starting with Consumer Banking and Lending on slide 11.

Speaker Change: Consumers, small and business banking revenue declined 5% from a year ago driven by lower deposit balances and the impact of customers migrating to higher yielding deposit products.

Speaker Change: Home lending revenue is down 3% from a year ago due to lower net interest income as loan balances continue to decline.

Speaker Change: Credit card revenue was stable from a year ago as higher loan balances driven by higher point of sale volume and new account growth was offset by lower other fee revenue.

Speaker Change: Auto revenue declined 25% from last year driven by lower loan balances and continued loan spread compression.

Michael Santomassimo: Personal lending revenues down 4% from a year ago due to lower loan balances and loans spread compression.

Michael P. Santomassimo: Personal lending revenues were down 4% from a year ago due to my lower loan balances and loan spread progression. Turning this into key business drivers on slide 12, retail mortgage originations declined 31% from a year ago, reflecting our focus on simplifying the home lending business, as well as the decline in the mortgage market. Since we announced our new strategy at the start of 2023, we have reduced headcount in home lending by approximately 45%. Balances in our auto portfolio declined 14% compared with a year ago, driven by lower origination volumes, which were down 23% from a year ago, reflecting previous credit tightening action.

Speaker Change: Personal lending revenue is down 4% from a year ago due to lower loan balances and loan spread progression.

Michael Santomassimo: Turning this in key business drivers on slide 12. Retail mortgage originations declined 31% from a year ago, reflecting our focus on simplifying the home lending business as well as the decline in the mortgage market. Since we now start a new strategy at the start of 2023, we have produced head counter home lending by approximately 45%. Balances in our auto portfolio declined 14% compared to the year ago due to lower origination bias, which were down 23% from a year ago, reflecting previous credit tightening actions. Both debit and credit cards' spend increased from a year ago.

Speaker Change: Turning to some key business drivers on slide 12, retail mortgage originations declined 31 percent from a year ago, reflecting our focus on simplifying the home lending business as well as the decline in the mortgage market. Since we announced our new strategy at the start of 2023, we have reduced headcount on home lending by approximately 45 percent.

Speaker Change: Balances in our auto portfolio declined 14% compared with a year ago, driven by lower origination volumes, which were down 23% from a year ago, reflecting previous credit tightening actions.

Michael P. Santomassimo: Both debit and credit card spend increased from a year ago. Turning to commercial banking results on slide 13. Middle market banking revenue was down 2% from a year ago due to lower net interest income due to higher deposit costs, partially offset by growth in treasury management fees. Asset-based lending and leasing revenue decreased 17% year-over-year, including lower net interest income, lower lease income, and revenue from equity investment. Average loan balances were down 1% compared with a year ago.

Speaker Change: both debit and credit card spend increased from a year ago.

Michael Santomassimo: Turning to commercial banking result from slide 13. Middle market banking revenue was down 2% from a year ago due to my lower net interest income due to higher deposit costs, partially offset by growth and treasury management fees. Activated lending and leasing revenue decreased 17% year-rear, whose lower net interest income lowered the leasing income and revenue from equity investments. Average loan balances were down 1% compared with a year ago.

Speaker Change: Turning to commercial banking results on slide 13.

Speaker Change: Middle market banking revenue was down 2% from a year ago due to my lower net interest income due to higher deposit costs, partially offset by growth in treasury management fees.

Speaker Change: Asset-based lending and leasing revenue decreased 17% year-over-year and included lower net interest income, lower lease income, and revenue from equity investments.

Michael Santomassimo: Loan demand has remained tepid, reflecting the higher prolonged rate environment, and market work competition has been more aggressive on pricing and loan structure. Turning to corporate investment banking, banking revenue increased 3% from a year ago, driven by higher investment banking revenue due to increased activity across all products, partially offset by lower treasury management results, driven by the impact of higher interest rates on the public accounts. Average loans declined 5% from a year ago as growth in markets was more than offset by reductions in commercial real estate, where originations remain muted, and we strategically reduced balances in our office portfolio, as well as declines in banking where clients continue to access capital markets funding.

Speaker Change: Average loan balances were down 1% compared with a year ago. Loan demand has remained tepid, reflecting the higher-for-longer rate environment in a market where competition has been more aggressive on pricing and loan structure.

Michael P. Santomassimo: Loan demand has remained tepid, reflecting the higher-for-longer rate environment in a market where competition has been more aggressive on pricing and loan structure. Turning to Corporate Investment Banking on slide 14. Banking revenue increased 3% from a year ago, driven by higher investment banking revenue due to increased activity across all products, partially offset by lower treasury management results driven by the impact of higher interest rates on deposit accounts. Commercial real estate revenue was down 4% from a year ago, reflecting the impact of lower loan balances.

Speaker Change: Turning to Corporate Investment Banking at slide 14.

Speaker Change: Banking revenue increased 3% from a year ago, driven by higher investment banking revenue due to increased activity across all products, partially offset by lower treasury management results driven by the impact of higher interest rates on deposit accounts.

Speaker Change: Commercial real estate revenue is down 4% from a year ago, reflecting the impact of lower loan balances.

Michael P. Santomassimo: Markets revenue grew 16% from a year ago, driven by strong performance in equities, structure products, and credit products. Average loans declined 5% from a year ago as broken markets were more than offset by reductions in commercial real estate, where originations remain muted and we've strategically reduced balances in our office portfolio, as well as declines in banking, where clients continue to access capital markets funding. On slide 15, wealth and investment management revenue increased by 6% compared to a year ago.

Speaker Change: Markets revenue grew 16% from a year ago, driven by strong performance in equities, structured products, and credit products.

Speaker Change: Average loans declined 5% from a year ago as growth in markets was more than offset by reductions

Speaker Change: where originations remain muted and we have strategically reduced balances in our office portfolio, as well as declines in banking where clients continue to access capital markets through this funding.

Michael Santomassimo: On slide 15, wealth and investment management revenue increased 6% per year ago; higher asset-based fees through inviting increased market valuations were partially offset by lower net interest income, reflecting lower deposit balances and higher deposit costs as customers reallocated cash into higher-yield alternatives.

Speaker Change: On slide 15, wealth and investment management revenue increased 6% compared with a year ago.

Michael P. Santomassimo: Higher asset-based fees, through a combined increase in market valuations, were partially offset by lower net interest income, reflecting lower deposit balances and higher deposit costs as customers reallocated cash into higher-yielding alternatives. 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 1st, which were up from both a year ago and from April 1s Slide 16 highlights our corporate results.

Speaker Change: Higher asset-based fees, driven by an increase in market valuations, were partially offset by lower net interest income, reflecting lower deposit balances and higher deposit costs as customers reallocated cash into higher-yielding alternatives.

Michael Santomassimo: As a reminder, the majority of women advisory assets are priced beginning in a quarter, so third quarter results will reflect market valuations as of July 1st, which were up from both the year ago and from April 1st.

Speaker Change: 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 1st, which were up from both the year ago and from April 1st.

Michael Santomassimo: Slide 16 highlights our corporate results; revenue grew from a year ago due to improved results from our venture capital investments.

Michael P. Santomassimo: Revenue grew from a year ago due to improved results from our venture capital investment. Turning to our 2024 outlook for net interest income and non-interest expense, on slide 17. At the beginning of the year, we expected 2024 interest income to be approximately 7-9% lower than full year 2023. During the first half of this year, the drivers of net interest income largely played out as expected, with net interest income down 9% from the same period a year ago.

Speaker Change: Slide 16 highlights our corporate results. Revenue grew from a year ago due to improved results from our venture capital investments.

Michael Santomassimo: Turning to our 2020 more outlook for net interest income and not interest expense on slide 17. At the beginning of the year, we expected 2024 net interest income to be approximately 7 to 9% lower than all year 2023. During the first half of this year, the drivers of net interest income largely played out as expected, with net interest income down 9% from the same period of year ago. Compared with where we began the year, our current outlook reflects the benefit of your rate cuts, as well as higher deposit balances and our businesses, and what we had seen in our original expectations, which has helped us reduce market funds.

Speaker Change: Turning to our 2024 outlook for net interest income and non-interest expense on slide 17.

Speaker Change: At the beginning of the year, we expected 2024 interest income to be approximately 7-9% lower than full year 2023.

Speaker Change: During the first half of this year, the drivers of net interest income largely played out as expected, with net interest income down 9% from the same period a year ago.

Michael P. Santomassimo: Compared with where we began the year, our current outlook reflects the benefit of fewer rate cuts, as well as higher deposit balances in our businesses than we had assumed in our original expectations, which has helped us reduce market funding. Provisions for bad loans increased during the first half of this year as expected, but the pace of the increase has slowed.

Speaker Change: Compared with where we began the year, our current outlook reflects the benefit of fewer rate cuts, as well as higher deposit balances in our businesses, than what we had assumed in our original expectations, which has helped us reduce market funding.

Michael Santomassimo: Posit costs increased during the first half of this year is expected, but the pace of the increase has slowed.

Speaker Change: Positive costs increased during the first half of this year as expected, but the pace of the increase has slowed.

Michael Santomassimo: However, late in the second quarter, we increased pricing in wealth and investment management unspeak deposits in advisory brokerage accounts. This change was not anticipated in our original guidance, federal lines, rates with rates paid in money market funds, and is expected to reduce net interest income by approximately $250 million this year. Our current outlook also reflects lower loan balances. At the beginning of the year, we assumed a slight confine in average loans for the full year, which reflected modest growth in commercial and credit card loans in the second half of the year after a slow start of the year.

Michael P. Santomassimo: However, late in the second quarter, we increased pricing in wealth and investment management on sweep deposits and advisory brokerage accounts. This change was not anticipated in our original guidance, better aligns rates with rates paid in money market funds, and is expected to reduce net interest income by approximately $350 million this year. Our current outlet also reflects a lower loan balance.

Speaker Change: However, late in the second quarter, we increased pricing in wealth and investment management

Speaker Change: This change was not anticipated in our original guidance, better aligns rates with rates paid in money market funds, and is expected to reduce net interest income by approximately $350 million this year.

Michael P. Santomassimo: At the beginning of the year, we assumed a slight decline in average loans for the full year, which reflected modest growth in commercial and credit card loans in the second half of the year, after a slow start to the year. However, as we highlighted on our first quarter earnings call, loan balances were weaker than expected, and that trend continued into the second quarter. We expect this underperformance to continue into the second half of the year, with loan balances declining slightly from second quarter levels.

Speaker Change: Our current outlets also reflect lower loan balances.

Speaker Change: At the beginning of the year, we assumed a slight decline in average loans for the full year, which reflected modest growth in commercial and credit card loans in the second half of the year, after a slow start to the year.

Michael Santomassimo: As we highlighted on our first quarter earnings call, loan balances were weaker than expected, and that trend continued into the second quarter. We expected its underperformance to continue into the second half of the year, with loan balances declining slightly from second quarter levels. As a result of these factors, we currently expect our full year 2024 net interest income to be in the upper half of the range we provided in January, or down approximately 9% from full year 2023.

Speaker Change: As we highlighted on our first quarter earnings call, loan balances were weaker than expected and that trend continued into the second quarter. We expect this underperformance to continue into the second half of the year with loan balances declining slightly from second quarter levels.

Michael P. Santomassimo: As a result of these factors, we currently expect our full-year 2024 net interest income to be in the upper half of the range we provided in January, or down approximately 89% from full-year 2023. We continue to expect net interest income to drop towards the end of the year.

Speaker Change: As a result of these factors, we currently expect our full year 2024 net interest income to be in the upper half of the range we provided in January , or down approximately 89% from full year 2023. We continue to expect net interest income will drop towards the end of the year.

Michael Santomassimo: We continue to expect net interest income will drop towards the end of the year.

Michael Santomassimo: We are only halfway through the year, and many of the factors driving net interest income are uncertain, and we will continue to see how EC's assumptions play out during the remainder of the year. The equity markets have outperformed our expectations, driving higher revenue-related compensation expense, and wealth and investment management, as a reminder, is a good thing, as these higher expenses are more than offset by higher non-interesting costs. Second, operating losses in the other customer remediation-related expenses have been higher during the first half of the year than we expected. As a reminder, we have outstanding litigation, regulatory, and customer remediation matters, like the impact operating losses during the remainder of the year.

Michael P. Santomassimo: We are only halfway through the year, and many of the factors driving net interest income are uncertain, and we will continue to see how each of these assumptions plays out during the remainder of the year. Earnings & Expenses. At the beginning of this year, we expected our full year 2024 non-interest expense to be approximately $52.6 billion. We currently expect our full year 2024 non-interest expense to be approximately $54 billion.

Speaker Change: We are only halfway through the year, and many of the factors driving net interest income are uncertain, and we will continue to see how each of these assumptions plays out during the remainder of the year.

Speaker Change: Earnings to Expenses.

Speaker Change: At the beginning of this year, we expected our full year 2024 non-interest expense to be approximately $52.6 billion.

Speaker Change: We currently expect our full year 2024 non-issue expense to be approximately $54 billion. There are three primary drivers for this increase.

Michael P. Santomassimo: There are three primary drivers for this increase. First, the equity markets have outperformed our expectations, driving higher revenue-related compensation expense and wealth and investment management. As a reminder, this is a good thing, as these higher expenses are more than offset by higher non-interest rates. Second, operating losses and other customer remediation-related expenses have been higher during the first half of the year than we expected.

Speaker Change: First, the equity markets have outperformed our expectations, driving higher revenue-related compensation expense and wealth and investment management.

Speaker Change: As a reminder, this is a good thing, as these higher expenses are more than offset by higher non-interesting costs.

Speaker Change: Second, property losses and the other customer remediation related expenses have been higher during the first half of the year than we expected.

Michael P. Santomassimo: As a reminder, we have outstanding litigation, regulatory, and customer remediation matters that could impact operating losses during the remainder of the year. Finally, we did not anticipate the $336 million of expense in the first half of the year for the FDIC Special Assessment, which is now included in our updated guidance. We will continue to update you as the year progresses. In summary, our results in the second quarter reflected the progress we were making to transform Wells Fargo and improve our financial performance. Our strong growth in fee-based businesses offset the expected decline in interest income. We made further progress on our efficiency initiatives.

Speaker Change: As a reminder, we have outstanding litigation, regulatory, and customer remediation matters that could impact operating losses during the remainder of the year.

Michael Santomassimo: Finally, we did not anticipate the $336 million expense in the first half of the year for the FDIC special assessment, which is now included in our updated guidance.

Speaker Change: Finally, we did not anticipate the $336 million of expense in the first half of the year for the FDIC Special Assessment, which is now included in our updated guidance.

Michael Santomassimo: We'll continue to update you as the year progresses.

Michael Santomassimo: In summary, our results in the second quarter reflected the progress we were making to transform Wells Fargo and improve our financial performance. Our strong growth in fee-based businesses offset the expected decline in interest income. We made further progress on our efficiency initiatives. Our capital position remains strong, enabling us to return access capital share holders, and we continue to make progress on our path through sustainable ROTCE of 15%.

Speaker Change: We'll continue to update you as the year progresses.

Speaker Change: In summary, our results in the second quarter reflected the progress we were making to transform Wells Fargo and improve our financial performance.

Speaker Change: Our strong growth in fee-based businesses offset the expected decline in an interesting column.

Operator: Our capital position remains strong, enabling us to return excess capital to shareholders, and we continue to make progress on our path to a sustainable ROTCE of 15%. We will now take your questions. At this time, we will now begin the question and answer session. If you would like to ask a question, please first unmute your phone and then press star 1.

Speaker Change: We made further progress on our efficiency initiatives, our capital position remains strong, enabling us to return excess capital to shareholders, and we continue to make progress on our path to a sustainable ROTCE of 15%.

Operator: We will now take your questions. At this time, we will now begin the question-and-answer session. If you would like to ask a question, please first unmute your phone and then press Star 1. Please record your name at the prompt. If you would like to withdraw your question, you may press star 2 to remove yourself from the question queue. Once again, please press star 1 and record your name if you would like to ask a question at this time. Please stand by for our first question.

Operator: Please record your name at the prompt. If you would like to withdraw your question, you may press star 2 to remove yourself from the question queue. Once again, please press star 1 and record your name if you would like to ask a question at this time. Our first question will come from Ken Usdin of Jefferies. Your line is open. Thanks a lot.

Speaker Change: We will now take your questions.

Speaker Change: At this time, we will now begin the question and answer session.

Speaker Change: If you would like to ask a question, please first unmute your phone and then press star 1. Please record your name at the prompt.

Speaker Change: If you would like to withdraw your question, you may press star 2 to remove yourself from the question queue.

Speaker Change: Once again, please press star 1 and record your name if you would like to ask a question at this time. Please stand by for our first question.

Ken Euston: Our first question will come from Ken Euston of Jeffries. Your line is open. Thanks a lot. Good morning.

Speaker Change: Our first question will come from Ken Usdin of Jefferies. Your line is open.

Michael P. Santomassimo: Good morning, Mike. I wonder if you could provide a little bit more detail on those latter points you made about the changes on the deposit cost side. First of all, I guess relative to the 12 basis points that you saw in terms of interest-bearing cost increase, which was lower than the 17, how do you just generally expect that to look going forward? And is sweep pricing also a part of what that number will look like going forward? Thank you.

Michael Santomassimo: Mike, I wonder if you could provide a little bit more detail on those latter points you made on the changes on the deposit cost side. First of all, I guess relative to the 12 basis points that you saw on terms of interest bearing cost increase, which was lower than the 17.

Kenneth Michael Usdin: Thanks a lot. Good morning. Mike, I wonder if you could provide a little bit more detail on those latter points you made on the changes on the deposit cost side. First of all, I guess, relative to the 12 basis points,

Kenneth Michael Usdin: that you saw in terms of interest bearing cost increase, which was lower than the 17. How do you just generally expect that to look going forward? And is that sweep pricing also a part of what that number will look like going forward? Thank you.

Michael Santomassimo: How do you just generally expect that to look going forward, and is that sweep pricing also a part of what that number will look like going forward? Thank you.

Michael Santomassimo: Thanks, Ken. Yes, the sweep pricing will be included in that going forward. Basically about a month's worth in the quarter. We made the change in June, so you saw about a third of a quarterly impact already included in the number.

Michael P. Santomassimo: Yeah, thanks, Ken. Yes, I mean, the suite pricing will be included in that going forward. You saw basically about a month's worth in the quarter. We made the change in June, so you saw about a third of a quarterly impact already included in the number. You know, I think when you drill into what's going on in the deposit side, I'd say a few things. One, overall, we're not seeing a lot of pressure on overall deposit pricing.

Michael P. Santomassimo: Yeah, thanks Ken. Yes, I mean the suite pricing will be will be included in that going forward. You saw basically about a month's worth in the quarter. We made the change in June , so you saw about, you know, a third of a quarterly impact already included in the number.

Michael Santomassimo: I think when you drill into what's going on in the deposit side, say a few things. We're not seeing a lot of pressure on overall pricing in deposits. On the consumer side, this migration that's been happening now for a while from checking into savings or CDs is still happening, but at a slower pace. You can see that over the last couple of years, as it's been pretty stable the last quarter or two, but it's definitely slowing as you look at the quarter. I'd anticipate you'd still see more migration, but continuing to slow as we look forward.

Michael P. Santomassimo: I think when you drill into what's going on in the deposit side, I'd say a few things. One, overall, we're not seeing a lot of pressure on overall pricing in deposits. On the consumer side,

Michael P. Santomassimo: On the consumer side, you know, this migration that's been happening now for a while, you know, from checking into savings or CDs, it's still happening, but at a slower pace. And you can see that over the last couple of years as it's been, you know, pretty stable in the last quarter or two, but it's definitely slowing as you look at the quarter. And so I'd anticipate you'd still see more migration, but, you know, continuing to slow as we look forward. On the wholesale side, you know, the pricing's been pretty competitive now for a while, and that's the case.

Michael P. Santomassimo: You know, this migration that's been happening now for a while, you know, from checking into savings or CDs, it's still happening, but at a slower pace, and you can see that over the last couple of years as it's been, you know, pretty stable the last quarter or two, but it's definitely slowing as you look at the quarter, and so I'd anticipate you'd still see more migration, but, you know, continuing to slow as we look forward.

Michael Santomassimo: On the wholesale side, the pricing has been pretty competitive now for a while, and that's the case. We've been pleased to see that we're able to grow good operational deposits. Given the competitive pricing there, that puts a little near-term pressure on NII, but those deposits are going to be very valuable over a long period of time, particularly as rates start to come back down. The positive overall, as you saw, deposits grow in every line of business for the first time in a long time, and that migration is slowing to higher yielding alternatives. We'll see how it plays out for the rest of the year, but I think there's some good positive trends that are emerging.

Michael P. Santomassimo: On the wholesale side, the pricing's been pretty competitive now for a while, and that's the case. And so we've been pleased to see that we're able to grow good operational deposits.

Michael P. Santomassimo: And so, you know, we've been pleased to see that we're able to grow good operational deposits. And so given the competitive pricing there, that puts a little near-term pressure on NII, but those deposits are going to be very valuable over a long period of time, particularly as rates start to come back down. And so the positive, I think, overall, as you saw, deposits grow in every line of business for the first time in a long time, and that migration is slowing to higher-yielding alternatives. And so we'll see how it plays out for the rest of the year, but I think there are some good positive trends that are emerging. Great, thank you.

Michael P. Santomassimo: And so, given the competitive pricing there, that puts a little near term.

Michael P. Santomassimo: You know, pressure on NII, but those deposits are going to be very valuable over a long period of time, you know, particularly as rates start to come back down. And so the positive, I think, overall is you saw, you know, deposits grow in every line of business for the first time in a long time.

Michael P. Santomassimo: and that migration is slowing to higher-yielding alternatives and so we'll see how it plays out for the rest of the year but I think there's some there's some good positive trends that are emerging there.

Michael Santomassimo: Thank you.

Michael P. Santomassimo: And just to follow up, you know, the fees were really good, and the trading business continues to demonstrate that it's taking market share. You know, I guess how do we understand how to kind of measure that going forward, right, versus what the group's doing? You guys are definitely zigging and outperforming there.

Michael Santomassimo: Just to follow up, the fees were really good, and the trading business continues to demonstrate that it's taking market share.

Speaker Change: Great, thank you. And just to follow up, you know, the fees were really good, and the trading business continues to demonstrate that it's taking market share. You know, I guess how...

Michael Santomassimo: I guess how do we understand how to measure that going forward versus what the group's doing? You guys are definitely zigging and outperforming there.

Speaker Change: How do we understand how to kind of measure that going forward, right, versus what the group's doing? You guys are definitely zigging and outperforming there. Where do you think you are in terms of market share gains and how sustainable do you think this new kind of run rate of trading is going forward? Thanks.

Michael Santomassimo: Where do you think you are in terms of market share gains, and how sustainable do you think this new kind of run rate of trading is going forward? Thanks.

Michael P. Santomassimo: Where do you think you are in terms of market share gains? And how sustainable do you think this new kind of run rate of trading will be going forward? Thanks. Yeah, no, I'll take that, and Charlie can chime in if he wants the, you know, as you look at, you know, trading, you know, at any given quarter, it's going to bounce around, right? So, you know, you can't necessarily straight line any, any single quarter.

Michael Santomassimo: Yeah.

Michael Santomassimo: I'll take that, and Charlie can chime in if you want. As you look at trading at any given quarter, it's going to bounce around. You can't necessarily straight-line any single quarter. I'd be careful there as you look forward. But I think the good part is we've been methodically sort of making investments in really all the asset classes: effects, credit, the lesser degree in equities in other places. But we're getting the benefit of those investments each quarter on an incremental basis. I think that business is still constrained by the asset cap. And so we are not growing assets or financing clients' assets at the same level.

Speaker Change: Yeah, no, I'll take that and Charlie can chime in if he wants the you know as you as you look at you know trading You know at any given quarter. It's going to bounce around right, so you know you can't necessarily straight line any any single quarter So I you know I'd be

Speaker Change: I'd be careful there as you look forward, but I think the good part is we've been methodically sort of making investments in really all of the asset classes, FX, credit, to a lesser degree in equities and other places, but we're getting the benefit of...

Michael P. Santomassimo: So I, you know, I'd be, I'd be careful there, as you look forward. But I think the good part is, like, you know, we've been methodically sort of making investments in really all the asset classes, FX, credit, you know, to a lesser degree in equities and other places, but we're, you know, we're getting the benefit of those investments each quarter on an incremental basis. You know, I think that business is still constrained by the asset cap.

Speaker Change: of those investments, you know, each quarter on an incremental basis.

Speaker Change: You know, I think that business is still constrained by the asset cap, and so we are not, you know, growing assets or financing, you know, clients' assets at the same level we would be if we didn't have the asset cap, which also then drives.

Charlie Scharf: We would be if we didn't have the asset cap, which also then drives more trading flow as we go. And so I'd say we're still methodically sort of building it out. And there should be opportunity for us to grow that in a prudent way for a while. But any given quarter may bounce around a little bit depending on what's happening in a market or an asset class. And we're getting good reception for clients as we engage with them more and see them move more flow to us.

Speaker Change: more trading flow as we go. And so I'd say we're still methodically sort of building it out.

Speaker Change: And there should be opportunity for us to grow that in a prudent way, you know, for a while.

Speaker Change: But any given quarter may bounce around a little bit depending on what's happening in a market or an asset class. And we're getting good reception from clients as we engage with them more and see them move more afloat to us.

Charlie Scharf: And this is Charlie. Let me just set a couple of things, which is, as we think about the things that we're doing to invest in our banking franchise, both markets and the investment back inside of the franchise, it's not risk based. It's focused on customer flows on the trading side. It's focused on expanding coverage and improving product capabilities on the banking side. So what we look at, and we're also very, very focused on returns overall, as you can imagine, as all the other large financial institutions are. So, as we're looking at our progress, we do look at share across all the different categories and would expect to see those to continue to tick up.

Michael P. Santomassimo: And so we are not, you know, growing assets or financing clients' assets at the same level we would be if, if we didn't have the asset cap, which also then drives, you know, more, more trading flow as we go. And so I'd say we're still, you know, methodically sort of building it out.

Charles W. Scharf: And this is Charlie. Let me just add a couple of things, which is...

Charles W. Scharf: as we think about the things that we're doing to invest in our banking franchise,

Charles W. Scharf: and the investment banking side of the franchise.

Charles W. Scharf: It's not risk-based. It's actually, it's focused on...

Charles W. Scharf: It's customer flows on the trading side, it's focused on expanding coverage and improving product capabilities on the banking side. So what we look at, and we're also very, very focused on returns overall, as you can imagine, as all the other large financial institutions are.

Michael P. Santomassimo: And, and there should be opportunity for us to grow that in a prudent way for a while. But any given quarter may bounce around a little bit, depending on what's happening in a market or an asset class. And we're getting good, good, you know, good reception for clients as we engage with them more and, and, and, and see them move more to us. And this is Charlie.

Charles W. Scharf: So, you know, as we're looking at our progress, we do look at share across all the different categories and would expect to see those to continue to tick up. And so, as you look through the volatility that exists in the marketplace...

Charlie Scharf: And so, as you look through the volatility that exists in the marketplace, we are looking at a sustained level of growth, recognizing that we don't control the quarter-to-quarter volatility.

Charles W. Scharf: We are looking at a sustained level of growth, recognizing that we don't control the quarter-to-quarter volatility.

Operator: Okay, God, thank you.

Operator: The next question will come from John to the confidence that MII should bottom towards the year and towards the back half of this year. Maybe could just give us, you know, what gives you the confidence in maintaining that view just given the low and growth dynamics that you mentioned and just mentioned the funding cost and the great backdrop.

Speaker Change: Okay, got it. Thank you.

Speaker Change: The next question will come from John Pancari of Evercore ISI. Your line is open, sir.

John G. Pancari: Good morning.

John G. Pancari: You're so confident that MII should...

John G. Pancari: at the bottom towards the year end, or towards the back half of this year. Maybe you could just give us, you know, what gives you the confidence in maintaining that view? Just given the loan growth dynamics that you mentioned, and you just mentioned the funding cost and the rate backdrop. You know, if you could just kind of walk us through...

Operator: You know, if you could just kind of walk us through your confidence in that kind of reflection, and I guess what it could mean as you go into 2025.

John G. Pancari: You know, your confidence in noninflection and I guess what it could mean as you go into 2025. Thanks.

Speaker Change: Yeah, you know, we'll, we'll, um...

John: You know, we won't talk much about 2025, John , but as you sort of look at, you know, what's happening, you know, you're seeing this pace of migration on the deposit side.

John: low as I mentioned earlier, so you're seeing more stability, you know as we as time goes by there

Michael Santomassimo: James? The market expects to happen later in the year. You'll start to see betas on the way down on the wholesale side of the deposit base. You'll continue to see some gradual repricing on the asset side, as you see more securities and more loans sort of roll. You've got to look exactly calling sort of the trough, which quarter it's going to be; sometimes going to be a little tough, but as you sort of look at all the components of it, we still feel pretty good about being able to see that happen over the coming few quarters.

John: You know, once the Fed starts lowering rates, which, you know, the market expects to happen later in the year, you'll start to see...

John: You know, betas on the way down on the wholesale side of the deposit base.

John: You'll continue to see, you know, some, you know, gradual sort of repricing on the asset side.

John: You know, as you see more securities and more loans sort of roll.

John: And so, you know, you got to look, you know, exactly calling sort of the trough is, you know, which quarter it's going to be sometimes can be a little tough, but as you sort of look at all the, you know, components of it, you know, we still feel pretty good about being able to see that happen over the coming few quarters.

Michael Santomassimo: Okay, thanks, Mike.

Operator: In fact, just hop over to Capitol, buy that. Somebody bought back about 6.1 billion this quarter, similar to the first quarter; indicated the pace will slow. You can do it, give us a little bit of color on how we should think about that moderation and how long that could persist at this point and how long until you could be back at the run rate you were previously.

Speaker Change: Okay, thanks, Mike. If I could just hop over to capital. By that, somebody brought back about $6.1 billion this quarter, similar to the first quarter. You indicated the pace was slow. Maybe if you could give us a little bit of color on how we should think about that moderation and how long that

Speaker Change: could persist at this point and you know how long until you could be back at the run rate you were previously.

Charlie Scharf: Let me take a shot out of Mike, and then you've made the color on this one. Listen, I think when you look at where we've been running Capitol, we've been trying to anticipate, as I mentioned in my prepared remarks, the uncertainties that exist around the way we find out about SCB, as well as the uncertainty that exists with where Basel III ultimately comes out. The reality of those two things is we know where the SCB is for this year at this point. We still don't know where Basel III ultimately winds up. So I think as we sit here today, we will be conservative on Capitol return in the shorter term until we learn more about exactly where Basel III will ultimately wind up.

Charles W. Scharf: Let me just add a couple of things, which is, as we think about the things that we're doing to invest in our banking franchise, both in the UK and the investment banking side of the franchise, it's not risk-based. It's actually, it's focused on customer flows on the trading side. It's custom, it's focused on expanding coverage and improving product capabilities on the banking side.

Speaker Change: Let me take a shot at it, Mike, and then you can add the color on this one.

Michael P. Santomassimo: You know, listen, I think when you look at, you know, where we've been running capital, we've been, you know, trying to anticipate, as I mentioned in my prepared remarks.

Michael P. Santomassimo: the uncertainties that exist around, you know, the way we find out about SCB.

Michael P. Santomassimo: as well as, you know, the uncertainty that exists.

Michael P. Santomassimo: with where Basel III ultimately comes out. You know, the reality of those two things are, you know, we know where the SCB is for this year at this point.

Michael P. Santomassimo: We still don't know where Basel III ultimately winds up.

Michael P. Santomassimo: So I think, you know, as we sit here today,

Michael P. Santomassimo: You know, we will continue, you know, we'll be conservative on capital.

Michael P. Santomassimo: return in the shorter term, until we learn more about exactly where Basel III will ultimately wind up, and then we can get more specific about what that means for capital return. So I think we're just trying to be very pragmatic.

Charlie Scharf: And then we can get more specific about what that means for Capitol return. So I think we're just trying to be very pragmatic. The reality is we're still generating a significant amount of capital and a reasonably sized dividend that's increased as our earnings power has increased. Given the fact that we have constraints, most of what the remainder of our Capitol generation goes towards Capitol return, but we want to see where Basel III ultimately winds up.

Michael P. Santomassimo: You know, the reality is, you know, we're still generating a significant amount of capital and a, you know, reasonably sized dividend that's increased as our earnings power has increased.

Michael P. Santomassimo: Given the fact that we have constraints, you know, most of what, you know, the remainder of our capital generation goes towards capital return, but we want to see where Basel III ultimately winds up.

Charlie Scharf: Okay, thank you.

Charles W. Scharf: So, what we look at, and we're also very, very focused on returns overall, as you can imagine, as all the other large financial institutions are. So as we're looking at our progress, we do look at share across all the different categories and would expect to see those to continue to tick up. And so as you look through the volatility that exists in the marketplace, we are looking at a sustained level of growth, recognizing that we don't control the quarter to quarter volatility. Okay. Thank you. The next question will come from John Pancari of Evercore ISI. Your line is open, sir. Good morning.

Ebrahim Poonawala: The next question will come from Ibrahim Purawala of Bank of America. Your line is open, sir.

Speaker Change: Okay, thank you.

Speaker Change: The next question will come from Ebrahim Poonawala of Bank of America. Your line is open, sir.

Ebrahim Poonawala: Okay, good morning. Just maybe one follow-up first, Mike and Charlie on Capitol.

Michael P. Santomassimo: You expressed confidence that NII should bottom towards the year-end or towards the back half of this year. Maybe you could just give us, you know, what gives you the confidence in maintaining that view, just given the loan growth dynamics that you mentioned, and you just mentioned the funding costs and the rate backdrop. You know, if you could just kind of walk us through your confidence in noninflation and, I guess, what it could mean as you go into 2025. Thanks.

Charles W. Scharf: Yeah, you know, we won't talk much about 2025, John, but as you sort of look at what's happening, you're seeing this pace of migration on the deposit side low, as I mentioned earlier, so you're seeing more stability, you know, as time goes by there. You know, once the Fed starts lowering rates, which the market expects to happen later in the year, you'll start to see betas on the way down on the wholesale side of the deposit base.

Charles W. Scharf: You'll continue to see, you know, some, you know, gradual sort of repricing on the asset side, you know, as you see more securities and more loans sort of roll. And so, you know, exactly calling sort of the trough is, you know, which quarter it's going to be sometimes can be a little tough, but as you sort of look at all the, you know, components of it, you know, we still feel pretty good about being able to see that happen over the coming few quarters.

Ebrahim Huseini Poonawala: Okay, good morning.

Ebrahim Huseini Poonawala: Just maybe one follow-up first, Mike and Charlie, on capital. Is 11% the line in the sand right now as you wait for Basel and clarity there? As we, at least, you're not guiding for it, but as we think about what the pace of buybacks might be.

Charles W. Scharf: Okay, thanks, Mike. If I just hop over to the capital. By that, somebody brought back about $6.1 billion this quarter, similar to the first quarter. But you indicated the pace was slow. Maybe you could give us a little bit of color on how we should think about that moderation and how long it could persist at this point and, you know, how long until you could be back at the run rate you were previously. Let me take a shot at it, Mike, and then you can add the color on this one.

Michael Santomassimo: Is 11% the line in the sand right now as you wait for Basel and clarity there, as we at least you're not guiding for it, but as we think about what the pace of buybacks might be. Or could Ct1 go below 11 still significant buffer over the 9.6 minimum? Would appreciate how you think about that ratio in the context of Capitol return. I think where we are, plus a little bit, probably not minus a little bit, plus some, is probably the right place to be. At this point, remember the SEB was higher than we expected, and so that's factoring into our thinking, and so that's really what's driving our thinking in terms of slowing the pace of buybacks at this point. But again, hopefully we'll get some more clarity on Basel 3.

Ebrahim Huseini Poonawala: Or, could CT1 go below 11, still significant buffer over the 9.6 minimum, would appreciate how you think about that ratio in the context of capital return.

Speaker Change: I think where we are, plus a little bit, probably not minus a little bit, but plus some is probably the right place to be at this point. Remember, the SCB was higher than we expected. And so that's factoring into our thinking. And so that's...

Charles W. Scharf: You know, listen. I think when you look at where we've been running capital, we've been, you know, trying to anticipate, as I mentioned in my prepared remarks, the uncertainties that exist around the way we find out about SCB, as well as the uncertainty that exists with where Basel III ultimately comes out. You know, the reality of those two things is that we know where the SCB is headed for this year at this point. We still don't know where Basel III ultimately winds up.

Charles W. Scharf: So I think, you know, as we sit here today, we will continue to be, you know, conservative on capital return in the shorter term until we learn more about exactly where Basel III will ultimately wind up, and then we can get more specific about what that means for capital return. So I think we're just trying to be very pragmatic. The reality is, you know, we're still generating a significant amount of capital and a reasonably sized dividend that's increased as our earnings power has increased.

Charles W. Scharf: Given the fact that we have constraints, you know, most of the remainder of our capital generation goes towards capital return, but we want to see where Basel III ultimately winds up. Okay, thank you. The next question will come from Ebrahim Poonawala of Bank of America. Your line is open, sir. Hey, good morning. Just maybe one follow-up first, Mike and Charlie, on capital.

Speaker Change: really what's driving our thinking in terms of slowing the pace of buybacks at this point.

Michael Santomassimo: You know, we know what you know, and then we'll be much clearer about what we think the future looks like there, but again, overall, we still have the capacity to buy back. We just, as we've always been, want to be prudent.

Speaker Change: But again, hopefully we'll get some more clarity on Basel III. You know, we know what you know. And, you know, then we'll be much clearer about...

Speaker Change: You know, what we think the future looks like there, but, you know, again, overall, we still have the capacity to buy back, we just, as we've always been, we want to be prudent.

Charlie Scharf: Understood, and then just moving to expenses, so I get the guide, the expense guide, increase, but remind us, has anything changed, maybe Charlie, from you first, on the expense flex, that's a big part of the Wells thesis around efficiency gains, which should lead to the path for that 15% ROTC, and what are you baking in in terms of the fee revenue for the back half, as part of that guide, like that is a sum elevated levels of creating an IBA? Thank you.

Speaker Change: understood. And then just moving to expenses...

Speaker Change: So I get the expense guide increase, but remind us, has anything changed, maybe, Charlie, from you first on the expense flex? That's a big part of the wealth thesis.

Speaker Change: around efficiency gains, which should lead to the path for that 15% ROTCE. And what are you baking in, in terms of the fee revenue for the back half, as part of that guide? Does it assume elevated levels of trading in IB? Thank you.

Charlie Scharf: Let me just take the first part. So just, and I appreciate you asking the question. I think, as far from work as we look forward, nothing has changed, Russ, as we think about the opportunity to become more efficient. That story is no different today than it was yesterday or last quarter. As we increased the estimates for the year, it's really reflective of three broad categories. One are the variable expenses that relate to our wealth and investment management business, where we have higher revenues that results in higher payout, and as Mike always points out, that's actually a good thing, even though it's embedded in the expense line which causes that number to head upwards.

Charles W. Scharf: Is 11% the line in the sand right now as you wait for Basel and clarity there? At least, you're not guiding for it, but as we think about what the pace of buybacks might be, or whether CT1 could go below 11, still a significant buffer over the 9.6 minimum, I would appreciate how you think about that ratio in the context of capital return. I think where we are, plus a little bit, probably not minus a little bit, but plus some, is probably the right place to be at this point. Remember, the SCB was higher than we expected.

Charles W. Scharf: And so that's factoring into our thinking. And so that's really what's driving our thinking in terms of slowing the pace of buybacks at this point. But again, hopefully, we'll get some more clarity on Basel III. We know what you know, and then we'll be much clearer about what we think the future looks like there.

Charles W. Scharf: But again, overall, we still have the capacity to buy back. We just, as we've always been, want to be prudent. And then just moving to expenses, so I understand the expense guide increase, but remind us, has anything changed, maybe, Charlie, from you first on the expense flex that's a big part of the wealth thesis around efficiency gains, which should lead to the path for that 15% ROTCE? And what are you baking in terms of the fee revenue for the back half as part of that guide? Like, does it assume elevated levels of trading in IBA? Thank you.

Charles W. Scharf: So, let me just take the first part. So, just, and I appreciate you asking the question. I think, as far as we can see, as we look forward, nothing has changed for us as we think about the opportunity to continue to become more efficient. That story is no different today than it was yesterday or last quarter.

Speaker Change: Let me just take the first part.

Speaker Change: As far as we look forward, nothing has changed for us.

Speaker Change: as we think about the opportunity to continue to become more efficient. That story is no different today than it was yesterday or last quarter.

Charles W. Scharf: As we increased the estimates for the year, it's really reflective of three broad categories. One are the variable expenses that relate to our wealth and investment management business, where we have higher revenues that result in higher payouts, and as Mike always points out, that's actually a good thing, even though it's embedded in, you know, the expense line, which causes that number to head upwards. The second thing is the fact that we've had, you know, higher customer remediations and FDIC expenses in the first half of the year than when we contemplated the expense guidance. On the customer remediations, we've said, you know, it's – they're not new items. They're historical items.

Speaker Change: As we increased the estimates for the year, it's really reflective of three broad categories.

Speaker Change: One are the variable expenses that relate to our wealth and investment management business where we have higher revenues that results in higher payout and as Mike always points out that's actually a good thing even though it's embedded in you know the expense line which causes that number to head upwards.

Charlie Scharf: The second thing are the fact that we've had higher customer mediations and FDIC expenses in the first half of the year than when we contemplated the expense guidance. On the customer remediation, we've said, you know, they're not new items, they're historical items. We're getting closer to the end of finalization in these things, and as that occurs, things like response rates and making sure that we've identified every, you know, the full amount of the population gets all fine-tuned, and that's what's flowing through. But, you know, that's a, it really rates to historical matters, and not something that's embedded in what we see in the business going forward.

Speaker Change: The second thing are the fact that we've had, you know, higher customer remediations and FDIC expenses in the first half of the year than when we contemplated the expense guidance.

Speaker Change: On the customer remediations, we've said, you know, they're not new items, they're historical items. We're getting closer to the end of finalization in these things, and as that occurs, things like response rates and...

Charles W. Scharf: We're getting closer to the end of finalization on these things, and as that occurs, things like response rates and making sure that we've identified every – you know, the full amount of the population gets all fine-tuned, and that's what's flowing through. But, you know, that's a really relates to historical matters and not something that's, you know, embedded in what we see in the business going forward. So what you're left with is, you know, the rest of the earnings – I'm sorry, the expense base of the company, and it's playing out as we would have expected.

Speaker Change: making sure that we've identified every, you know, the full amount of the population gets all fine-tuned and that's what's flowing through but, you know, that's a, it really writes to historical matters and not something that's

Charlie Scharf: So what you're left with is, you know, the rest of the earnings, I'm sorry, the expense base of the company, and it's playing out as we would have expected. And so, as we sit here and look forward, all the statements I've made in the past are still true, which is we're not as efficient as we need to be. We're focused on investing in growing the business, we're focused on spending what's necessary to build the right risk and control infrastructure, and we're focused on driving efficiency out of the company, and that lever, you know, continues to be exactly what it's been.

Speaker Change: You know, embedded in what we see in the business going forward. So what you're left with is, you know, the rest of the earnings, I'm sorry, the expense base of the company, and it's playing out as we would have expected.

Charles W. Scharf: And so as we sit here and look forward, all the statements I've made in the past are still true, which is that we're not as efficient as we need to be. We're focused on investing in growing the business. We're focused on spending what's necessary to build the right risk and control infrastructure, and we're focused on driving efficiency out of the company. And that lever, you know, is – continues to be exactly what it's been.

Speaker Change: And so as we sit here and look forward...

Speaker Change: All the statements I've made in the past are still true, which is we're not as efficient as we need to be. We're focused on investing in growing the business. We're focused on...

Speaker Change: Spending what's necessary to build the right risk and control infrastructure and we're focused on driving efficiency out of the company and That lever, you know is as you know continues to be exactly what it's been

Michael Santomassimo: Good morning. What a new assumed thesis being elevated in the back half as part of the guidance. Yeah, we're, you know, assuming equity markets are, you know, about about where they are today, you know, so still staying pretty elevated.

Charles W. Scharf: And you assume fees are staying elevated in the back half as part of the guidance. Yeah, we're, you know, assuming equity markets are, you know, about where they are today, and are still staying pretty elevated. Thank you so much.

Speaker Change: And you assume fees are staying elevated in the back half as part of the guidance?

Speaker Change: Yeah, we're, you know, assume equity markets are, you know, about where they are today. You know, it's still staying pretty elevated. Okay. Thank you so much.

Michael Santomassimo: Thank you so much.

Erika Najarian: The next question will come from Erica Najarian of UBS. Your line is open. Hi, good morning.

Charles W. Scharf: The next question will come from Erika Najarian of UBS. Your line is open. Hi, good morning. First, I just want to put context on this question because I didn't want to ask it just in isolation because it seems a bit ticky tacky, but it's not.

Speaker Change: The next question will come from Erika Najarian of UBS. Your line is open.

Michael P. Santomassimo: So the stock is down, you know, seven and a half percent, and if I just take consensus to the higher end of your NII range, you know, to nine, that would imply that consensus would adjust by 3.5% in isolation. So, this is just the context of why I'm asking this question on expenses. So, your expenses went up in terms of, from your original guide, $1.4 billion.

Erika Najarian: First, I just want to put context to this question because I didn't want to ask it just in isolation, because it seems taking tacky, but it's not. So the stock is down, you know, seven and a half percent. And if I just take consensus to the higher end of your NII range, you know, to nine, that would imply that consensus would adjust 3.5% in isolation. So this is just a context of why I'm asking this question on expenses. So your expenses went up in terms of from your original guide, 1.4 billion. I guess in laid out those three bullets, and you quantified FDIC special assessment.

Erika Najarian: Hi, good morning. First, I just want to put context to this question because I didn't want to ask it just in isolation because it seems ticky-tacky, but it's not. So the stock is down, you know, seven and a half percent.

Erika Najarian: And if I just take consensus to the higher end of your NII range.

Erika Najarian: You know, to nine, that would imply that consensus would adjust 3.5% in isolation. So, this is just a context of why I'm asking this question on expenses.

Erika Najarian: So, your expenses went up, in terms of, from your original guide, $1.4 billion.

Michael P. Santomassimo: I guess, and you laid out those three bullets, and you quantified the FDIC special assessment. I guess I'm just wondering, you know, if you could give us a little bit more detail on how much more the remediation expenses and the operational losses were up versus your original expectation. Because I think what the market wants to understand is, you know, NII, okay, we get it. That's happening because of deposit repricing. But is core, you know, is core PPNR outside of that going up, right?

Speaker Change: I guess, and you laid out those three bullets and you quantified FDIC special assessment, I guess I'm just wondering...

Michael Santomassimo: I guess I'm just wondering, you know, if you could give us a little bit more detail on how much more the remediation expenses and op losses for up versus your original expectation. Because I think what the market wants to understand is, you know, PPI, you know, NII, OK, we get it. That's happening because it's a deposit repricing, but its core, you know, its core PPR are outside of that and going up, right.

Speaker Change: If you could give us a little bit more detail on how much more the remediation expenses and the op losses were up versus your original expectation, because I think what the market wants to understand is, you know,

Speaker Change: NII, okay, we get it, that's happening because of deposit repricing.

Speaker Change: Is core PPNR outside of that going up?

Michael P. Santomassimo: I just sort of want to, you know, have that assurance in terms of, you know, is the EPS going to be down as much coming out of this as the market is indicating? Yeah, no, Erika, it's Mike.

Michael Santomassimo: Just sort of want to, you know, have that assurance in terms of, you know, is the EPS going to be down as much coming out of, you know, coming out of this as the market is indicating. Yeah, no, Erica, it's my; I appreciate the question. You know, you know, we give you the operating loss line in the supplement. So you can, you know, you can see that. And if you, you know, based on what we had said, you know, January, if you, if you, you know, assume that the 1.3 billion dollars on a full year basis was just split evenly across all the quarters.

Speaker Change: I just sort of want to have that assurance in terms of, you know, is the EPS going to be down as much coming out of this as the market is indicating?

Michael P. Santomassimo: I appreciate the question. You know, we give you the operating loss line in the supplement, so you can, you know, you can see that. And if you, you know, based on what we said in January, if you, you know, assume that the $1.3 billion on a full-year basis was just split evenly across all the quarters, you can see that, you know, the operating losses are up about $500 million year to date over that run rate.

Michael P. Santomassimo: Yeah, no, Erika, it's Mike. I appreciate the question. You know, you know, we give you the operating loss line in the supplement, so you can, you know, you can see that. And if you, you know, based on what we had said, you know, in January , if you

Michael P. Santomassimo: if you assume that the $1.3 billion on a full-year basis

Michael Santomassimo: You can see that, you know, the operating losses are up about 500 million dollars year to date over that run rate. So that's the way to think about, you know, approximately what the impact of that is year to date. The first half. So then you take that, you add the FTIC to it, right. And the remainder is roughly the, you know, the revenue-related expenses and wealth management. So that's why, Erica, when I was talking before, when you look at, you know, what's driving the increase in the expense guide. It is its remediations in the first and second quarter.

Michael P. Santomassimo: you can see that the operating losses are up about $500 million year-to-date over that run rate. So that's the way to think about approximately what the impact of that is year-to-date in the first half.

Michael P. Santomassimo: So that's the way to think about, you know, approximately what the impact of that is year to date in the first half. So then you take that, you add the FDIC to it, and the remainder is roughly revenue-related expenses in wealth management.

Michael P. Santomassimo: So then you take that, you add the FDIC to it. Right. And the remainder is roughly the, you know, the revenue-related expenses in wealth management.

Charles W. Scharf: So that's why, Erika, when I was talking before, when you look at what's driving the increase in the expense guide, it is its remediations in the first and second quarter, it's the FDIC expense that you've seen, and it's the increase in variable expenses. Everything else is playing out as we would have expected. Okay.

Erica: So that's why, Erika, when I was talking before, when you look at, you know, what's driving the increase...

Erica: In the expense guide, it is its remediations in the first and second quarter, it's the FDIC expense that you've seen, and it's the increase in variable expenses. Everything else is playing out as we would have expected.

Michael Santomassimo: It's the FTIC expense that you've seen. And it's the increase in variable expenses. Everything else is playing out as we would have expected. Got it.

Charles W. Scharf: Okay. That makes sense. And maybe some comments on, you know, how you're thinking about credit quality from here. You know, it looks like you continue to release reserves in the second quarter.

Michael Santomassimo: Okay. That makes sense.

Michael Santomassimo: And just, you know, made me some comments on, you know, how you're thinking about credit quality from here. You know, it looks like you continue to release reserves in the second quarter. Is this a message that you feel like you've captured, you know, most of the theory-related issues. Of course, absent of a further deterioration in the economy. And how should we think about the trajectory of, you know, the reserves from here relative to your tar jaw?

Speaker Change: Got it. Okay. That makes sense. And just

Speaker Change: You know, maybe some comments on, you know, how you're thinking about credit quality from here.

Speaker Change: It looks like you continue to release reserves in the second quarter. Is this a message that you feel like you've captured most of the CRA-related issues, of course, absent of a further deterioration in the economy? And how should we think about the trajectory of the reserves from here relative to your charge-offs?

Charles W. Scharf: Is this a message that you feel like you've captured, you know, most of the CRA-related issues, of course, absent a further deterioration in the economy? And how should we think about the trajectory of, you know, the reserves from here relative to your charge-off? Well, when you say, well, I think when we look at the reserves, you know, you have to break it down into different pieces. Our exposures are coming down in parts of the consumer business.

Michael Santomassimo: Well, I think when we look at the reserves, you know, you have to buck it into different pieces. Our exposures are coming down in parts of the consumer business and are based on underwriting changes we made. It's not just balances, but also the actual losses. So that's what's driving the reductions in that part of the loss reserves on the consumer side. And on the credit card side, the increase is really driven by balance. So you've got two very different dynamics going on there with the releases being just representative of a smaller, higher credit quality credit portfolio.

Speaker Change: Well, I think when we look at the reserves, you have to bucket into different pieces. Our exposures are coming down in parts of the consumer business.

Charles W. Scharf: And based on underwriting changes we've made, it's not just balances but also actual losses. So that's what's driving the reductions in that part of the loss reserves. And on the credit card side, it's really driven by balances. So you've got two very different dynamics going on there with the releases being just representative of a smaller, higher credit quality.

Speaker Change: And based on underwriting changes we've made, it's not just balances, but also the actual losses. So that's what's driving the reductions in that part of the loss reserves.

Speaker Change: And on the credit card side, it's really driven, the increase is really driven by balances.

Speaker Change: with the releases being just representative of a smaller, higher credit quality credit portfolio. And then on the wholesale side, you know, the losses that we've seen and the...

Charles W. Scharf: And then on the wholesale side, you know, what we... The losses that we've seen and the... And the credit performance in that, you know, in our CIB office. The CRE portfolio is playing out no worse than we would have expected when we set our ACL.

Michael Santomassimo: And then on the wholesale side, you know, the losses that we've seen and the credit performance in that, you know, in our C.I.B. Office, C.R. Reportfolio is playing out. But no worse than we would have expected when we set our ACL, but there's still uncertainty there. So we're maintaining the coverage. So overall, you know, there's really, you know, in terms of our expectations, no real change from what we're seeing in the C.I.E. portfolio, which is where the lost content is actually coming through.

Speaker Change: and the credit performance in that, you know, in our CIB.

Speaker Change: Office.

Speaker Change: CRE Portfolio.

Speaker Change: is playing out no worse than we would have expected when we set our ACL.

Charles W. Scharf: But there's still uncertainty there, so we're maintaining the coverage. So, overall, you know, there's really, you know, in terms of our expectations, no real change from what we're seeing in the CRE portfolio, which is where the lost content is actually coming from. And elsewhere, things are still, you know, fairly benign, other than some episodic credit events and part of the wholesale business, but no real trend. Great. Thank you, Charlie and Mike. The next question will come from Matt O'Connor with Deutsche Bank. Your line is open, sir. Good morning.

Speaker Change: But there's still uncertainty there, so we're maintaining the coverage. So, overall, you know, there's really, you know, in terms of our expectations, no real change from what we're seeing in the CRE portfolio, which is where the lost content is actually coming through.

Michael Santomassimo: And elsewhere, things are still, you know, fairly benign other than some episodic credit events in part of the wholesale business, but no real trend there. Great. Thank you, Charlie and Mike.

Speaker Change: And elsewhere, things are still, you know, fairly benign other than some episodic credit events in part of the wholesale business, but no real trend there.

Matt O'connor: The next question will come from Matt O'Connor with Deutsche Bank. Your line is open, sir. Good morning. Can you just elaborate a bit on why you increase the deposit cost or wealth? Was it to keep up with competition? Or is it trying to get ahead of, you know, some potential reprising pressures? What was kind of the logic there?

Speaker Change: Great, thank you Charlie and Mike.

Speaker Change: The next question will come from Matt O'Connor with Deutsche Bank. Your line is open, sir.

Michael P. Santomassimo: Can you just elaborate a bit on why you increased the deposit cost for Wells? Was it to keep up with competition? Was it trying to get ahead of, you know, some potential pricing pressures? Or what was kind of the logic there?

Matt O'connor: Good morning. Can you just elaborate a bit on why you increased the deposit cost for wealth? Was it to keep up with competition? Was it trying to get ahead of, you know, some potential pricing pressures? Or what was kind of the logic there?

Michael Santomassimo: Yeah, hey, it's Mike. So, you know, this was very specific to, you know, a sweet product in the wealth business. So it's a portion of, you know, that overall deposits, and it doesn't have any, any, any bearing on any other product. So I would, you know, just leave it that very specific to that one individual product in fiduciary accounts or advisory accounts. Okay.

Michael P. Santomassimo: Yeah, hey, it's Mike. So, you know, this was very specific to, you know, a sweet product in the wealth business. So it's a portion of, you know, that overall deposit, and it doesn't have any, any bearing on any other product. So I would just leave it at that, very specific to that one individual product in fiduciary accounts or advisors. Okay, and how big is that, those deposit balances? We didn't, we don't, that's not something we normally have out there, but you can see the impact is, you know, I sort of highlighted the impact is roughly 350 million dollars for the rest of the year, for the second half of the year. So I would just use that as, and that's already embedded in sort of the guide. Okay. I mean, just a separate topic here.

Michael P. Santomassimo: Yeah, hey, it's Mike, man. So, you know, this was very specific to, you know, a sweet product in the wealth business. So it's a portion of, you know, that overall deposits, and it doesn't have any bearing on any other product. So I would, you know, just leave it at that. Very specific to that one individual product in fiduciary accounts.

Michael Santomassimo: And how big is that there's deposit balances? We didn't; we don't; that's not something we normally have out there. But you can see the impact is, you know, I sort of highlighted the impact is roughly $350 million for the rest of the year for the second half of the year. So I would just use that as, and that's already embedded in sort of the guidance we gave. Okay.

Michael P. Santomassimo: for advisory accounts.

Speaker Change: Okay, and how big is that, those deposit balances?

Speaker Change: We didn't, we don't, that's not something we normally have out there, but you can see the impact is, you know, I sort of highlighted the impact is roughly 350 million dollars for the rest of the year, for the second half of the year. So, I would just use that as, and that's already embedded in sort of the guidance we gave.

Charles W. Scharf: I mean, credit card growth has been very good, and you highlighted rolling out some new products. And, you know, the question is always, when anybody grows kind of so much in a certain category, you usually are not growing too quickly. The loss rates have gone up, maybe a little more than some peers, not as much as some others, obviously, in line with what you were targeting. There was that negative Wall Street Journal article on one of your cards.

Michael Santomassimo: I mean, just separate topic here. I mean, the credit card growth is being very good. You're highlighting growing up new products. And, you know, the question is always when you, anybody growth kind of so much in a certain category. You mentioned not growing too quickly. The lost rates have gone up. Maybe a little more than some peers, not as much as from others. Obviously, in line with what you were targeting, there was that negative Wall Street Journal article on one of your cards. So just kind of taking it together, you know, what kind of checks and balances you have to make sure that, you know, it's somewhat new initiative for you that you're growing up in the right place.

Speaker Change: Okay, I mean, just a separate topic here. I mean, the credit card growth has been very good. You highlighted rolling out some new products.

Speaker Change: And, you know, the question is always, when you – anybody grows kind of so much in a certain category, do you make sure you're not growing too quickly? The loss rates have gone up, maybe a little more than some peers, not as much as some others, obviously in line with what you were targeting. There was that negative Wall Street Journal article on one of your cards.

Charles W. Scharf: So, just kind of taking together, you know, what kind of checks and balances you have to make sure that, you know, a somewhat new initiative for you, that you're growing at the right pace. Thank you.

Speaker Change: So, just kind of taking together, you know, what kind of checks and balances you have to make sure that, you know, a somewhat new initiative for you that you're, you know, growing at the right pace. Thank you.

Charlie Scharf: Thank you.

Charlie Scharf: Yes, and Michael, I'll start, and then you can chime in. So, first of all, when we look at our credit card performance, we do not look at it in total. We look at each individual product; we look at all of the performance broken out by vintage. And we compare the results that we're seeing both in terms of balance, build as well as credit performance, not losses, but starting very early with, you know, early on books to linquencies. And we look at how they're playing out versus, you know, pre-pandemic results, as well as what we would have anticipated when we launched the product.

Charles W. Scharf: Yes, and Mike, why don't I start, and then you can chime in. So, first of all, we, uh, uh, when we look at our credit card performance... We do not look at it in total, right? We look at each individual product. We look at all of the performance broken out by vintage.

Speaker Change: Yes, so Mike, why don't I, I'll start and then you can chime in.

Speaker Change: So first of all we

Speaker Change: When we look at our credit card performance,

Speaker Change: We do not look at it in total, right? We look at each individual product. We look at all of the performance broken out by vintage.

Charles W. Scharf: And we compare the results that we're seeing, both in terms of, you know, balance build, as well as credit performance, not losses, but starting very early with, you know, early on book delinquencies. And we look at how they're playing out versus, you know, pre-pandemic results, as well as what we would have anticipated when we launched the product. As I've said, we look at the actual quality of the consumers that we're underwriting and the overall credit quality. We haven't compromised credit quality at all.

Speaker Change: And we compare the results that we're seeing, both in terms of, you know, balance build, as well as credit performance, not losses, but starting very early with, you know, early on books delinquencies.

Speaker Change: And we look at how they're playing out versus, you know, pre-pandemic results, as well as what we would have anticipated when we launched the product.

Charlie Scharf: As I said, we look at the actual quality of the consumers that we're underwriting and the overall credit quality. We haven't compromised credit quality at all. We probably tightened up a little bit as time has gone on, relative to where we had been. But the actual performance, when you look at the vintage, is it's really spot on with what we would have expected. So what you're seeing in terms of the increase in loss rates is just the maturing of the portfolio. And the last thing I'll just say is just when you think about the Wall Street Journal article, you know, we've launched a bunch of new credit cards.

Speaker Change: As I've said, we look at...

Speaker Change: The actual quality of the consumers that we're underwriting and the overall credit quality, we haven't compromised credit quality at all. We've probably tightened up a little bit as time has gone on relative to where we had been.

Michael P. Santomassimo: We probably tightened up a little bit as time went on relative to where we had been. But the actual performance, when you look at the vintages, is really spot on with what we would have expected. So what you're seeing in terms of the increase in loss rates is just the maturing of the portfolio. And the last thing I'll just say is just when you think about the Wall Street Journal article. You know, that probe, you know, we've launched a lot of new credit cards that are, you know, relative to the size and the scope of all of the cards that we issue and what our strategy is. That's a very, very, small piece. Yeah, and I just have one piece.

Speaker Change: But the actual performance, when you look at the vintages, it's really spot-on with what we would have expected. So what you're seeing in terms of the increase in loss rates is just the maturing of the portfolio.

Speaker Change: And the last thing I'll just say is just when you think about the Wall Street Journal article, you know, we've launched a lot, a bunch of new credits.

Charlie Scharf: That is a, you know, relative to the size and the scope of all of the cards that we issue and what our strategy is. That's a very, very, very small piece of it. And I would just have one piece; you know, as you look at new account growth, you know, we're not originating anything less than 660. So, as you know, Charlie mentioned some of the credit tightening with 660 FICA. Sorry. So, as Charlie mentioned, you know, the credit box has not been brought in really at all. And when you look at some of the, you know, bigger products like cash back, like the cash back card, Active Cash.

Speaker Change: cards, that is a, you know, relative to the size and the scope of all of the cards that we issue and what our strategy is, that's a very, very, very small piece of it.

Michael P. Santomassimo: You know, as you look at new account growth, you know, we're not originating anything less than 660. So, as Charlie mentioned, some of the credit tightening with 660 FICA, sorry. But, as Charlie mentioned, you know, the, you know, the credit box has not been brought in really at all.

Speaker Change: Um...uh...

Charles W. Scharf: Yeah, and I just have one piece, you know, as you look at new account growth, you know, we're not originating anything less than 660, so as Charlie mentioned, some of the credit tightening, 660 FICO, sorry.

Speaker Change: So as Charlie mentioned, the credit box has not been brought in really at all, and when you look at some of the bigger products like cash back, like the cash back card, active cash, the new originations are coming in at a higher credit.

Charlie Scharf: You know, the new originations are coming in at a higher credit quality than the back book was. And so at this point, Charlie said we go through it at a very, very granular level, each, you know, each quarter, and results are kind of right where we expect. And if we start to see any kind of weakness at all, you know, we're, you know, we're adjusting; we're needed. And it's just one less comment here, which is again, because I appreciate the question. Whenever it's, you know, whenever you see a lot of, you know, a growth and a product that has risk in it, it's always the right thing to ask the questions.

Charles W. Scharf: And when you look at some of the bigger products like cashback, like the cashback card, active cash, you know, the new originations are coming in at a higher credit quality than the back book was. And so at this point, as Charlie said, we go through it at a very, very granular level. You know, each quarter and the results are kind of right where we expect them, and if we start to see any kind of weakness at all, you know, we're, uh...

Speaker Change: than the back book was.

Speaker Change: You know, each quarter and results are kind of right where we expect, and if we start to see any kind of weakness at all...

Charles W. Scharf: And just one last comment here, which is, again, because I appreciate the question. Whenever it's, you know, whenever you see a lot of growth in a product that has risk in it, it's always the right thing to ask the questions. The people that are doing this, both in our card business, Kleber, who runs consumer lending, myself, this is not a new product for us. We've seen this happen.

Speaker Change: We're adjusting where needed. And just one last comment here, which is, again, because I appreciate the question. Whenever you see a lot of growth in...

Speaker Change: It's always the right thing to ask the questions.

Charlie Scharf: We're not, you know, this isn't the people that are doing this, both in our card business. Clevver runs consumer lending myself like it, you know, this is not a new product for us. We've seen this happen in the past. We've seen people do this well, and we've seen people not do this well. And so we're very, very conscious of the risk that you're pointing out as we go forward, just as we are on the other businesses that we're investing in.

Speaker Change: The people that are doing this, both in our card business, Kleber, who runs consumer lending, myself, this is not a new product for us. We've seen this happen.

Charles W. Scharf: In the past, we've seen people do this well, and we've seen people not do this well. And so we're very, very conscious of the risks that you're pointing out as we go forward, just as we are in the other businesses that we're investing in. Okay, that's helpful. And obviously, you talked about Carl Walsh going down in 3Q.

Speaker Change: In the past, we've seen people do this well, and we've seen people not do this well. And so we're very, very conscious of the risks that you're pointing out as we go forward, just as we are on the other businesses that we're investing in.

Charlie Scharf: Okay, that's helpful. And obviously you talked about car wash and going down and treat you. So that's consistent with everything that you said as well.

Speaker Change: Okay, that's helpful and obviously you talked about car washes going down in 3Q, so that's consistent with everything that you said as well, so thank you for the call. Yep, absolutely.

Charlie Scharf: So thank you for the color.

Betsy Graseck: Yep. The next question will come from Betsy Graseck of Morgan Stanley. Your line is open. Hi, good morning. Hey Betsy. So just wanted to make sure on the expense guide I get the point that you know a bunch of that is related to better revenues from wealth management. And so you know we should be anticipating as a part of that that you know revenues for wealth management and second half is going to be at least at one half or maybe even a little higher. Is that fair? Yeah, I mean Betsy, I covered that in my script too.

Charles W. Scharf: So that's consistent with everything that you said as well. So, thank you for the call. Yes. The next question will come from Betsy Graseck of Morgan Stanley. Your line is open. Hi, good morning. Hey Betsy.

Speaker Change: The next question will come from Betsy Graseck of Morgan Stanley . Your line is open.

Michael P. Santomassimo: Hi, good morning. So just wanted to make sure on the expense guide that I understand the point that, you know, a bunch of that is related to better revenues from wealth management. And so. We should be anticipating, as a part of that, that... You know, revenues for wealth management in the second half are going to be at least half or maybe even a little higher. Is that fair? Yeah, I mean, I covered that in my script, too.

Betsy Lynn Graseck: Hi, good morning.

Speaker Change: Thank you.

Betsy Lynn Graseck: So just wanted to make sure, on the expense guide, I get the point that, you know, a bunch of that is related to better revenues from wealth management, and so, you know, we should be anticipating as a part of that that...

Betsy Lynn Graseck: Revenues for Wealth Management in the second half is going to be at least at one half or maybe even a little higher. Is that fair?

Michael P. Santomassimo: So as you look at, you know, the advisory assets there, they get priced based on it; most of them get priced in advance for the quarter. So you know what the third quarter looks like based on where we are now. And, you know, obviously, it's not all equity markets; there's some fixed income in there, as well. But, you know, you should see a little bit of an increase as you go into the third quarter based on where the markets are now. And then we'll go to, https://www.buffalo.edu.

Michael Santomassimo: So as you look at, you know, the advisory assets there, they get priced based on, and most of them get priced in advance for the quarter. So you know what third quarter looks like based on where we are now. And you know, obviously, it's not all equity market. There's some fixed income in there as well. But, but you know you should see a little bit of an increase as you go into the third quarter based on where the markets are now.

Speaker Change: Yeah, I mean, I covered that in my script, too, so as you look at, you know, the advisory assets there, they get priced based on, most of them get priced in advance for the quarter, so you know what third quarter looks like based on where we are.

Speaker Change: Now and you know obviously it's not all equity market there's some fixed income in there as well but but you know you should see a little bit of an increase as you go into the third quarter based on where the markets are now and then we'll see what the fourth quarter looks like when when we get there

Michael Santomassimo: And then we'll see what the fourth quarter looks like when we get there. Yeah, okay.

Betsy Graseck: So I just wanted to make sure we balanced out the expenses with the rev fee that you know I know you're not guiding revs up, but interpretation leads you down that path. And so then that gets the other piece of the question I had just had to relate with the loan balance discussion that was going on earlier. And what's your view of interest in leaning into the markets business today. I realized there's opportunity. There's still the asset cap constraint, but you're not at the asset cap. So there is room for you to lean in. There are players who are a little bit more constrained on capital than you, even in that space.

Speaker Change: Yeah, okay. So I just wanted to make sure we balanced out the expenses with the REV-B. I know you're not guiding REVs up, but...

Speaker Change: Interpretation leads you down that path. And so then I guess the other piece of the question I had just had to relate with...

Speaker Change: The Loan Balance Discussion that was going on earlier.

Speaker Change: What's your view of...

Speaker Change: Interest in leaning into the markets business today. I realize there's opportunity, there's still the asset cap constraint, but

Speaker Change: You're not at the asset cap, so there is room for you to lean in. There are players who are a little bit more constrained on capital than you, even, in that space. So, is this an area that you would be interested in leaning into, especially when...

Charlie Scharf: So is this an area that you would be interested in leaning into, especially when CNI and Cree and you know other types of loans are low demand right now. I do you indicated earlier thanks.

Speaker Change: C&I & Cree, and other types of loans are low demand right now, as you indicated earlier.

Charlie Scharf: Well, let me let me start. I think so. First of all, relative to where the balance sheet is running. You know we were not we want to work we're careful about how we run the overall balance sheet, right? Which is we don't want to operate at the cap on a regular basis because you've got to be prepared both for, you know, customer appetite in terms of lending and deposits when you see it as well as, you know, we lived through COVID where there was an event and all of a sudden there were a bunch of draws and we have to live within that asset cap.

Speaker Change: You know, we...

Speaker Change: We're not

Speaker Change: We're careful about how we run the overall balance sheet, right?

Speaker Change: We don't want to operate at the cap.

Speaker Change: on a regular basis, because you've got to be prepared both for, you know, customer appetite, in terms of lending and deposits when you see it, as well as, you know, we live through COVID, where there was an event, and all of a sudden there were a bunch of draws, and we have to live within that asset gap.

Charlie Scharf: So you know we're running, so you know running it with the cushion is a very smart thing we think for us to do, even though you can argue we're giving up some shorter term profits. So that's just the reality of where we live, and so as we think about the markets, business, and what that means. Yeah, in the perfect world we, you know, be allowing them to finance more. You know, there are more opportunities out there for us to be able to do that. But what we are doing is, as we think about inside the company, optimizing the balance sheet and where we get the most returns and where there's more demand and less demand.

Speaker Change: So, you know, running it with a cushion,

Speaker Change: is a very smart thing, we think, for us to do, even though you can argue we're giving up some shorter-term profits. So, that's just the reality of where we live. And so, as we think about the markets business...

Speaker Change: Yeah, in the perfect world, we'd be allowing them to finance some more.

Speaker Change: to be able to do that. But what we are doing is, as we think about inside the company, optimizing the balance sheet and where we get the most returns.

Charlie Scharf: There has been less demand in other parts of the company, and there's been more demand on the trading side, so our assets are actually up, you know, if you have a teenish percent. Yeah trading if you go to the supplement that's you trading assets on an average basis are up to 17% a little more on a spot basis. So we're just trying to, you know, so we're reflective of what those opportunities are, but you know we've got to keep capacity for the reasons. I mentioned.

Speaker Change: and where there's more demand and less demand. There has been less demand in other parts of the company, and there's been more demand on the trading side, so our assets are actually up.

Speaker Change: [inaudible]

Gerard Cassidy: The next question will come from Gerard Cassidy of RBC Capital Markets. Your line is open. Thank you.

Speaker Change: But you know we've got to keep capacity for the reasons I mentioned. Got it. Okay. Thank you

Speaker Change: The next question will come from Gerard Cassidy of RBC Capital Markets. Your line is open.

Michael P. Santomassimo: ......

Gerard Cassidy: Good morning, Charlie. Good morning, Mike. You mentioned in your reporting comments about Fargo. You know, you guys launched Fargo over a year ago, I guess, and you're having, you know, real good pickup.

Michael P. Santomassimo: Yeah, okay. I just wanted to make sure we balanced out the expenses with the REV-B. I know you're not guiding revs up, but... And so then I guess the other piece of the question I had just had to relate to is, the Loan Balance Discussion that was going on earlier and, What's your view of... Interest in leaning into the markets business today? I realize there's opportunity. There's still the asset cap constraint, but you're not at the asset cap, so there is room for you to lean in.

Gerard Sean Cassidy: Thank you. Good morning, Charlie. Good morning, Mike.

Speaker Change: I'm running.

Gerard Sean Cassidy: Charlie, you mentioned in your opening comments about Fargo, you know, you guys launched Fargo over a year ago, I guess, and you're having, you know, real good pickup. Can you share with us any other AI-orientated programs that are in, you know, work in progress right now that could lead to increased efficiencies or cost savings or even revenue enhancements as you go forward? Thank you.

Charlie Scharf: Can you share one of the any other AI-orientated programs that are in, you know, work, work and progress right now that could lead to increased efficiencies or cost savings or even revenue enhancements as you go forward? Sure. You know, when we think about AI, we do break it into, you know, different categories. There is traditional AI, and then there is Gen AI. We have a huge number of use cases already embedded across the company with just traditional AI. And, you know, that is, it's in marketing, it's in credit decisioning, it's in information that we provide bankers on both the wholesale, on the consumer side, about what customers could be willing, or, you know, might be willing to entertain a discussion about.

Michael P. Santomassimo: There are players who are a little bit more constrained on capital than you, even, in that space. So is this an area that you would be interested in leaning into, especially when C&I and Cree and other types of loans are in low demand right now, as you indicated earlier? Well, let me start, I think.

Charles W. Scharf: So, first of all, relative to where the balance sheet is running. You know, we're careful about how we run the overall balance sheet, which is that we don't want to operate at the cap on a regular basis because you've got to be prepared both for customer appetite in terms of lending and deposits when you see it, as well as we lived through COVID, where there was an event, and all of a sudden, there were a bunch of draws, and we have to live within that asset.

Charles W. Scharf: Sure. You know, as we, first of all, when we think about AI, we do break it into, you know, different categories, right? There is, there's, there's traditional AI, and then there is gen AI.

Charles W. Scharf: So, you know, running it with a cushion is a very smart thing, we think, for us to do, even though you can argue we're giving up some shorter-term profits. But that's just the reality of where we live.

Charles W. Scharf: We have a huge number of use cases already embedded across the company with just traditional AI.

Charles W. Scharf: And, you know, that is, it's in...

Charles W. Scharf: It's in marketing, it's in credit decisioning.

Charles W. Scharf: It's in information that we provide bankers on both the wholesale and the consumer side about what customers could be willing or might be willing to entertain a discussion about. And so that is, in a lot of respects, that's business as usual for us.

Charles W. Scharf: And so, as we think about the markets business and what that means, yeah, in the perfect world, we'd, you know, be allowing them to finance some more. There are more opportunities out there for us to be able to do that. But what we are doing is, as we think about inside the company, optimizing the balance sheet and where we get the most returns, and where there's more demand and less demand, there has been less demand in other parts of the company, and there's been more demand on the trading side.

Charlie Scharf: And so, that is, you know, a lot of respects that's business as usual for us. You know, the, you know, the new opportunity that exists with gen AI is where AI creates something, you know, based upon whether it's public data or our own data in terms of things that haven't existed. We are most focused in the shorter term on things that can drive efficiency, but it also contributes to just quality of the experience for our customers. So, great examples of things like that are call centers. We take lots of phone calls, and we've got lots of opportunities through AI to answer those questions before someone gets to a call center rep.

Charles W. Scharf: So, our assets are actually up, you know, a 15-ish percent. Yeah, trading, if you go to the supplement, Betsy, trading assets on an average basis are up 17%, a little more on a spot basis. So, we're just trying to, you know, be reflective of what those opportunities are. But, you know, we've got to keep capacity for the reasons. Got it.

Michael P. Santomassimo: Okay, thank you. The next question will come from Gerard Cassidy of RBC Capital Markets. Your line is open. Thank you. Good morning, Charlie.

Charles W. Scharf: You know, the new opportunity that exists with GenAI is where AI creates something, you know, based upon whether it's public data or on our own data in terms of things that haven't existed.

Charles W. Scharf: We are most focused, in the shorter term, on things that can drive efficiency, but it also...

Charles W. Scharf: contributes to just quality of the experience for our customers.

Charles W. Scharf: So, great examples of things like that are...

Charles W. Scharf: Good morning, Mike. Charlie, you mentioned in your opening comments about Fargo, you know, you guys launched Fargo over a year ago, I guess, and you're having, you know, real good pickup. Can you share with us any other AI-oriented programs that are in, you know, work, in progress right now that could lead to increased efficiencies or cost savings or, or even revenue enhancements as you go forward? Sure. First of all, when we think about AI, we do break it into different categories, right? There is traditional AI, and then there is Gen-A.

Charles W. Scharf: call centers.

Charles W. Scharf: We take lots of phone calls.

Charles W. Scharf: We have a huge number of use cases already embedded across the company with just traditional AI. And, you know, that is, it's in marketing, it's in credit decisioning, it's in information that we provide bankers on both the wholesale and consumer side about what customers could be willing or might be willing to entertain a discussion about. And so that is, in a lot of respects, that's business as usual. You know, the new opportunity that exists with Gen AI is where AI creates something based on whether it's public data or our own data in terms of things that happen.

Charles W. Scharf: And we've got lots of opportunities through AI to answer those questions before someone gets to a call center rep.

Charlie Scharf: But once they get to a call center rep, we put a lot of effort into answering that question correctly, but also making sure that we're capturing that information, understanding root cause across all these calls we get. That means bankers have to go, telephone bankers have to go in, actually enter what the call was about, what they think the root cause is. We didn't have to aggregate that and so on and so forth. Through Gen AI, that can be done automatically. It could be done immediately, and the work can be done for us to identify that root cause.

Charles W. Scharf: We are most focused in the shorter term on things that can drive efficiency, but it also... contributes to just the quality of the experience for our customers. So great examples of things like that are call centers. We take lots of phone calls, and we've got lots of opportunities through AI to answer those questions before someone gets to a call center rep. But once they get to a call center rep, we put a lot of effort into answering that question correctly, but also making sure that we're capturing that information, and understanding the root cause across all these calls we get.

Charles W. Scharf: But once they get to a call center...

Charles W. Scharf: We put a lot of effort into answering that question correctly.

Charles W. Scharf: But also making sure that we're capturing that information, understanding root cause across all these calls we get. That means bankers have to go, telephone bankers have to go in, actually enter what the call was about, what they think the root cause is. We then have to aggregate that and so on and so forth.

Charles W. Scharf: That means telephone bankers have to go in, actually enter what the call was about, what they think the root cause is, and we then have to aggregate that, and so on and so forth. Through Gen-AI, that can be done automatically.

Charles W. Scharf: It could be done immediately, and the work can be done for us to identify the root cause so then we can go back, look at it, make sure that's the case, and make the change. So ultimately, that results in fixing defects going forward, but it also takes so much manual effort out of what we do. So any place where something is written, or something is analyzed by an individual, we've got the opportunity to automate that.

Charles W. Scharf: Through Gen-AI, that can be done automatically, it can be done immediately, and the work can be done for us to identify that root cause, so then we can go back, look at it, make sure that's the case, and make the change. So, ultimately, that results in...

Charlie Scharf: So then we can go back, look at it, make sure that the case and make the change. So ultimately, that results in, you know, fixing defects going forward, but it also takes so much manual effort out of what we do. And so that's, you know, and so any place where something is written, something is analyzed by an individual, we've got the opportunity to automate that. Those things exist on the wholesale side as well as the consumer side. To the extent that they impact a consumer, we're going to move very slowly to make sure we understand the impact of that.

Charles W. Scharf: fixing defects going forward.

Charles W. Scharf: And so that's, you know, and so any place where something is written, something is analyzed by an individual, we've got the opportunity to automate that. Those things exist on the wholesale side as well as the consumer side.

Charles W. Scharf: Those things exist on the wholesale side, as well as on the consumer side. To the extent that they impact a consumer, we're gonna move very slowly to make sure we understand the impact of that. And so, the work is a meaningful part of as we think about prioritization in terms of our tech. Very good.

Charles W. Scharf: to the extent that they impact a consumer.

Charles W. Scharf: We're going to move very slowly to make sure we understand the impact of that.

Charlie Scharf: And so, you know, the work is, you know, a meaningful part of, as we think about prioritization in terms of our text.

Charles W. Scharf: And so, you know, the, you know, the work is, you know, a meaningful part of

Charlie Scharf: Very good. I appreciate those insights. And then just as a quick follow-up, you also mentioned about improved advisor retention in the quarter. When you look at your wealth and investment management segment, I recognize commissions and brokerage service fees are not the main driver; investment advisory and other asset-based fees are in revenues for this division. But I noticed that they've been flat to down this year; they're up over a year ago. Is it seasonal in the second quarter that that line of business just gets off there, or is it the higher rate environment where customers are just leaving more, you know, cash in more, you know, assets and cash because they're getting 5% or so? Yeah, there really is no rhyme or reason necessarily to exactly, you know, how that moves one quarter to the next necessarily. You know, obviously if there's like large bounce of volatility, you might see more transaction activity. That certainly hasn't been the case, you know, necessarily in the equity market in the second quarter. But to some degree, has that line item, you know, over a very long period of time, that line item probably declines more and advisory goes up, and that's actually a really good thing, you know, from a productivity and from an ongoing revenue perspective as well. Yeah, okay, super. Okay, I appreciate it. Thank you, Mike. And our final question for today will come from Stephen Chewbick of Wolf Research. Your line is open, sir. Thanks, and good morning, Charlie. Good morning, Mike. Just given this year a amount of, I guess, investor questions that we've received on the deposit pricing changes in wealth, I was hoping you could provide some additional context given many of your peers have talked about cash sorting pressures abating or at least being in the very late innings. And want to better understand what informed the decision to adjust your pricing. Was it impacting advisor recruitment or retention? Was it impeding your ability to retain more share of wallet? And/or is this an effort maybe to go on the offensive and lead the market on pricing and sweep deposits and force others to potentially follow suit? Yes, Steve, it's Mike. I'd say just a couple things. One, this is not in reaction to cash sorting. We are seeing cash sorting slow, you know, in the wealth business just like we're seeing that in the consumer business. So this is not a reaction to that in any way. It's a, you know, it's a, you know, relatively small portion of the overall deposits that's it, you know, within the wealth business. And it is very specific to this product, which is in an advisory account, you know, where there's frictional cash there. So it's not, it's not, it's not a reaction to competitive, you know, forces that we're seeing or us trying to be proactive somewhere to drive growth. Understood. And just one follow-up on the discussion relating to expenses and just given the female momentum that you're seeing within C.I.B.

Charles W. Scharf: I appreciate those insights. And then, just as a quick follow-up, you also mentioned improved advisor retention in the quarter. And when you look at your wealth and investment management segment, I recognize commissions and brokerage service fees are not the main driver of revenues for this division, but I noticed that they've been flat to down this year. But they're up over a year ago.

Charles W. Scharf: as we think about prioritization in terms of our tax cut.

Speaker Change: Very good. I appreciate those insights. And then just as a quick follow-up, you also mentioned about improved advisor retention in the quarter. And when you look at your wealth and investment management segment, I recognize commissions and brokerage service fees are not the main driver, investment advisory and other asset-based fees are in revenues for this division. But I noticed that they've been flatted down this year. They were up over a year ago. Is it seasonal in the second quarter that that line of business just gets soft, or is it the higher rate environment where customers are just leaving more assets in cash because they're getting 5% or so?

Michael P. Santomassimo: Is it seasonal in the second quarter that that line of business just gets soft? Or is it the higher rate environment where customers are just leaving more, you know, cash in, more, yeah, assets in cash because they're getting 5% or so? Yeah, there really is no rhyme or reason necessarily, Gerard, to exactly how that moves one quarter to the next.

Gerard Sean Cassidy: Yeah, there really is no rhyme or reason necessarily, Gerard, to exactly, you know, how that moves one quarter to the next necessarily, you know, obviously if there's like large bouts of volatility, you might see more transaction activity.

Michael P. Santomassimo: You know, obviously, if there are large bouts of volatility, you might see more transaction activity. That certainly hasn't been the case, you know, necessarily in the equity market in the second quarter. But to some degree, as that line item, you know, over a very long period of time, that line item probably declines more, and advisory goes up. And that's actually a really good thing, you know, from a productivity and from an ongoing, Yes. Okay. Super. Okay. I appreciate it.

Gerard Sean Cassidy: that certainly hasn't been the case necessarily in the equity market in the second quarter.

Speaker Change: But to some degree, over a very long period of time, that line item probably declines more and advisory goes up. And that's actually a really good thing from a productivity and from an ongoing revenue perspective as well. Yep. Okay. Super. Okay. Appreciate it. Thank you, Mike.

Michael P. Santomassimo: Thank you, Mike. And our final question for today will come from Steven Chubak of Wolf Research. Your line is open. Thanks. And good morning, Charlie.

Speaker Change: And our final question for today will come from Steven Chubak of Wolf Research. Your line is open, sir.

Michael P. Santomassimo: Good morning, Mike. Just given the sheer number of, I guess, investor questions that we've received on the deposit pricing changes in Wells. I was hoping you could provide some additional context, given many of your peers have talked about cash sorting pressures abating or at least being in the very late innings. And I want to better understand what informed the decision to adjust your pricing. Was it impacting advisor recruitment or retention? Was it impeding your ability to retain more share of wallet? And or is this an effort to maybe go on the offensive and lead the market on pricing and sweep deposits and force others to potentially follow suit? Yeah, Steve. It's Mike.

Steven Joseph Chubak: Thanks, and good morning, Charlie. Good morning, Mike.

Steven Joseph Chubak: amount of, I guess, investor questions that we've received on the deposit pricing changes

Steven Joseph Chubak: I was hoping you could provide some additional context given many of your peers have talked about cash sorting pressures abating or at least being in the very late innings.

Speaker Change: And I want to better understand what informed the decision to adjust your pricing. Was it impacting advisor recruitment or retention? Was it impeding your ability to retain more share of wallet?

Speaker Change: And, or is this an effort to maybe go on the offensive and lead the market on pricing and sweep deposits and force others to potentially follow suit?

Michael P. Santomassimo: I'd say just a couple things. One, this is not in reaction to cash sorting. We are seeing cash sorting slow, you know, in the wealth business, just like we're seeing that in the consumer business. So this is not a reaction to that in any way.

Michael P. Santomassimo: Yeah, Steve, it's Mike. I'd say just a couple things. One, this is not in reaction to cash sorting. We are seeing cash sortings flow, you know, in the wealth business just like we're seeing that in the consumer business, so this is not a reaction to that in any way.

Michael P. Santomassimo: It's a relatively small portion of the overall deposits

Michael P. Santomassimo: in the wealth business. And it is very specific to this product, which is in an advisory account.

Michael P. Santomassimo: It's a, it's a, you know, it's a relatively small portion of the overall deposits that sit within the wealth business. And it is very specific to this product, which is in an advisory account, you know, where there's frictional cash there. So it's not, it's not, it's not a reaction to competitive forces that we're seeing or us trying to be proactive somewhere to drive growth.

Michael P. Santomassimo: you know where there's frictional cash there so it's not it's not it's not a reaction to competitive you know forces that we're seeing or us trying to be proactive somewhere to drive growth

Michael P. Santomassimo: And just one follow-up on the discussion relating to expenses. And just given the fee momentum that you're seeing within CIB and wealth, and you're clearly making investments in both of those segments, at the same time, the incremental margins have actually been quite high, especially in CIB, where it's running north of 75 percent in the first half of this year versus last. I was hoping to get some perspective as we think about some of that fee momentum being sustained.

Speaker Change: Understood. And just one follow-up on the discussion relating to expenses, and just given the fee momentum that you're seeing within CIB and wealth, and you're clearly making investments in both of those segments, at the same time the incremental margins have actually been quite high, especially in CIB where it's running north of 75 percent.

Charlie Scharf: and wealth, and you're clearly making investments in both of those segments at the same time. The incremental margins have actually been quite high, especially in C.I.B.

Michael Santomassimo: where it's running north of 75% just first half this year versus last and was hoping to get some perspective as we think about some of that female momentum being sustained. What do you believe are sustainable or durable, incremental margins within CIV and wealth, recognizing the payout profiles are different?

Speaker Change: just first half of this year versus last.

Michael P. Santomassimo: What do you believe are sustainable or durable incremental margins within CIB and wealth, recognizing that the payout profiles are different? Well, let me start on the wealth side, and I'll come back to the iBanking or banking side.

Speaker Change: What do you believe are sustainable or durable incremental margins within CIB & Wealth, recognizing the payout profiles are different?

Michael Santomassimo: Well, let me start on the wealth side, and I'll come back to the eye banking side. On the wealth side, what's really going to help us drive margin expansion in that business over time, are really two things. One is continued productivity and growth in the advisory asset side, which you can see happening. And then two, we've talked about this in other forums. It's doing a much better job penetrating that client base with banking and lending products. When you look at our loans in the wealth business and you look at the overall asset base or the advisor for us, we're much less penetrated than some of the peers.

Speaker Change: Well, let me start on the wealth side and I'll come back to the banking side. So on the wealth side, what's really going to help us drive

Michael P. Santomassimo: So on the wealth side, you know, what's really going to help us drive margin expansion in that business over time are really kind of two things. One is, you know, continued productivity and growth in the advisory asset side, which you can see is happening. And then two, and we've talked about this in other forums, it's doing a much better job penetrating that client base with banking and lending products. And when you look at, you know, our loans in the wealth business and you look at the overall asset base or the advisor, you know, for us, we're much less penetrated than, you know, some of our peers.

Speaker Change: margin expansion in that business over time are really

Speaker Change: and growth in the advisory asset side, which you can see happening. And then two, and we've talked about this in other forums, it's doing a much better job penetrating that client base with banking and lending products. And when you look at our loans in the wealth business,

Speaker Change: asset base or the advisor force, we're much less penetrated than some of the peers.

Michael Santomassimo: I think those things really help drive us to get to more best-in-class margins, which are higher than where we sit today. That takes some time on the lending side. In this rate environment, it's a little harder to drive that growth, and it's very start to come down. You'll probably see more demand there, and so there are some cyclical aspects of it that sort of come from a timing perspective. But those are things that the very summers and the whole management team and wealth are very focused on, making sure we've got the right capabilities, the right sales force, the right support for the sales force, and so forth.

Michael P. Santomassimo: And so I think those things really help drive us to, you know, you know, get to more best-in-class margins, which are higher than where we sit today. And that takes some time on the lending side.

Speaker Change: And so I think those things really help drive us to, you know,

Speaker Change: which are higher than where we sit today. And that takes some time on the lending side. In this rate environment, it's a little harder to drive that growth. And as rates start to come down, you'll probably see more demand there. And so there are some cyclical aspects of it that sort of come from a timing perspective. But those are things that Barry Summers and the whole management team and Wells are very focused on in making sure we've got the right capabilities, the right support for the sales force and so forth.

Michael P. Santomassimo: In this rate environment, it's a little harder to drive that growth, and as rates start to come down, you'll probably see more demand there. And so there are some cyclical aspects of it that sort of come from a timing perspective.

Michael P. Santomassimo: But those are things that Barry Summers and the whole management team and the Wealth team are very focused on making sure we've got the right capabilities, the right sales force, the right support for the sales force, and so forth. On the iBanking side, we've been making investments in that business for the better part of two plus years, maybe a little longer than that. And as we're adding good people, we're also making sure that we've got the right people in the right seats. And so you're not seeing this really huge increase in overall senior headcount.

Michael Santomassimo: On the eye banking side, we've been making investments in that business now for the better part of two plus years. A little longer than that probably, and as we're adding good people, we're also not necessary. We're also making sure that we've got the right people in the right seats. You're not seeing this really huge increase in overall senior headcount. We're making sure we have the right people in the right seats, so you've seen some reductions as you've seen some growth. That's helping also moderate the overall investment. Also, as we brought those people on, you're paying them full freight when you recruit people.

Speaker Change: On the iBanking side, we've been making investments in that business now for the better part of two plus years, a little longer than that probably. And as we're adding good people, we're also making sure that we've got...

Speaker Change: You know, the right people in the right seats. And so you're not seeing this really huge increase in...

Michael P. Santomassimo: We're making sure we have the right people in the right seats, and so you've seen some reductions as we've seen some growth. And so that's helping also moderate the overall investment. And then also, as we've brought those people on, you're paying them full freight when you recruit people. So what you're seeing is you're getting the benefit of those investments by adding the revenue piece now. I think you'll see the pace of margin expansion moderate over time, but what you're seeing is what you should expect.

Speaker Change: In overall senior headcount, we're making sure we have the right people in the right

Speaker Change: as you've seen some growth, and so that's helping also moderate, you know, the, you know, the overall investment.

Speaker Change: And then also, as we brought those people on, you're paying them full freight when you recruit people, right? So what you're seeing is you're getting the benefit of those investments by adding the revenue piece now, but you've already got the expense and the run rate.

Michael Santomassimo: What you're seeing is you're getting the benefit of those investments by adding the revenue piece now, but you've already got the expense and the run rate to some degree. You'll see that pace of margin expansion moderate over time, but what you're seeing is what you should expect, which is we made the investments, you're paying the people; now they're becoming productive incrementally each quarter, and that's good to see. That's really helpful to call our mic.

Speaker Change: to some degree and so so I think you'll you'll see you'll see that pace of margin expansion moderate over time but but what you're seeing is what you should expect which is like we made the investments you're paying the people now they're becoming productive incrementally you know each quarter and that's that's good to see

Michael P. Santomassimo: We made the investments, you're paying the people, and now they're becoming productive incrementally each quarter, and that's good to see. It's really helpful to call her, Mike. Thanks for taking the mic. Alright, everyone. Thanks very much. We'll talk to you soon. Thank you all for your participation in today's conference call. At this time, all parties may disconnect.

Michael Santomassimo: Thanks for taking my questions.

Operator: All right, everyone. Thanks very much.

Speaker Change: That's a really helpful caller, Mike. Thanks for taking my questions.

Operator: We'll talk to you soon. Thank you all for your participation on today's conference call.

Speaker Change: Alrighty everyone, thanks very much, we'll talk to you soon.

Operator: At this time, all parties may disconnect.

Speaker Change: Thank you all for your participation on today's conference call. At this time, all parties may disconnect.