Q2 2026 Wells Fargo & Co Earnings Call

July 14, 2026

Speaker #1: Welcome, and thank you for joining the Wells Fargo second quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker #1: After the speakers' remarks, there will be a question-and-answer session. If you would like a question during this time, simply press star 1. If you would like to withdraw your question, start.

Speaker #1: 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.

Speaker #1: Well. And thank you for Well. And thank you for joining our Wells Fargo & joining the Wells Fargo & Co 2026 earnings Co 2026 earnings conference call.

Speaker #2: Good morning, everyone. Thanks for joining our call today. We're our CEO, Charlie Sharf, and our CFO, Mike Sanomasimo. We'll discuss second quarter results and answer your questions.

Speaker #1: conference call. I'll have been placed on mute to prevent any I'll have them placed on mute to prevent any background noise. background noise. After the speaker's remarks, there will be After the speaker's remarks, there will be a question-and-answer a question-and-answer session.

Speaker #2: This call is being recorded. Before we get started, I would like to remind you that our second quarter earnings materials—including the release financial supplement and presentation deck—are available on our website at wellsfargo.com.

Speaker #1: If you would like a question during If you would like a question during this time, simply press this time, simply press star 1. star 1.

Speaker #1: If you would like to withdraw your question, withdraw your question, start. Please note that start. Please note that today's call is being recorded. today's call is being recorded.

Speaker #1: I would now like to turn the call over I would now like to turn the call over to John Campbell, Director of to John Campbell, Director of Investor Relations, sir.

Speaker #1: I would now like to turn the call over I would now like to turn the call over to John Campbell, Director of to John Campbell, Director of Investor Relations, sir. Investor Relations, sir.

Speaker #2: I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risk and uncertainties. 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 materials.

Speaker #1: You may You may begin the begin the conference. conference.

Speaker #2: Good morning, everyone. Thanks for Good morning, everyone. Thanks for joining our call today. We're our CEO, joining our call today. We're our CEO, Charlie Scharf, and our CFO, Charlie Scharf, and our CFO, Mike Santomassimo, will discuss Mike Santomassimo, will Q2 results and answer your discuss Q2 results, and answer your questions.

Speaker #2: This call is being This call is being recorded. Before we get recorded. Before we get started, I would like to remind you that our started, I would like to remind you that our Q2 earnings materials, including Q2 earnings materials, including the release of financial the release of financial supplements and presentation deck, are supplements and presentation deck, are available on our website at available on our website at wellsfargo.com.

Speaker #2: 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.

Speaker #2: I will now turn the call over to Charlie.

Speaker #2: wellsfargo.com. I'd also I'd like to caution you that we may make also like to caution you that we may make forward-looking statements during today's forward-looking statements during today's call that are subject to risk and call that are subject to risk and uncertainty.

Speaker #3: Thanks, John. I'm going to provide some comments about our results and the momentum we are seeing across our businesses. I'll then turn the call over to Mike to review second quarter results in more detail before we take your questions.

Speaker #2: Factors that may cause actual results to Factors that may cause actual results to differ materially from expectations are differ materially from expectations are detailed in our SEC detailed in our SEC filings, including the Form 8K filed filings, including the Form 8K filed today containing our earnings today containing our earnings material.

Speaker #3: Let me start with slide 2 of the presentation deck, where I will walk you through the broad-based strength we see in our business. We grew, diluted earnings per share to $2 in the second quarter, up 25% from a year ago.

Speaker #2: Information about Information about any non-gas financial measures any non-gas financial measures referenced, including a reconciliation of those referenced, including a reconciliation of those measures to gas measures, can measures to gas measures, can also be found in our SEC also be found in our SEC filings and the earnings materials available filings and the earnings materials available on our website.

Speaker #3: Revenue grew 9% from a year ago, growth was broad-based with every one of our operating segments generating higher net interest income and non-interest income.

Speaker #2: I on our website. I will now turn the call over to will now turn the call over to Charlie. Thanks, John. Charlie. Thanks, John.

Speaker #3: I'm going to I'm going to provide some comments about our results provide some comments about our results and and the momentum we are seeing across our the momentum we are seeing across our businesses.

Speaker #3: We are clearly benefiting from the economic strength we see in the U.S., but the investments we are making and our improved operating discipline drove strong momentum and continued to result in improved performance.

Speaker #3: businesses. I'll then turn the call I'll then turn the call over to Mike to review Q2 over to Mike for a few seconds for the results and more detail before we take your results in more detail before we take your questions.

Speaker #3: questions. Let me start with Let me start with slide 2 of the presentation deck, where I slide 2 of the presentation deck, where I will walk you through the broad-based will walk you through the broad-based strengths strengths we see in our business.

Speaker #3: Net interest income grew 5% from a year ago, and non-interest income grew 13% as we're making good progress against our goal to create a more balanced revenue mix by growing fee-based revenues.

Speaker #3: we see in our business. We grew saluted earnings per We grew alluded earnings per share $2 in the Q2, share $2 in Q2, up 25% from a year up 25% from a year ago.

Speaker #3: ago. Revenues were Revenue grew 9% from a year ago. 9% from a year ago. Growth was broad-based with every one of our Growth was broad-based with every one of our operating segments generating operating segments generating higher net interest income and higher net interest income and non-interest income.

Speaker #3: Expenses increased 2% from a year ago, reflecting investments we are making, offset by continued expense discipline. Expenses excluding revenue-related compensation declined. One of the ways you can clearly see the results of our efficiency initiatives is through headcount, which is declined for 24 consecutive quarters, and in the second quarter, our headcount was 197,000, down 79,000 from 6 years ago, 15,000 from last year, and 3,500 from last quarter.

Speaker #3: non-interest income. We are We are clearly benefiting from the economic clearly benefiting from the economic strength we see in the U.S., but the strength we see in the U.S.

Speaker #3: But the investments we are making and our investments we are making and our improved operating discipline drove improved operating discipline drove strong momentum and continued strong momentum and continued results in improved results in improved performance.

Speaker #3: performance. Net interest income grew Net interest income grew 5% from a year ago, and 5% from a year ago, and non-interest income grew non-interest income grew 13% as we're making good 13% as we're making good progress against our goal to create a progress against our goal to create a more balanced revenue mix by more balanced revenue mix by growing Q-based growing Q-based revenues.

Speaker #3: We are using these efficiencies to offset broad-based investments across the company to drive growth, including adding branch bankers, investment advisors, commercial banking relationship managers, investment bankers, and traders.

Speaker #3: Expenses increased 2% from Expenses increased 2% from a year ago reflecting investments we are a year ago reflecting investments we are making offset by continued making offset by continued expense discipline.

Speaker #3: expense discipline. Expenses excluding Expenses excluding revenue-related compensation revenue-related compensation declined. declined. One of the ways we can clearly One of the ways we can clearly see the results of our efficiency in nature see the results of our efficiency initiative is through headcount, which is through headcount, which has has declined for 24 consecutive declined from 24 consecutive quarters, and in the quarters, and in the Q2, our headcount was Q2, our headcount was 197,000, down 79,000 from 197,000, down 79,000 from 60 years ago, 60 years ago, 15,000 from last year, and 15,000 from last year, and 3,500 from last 3,500 from last quarter.

Speaker #3: We are also increasing our marketing investments, accelerating product development, investing in AI, and increasing our cyber defenses. Consumer and commercial credit quality remains strong, across all portfolios, and net loan charge-offs declined 10 basis points from a year ago.

Speaker #3: After years of not being on a level playing field with our competitors because we couldn't grow our balance sheet, we had strong growth during the first half of this year, including in the second quarter, with average loans up 12% and average deposits up 10% from a year ago.

Speaker #3: We are using these efficiencies to offset quarter. We are using these efficiencies to offset broad-based investments across the company to drive broad-based investments across the company to drive growth, including adding growth, including adding branch bankers, investment branch bankers, investment advisors, commercial banking relationship advisors, commercial banking relationship managers, investment managers, investment bankers, and traders.

Speaker #3: We are also We are also increasing our marketing investments, increasing our marketing investments, accelerating product development, accelerating product development, investing in AI, and increasing investing in AI, and increasing our cyber our cyber defenses.

Speaker #3: Just a reminder, growth can be risky, and we are carefully deploying capital to grow and support our clients by taking risks that we think are prudent through economic cycles, not just the strong environment we see today.

Speaker #3: defenses. Consumer and commercial Consumer and commercial credit quality remains strong across credit quality remains strong across all portfolios, and net all portfolios, and net loan charge-offs declined 1 basis loan charge-offs declined 10 basis points from a year ago.

Speaker #3: We returned over 9.8 billion dollars of capital to shareholders in the first half of this year, including repurchasing 7 billion of common stock, while continuing to maintain the significant amount of excess capital.

Speaker #3: After years of not being on a level playing field without competitors because we couldn't grow our balance sheet, we had strong growth during the first half of this year, including in the Q2, with average loans up 12% and average deposits up 10% from a year ago.

Speaker #3: As we previously announced, we expect to increase our third quarter common stock dividend by 11% to 50 cents per share, subject to approval by our board of directors at its meeting later this month.

Speaker #3: Just a reminder, After years of not being on a level playing field with our competitors because we growth can be risky, and we are couldn't grow our balance sheet, we had strong growth during the first half of this year, including in the Q2, with average loans up 12% and average deposits up 10% from a year ago.

Speaker #3: Just a reminder, growth can be risky, and we are carefully deploying capital to grow and support carefully deploying capital to grow and support our clients by taking our clients by taking risks that we think are risks that we think are prudent through economic prudent through economic cycles, not just the strong environment we cycles, not just the strong environment we see today.

Speaker #3: Our continued focus on improving returns was evident with ROTCE increasing from 15.2% a year ago to 17.7% in the second quarter, and 16.1% in the first half of 2026.

Speaker #3: see today. We We returned over $9.8 returned over $9.8 billion in capital to shareholders in the billion in capital to shareholders in the first half of this year, including first half of this year, including repurchasing $7 billion of common repurchasing $7 billion of common stock while continuing to stock while continuing to maintain the significant amount of maintain the significant amount of excess capital. excess capital.

Speaker #3: While outsized venture capital equity gains favorably affected our returns this quarter, we have said that they can be lumpy, but that we do expect strong returns from these investments over time.

Speaker #3: As we As we previously announced, we expect to increase previously announced, we expect to increase our Q3 common stock dividend our Q3 common stock dividend by 11% to by 11% to $0.50 per share, subject to approval by our board of directors at its approval by our board of directors at its meeting later this meeting later this month.

Speaker #3: But more importantly, the growth and efficiency improvements that we have seen over the past several years are now broader-based and it is these trends that give us confidence in reaching our goal of a sustainable ROTCE of 17 to 18 percent.

Speaker #3: Our continued focus on Our continued focus on improving returns was evident improving returns was evident with ROECE with ROECE increasing from 15.2% a increasing from 15.2% a year ago to year ago to 17.7% in the Q2, 17.7% in the Q2, and 16.1% in the and 16.1% in the first half of first half of 2026.

Speaker #3: We are often asked about the timing of achieving this goal, and I know you all understand that interest rates markets and credit impact us and are hard to predict making difficult to give a definitive answer.

Speaker #3: 2026. While outsized While outsized venture capital equity gain venture capital equity gain favorably affected our returns this favorably affected our returns this quarter, we have said that they can be quarter, we have said that they can be lumpy, but that we do expect monthly, but that we do expect strong returns from these investments over strong returns from these investments over time.

Speaker #3: But assuming favorable conditions continue to exist, we remain confident that our favorable trends will allow us to achieve this goal in a reasonable time frame and then reset the bar higher for the future.

Speaker #3: But more But more importantly, the growth and efficiency improvements importantly, the growth and efficiency improvements that we have seen over the past several that we have seen over the past several years are now broader-based years are now broader-based and it is these trends that give us and it is these trends that give us confidence in reaching our goal of a sustainable of a sustainable ROECE of 17 to ROECE of 17 to 18%.

Speaker #3: As we show on slide 3, our strategy is driving growth across all of our businesses. Let me start with consumer banking lending, with 6% revenue growth from a year ago.

Speaker #3: We are often asked We are often asked about the timing of seizing this about the timing of achieving this goal, and I know you all understand that goal, and I know you all understand interest rates, markets, and that interest rates, markets, and credit impact us and are hard credit impact us and are hard to predict, making it difficult to to predict, making it difficult to give a definitive answer.

Speaker #3: After years of little to no growth in checking accounts, our investments in marketing and digital account openings are paying off, and we have grown consumer primary checking accounts year over year for 13 consecutive quarters.

Speaker #3: give a definitive answer. But But assuming favorable assuming favorable conditions continue to exist, we conditions continue to exist, we remain confident that our favorable remain confident that our favorable trends will allow us to achieve the trends will allow us to achieve this goal in a reasonable time goal in a reasonable time frame and then reset the frame and then reset the bar higher for the future.

Speaker #3: We have significant opportunity to increase the pace of growth, and this along with offering our broad set of products, including credit cards, investments, and mortgages, should drive low-cost deposits higher over time.

Speaker #3: As we show on slide 3, our strategy is driving growth across all of our businesses. Let me start with consumer banking lending, with 6% revenue growth from a year ago.

Speaker #3: Let me start with consumer banking lending, with 6% revenue growth from a year ago. After a year of little to no growth in checking accounts, our investments in marketing and digital account openings are paying off, and we have grown consumer primary checking consumer primary checking accounts accounts year over year to 13 consecutive year over year to 13 consecutive quarters. quarters.

Speaker #3: Over the past 5 years, we have enhanced our credit card products and improved the customer experience which is driven new account and balanced growth, including new accounts increasing 46% in the second quarter from a year ago.

Speaker #3: After years of little to no growth in checking accounts, our investments in marketing and digital account openings are paying off, and we have grown As we show on slide 3, our strategy is driving growth across all of our businesses.

Speaker #3: Building a larger credit card business is an investment that puts pressure on profitability in the initial years, with new products having significant upfront costs related to marketing, promotional rates, onboarding, and allowance.

Speaker #3: We have We have significant opportunity to increase significant opportunity to increase the pace of growth and the pace of growth, and this along with offering our this along with offering our broad set of products, including broad set of products, including credit cards, investments, and credit cards, investments, and mortgages, should drive low-cost mortgages, should drive low-cost deposits higher over deposits higher over time.

Speaker #3: It takes approximately 2 to 3 years for vintages to season and earn through these upfront costs. Our 2022 through 2024 vintages are now adding to profitability.

Speaker #3: time. Over the past 5 Over the past 5 years, we have enhanced our credit card years, we have enhanced our credit card product and improved the customer product and improved customer experience which has driven new experience, which has driven new account and balance growth, account and balanced growth, including new accounts increasing including new accounts increasing 46% in the Q2 from a year 46% in the Q2 from a year ago.

Speaker #3: Our 2025 and 2026 vintages are bigger, as account openings have accelerated, so they offset some of the positive contribution from the earlier vintages importantly.

Speaker #3: Building a larger Building a larger credit card business is an investment that credit card business is an investment that puts pressure on profitability in the initial puts pressure on profitability in the initial years, with new products having years, with new products having significant upfront costs significant upfront costs related to marketing, promotional related to marketing, promotional rates, onboarding, and rates, onboarding, and alliance.

Speaker #3: We have seen strong performance versus our original assumptions regarding new account acquisition and credit performance, which gives us confidence that we should see profitability and returns increase.

Speaker #3: alumni. It takes approximately It takes approximately 2 to 3 years for businesses to 2 to 3 years for vintage to season and to turn through these upfront season and to turn through these upfront costs.

Speaker #3: I do want to note that the rate of growth is a decision point for us. We could have higher profitability in the shorter term, by reducing our growth, but we are prioritizing longer-term results, given the quality of the accounts we are generating.

Speaker #3: costs. Our Our 2022 to 2024 businesses are 2022 to 2024 vintages are now adding to now adding to profitability. profitability. Our 2025 and 2026 Our 2025 and 2026 businesses are bigger, as account vintages are bigger, as account openings have accelerated, so openings have accelerated, so they offset some of the positive they offset some of the positive contribution from the earlier contribution from the earlier vintages.

Speaker #3: We evaluate this each quarter, and will continue to do so. The momentum in our digital offerings continued, with mobile active users increasing to 33.7 million in the second quarter, that's 1.6 million more than a year ago.

Speaker #3: businesses. Importantly, Importantly, we have seen strong we have seen strong performance versus our original performance versus our original assumptions regarding new account acquisition and assumptions regarding new account acquisition and credit performance, which gives credit performance, which gives us confidence that we should see us confidence that we should see profitability and returns profitability and returns increase.

Speaker #3: The investments we have been making to improve the customer experience were reflected in the 2026 JD Power mobile app study where we moved up to number 2 in mobile app satisfaction.

Speaker #3: increase. I do want to note that I do want to note that the rate of growth is a decision point for the rate of growth is a decision point for us.

Speaker #3: increase. I do want to note that I do want to note that the rate of growth is a decision point for the rate of growth is a decision point for us. us.

Speaker #3: We could have We could have higher profitability in the shorter term, by higher profitability in the shorter term, by reducing our growth, but we reducing our growth, but we are prioritizing longer-term are prioritizing longer-term results, given the quality of the accounts we are results given the quality of the accounts we are generating.

Speaker #3: We are also doing more for our affluent clients. We've been hiring licensed bankers and branch-based financial advisors, and that investment is helping to drive better results, with premier client assets up 13% from a year ago.

Speaker #3: generating. We We have evaluated each quarter and will continue to do so. The momentum in our so. The momentum in our digital offerings continued, digital offerings continued, with mobile active users with mobile active users increasing to 33.7 million increasing to 33.7 million in the Q2, that's this Q2, that's 1.6 million more than a year 1.6 million more than a year ago.

Speaker #3: Our auto business returned to growth last year, after intentionally scaling back to improve our capabilities. And the momentum has continued. Originations increased 41% from a year ago, and the average balances were up 31%, in part due to becoming the preferred financing provider for Volkswagen and Audi vehicles in the US.

Speaker #3: The investments we have ago. The investments we have been making to improve the customer been making to improve the customer experience were reflected in the experience were reflected in the 2026 JD Power mobile app 2026 JD Power mobile app study, where we moved up to number study, where we moved up to number 2 in mobile app 2 in mobile app satisfaction.

Speaker #3: We are also doing more for We are also doing more for our affiliate clients. We've been our affiliate clients. We've been hiring licensed bankers hiring licensed bankers and and branch-based financial advisors, branch-based financial advisors, and that investment is helping to and that investment is helping to drive better results with premier drive better results with premier client assets up 13% client assets up 13% from a year ago.

Speaker #3: Importantly, credit performance has remained strong and in line with our expectations. Turning to wealth and investment management, revenue grew 13% from a year ago.

Speaker #3: Wealth and investment management client assets grew 15% from a year ago to over 2.4 trillion dollars, driven by increased market valuations and also benefiting from four consecutive quarters of positive net flows.

Speaker #3: from a year ago. Our Our auto business return-to-growth last year auto business return-to-growth last year after intentionally scaling back to improve after intentionally scaling back to improve our capabilities and the momentum our capabilities and the momentum has continued.

Speaker #3: Originations Originations increased 41% from a year increased 41% from a year ago, and the average balances were ago, and the average balances were up 31%, in up 31%, in part due to becoming the preferred financing part due to becoming the preferred financing provider for Volkswagen and provider for Volkswagen and Audi vehicles in the Audi vehicles in the US.

Speaker #3: We have invested over a billion dollars over the past several years, to modernize the technology platform, and in the second quarter we launched advisor gateway, a new desktop technology with Gen AI capabilities that gives advisors better tools to serve clients and grow their practices.

Speaker #3: Importantly, credit Importantly, credit performance has remained strong and performance has remained strong in line with our and in line with our expectations. Turning to wealth and investment expectations.

Speaker #3: Turning to wealth and investment management, revenue grew management, revenue grew 13% from a year ago. 13% from a year ago. Wealth and investment management client Wealth and investment management client assets grew 15% from a year ago to assets grew 15% from a year ago to over $2.4 over $2.4 trillion, driven by increased market trillion, driven by increased market valuations and also valuations and also benefiting from 4 consecutive benefiting from 4 consecutive quarters of positive net quarters of positive net flows.

Speaker #3: Investments like this are improving productivity, strengthening the client experience, and driving improved advisor hiring and retention. We are also working to be our client's primary bank, by expanding our deposit and lending capabilities and are seeing strong results with average deposits up 10% and average loans up 12% from a year ago.

Speaker #3: We have invested over $1 We have invested over $1 billion over the past several billion over the past several years to modernize the technology years to modernize the technology platform, and in the Q2 we platform, and in the Q2, we launched advisor gateways, a launched advisor gateways, a new desktop technology for new desktop technology for Gen AI capabilities that gives Gen AI capabilities that gives advisors better tools to serve client and global clients and grow their practices.

Speaker #3: Securities-based lending has been a key driver of loan growth, with average balances up 31% from a year ago, reflecting our success in increasing the number of financial advisors offering this product to their clients.

Speaker #3: practices. Investments like this are Investments like this are improving productivity, improving productivity, strengthening the client experience, and strengthening the client experience, and driving improved driving improved advisor hiring and advisor hiring and retention.

Speaker #3: Importantly, the opportunity in this business to grow investments and banking remains significant. We estimate that our existing customers hold trillions in assets at other financial institutions, and their lending, deposit, and payment needs are large and growing.

Speaker #3: We are also working to get our We are also working to get our clients' primary bank, by expanding clients' primary bank, like expanding our deposit and lending our deposit and lending capabilities and are seeing strong results capabilities, and are seeing strong results with average deposits up with average deposits up 10% and average loans up 10% and average loans up 12% from a year ago.

Speaker #3: Turning to our commercial businesses, starting with the corporate investment bank. Revenue grew 16% from a year ago. In our markets business, revenue grew 24% from a year ago.

Speaker #3: Securities-based lending has been a key Securities-based lending has been a key driver of loan growth, with driver of loan growth, with average balances up 31% from a year average balances up 31% from a year ago, reflecting our success ago, reflecting our success in the increasing number of financial in the increasing number of financial advisors offering this product to their advisors offering this product to their clients.

Speaker #3: We have been growing our balance sheet to support our clients with average trading-related assets increasing 41% from a year ago, driven primarily by financing-related activity.

Speaker #3: clients. Importantly, Importantly, the opportunity in this business to the opportunity in this business to grow investments and banking grow investments and banking remains significant.

Speaker #3: remains significant. We We estimate that our existing estimate that our existing customers hold trillions in customers hold trillions in assets at other financial institutions, assets at other financial institutions, and their lending, deposit, and and their lending deposits and payment needs are large and payment needs are large and growing.

Speaker #3: While this financing activity impacts our net interest margin because it is lower spread, it has good returns and profitability, and positions us to attract more flow business.

Speaker #3: Turning to our commercial Turning to our commercial businesses, starting with the corporate businesses, starting with the corporate investment bank. Revenue grew investment bank. Revenue grew 16% from a year 16% from a year ago.

Speaker #3: We track this by client and we are seeing higher trading revenue and wallet share gains from customers where we are providing financing. While the most immediate revenue benefits are expected within markets, including trading, hedging, and risk management products, these deeper client relationships also enhance opportunities across the broader corporate investment banking platform over time.

Speaker #3: In our marketing business, revenue In our marketing business, revenue grew 24% from a year grew 24% from a year ago. We have been growing our balance ago.

Speaker #3: We have been growing our balance sheet to support our clients with average sheet to support our clients with average trading-related assets trading-related assets increasing 41% from a year ago, driven primarily by ago, driven primarily by financially related financing-related activity. activity.

Speaker #3: In our banking business, revenue grew 20% as our focus on providing a broader set of capital and advisory solutions is working. This was a record quarter for investment banking fees across the firm.

Speaker #3: While this financing activity impacts While this financing activity impacts our net interest margin because it is our net interest margin because it is lower spread, it has lower spread, it has good returns and profitability good returns and profitability and positions us to attract more and positions us to attract more low business.

Speaker #3: low business. We track this We track this by client and we are seeing higher by client and we are seeing higher trading revenue and wallet share trading revenue and wallet share gains from customers where we are gains from customers where we are providing financing.

Speaker #3: Our willingness to invest more in senior talent and in technology and dedicate more balance sheet to these activities is paying off. What's important here is having a growth plan that is properly paced, and leverages the broader strengths of Wells Fargo.

Speaker #3: While the most immediate revenue benefits are While the most immediate revenue benefits are expected within market, including expected within market, including trading, hedging, and risk management trading, hedging, and risk management products, these deeper client products, these deeper client relationships also enhance relationships also enhance opportunities opportunities across the broader corporate across the broader corporate investment banking platform over investment banking platform over time.

Speaker #3: The team has executed with discipline, has hired and promoted the right people, and is taking risks that are in line with our risk tolerance.

Speaker #3: In our banking In our banking business, revenue grew 20% as business, revenue grew 20% as our focus on providing a broader our focus on providing a broader set of capital and advisory set of capital and advisory solutions is working.

Speaker #3: The favorable environment for M&A and financing is helping drive higher revenues across the industry, but our investments are also delivering strong results and we are increasing market share in key areas.

Speaker #3: solutions is working. This was This was a record quarter for investment banking a record quarter for investment banking fees across the term. fees across the term.

Speaker #3: Our willingness to invest more in senior willingness to invest more in senior talent and in technology and talent and in technology and dedicate more balance sheet to these activities dedicate more balancing to these activities is paying off.

Speaker #3: In leveraged finance, our year-to-date market share is 7.2% and we rank number 3. In equity capital markets, our share has increased 74 basis points from a year ago to 3.8%.

Speaker #3: is paying off. What's important What's important here is having a growth plan that here is having a growth plan that is properly paced, and is properly paced, and leveraging the broader strengths of Wells leveraging the broader strengths of Wells Fargo.

Speaker #3: The team has executed The team has executed with discipline, has hired and with discipline, has hired and promoted the right people, and has promoted the right people, and has taken risks that are in line with our taken risks that are in line with our risk tolerance.

Speaker #3: In M&A, we have climbed from number 9 to number 4 among US advisors by announced deal volume, reflecting our active role in advising our clients on franchise-defining transactions.

Speaker #3: risk tolerance. The The favorable environment for M&A and favorable environment for M&A and financing is helping drive higher revenues across financing is helping drive higher revenues across the industry, but our the industry, but our investments are also delivering strong results investments are also delivering strong results and we are increasing market and we are increasing market share in the area.

Speaker #3: We also have strong share in CRE capital markets, including being the number 1 non-agency CMBS book runner, number 1 in real estate loan syndications, and number 1 in CRE CLOs.

Speaker #3: In In leveraged finance, our year-to-date market leveraged finance, our year-to-date market share is 7.2% and we share is 7.2% and we rank number 3.

Speaker #3: rank number 3. In equity In equity capital markets, our share has capital markets, our share has increased 74 basis points from a year increased 74 basis points from a year ago to ago to 3.8%.

Speaker #3: This was a strong quarter across corporate investment banking, and we still have significant opportunity to grow each of the businesses. Finally, let me highlight commercial banking, which generated 6% revenue growth from a year ago.

Speaker #3: In M&A, we have climbed from In M&A, we have climbed from number 9 to number 4 number 9 to number 4 among US advisors by announced among US advisors by announced deal volume, reflecting our deal volume, reflecting our active role in advising our clients on active role in advising our clients on franchise-defining franchise-defining transactions.

Speaker #3: The investments we've been making in the business over the past couple of years are driving strong results. Absent the transfers of loans and deposits to consumer banking and lending last year, average loans grew 9% and average deposits grew 10% from a year ago, our investments include targeted hiring in 20 high-density markets where we are underpenetrated relative to the rest of the country.

Speaker #3: We also have We also have strong share in ERD capital strong share in ERE capital markets, including being the number markets, including being the number 1 non-agency CMBS book 1 non-agency CMBS runner, number 1 in real runner, number 1 in real estate loan syndications, and estate loan syndications, and number 1 in CRE number 1 in CRE BLOs.

Speaker #3: BLOs. This was a This was a strong quarter across corporate investment strong quarter across corporate investment banking, and we still have significant banking and we still have significant opportunity to grow each opportunity to grow each other's businesses.

Speaker #3: The plan is working as we are seeing incremental client growth and higher loan and deposit balances, and we expect this momentum to continue as we execute on our plan.

Speaker #3: other's businesses. Finally, let me highlight commercial banking, Finally, let me highlight commercial banking, which generated 6% revenue growth which generated 6% revenue growth from a year ago.

Speaker #3: from a year ago. The The investments we've been making in the business investments we've been making in the business over the past couple of years are driving over the past couple of years are driving strong results.

Speaker #3: We've also focused on delivering investment banking and markets products to our commercial banking clients. We've had success, which has helped drive revenue growth, but we still see significant opportunities to grow revenue here.

Speaker #3: strong results. Absent the transfers of loans and Absent the transfers of loans and deposits to consumer banking and lending last deposits to consumer banking and lending last year, average loans grew year, average loans grew 9% and average deposits 9% and average deposits grew 10% from a year grew 10% from a year ago.

Speaker #3: While commercial banking is one of our more mature businesses, we still have significant opportunities to grow. Our treasury management and payments revenues are embedded in our commercial bank and corporate investment bank results.

Speaker #3: ago. Our investments include Our investments include targeted hiring in 20 targeted hiring in 20 identity markets where we are identity markets where we are underpenetrated relative to the rest of the underpenetrated relative to the rest of the country.

Speaker #3: country. The plan is working The plan is working as we are seeing incremental client growth and higher loan and deposit growth and higher loan and deposit balances and we expect this momentum to continue as we execute on our to continue as we execute on our plan.

Speaker #3: Across both segments, revenue was up 5% from a year ago. We've been investing in coverage teams and payment platforms and are beginning to innovate using blockchain technology to create better payment solutions for our commercial customers.

Speaker #3: We've also focused We've also focused on delivering investment banking and on delivering investment banking and market products for commercial banking clients. We've had success, which has clients.

Speaker #3: We've had success, which has helped drive revenue growth, but we helped drive revenue growth, but we still see significant opportunities still see significant opportunities to grow revenue here. to grow revenue here.

Speaker #3: These solutions will use blockchain-based payment rails to make cross-border payments faster, more transparent, and more predictable. And over time, they will extend operating hours to 24 hours, 7 days a week.

Speaker #3: While commercial banking is one of our more While commercial banking is one of our more mature businesses, we still mature businesses, we still have significant opportunities to have significant opportunities to grow.

Speaker #3: Our treasury Our treasury management and payments revenues are management and payments revenues are embedded in our commercial bank and corporate embedded in our commercial bank and corporate investment bank results.

Speaker #3: As we look ahead, consumers and businesses remain strong. Consumer spending is higher, charge-offs are lower, and savings and investments are growing across customer segments.

Speaker #3: investment bank results. Across both sectors, Across both sectors, revenue was up 5% from a revenue was up 5% from a year ago. We've been investing in We've been investing in coverage teams and payment coverage teams and payment platforms and are beginning to innovate using platforms and are beginning to innovate using blockchain technology to create better blockchain technology to create better payment solutions for our commercial payment solutions for our commercial customers.

Speaker #3: Businesses are cautious but balance sheets and cash flows remain strong, resulting in strong credit performance. Equity indices are at or near all-time highs, and credit spreads are narrow.

Speaker #3: These solutions These solutions will use blockchain-based payment will use blockchain-based payment rails to make cross-border rails to make cross-border payments faster, more transparent, and more predictable, and over and more predictable, and over time, time, they will extend operating hours to they will extend operating hours to 24 hours 7 days a 24 hours 7 days a week.

Speaker #3: Concerns around affordability and inflation exist, but the labor market and wage growth remain strong. The markets and US economy have absorbed macroeconomic and geopolitical uncertainty well.

Speaker #3: As we look As we look ahead, consumer ahead, consumer businesses remain strong. businesses remain strong. Consumer spending is higher, Consumer spending is higher, charge offs are lower, and savings charge offs are lower, and savings and investments are growing across and investments are growing across customer segments.

Speaker #3: Strong environments like this don't last forever, and we see large amounts of capital being deployed by both banks and non-banks across a broad range of risk assets.

Speaker #3: Businesses are cautious but balance Businesses are cautious but balance sheets and cash flows remain strong sheets and cash flows remain strong resulting in strong credit resulting in strong credit performance.

Speaker #3: Often, when times like this continue, leverage and risk develop that are sometimes hard to see. We are proud of the progress we have made and remain excited about our competitive position and ability to execute and drive towards our goal of industry leadership in the US.

Speaker #3: performance. Equity indices Equity indices are at their near all-time are at their near all-time highs, and credit spreads are highs, and credit spreads are narrow.

Speaker #3: narrow. Concerns around affordability and Concerns around affordability and inflation exist, but the labor inflation exist, but the labor market and wage growth remain market and wage growth remain strong.

Speaker #3: We will watch carefully for signs of outside risks and stress and continue to deploy our resources carefully and deliberately to serve our clients and build sustainable high returns and higher growth that can endure the inevitable market shocks and economic cycles.

Speaker #3: The markets in US The markets in US economy have absorbed economy have absorbed macroeconomic and geopolitical macroeconomic and geopolitical uncertainty well. Strong uncertainty well.

Speaker #3: Strong environments like this don't last environments like this don't last forever, and we see large amounts of capital forever, and we see large amounts of capital being deployed by both banks and being deployed by both banks and non-banks across a broad range non-banks across a broad range of risk assets.

Speaker #3: of risk assets. Often, when times like this Often, when times like this continue, leverage and risk develop continue, leverage and risk develop that are sometimes hard to see.

Speaker #3: In closing, we and most financial institutions are benefiting from today's environment. However, we're also seeing the benefits in our results from the actions we've taken which should endure the cycles as I have said.

Speaker #3: that are sometimes hard to see. We are proud of the progress we've We are proud of the progress we've made and remain excited about our made and remain excited about our competitive competitive position and ability to position and ability to execute and drive towards our goal execute and drive towards our goal of industry leadership in the of industry leadership in the US.

Speaker #3: Our metrics clearly show our momentum across all business segments, and we will continue to remain focused on driving towards higher sustainable returns. I will now turn the call over to Mike.

Speaker #3: We will watch carefully for We will watch carefully for signs of outside signs of outside risks and stress and continue to risks and stress and continue to deploy our resources carefully and deploy our resources carefully and deliberately to serve our deliberately to serve our clients and build sustainable high clients and build sustainable high returns and higher growth returns and higher growth that that can endure the inevitable can endure the inevitable market shocks and economic market shocks and economic cycles.

Speaker #1: Thank you, Charlie. Good morning, everyone. Since Charlie covered the drivers of our improved financial results and the momentum we are seeing across our businesses that we highlighted in the first two slides, I will start my comments on slide four.

Speaker #3: In closing, we In closing, we and and most financial institutions are most financial institutions are benefiting from today's environment. benefiting from today's environment. However, we're also seeing the benefits from However, we're all the same the benefit from our results from the actions our results, from the action that we've we've taken, which should taken that should endure cycles as I endure the cycles as I said.

Speaker #1: Our second quarter results were strong, with broad-based revenue growth, disciplined expense management, and improved credit performance. Our earnings increased 17% from a year ago to 6.4 billion, and our diluted earnings per share grew to $2 up 25% from a year ago.

Speaker #3: said. Our metrics clearly show Our metrics clearly show our momentum across all business our momentum across all business segments and we will continue to remain segments and we will continue to remain focused on driving towards higher focused on driving towards higher sustainable returns.

Speaker #1: Our second quarter results included 132 million or 4 cents per share of discrete tax benefits related to the resolution of prior period matters. Turning to slide six, net interest income increased 609 million or 5% from a year ago and increased 2% from the first quarter.

Speaker #3: turn the call over to Mike. Thank you,

Speaker #2: Thank you,

Speaker #3: I will now sustainable returns. I will now turn the call over to Mike.

Speaker #2: Charlie. Good morning, everyone. Since Charlie came Charles.

Speaker #2: in the drivers of our improved financial

Speaker #1: Good morning, everyone. Since Charlie

Speaker #2: across our businesses that we highlight in the first

Speaker #1: results and the momentum we are seeing across our businesses that we highlighted in the first

Speaker #2: few slides, I will start my comments on

Speaker #1: few slides, I will start by commenting

Speaker #2: slide four. on slide 4. Our second quarter

Speaker #1: The growth from the first quarter was driven by higher loan and investment securities balances, as well as one additional day in the quarter. As expected, the net interest margin declined 4 basis points from the first quarter down from the 13 basis points decline we had last quarter.

Speaker #2: results were strong with broad-based revenue

Speaker #1: Our second quarter results were strong with broad-based revenue

Speaker #2: growth, disciplined expense management, and growth, disciplined defense management, and

Speaker #2: improved credit performance. Our improved credit performance.

Speaker #2: earnings increased 17% from a year

Speaker #1: Our earnings increased 17% from a year

Speaker #2: ago to 6.4 billion, and our ago to 6.4 billion, and our

Speaker #2: diluted earnings per share accrued at diluted earnings per share grew to

Speaker #2: $2 up 25% from a year $2 up 25% from a year

Speaker #1: The biggest driver of the decline in NIM in the second quarter and over the past year has been growth in interest-bearing deposits, as well as continued growth in our markets business.

Speaker #2: ago. Our second quarter results included ago.

Speaker #2: 132 million or 4 cents per share of discrete tax benefits related to

Speaker #1: Our second quarter results included 132 million or 4 cents

Speaker #2: the resolution of prior period

Speaker #1: per share plus 3 tax benefits related to the resolution of prior period

Speaker #2: matters. matters. Turning to slide

Speaker #1: The success we are having growing interest-bearing deposits deepens our relationships with clients in the commercial bank and the corporate investment bank and gives us the opportunity to attract non-interest-bearing deposits in the future.

Speaker #2: six. Net interest

Speaker #1: Turning to slide 6. Net interest

Speaker #2: income increased 609 million or

Speaker #1: income increased 609 million or

Speaker #2: 5% from a year ago and increased

Speaker #2: 2% from the first quarter. 2% from the first quarter.

Speaker #1: 5% from a year ago and increased

Speaker #2: The growth from the first quarter was driven by higher

Speaker #1: The growth from the first quarter was driven by

Speaker #2: loans and investment securities higher loans and investment securities

Speaker #1: And as Charlie mentioned, while financing balances in the markets business are lower spread, they have good returns and profitability and position us to grow other activities at those clients.

Speaker #1: balances as well as one additional day in balances as well as one additional day in the the quarter. As expected, the

Speaker #2: quarter. As expected, the net

Speaker #2: interest margin declined 4 basis points from net interest margin declined 4 basis points

Speaker #2: the first quarter, down from a 13 from the first quarter, down from a 13

Speaker #2: basis point decline we had last basis point decline we had last

Speaker #1: We see it in our results, including total revenue in the markets business growing 24% from a year ago as well as returns starting to increase along with our market share.

Speaker #2: The biggest driver of this decline in quarter.

Speaker #2: NIM in the second quarter and over the past

Speaker #1: The biggest driver of this decline in NIM in the second quarter and over the past

Speaker #2: deposits as well as continued growth in

Speaker #1: year has been growth in interest-bearing deposits as well as continued growth

Speaker #2: our markets business. The in our markets business.

Speaker #1: I would also note that even with the NIM compression, we grew net interest income versus last year and last quarter. While we'll talk more about our expectations for net interest income later on the call, we expect modest net interest margin compression in the third quarter broadly in line with the second quarter's decline from the first quarter before stabilizing in the fourth quarter.

Speaker #2: success we are having growing interest-bearing

Speaker #1: The success we are having growing interest-bearing

Speaker #2: deposits deepens our relationships with

Speaker #2: clients in the commercial bank and the corporate clients in the commercial bank and the

Speaker #1: deposits deepens our relationships with

Speaker #2: investment bank and gives us the corporate investment bank and gives us the

Speaker #2: opportunity to attract non-interest-bearing opportunity to attract non-interest-bearing

Speaker #2: deposits in the future. And as Charlie deposits in the future.

Speaker #2: mentioned, while financing balances in the markets

Speaker #1: And as Charlie mentioned, while financing balances in the

Speaker #2: business are lower spread, we have markets business are lower spread, we

Speaker #2: good returns and profitability and

Speaker #1: have good returns and profitability

Speaker #2: position us to grow other activities

Speaker #1: Moving to slide seven, average loans increased 110 billion or 12% from a year ago driven by growth in commercial and industrial loans as well as growth across our consumer portfolios except for residential mortgage loans.

Speaker #1: and position us to grow other

Speaker #2: of those clients. We see it in activities at those points.

Speaker #2: our results, including total revenue

Speaker #1: We see it in our results, including total

Speaker #2: in the markets business growing

Speaker #2: 24% from a year ago, as well as 24% from a year ago as well

Speaker #1: revenue in the markets business growing

Speaker #2: returns starting to increase along with our as returns starting to increase along with

Speaker #2: returns starting to increase along with our as returns starting to increase along with market share. I would also note that our market share.

Speaker #2: even with a NIM compression, we grew

Speaker #1: I would also note that even with an increase, we

Speaker #1: Turning to deposits, average deposits increased 134 billion or 10% from a year ago with growth across our consumer and commercial businesses as well as higher corporate deposits.

Speaker #2: net interest income versus last year and

Speaker #1: grew net interest income versus last year

Speaker #2: last quarter. While we'll

Speaker #1: and last quarter. While

Speaker #2: talk more about our expectations for net interest

Speaker #2: income later on the call, we expect

Speaker #1: we'll talk more about our expectations for net interest

Speaker #1: income later on the call, we

Speaker #1: expect modest net interest margin compression in the third quarter broadly

Speaker #2: compression in the third quarter broadly

Speaker #1: Average deposits declined 1 basis point from a year ago and were up 8 basis points from the first quarter driven by growth in interest-bearing deposits.

Speaker #2: in line with the second quarter's decline from the in line with the second quarter's decline from

Speaker #2: first quarter, before stabilizing in the first quarter before stabilizing

Speaker #2: the fourth in the fourth

Speaker #2: quarter. Moving to slide quarter.

Speaker #2: Average loans increased

Speaker #1: Moving to slide

Speaker #1: Turning to slide eight, we had broad-based growth in non-interest income up 1.2 billion or 13% from a year ago. We generated over $10 billion in non-interest income in the quarter with growth across most key categories.

Speaker #1: 7. seven.

Speaker #2: 110 million or 12% from a year

Speaker #1: 110 million or 12% from a year

Speaker #1: ago driven by growth in commercial and industrial loans as well as growth across

Speaker #2: industrial loans as well as growth across our consumer portfolios except

Speaker #1: our consumer portfolios except

Speaker #2: loans. Turning to deposits, average

Speaker #1: for residential mortgage for residential mortgage loans. Turning to deposits, average

Speaker #1: We had strong performance from our venture capital investments with $847 million in both unrealized and realized net equity gains. For 604 million after non-controlling interest.

Speaker #1: deposits increased 134

Speaker #2: ago with growth across our consumer and commercial businesses as well as higher

Speaker #1: million or 10% from a year million or 10% from a year ago with growth across our consumer and

Speaker #2: corporate deposits. Average deposits declined 1 basis point from a

Speaker #1: commercial businesses as well as higher corporate deposits. Average

Speaker #1: It's important to look at these results after the impact of non-controlling interest. We also had double-digit growth in investment advisory fees, brokerage commissions, and investment banking fees from a year ago.

Speaker #1: deposits declined 1 basis point from a year ago and were up 8 basis points

Speaker #2: year ago and were up 8 basis points

Speaker #2: from the first quarter driven by growth in from the first quarter driven by growth in

Speaker #1: interest-bearing

Speaker #2: Turning to slide eight. We have

Speaker #1: Turning to slide deposits.

Speaker #2: broad-based growth in non-interest income

Speaker #1: 8. We had

Speaker #1: We had over 900 million investment banking fees in the second quarter a new record. Turning to expenses on slide nine, non-interest expense increased 282 million or 2% from a year ago and our efficiency ratio improved to 60% down 4 basis points from a year ago.

Speaker #2: up 1.2 billion or 13% from a year ago. We

Speaker #1: up 1.2 billion or

Speaker #1: 13% from a year ago. We

Speaker #1: generated over 10 billion in non-interest generated over 10 billion in non-interest income in the quarter with growth across the

Speaker #2: income in the quarter with growth across the

Speaker #2: most key categories. We had strong performance from our venture capital

Speaker #1: most key categories. We had

Speaker #2: investments with 847

Speaker #2: investments with 847 million of unrealized and realized net million or unrealized and realized net

Speaker #1: strong performance from our venture capital investments with 847

Speaker #2: expenses gains, or expenses gains for 604 million after non-controlling

Speaker #1: Four percentage points from a year ago. The increase in expenses from a year ago was driven by higher revenue-related and incentive compensation expense which I like to remind you is a good thing as these higher expenses are more than offset by higher revenue.

Speaker #2: interest. It's important to look at these

Speaker #1: 604 million after non-controlling interest.

Speaker #1: results after the impact of non-controlling interest.

Speaker #2: interest. We also had double-digit growth in investment advisory

Speaker #2: fees, brokerage commissions, and investment banking fees from a year ago. We had

Speaker #1: double-digit growth in investment advisory fees, brokerage commissions, and investment

Speaker #1: We also have higher technology and advertising costs driven by the investments we are making in our businesses to generate growth. These higher expenses were partially offset by the impact of efficiency initiatives including a 7% reduction in headcount from a year ago.

Speaker #1: banking fees from a year ago. We had over 900 million investment banking

Speaker #2: over 900 million investment banking fees in the second quarter of compete

Speaker #2: records.

Speaker #1: fees in the second quarter of the

Speaker #1: record. Turning to expectations on slide

Speaker #2: Turning to expenses on slide

Speaker #2: nine. Non-interest expense 9.

Speaker #2: increased 282 million or 2% from a year ago and

Speaker #1: Non-interest expense increased 282 million or

Speaker #1: 2% from a year ago and our efficiency ratio improved to

Speaker #2: our efficiency ratio improved to

Speaker #1: We are pleased to see the continued execution of our efficiency initiatives quarter after quarter. This is the 24th consecutive quarter of headcount reductions and along with other meaningful efficiency initiatives, we have been able to continue to invest in our businesses while managing overall expense levels.

Speaker #2: 60% down 4 basis points from a year 60% down 4 basis points from a year

Speaker #2: 4% points from a year ago.

Speaker #1: 4 percentage points from a year

Speaker #2: The increase in expenses from a year ago was driven by higher

Speaker #1: ago. The increase in expenses from ago.

Speaker #2: revenue-related and incentive compensation expense which I like to remind you is a good

Speaker #1: a year ago was driven by higher revenue-related and incentive compensation

Speaker #1: expense which I like to remind you is a good thing as these higher expenses are more than

Speaker #2: thing as these higher expenses are more than offset by higher revenue. We

Speaker #1: In fact, as Charlie highlighted, non-revenue-related expenses were actually down from a year ago. Turning to credit quality on slide 10, our credit performance in the second quarter remained strong with our net loan charge-off ratio down 10 basis points from a year ago to 34 basis points of average loans.

Speaker #2: also had higher technology and advertising costs driven by the investments we are making

Speaker #1: offset by higher revenue. We also had higher technology and

Speaker #1: advertising costs driven by the investments we are making

Speaker #2: growth. These higher expenses were partially offset by the impact of

Speaker #1: in our businesses to generate in our businesses to generate growth. These higher expenses were

Speaker #1: partially offset by the impact of

Speaker #2: efficiency initiatives, including a

Speaker #1: 7% reduction in headcount from a year

Speaker #2: We are pleased to see

Speaker #1: ago. We are pleased to ago.

Speaker #1: Commercial credit continued to be strong with net loan charge-offs declining to 10 basis points. Consumer performance was also strong with loan charge-offs declining to 74 basis points with improvements across the portfolio from the first quarter and continued net recoveries in the residential mortgage portfolio.

Speaker #1: see the continued execution of our efficiency

Speaker #2: initiatives quarter after quarter. This is a 24th

Speaker #2: consecutive quarter of headcount reductions and along

Speaker #1: quarter. This is a 24th consecutive quarter of headcount reductions and along

Speaker #2: initiatives, we have been able to continue to

Speaker #1: with other means for efficiency

Speaker #1: invest in our businesses while managing invest in our businesses while managing

Speaker #2: overall expense levels.

Speaker #2: In fact, as Charlie highlighted, In fact, as Charlie highlighted,

Speaker #2: non-revenue-related expenses were actually down from a year non-revenue-related expenses were actually down from a year

Speaker #1: Non-performing assets as a percentage of total loans declined from the first quarter and from a year ago with improvements in both the commercial and consumer portfolios.

Speaker #2: ago. Turning to credit quality on slide ago.

Speaker #2: 10. Our credit performance in the second quarter remained strong with our net

Speaker #1: Turning to credit quality on slide 10. Our credit performance in the

Speaker #1: Our allowance coverage ratio for loans was relatively stable from the first quarter; credit card and auto loan growth drove a modest increase in our allowance which was largely offset by a lower allowance for commercial real estate office loans.

Speaker #2: loan charge-off ratio down 10 basis points

Speaker #1: second quarter remained strong with our net loans charged off ratio down 10 basis points

Speaker #2: points of average loans.

Speaker #1: from a year ago to 34 basis points of average loans.

Speaker #2: Commercial credit continued to be strong with net Commercial credit continued to be strong with net loan charge-offs declining to 10 basis

Speaker #1: loans charged off responded to 10 basis points. Consumer performance

Speaker #2: points. Consumer performance

Speaker #2: was also strong with loan charge-offs

Speaker #1: Turning to capital and liquidity on slide 11, our capital levels remained strong with our CET-1 ratio at 10.3% within our stated 10 to 10 and a half percent target range.

Speaker #2: improvements across the portfolio. From the first quarter, NIM continued net

Speaker #1: responding to 74 basis points with improvements across the portfolio from

Speaker #1: the first quarter and continued net recoveries in the residential mortgage

Speaker #2: recoveries in the residential mortgage portfolio.

Speaker #2: Non-performing assets and percentage of total loans

Speaker #1: portfolio. Non-performing assets and percentage of total loans

Speaker #1: And well above our CET-1 regulatory minimum plus buffers at 8.5%. While the Federal Reserve's stress test results do not impact capital requirements this year, our results continued to be below the stress capital buffer for a 2.5%.

Speaker #2: declined from the first quarter and from a year ago declined from the first quarter and from a year

Speaker #1: ago with improvements in both the commercial and

Speaker #2: portfolios. Our allowance coverage ratio for loans was relatively stable from the

Speaker #1: consumer consumer portfolios. Our allowance coverage ratio for

Speaker #1: loans was relatively stable from the first quarter; credit card and auto

Speaker #2: first quarter, credit card and auto

Speaker #2: allowance which was largely offset by lower

Speaker #1: loan growth showed a modest increase in our

Speaker #1: We repurchased $3 billion of common stock in the second quarter and common shares outstanding declined 6% from a year ago. We continue to have the capacity to repurchase shares while also supporting our clients.

Speaker #2: allowance for commercial real estate office allowance for commercial real estate office

Speaker #2: Turning to capital and liquidity on loans.

Speaker #2: slide 11. Our capital levels remained strong with our CEP

Speaker #1: Turning to capital and liquidity on slide 11. Our capital

Speaker #2: loan ratio of 10.3% within our stated 10 to 10 and a half

Speaker #1: levels remained strong with our CEP loan ratio of 10.3%

Speaker #1: Moving to our operating segment, starting with consumer banking and lending on slide 12. Consumer small and business banking revenue increased 8% from a year ago driven by higher deposit and loan balances; wider deposit spreads; and growth in non-interest income.

Speaker #1: within our stated 10 to 10 and a half

Speaker #2: percent target range. And well above our CEP one regulatory

Speaker #2: minimum of buffers at 8.5%.

Speaker #1: well above our CEP one regulatory minimum of buffers at

Speaker #1: 8.5%. While the Federal Reserve's test results do not

Speaker #2: Reserve's test results do not impact capital requirements this year, our

Speaker #2: results continue to be below the stress

Speaker #1: impact capital requirements this year, our results continue to be below the strict

Speaker #1: Credit card revenue grew 2% from a year ago due to higher loan balances. Home lending revenue declined 7% from a year ago reflecting lower loan balances; however, the rate of reduction has continued to slow with balances relatively stable from the first quarter.

Speaker #2: capital buffer floor of capital buffer floor of

Speaker #2: 2.5%. We 2.5%.

Speaker #2: repurchased 3 billion of common stock in the second

Speaker #1: We repurchased 3 billion of common stock in the second

Speaker #2: quarter and common shares upstanding

Speaker #1: quarter and commentary of us ending

Speaker #1: declined 6% from a year ago. We continue to have capacity to repurchase

Speaker #2: continue to have capacity to repurchase shares while also supporting our

Speaker #2: clients. Moving to our operating segment, starting with

Speaker #1: shares while also supporting our clients.

Speaker #1: Lower revenue also reflected the continued reduction in the size of our servicing business with third-party mortgage loans serviced for others down 21% from a year ago.

Speaker #2: consumer banking and lending on slide

Speaker #1: Moving to our operating segment starting with

Speaker #2: 12. Consumer small and

Speaker #1: consumer banking and lending on slide 12. Consumer small and

Speaker #2: 8% from a year ago driven by higher deposit

Speaker #1: business banking revenue increased 8% from a year ago driven by higher

Speaker #1: Auto revenue increased 33% from a year ago due to higher loan balances; auto originations increased 41% year over year but were stable from the first quarter.

Speaker #2: and loan balances, wider

Speaker #1: deposit and loan balances; wider

Speaker #2: non-interest income. Credit

Speaker #1: deposit spreads; and growth in non-interest income. Credit

Speaker #2: card revenue grew 2% from a year

Speaker #1: card revenue grew 2% from a year

Speaker #2: balances. Home lending revenue declined

Speaker #1: Turning to commercial banking results on slide 13. Revenue increased 6% from a year ago driven by non-interest income growth from equity investments; revenue from the financing we do for renewable energy projects that come in the form of tax credits; and investment banking as well as growth in net interest income from higher loan and interest-bearing deposit balances.

Speaker #1: ago through higher loan balances. While lending revenue declined

Speaker #2: 7% from a year ago reflecting lower 7% from a year ago we likely lower loan balances; however, the rate of

Speaker #1: loan balances; however, the rate of

Speaker #1: reduction has continued to slow reduction has continued to slow

Speaker #1: with balances relatively stable from the first with balances relatively stable from the first quarter. Lower

Speaker #2: quarter. Lower revenue also reflected a continued

Speaker #2: reduction in the size of our servicing business

Speaker #1: revenue also reflected a continued reduction in the size of our servicing business

Speaker #2: with third-party mortgage loan service for others with third-party mortgage loan service for

Speaker #2: from 21% from a year others among 21% from a year ago. Auto revenue

Speaker #1: Loan growth was broad-based with increased demand from both new and existing customers. Turning to corporate investment banking on slide 14. Banking revenue increased 20% from a year ago with growth in investment banking fees and equity and debt capital markets as well as higher loan and interest-bearing deposit balances.

Speaker #1: ago. Auto revenue increased 32% from a year ago

Speaker #2: increased 32% from a year ago through higher loan balances.

Speaker #2: Auto illustrations increased 41%

Speaker #1: through higher loan balances; auto illustrations increased 41%

Speaker #2: quarter. Turning to commercial banking results on

Speaker #1: year over year but were stable from the first quarter. Turning to commercial banking results on

Speaker #2: slide 13. slide 13.

Speaker #2: Revenue increased 6% from a year ago Revenue increased 6% from a year ago

Speaker #2: driven by non-interest income growth from driven by non-interest income growth from equity investments revenue from the

Speaker #1: Commercial real estate revenue declined 1% from a year ago as higher capital markets activity and loan balances were more than offset by the impact of lower interest rates.

Speaker #1: equity investments; revenue from the stamping we do for renewable energy

Speaker #2: stamping we do for renewable energy projects had come in the form of tax

Speaker #1: projects had come in the form of tax

Speaker #2: credits and investment banking as well as

Speaker #2: growth in net interest income from higher

Speaker #1: growth in net interest income from higher

Speaker #2: balances. Loan

Speaker #1: Markets revenue grew 24% from a year ago driven by stronger performance in equities and higher revenue across most fixed income products including the impact of balance sheet growth.

Speaker #1: loans and interest-bearing deposit balances.

Speaker #1: growth was broad-based with increased demand

Speaker #2: from both new and existing customers. Turning to corporate investment banking on slide

Speaker #1: customers. Turning to corporate investment banking on slide 14.

Speaker #1: As you know, we've been growing our balance sheet in the markets business. It has increased 198 billion since the end of 2024 with approximately 60% in financing balances; 20% on the trading side; and 20% for the lending we do in this business.

Speaker #2: 14. Banking

Speaker #2: ago with growth in investment banking fees

Speaker #1: revenue increased 2% from a year ago with growth in investment banking fees

Speaker #2: and equity index capital markets as and equity index capital markets

Speaker #1: as well as higher loans and

Speaker #2: balances. Commercial real estate revenue declined 1% from a year ago as higher capital

Speaker #1: interest-bearing deposit interest-bearing deposit balances.

Speaker #1: We extend these balances to clients who can also bring us additional business in our early tracking shows that is what's occurring. We track this on a granular basis and will continue to optimize with clients to drive growth and returns.

Speaker #1: 1% from a year ago as higher capital

Speaker #2: balances were more than offset by the impact of

Speaker #1: markets activity and loan markets activity and loan balances were more than offset by the impact of

Speaker #2: rates. Markets revenue grew

Speaker #1: lower interest

Speaker #2: 24% from a year ago driven by stronger 24% from a year ago driven by stronger performance in equities and higher revenue across

Speaker #1: Average loans in corporate investment banking grew 26% from a year ago with growth across all businesses while utilization rates were relatively stable. On slide 15, wealth and investment management revenue increased 13% from a year ago driven by growth in investment advisory fees from increased market valuations as well as higher net interest income due to lower deposit pricing and higher deposit and loan balances.

Speaker #1: performance in equities and higher revenue across both fixed income products including the

Speaker #2: both fixed income products including the impact on balance sheet

Speaker #2: growth. As you know, we've been growing our

Speaker #1: impact of loan balance sheet

Speaker #1: our balance sheet in the markets business.

Speaker #2: It has increased 198 billion since the end of

Speaker #1: It has increased 198 balance sheet in the markets business.

Speaker #2: 2024 with approximately 60%

Speaker #1: billion since the end of 2024 with approximately 60%

Speaker #1: in financial balances; 20% on the

Speaker #2: lending we do in the business. We extend these balances to clients who can also

Speaker #1: trading side; and 20% for trading side and 20% for

Speaker #2: bring us additional business and our early

Speaker #1: We extend these balances to clients who can also

Speaker #2: tracking shows that is what's occurring. We track this on a granular

Speaker #1: 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.

Speaker #1: tracking shows that is what's

Speaker #2: basis and will continue to optimize with clients to drive growth and

Speaker #1: occurring. We track this on a granular basis and will continue to optimize with clients to

Speaker #2: returns. Average loans in corporate investment banking grew 36% from a year

Speaker #1: drive growth and returns. Average loans in corporate

Speaker #1: Which were up from April 1st and from a year ago. Turning to our 2026 outlook on slide 17. We are maintaining our guidance of $50 billion plus or minus of net interest income for the full year and similar to last year, we expect stronger growth in the second half of the year compared to the first half.

Speaker #1: investment banking grew 36% from a year ago with growth across all businesses

Speaker #2: ago with growth across all businesses

Speaker #1: while utilization rates were relatively

Speaker #2: On slide 15. We're

Speaker #2: 13% from a year ago driven by growth

Speaker #1: We're stable.

Speaker #1: often about to mention revenue increased

Speaker #1: in investment advisory fees from

Speaker #2: as higher net interest income due

Speaker #1: increased market valuation as well increased market valuation as well

Speaker #1: We still expect net interest income excluding markets to be approximately $48 billion for the full year. Looking at the key drivers, starting with loans, as I highlighted, average loans in the second quarter grew 12% from a year ago, so year over year average loan growth in the fourth quarter will likely be higher than the mid-single-digit increase we had assumed in our outlook back in January.

Speaker #2: to lower deposit pricing and higher

Speaker #2: deposit and loan balances. deposit and loan balances. As a reminder, the majority of NIM

Speaker #1: to lower deposit pricing and higher

Speaker #1: As a reminder, the majority of them

Speaker #1: advisory assets were priced at the beginning of advisory assets were priced at the beginning of the quarter so third-quarter results will

Speaker #2: the quarter so third-quarter results will

Speaker #2: reflect market valuations as of July reflect market valuations as of July 1st. Which were up from April

Speaker #1: 3rd. Which were up from April

Speaker #2: 1st and from a year

Speaker #2: ago. Turning to our 2026 ago.

Speaker #2: outlook on slide

Speaker #1: This is a positive versus our original expectation. We have also successfully grown interest-bearing deposits, which is a good thing since these higher balances help us deepen relationships with our customers and, as I mentioned earlier, gives us the opportunity to attract non-interest-bearing deposits in the future.

Speaker #1: Turning to our 2026 outlook on slide

Speaker #2: 17. We are maintaining our guidance at 50 billion plus or minus for net interest

Speaker #1: 17. We are maintaining our guidance at

Speaker #2: income for the full year and similar to last year we kept stronger growth in the

Speaker #1: 50 billion plus or minus for net interest income for the full year and similar

Speaker #2: second half of the year compared to the first

Speaker #1: to last year we kept stronger growth in the second half of the year compared to the first

Speaker #1: half. We still expect net interest income excluding markets to be

Speaker #2: interest income excluding markets to be approximately 48 billion for the full

Speaker #1: We had originally assumed some growth in non-interest-bearing deposits, but we now expect them to be relatively stable, which is a negative versus our original expectation.

Speaker #1: approximately 48 billion for the full

Speaker #1: year looking at the key drivers starting year looking at the key drivers starting

Speaker #2: highlighted average loans in the second quarter grew

Speaker #1: with loans as I with loans as I highlighted average loans in the second quarter grew

Speaker #1: Interest rates are currently not a significant factor in our outlook for this year, while interest rates have been higher than we expected in our original outlook, which benefits NII excluding markets.

Speaker #2: average loan growth in the fourth quarter grew

Speaker #1: 12% from a year ago through year over year average loan growth in the fourth quarter will

Speaker #2: mid-single-digit increase we have seen in our

Speaker #1: likely be higher than the mid-single digit increase we have seen in our

Speaker #1: outlook back in January. This is a

Speaker #1: The rate cuts we had originally assumed were expected later in the year, so the change is only a modest impact on this year's net interest income expectations.

Speaker #1: positive with more visual expectations. positive with average expectation.

Speaker #1: We have also successfully We have also successfully grown interest-bearing deposits which is a good

Speaker #1: thing since these higher balances help us keep grown interest-bearing deposits which is a good

Speaker #2: relationships with our customers

Speaker #1: in relationships with our customers thing since these higher balances help us keep in

Speaker #2: and as I mentioned earlier it gives us the and as I mentioned earlier it gives us the

Speaker #1: In terms of markets NII, as we all know, it's always hard to forecast. Higher short-term rates typically result in lower markets NII, but as of now, we still expect markets NII to be approximately $2 billion in 2026.

Speaker #2: opportunity to attract non-interest-bearing opportunity to attract non-interest-bearing deposits in the future.

Speaker #2: originally assumed that growth in non-interest-bearing deposits that we now expect

Speaker #1: deposits in the future. We had originally assumed that growth in

Speaker #1: non-interest-bearing deposits that we now expect them to be relatively stable would

Speaker #2: them to be relatively stable would be negative versus our original

Speaker #1: be negative versus our original

Speaker #1: So putting this all together, while the drivers have moved around since our original outlook, which is always the case, our current outlook is still $50 billion plus or minus of NII for 2026.

Speaker #2: Interest rates are currently not a

Speaker #1: expectations. Interest rates are currently not a expectations.

Speaker #2: significant factor in the analysis this significant factor in the generalities of this

Speaker #2: year while interest rates have been higher than year while interest rates have been higher than we expected in our original outlook which

Speaker #1: we expected in our original outlook which

Speaker #2: markets. The rate cuts we had originally

Speaker #1: benefits NII excluding benefits NII excluding

Speaker #1: Regarding our expense outlook, we still expect 2026 non-interest expense to be approximately $55.7 billion, expenses in the first half of the year were in line with our expectations, as we look at the second half of the year, we expect revenue-related expenses to be somewhat higher than we expected at the beginning of the year, but we expect expenses in other areas to be lower through our continued focus on efficiency initiatives.

Speaker #2: assumed were expected later in the year and the assumed were expected later in the year and change is only a modest impact on this

Speaker #1: changes only in markets impact on this

Speaker #2: expectations. In terms

Speaker #1: year's net interest income year's net interest income expectations. In

Speaker #2: of market NII, as terms of markets NII we all know, always hard to

Speaker #2: forecast. Higher short-term rates

Speaker #1: as we all know always hard to forecast. Higher short-term rates

Speaker #2: typically result in a lower market NII but as

Speaker #1: typically result in lower markets NII but as

Speaker #1: of now we still expect markets NII

Speaker #2: be approximately 2 billion in 2026. So putting this all

Speaker #1: 2026. So putting this all together while the drivers have moved around since

Speaker #2: together while the drivers have moved around since

Speaker #1: In summary, we had strong second-quarter results and a clearly demonstrate that the strategy we have been implementing to drive growth is working. Revenue growth was broad-based with every one of our operating segments generating higher net interest income and non-interest income from a year ago.

Speaker #1: our original outlook is always the

Speaker #1: case our current outlook is still 50 billion our current outlook is still 50 billion plus or minus of NII for

Speaker #2: plus or minus of NII for 2026. Regarding

Speaker #1: 2026.

Speaker #2: our current outlook, we still expect

Speaker #1: Regarding our current outlook we still expect 2026 non-interest expense

Speaker #2: 2026 non-interest expense

Speaker #1: Our continued focus on improving efficiency drove positive operating leverage. The asset cap came off last year, and we had double-digit growth in both average loans and deposits from a year ago.

Speaker #2: billion expenses in the

Speaker #1: to be approximately 55.7 billion; expenses in the

Speaker #1: first half of the year will align with our

Speaker #1: expectations as we look at the second expectations as we look at the second half half of the year we expect revenue-related

Speaker #2: of the year we expect revenue-related expenses to be somewhat higher than we expected at

Speaker #1: expenses to be somewhat higher than we expected at

Speaker #1: Credit quality was strong, with improved performance in both our commercial and consumer portfolios. We continue to return significant capital shareholders while maintaining our strong capital position.

Speaker #1: the beginning of the year but we the beginning of the year but we expect

Speaker #1: expect expenses in other areas to be lower so expenses in other areas to be lower so

Speaker #2: we'll continue to focus on efficiency

Speaker #1: initiatives. In summary, we have strong

Speaker #2: second-quarter results and we clearly

Speaker #1: As Charlie highlighted, we are seeing strong momentum in key business drivers in every one of our businesses, and the steady improvements in our returns continue to give us confidence in achieving our medium-term 17 to 18 percent return on tangible income and equity target.

Speaker #2: demonstrate that the strategy we have been implementing to demonstrate that the strategy we have been implementing to drive growth is working. Revenue

Speaker #1: drive growth is working. Revenue

Speaker #2: growth is broad-based in every one of our operating areas generating higher net interest

Speaker #2: income and non-interest income from a year

Speaker #1: operating areas generating higher net interest income and non-interest income from a year

Speaker #1: ago. Our continued focus on improving efficiency growth positively offers

Speaker #2: improving efficiency growth positively offers another. The asset capital model

Speaker #1: We will now take your questions.

Speaker #1: another. The asset capital

Speaker #2: for last year can be double-digit growth from both average loans and deposits from a year

Speaker #2: 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 one.

Speaker #1: of both average loans and deposits from a year ago. Credit quality is

Speaker #2: ago. Credit quality is strong with improved performance in both our

Speaker #1: strong with improved performance in both our

Speaker #2: commercial and consumer

Speaker #2: portfolios. We continue to return portfolios.

Speaker #2: Please record your name at the prompt. If you would like to withdraw your question, you may press star two to remove yourself from the question queue.

Speaker #2: significant outlook shareholders following maintaining our strong capital position.

Speaker #1: We continue to return significant capital shareholders following

Speaker #1: maintaining our strong capital position. As Charlie highlighted we are seeing strong

Speaker #2: As Charlie noted we are seeing strong momentum in key business drivers in every one of our

Speaker #1: momentum in key business drivers in every one of our businesses and the setting improvements in

Speaker #2: businesses and the steady improvements in

Speaker #2: Once again, please press star one and record your name. If you would like to ask a question at this time, please stand by for our first question.

Speaker #2: confidence in achieving our median term

Speaker #1: our returns continue to give us confidence in achieving our median return

Speaker #2: 17 to 18% return on

Speaker #1: 17 to 18 percent return on

Speaker #1: tangible income and equity

Speaker #1: tangible income and equity markets. We will now take the targets.

Speaker #2: We will now take the

Speaker #2: The first question comes from Ken Yeuston of Autonomous Research. Your line is open.

Speaker #1: I have this. We will now questions.

Speaker #2: I have this.

Speaker #1: question. If you would like to ask a question, please first unmute your phone and

Speaker #2: begin the question and answer begin the question and answer question. If you would like to ask a

Speaker #3: Hi, thanks. Good morning. And Mike, thanks for the color on the second half expected NIM trends. Two questions I have. One is just, again, to get to $50 billion, I think we need to assume at the average earning assets continue to grow at around this 3% pace and given your comments about loan growth and the deposit growth, is that kind of what we need to put forward to get there?

Speaker #2: question please first unmute your phone and then press R1. Please

Speaker #1: then press R1. Please

Speaker #2: record any and at the prompt. If

Speaker #1: question, you may press R2 to remove yourself from the question

Speaker #2: you would like to withdraw your you would like to withdraw your question you may press R2 to

Speaker #1: queue. Once again,

Speaker #2: remove yourself from the question queue. Once again

Speaker #1: please press R1 and record your name. If you would like to ask a question at

Speaker #2: please press R1 and record your

Speaker #2: game. If you would like to ask a question at this time please stand by for

Speaker #1: this time, please stand by for

Speaker #3: Any other things we need to think about in terms of mix within? Thanks.

Speaker #1: question. The first question

Speaker #2: our first question. The first

Speaker #1: comes from NEN of question comes from Ken Yeakin of Autonomous Research.

Speaker #4: Yeah, sure. Yeah, I mean, look, when you look at what's going to progress for the second half of the year, it's very similar to what we saw last year, right, in terms of the step-up as we went through each of the quarters.

Speaker #2: Autonomous Research. Your line is

Speaker #1: open.

Speaker #3: Oh, hey, thanks. Good morning. Can I come to Hi, thanks. Good morning. In response to the caller on the second the color on the second half expected interns the two half expected NIM trends?

Speaker #4: You do benefit from an extra day, as you sort of go into the third quarter, so you sort of have to account for that.

Speaker #3: Two questions I have one is questions I have. One is just I can get 50 billion just I can get 50 billion. I think we need to assume that the average I think we need to assume that the average earning assets continue to grow at around this earning assets continue to grow at around this 2% pace and given your 2% pace and given your comments about loan growth and the deposit growth, comments about loan growth and the deposit growth is that kind of what we need to put forward is that kind of what we need to put forward to get there?

Speaker #4: But we expect to see some growth in loans, securities, you get benefit of the fixed asset turnover, given where rates are. And so I think it's all progressing.

Speaker #4: So it's not a bad assumption, sort of relative to what to expect. But we still feel very good about getting to that $50 billion in total.

Speaker #3: Any other things we need to Any other things we need to think about in terms of mix within? think about in terms of mix within?

Speaker #3: Thanks.

Speaker #4: Yeah, Yeah, sure. sure. If we look at what's going to progress for look at what's going to progress for the second half of the year, it's very similar to what we saw the second half of the year very similar to what we saw last year right in terms of the step up last year, right, in terms of the step-up as we went through each of the as we went through each of the quarters.

Speaker #3: Got it. And then the second question is just, on that NIM stabilizing in the fourth quarter, what are the pieces that kind of get there?

Speaker #4: quarters. You do benefit You do benefit from an extra day to sort of go from an extra day to sort of go into the third quarter so you sort of have into the third quarter.

Speaker #3: Meaning, is it that one piece slows relative to the growth rate? Is it just that you kind of lap some comps? What are the helpful things underneath that that can give us the confidence that that stabilization happens?

Speaker #4: So you sort of have to account for that. But we to account for that. But we expect to see some growth in loans, expect to see some growth in loans, securities, you get benefit securities, you get benefit of the fixed assets turnover given of the fixed assets turnover given where rates are.

Speaker #4: Yeah, sure. And we've talked about this a little bit over throughout the quarter, but we don't expect to see the markets balance sheet to grow at the same pace.

Speaker #4: And And so I think it's all progressing so it's not a bad assumption sort of relative it's not a bad assumption sort of relative to what to expect.

Speaker #4: And And so I think it's all progressing so it's not a bad assumption sort of relative it's not a bad assumption sort of relative to what to expect. to what to expect.

Speaker #4: But we But still feel very good about getting to that we still feel very good about getting to that 50 billion in 50 billion in total.

Speaker #4: But we But still feel very good about getting to that we still feel very good about getting to that 50 billion in 50 billion in total. total.

Speaker #4: And so the impact that we've seen over the last few quarters moderates. And that's certainly part of the story, as you get into the latter part of the year.

Speaker #3: Got it. And then the Got it. And then the second question is just on that NIM second question is just on that NIM stabilizing in the fourth quarter stabilizing in the fourth quarter, what what are the pieces that kind of get are the pieces that kind of get there?

Speaker #4: And then I think you continue to get the benefit of all of what we just talked about in terms of the growth in earning assets, the repricing, and then you sort of see the rest of the growth across the balance sheet.

Speaker #3: Meaning is it Meaning is it that one piece slows relative that one piece slows relative to to the growth rate? Is it just that you kind the growth rate?

Speaker #3: Is it just that you kind of lack some of lack some comp? comp? What are the helpful What are the helpful things underneath that that can give us the confidence things underneath that that can give us the confidence that that stabilization that that stabilization happens?

Speaker #3: happens?

Speaker #4: But at this point, as I said, we expect just a small decline potentially in the third quarter, hopefully it ends up maybe even being better than that, and then we sort of stabilize from there.

Speaker #4: Yeah, sure. Yeah, sure. We talked about this a little bit over throughout the We talked about this a little bit over throughout the quarter but we don't quarter, but we don't expect to see the market balance expect to see the markets balance sheet grow at the same pace and so the sheet grow at the same pace and so the impact that we've seen over the last few impact that we've seen over the last few quarters quarters moderates.

Speaker #4: moderates. And that's certainly part of the story as And that's certainly part of the story as you get into the latter part of you get into the latter part of the year. the year.

Speaker #4: moderates. And that's certainly part of the story as And that's certainly part of the story as you get into the latter part of you get into the latter part of the year.

Speaker #3: Okay. Got it. Thanks, Mike.

Speaker #2: The next question will come from John McDonald of Truist Securities. Your line is open.

Speaker #4: And then I think you continue to get the And then I think you continue to get the benefit of all what benefit of what we just talked about in terms of we just talked about in terms of the growth in earning assets, the the growth in earning assets, the repricing, and repricing, and then you sort of see the rest of the growth then you sort of see the rest of the growth across the across the balance sheet.

Speaker #5: Hi, thanks. Yeah, I was wondering, Mike, on expenses and efficiency, what's the outlook? I mean, you've done a great job with the outlook on headcount.

Speaker #5: So from here, are you still looking to keep that flat to down? And just the broader commentary about the opportunity for efficiency improvement from here, to keep going.

Speaker #4: But at this point, as I But at this point as I said we expect just a said, we expect just a small decline potentially in the third small decline potentially in the third quarter hopefully it ends up maybe even quarter hopefully maybe even being better than that.

Speaker #5: Thanks.

Speaker #4: Yeah, sure. I'll take a shot and start. And Charlie can add if he wants. On the headcount side, in just more broadly, on efficiency, we still come into the environment thinking the same thing we've now done now for a number of years.

Speaker #4: being better than that and then we sort of stabilize And then we sort of stabilize from from there. there.

Speaker #3: Okay. Thanks, Okay. Thanks, Mike. Mike.

Speaker #1: The The

Speaker #1: next question will come from John next question will come from John

Speaker #1: Your McDonald of Truist Securities.

Speaker #1: line is

Speaker #1: open. Hi, thanks.

Speaker #2: Your line is

Speaker #5: Hi, thanks. Yeah, I was wondering, Mike, on expenses and wondering Mike on expenses and efficiency what's the outlook? I mean efficiency, what's the outlook?

Speaker #2: open.

Speaker #4: We've got a lot of room to go to continue to make the place more efficient. And in part, that drives headcount down. And so given the size of our business, the activity levels we've got, we expect that we should be able to run this company with less headcount than we've got today.

Speaker #5: I mean, you've done a great job with the outlook on you've done a great job with the outlook on headcount. So from here, are headcount so from here are you still looking to keep that flat or you still looking to keep that flat or down?

Speaker #5: down? And just the broader And just the broader commentary about the opportunity commentary about the opportunity for efficiency improvement from for efficiency improvement from here to keep going.

Speaker #4: Certainly, technology and AI helps us get at aspects of that in a different way or faster than maybe in the past, but we expect that we'll continue to see more efficiency from here.

Speaker #5: Thanks. Thanks.

Speaker #4: Yeah, sure. I'll Yeah, sure. I'll take a shot and start and Charlie can add if you want. take a shot and start, and Charlie can add if you want.

Speaker #4: The headcount side The headcount side, just more broadly on just more broadly, on efficiency we still come into efficiency, we still come into the environment thinking the same thing the environment thinking the same thing we've now done now for a number of we've now done now for a number of years.

Speaker #4: And then just more broadly, it applies to just about everything we do. And I know we keep talking about this over and over and over, but as you peel back the onion, there's more opportunity to make things more automated, to improve the client experience, to make things more efficient in terms of how we serve clients every day.

Speaker #4: years. We've had a lot of room to go. We've had a lot of room to go. We continue to make the players more We continue to make the place more efficient.

Speaker #4: years. We've had a lot of room to go. We've had a lot of room to go. We continue to make the players more We continue to make the place more efficient. efficient.

Speaker #4: And in part that And in part that drives headcount down. And drives headcount down. And so given the size of our business, the so given the size of our business, the activity levels we've activity levels we've got, we expect that we should got, we expect that we should be able to run this company be able to run this company with less headcount than we've got today.

Speaker #4: And I think there's a lot still to go. And we just come in every day and every week to sort of make sure that we continue to execute like we've done over the last few years.

Speaker #4: with less headcount than we've got today. Certainly, technology and AI Certainly technology and AI help us get out aspects of help us get at aspects of that in a different way or faster than that in a different way or faster than maybe in the past, but we expect maybe in the past but we expect that we'll continue to see more that we'll continue to see more efficiency from here.

Speaker #5: Okay. Thanks. And then maybe just to follow up on Ken's line of questioning around the net interest income drivers, the change in non-interest-bearing from what you saw, what you were expecting earlier in the year, Mike, is that related to any developments in your checking account growth, or is it more attributable to rate-seeking behavior on customers and just the rate environment?

Speaker #4: efficiency from here. And then just more broadly it And then just more broadly, it applies to just about everything we applies to just about everything we do. do.

Speaker #4: efficiency from here. And then just more broadly it And then just more broadly, it applies to just about everything we applies to just about everything we do.

Speaker #4: And I know we keep talking about this over and over And I know we keep talking about this over and over and over but as you peel back the and over, but as you peel back the onion there's more opportunity to do onion, there's more opportunity to do things more automated, to improve things more automated, to improve the client experience, the client experience, to make things more efficient in to make things more efficient in terms of how we serve clients every day.

Speaker #4: terms of how we serve clients every day. And I think there's And I think there's a lot still to a lot still to go.

Speaker #4: terms of how we serve clients every day. And I think there's And I think there's a lot still to a lot still to go. go.

Speaker #5: What do you attribute the change in your NIB outlook to?

Speaker #4: Yeah, no, it's actually not related to the checking account growth. That's actually progressing quite well. And as Charlie mentioned, we're up in we're up in sort of the checking account growth now for a number of quarters and months in a row.

Speaker #4: And And we just come in every day and every week to we just come in every day and every week to sort of make sure that we continue to execute like sort of make sure that we continue to execute like we've done over the last few we've done over the last few years.

Speaker #4: years.

Speaker #5: Okay. Okay. Thanks. Thanks. And then maybe just a follow-up on And then maybe just a follow-up on Ken's final questioning around an interesting Ken's final questioning around an income drivers.

Speaker #4: And so I think that's actually going quite well. I think when you look at just the broader backdrop in terms of the rate environment, we expect it a little bit more growth than we're seeing.

Speaker #5: The change in The change in non-interest bearing from what non-interest bearing from what you saw what you were expecting earlier in the year, you saw what you were expecting earlier in the year, Mike, is that related to Mike, is that related to any developments in your checking any developments in your checking account growth or is it more account growth or is it more attributable to rate seeking behavior on attributable to rate seeking behavior on customers and just the rate environment?

Speaker #4: We did see a little bit of growth from the first quarter and the second quarter, so that's good. But we expect it to be pretty stable from here.

Speaker #5: What do you What do you attribute the change in your NIM outlook attribute the change in your NIM outlook to? to?

Speaker #4: We are seeing really good success in growing interest-bearing deposits and growing other business with clients. In the payment space and the treasury management space.

Speaker #4: Yeah, Yeah, it's actually not related to the checking no, it's actually not related to the checking account growth. That's actually progressing account growth. That's actually progressing quite well and as Charlie quite well and as Charlie mentioned we're up in mentioned, we're up in we're up in sort of the checking we're up in sort of the checking account growth now from number quarters account growth now for number of quarters a month in a row.

Speaker #4: And so those things will bring net interest non-interest-bearing deposits with them over time. It just takes a little bit longer for that stuff to get onboarded and to see the results there.

Speaker #4: And so I think And so I think that's actually going quite well. I that's actually going quite well. I think when you look at just a broader think when you look at just the broader backdrop in terms of the rate environment we expect it a little backdrop in terms of the rate environment, we expect it a little bit more growth than we're bit more growth than we're seeing.

Speaker #4: But we're not seeing pricing pressures or client behavior drive any of the results.

Speaker #4: seeing. We did see a little bit of growth from We did see a little bit of growth from the first quarter and the second quarter so the first quarter and the second quarter, so that's good.

Speaker #5: Okay. Thank you.

Speaker #4: that's good. But we expect it But we expect it to be pretty stable from to be pretty stable from here. here. We are seeing really good We are seeing really good success in growing interest bearing deposits success in growing interest bearing deposits and and growing other business with growing other business with clients.

Speaker #2: The next question will come from Erica Najerian of UBS. Your line is open.

Speaker #6: Hi. Good morning. Thanks for all the callers so far. As we think about the trajectory of net interest income and net interest margin, I'm wondering if we could maybe just take a step back because obviously, there is a lot of focus on this number.

Speaker #4: In the payment In the payment space and the treasury management space. And space and the treasury management space. And so those things will bring that into so those things will bring that into non-interest bearing deposits with them over non-interest bearing deposits with them over time.

Speaker #4: It just takes a little bit longer for that It just takes a little bit longer for that stuff to get onboarded and to see the results stuff to get onboarded and to see the results there.

Speaker #6: But I'm wondering if we could sort of separate sort of the structural factors versus the cyclical factors. So first, what are you expecting for deposit costs in the second half of the year?

Speaker #4: But we're not But we're not seeing we're not seeing pricing seeing we're not seeing pricing pressure sort of or client behavior pressure sort of or client behavior drive any of the drive any of the results.

Speaker #4: results.

Speaker #5: Okay. Thank Okay. Thank you. you.

Speaker #1: from Erica at Nigerian of

Speaker #2: The next question will come The next question will come

Speaker #6: Is there a rate hike priced in? I think you removed the cuts, but Mike, I just want to make sure what you were I understood what you were assuming for the short end.

Speaker #1: BS. Your line is

Speaker #1: open. open.

Speaker #2: CBS.

Speaker #6: Hi. Good morning. Hi. Good morning. Thanks for all the callers so Thanks for all the callers so far. As we think about the far.

Speaker #6: As we think about the trajectory of net interest income and net trajectory of non-interest income and non-interest margin I'm wondering interest margin, I'm wondering if this would be we just take a step back specifically we just take a step back because obviously there is a because obviously there is a lot of focus on this lot of focus on this number.

Speaker #6: So what should we expect from deposit cost standpoint from here? In addition, you have two strategies that are sort of a competing factors on the NIM.

Speaker #6: number. But I'm wondering if you could sort But I'm wondering if you could sort of separate sort of of separate sort of the structural factors versus the structural factors the cyclical factors.

Speaker #6: One is this great growth in markets, which is obviously NIM-dilutive, and also strong momentum in card, which in theory could be NIM accretive, especially once the accounts mature.

Speaker #6: versus the cyclical factors. So first, what are you So first, what are you expecting for the cost in the expecting for the cost and the second half of the second half of the year?

Speaker #6: year? Is there a rate hike priced in? Is there a rate hike priced in? I think you removed the cuts but Mike I just want I think you removed the cut, but Mike, I just want to make sure what you to make sure what you were I understood what you were were I understood what you were assuming for the short end.

Speaker #6: So as we think of all of those factors, how should we think about whether or not we should expect more secular pressure on the NIM beyond the macro factors with rates and deposit costs in the second half of the year?

Speaker #6: assuming for the short end. So So what do you what do you expect from the cost standpoint from here? In additionally, you here? In additionally, you have two strategies that are sort of a have two strategies that are sort of a competing factors on the NIM.

Speaker #6: competing factors on the NIM. One One is this great is this great growth in markets which is obviously growth in markets, which is obviously NIM salutable, and also NIM saluted and also strong momentum in card which in theory could be NIM accretive especially once the talents mature.

Speaker #4: Yeah. Okay. There's a lot in there, so I'll try to get it. And if I miss a piece, please point me in the right direction.

Speaker #4: So I think when you look at what's happening across NIM, obviously, what we've got baked into the second half of the year is the market's pricing in a little over 1 increase at this point.

Speaker #6: So as we think of all of those factors how should we think about whether or not we should expect more secular pressure on the NIM beyond the macro factors with rates and deposit cost in the second half of the be NIM accretive, especially once the talents mature.

Speaker #4: And so I think we'll see how that actually plays out. But that'll have very little impact on the full-year results, just given the timing of it, depending on when that happens.

Speaker #4: And so I think that's not a huge driver one way or the other. I think what's happening in our deposit book, though, is that we're seeing the pace of interest-bearing deposits grow.

Speaker #4: Yeah, okay. There's a Yeah, okay. There's a lot in there so I'll try to get lot in there. So I'll try to get it.

Speaker #4: it. I missed a piece. I disagree. Please point me in the right direction. Please point me in the right direction. So I think when you look So I think when you look at what's happening at what's happening across NIM obviously what we've got baked across NIM, obviously what we've got baked into the second half of the year into the second half of the year is the market's pricing in a little is the market's pricing in a little over over 1 increase at this 1 increase at this point.

Speaker #4: At a really good clip. And you can see that in the results quarter after quarter. And I think even if you just look at the CIB and the Corporate Investment Bank and the Commercial Bank deposits, where you've seen really good deposit growth year on year, and sequentially, and the majority of those deposits are going to be interest-bearing deposits.

Speaker #4: And so I think we'll see how that And so I think we'll see how that actually plays out. But that'll have very little actually plays out.

Speaker #4: But that'll have very little impact on the full year results just impact on the full-year results just given the timing of it, given the timing of it depending on when that depending on when that happens.

Speaker #4: And so since they're growing faster, and you're seeing slower growth in the consumer side, and pretty stable non-interest-bearing deposits, you're going to see the deposit cost inch up a little bit.

Speaker #4: And so I think that's not a huge And so I think that's not a huge driver one way or the other. I think driver one way or the other.

Speaker #4: I think what's happening in what's happening in our deposit book, though, is that our deposit book though is we're seeing a pace that we're seeing a pace of interest bearing of interest bearing deposit grow.

Speaker #4: At a At a really good clip. And you can see that in the really good clip. And you can see that in the results quarter after results quarter after quarter after quarter.

Speaker #4: And that's actually fine. And expected. And frankly, not a bad thing because we're growing sort of these profitable balances across the businesses. So I would expect the deposit cost to just move up a little bit as you go in the second half of the year, but ultimately, I think that's actually a good thing from a profitability point of view.

Speaker #4: quarter after quarter. And I think even if you just And I think even if you just look at the CIB and look at the CIB and the corporate investment bank and the commercial bank the corporate investment bank and the commercial bank deposits where you've seen really deposits where you've seen really good deposit growth year on good deposit growth year on year, and sequentially, year and sequentially and the majority of those deposits and the majority of those deposits are going to be interest bearing are going to be interest bearing deposits.

Speaker #4: deposits. And so since they're growing And so since they're growing faster and you're seeing slower faster, and you're seeing slower growth in the consumer growth in the consumer side and pretty stable side, and pretty stable non-interest bearing deposits, you're going to non-interest bearing deposits you're going to see the deposit see the deposit cost inch up a little cost inch up a little bit.

Speaker #4: And supports sort of the broader set of business that we do with those customers. And then as I sort of mentioned in the commentary, we expect a little bit more NIM compression in the third quarter, and things then it starts to stabilize, and you get the benefit of all of the other impacts of that we sort of talked about in terms of the earning asset growth, the repricing that's happening across a large portion of the book, of the securities book.

Speaker #4: bit. And that's actually fine and And that's actually fine and expected and frankly expected. And frankly, not not a bad thing because we're growing sort a bad thing because we're growing sort of these profitable of these profitable balances balances across the businesses.

Speaker #4: across the businesses. So I would expect the So I would expect the deposit cost to just move up a little bit as you deposit cost to just move up a little bit as you go in the second half of the go in the second half of the year, but ultimately, I think that's year but ultimately I think that's actually a good thing from a profitability actually a good thing from a profitability point of view and supports sort of point of view and supports sort of the broader set of business that we the broader set of business that we do with do with those customers.

Speaker #4: And so all of that, I think, contributes quite well. And I think just keep in mind, as we sort of look at NII, what we're most focused on here is really growing NII over a long period of time, that will generate really profitable business and relationships that I think we'll see benefit us for many years to come.

Speaker #4: And then as And then as I sort of mentioned in the I sort of mentioned in the commentary we expect a little bit commentary, we expect a little bit more NIM compression in the more NIM compression in the third quarter and things then it starts third quarter and things then it starts to stabilize and you get the benefit of all of to stabilize and you get the benefit of all of the other impacts the other impacts of that we've sort of talked about in terms of that we've sort of talked about in terms of the earning asset growth, the repricing of the earning asset growth, the repricing that's happening across a that's happening across a large portion large portion of the book of the securities book.

Speaker #4: And you may see a little bit of volatility in the NIM number that you've seen over the last few quarters, and that's to be expected just given where we came from last year with the asset cap coming off, and the pace of growth that you've seen since then.

Speaker #4: And And so and all of that I think so in all of that, I think contributes quite well. contributes quite well. And I think just keep in mind And I think just keep in mind as we sort of look at as we sort of look at NII what we're NII, what we're most focused on here is really most focused on here is really growing NII over a long period of growing NII over a long period of time that will generate time that will generate really profitable business and really profitable business and relationships that I think we'll see relationships that I think we'll see benefit us for benefit us for many years to come.

Speaker #5: Let me just add, Erica, this is Charlie, if I can, just a couple of things. Number one is, I think the way we think about this is I kind of separate out our balance sheet and what you're seeing into a couple of different components.

Speaker #5: One is just kind of the business that we have which generates the majority of NII. That is very stable. And then we have these businesses that we're looking to grow.

Speaker #4: many years to come. And you may see a little And you may see a little bit of volatility in the NIM number that you've bit of volatility in the NIM number that you've seen over the last few seen over the last few quarters and that's to be expected just quarters.

Speaker #4: And that's to be expected just given where we came from last year with the given where we came from last year with the asset cap coming off and the pace of growth that asset cap coming off and the pace of growth that you've seen since you've seen since then.

Speaker #5: Both in the markets business, but also ultimately expanding relationships and treasury management on the consumer side. And there, as we talked about, you're seeing growth in interest-bearing liabilities.

Speaker #5: Let me just add, Erica, just as early Let me just add Erica this is Charlie if I can a couple of if I can, just a couple of things.

Speaker #4: then.

Speaker #5: things. Number one is, I think the think the way we think way we think about this is kind of separate about this is kind of separate out our balance sheet and out a balance sheet and what you're saying is a couple of different components.

Speaker #5: And so it's those additional businesses that have narrower margin NIM, that is, that's bringing down the NIM, but we're looking at it in terms of what it means in the shorter term for profit growth and for returns.

Speaker #5: what you're saying into a couple of different components. One One is just kind of the business is just kind of the business that we have with Generate that we have with Generate and the majority of the majority of NII. NII.

Speaker #5: That That is very is very stable. And then we have these stable. And then we have these businesses that we're looking businesses that we're looking to grow.

Speaker #5: That That is very is very stable. And then we have these stable. And then we have these businesses that we're looking businesses that we're looking to grow. to grow both in the markets Both in the markets business, but also business but also ultimately expanding ultimately expanding relationships and treasury management and the consumer relationships and treasury management and the consumer side.

Speaker #5: And we feel good about that. At this point, but more importantly, over time, that should also help us grow NIM as we attract more non-interest-bearing over a period of time.

Speaker #5: side. And there as we And there, as we talked talked about you're seeing growth in about, you're seeing growth in interest bearing liability. interest bearing liabilities.

Speaker #5: And away from NIM, we generate stronger trading revenues. And so that is the flywheel effect of that financing that we're providing. And as I've said, if we don't see that, then we can certainly pull back on some of that activity and improve the NIM, but as I said in our prepared remarks, we are seeing the payoff certainly on the market side at this point, even though it's early.

Speaker #5: And And so those additional businesses that have businesses that have narrower margins, narrower margins NIM that's bringing NIM that's bringing down the NIM, but we're down the NIM but we're looking at it in terms of what it looking at it in terms of what it means in the shorter term means in the shorter term for profit growth and for profit growth and for returns.

Speaker #5: And it feels And we'll feel good about that. At this good about that. At this point, but more importantly, over point. But more importantly over time that should also time, that should also help us help us grow NIM as we attract more grow NIM as we attract more non-interest bearing over a period non-interest bearing over a period of time.

Speaker #5: But that's a decision point that we have to make, and we'll be very conscious of what the impact is both on NIM, but also on this balance between what you see in terms of NIM profit growth, but returns.

Speaker #5: of time. And away And away from NIM, we generate stronger from NIM we generate stronger trading revenues. trading revenues. And so And so that is the flywheel effect of that that is the flywheel effect of that financing that we're providing.

Speaker #6: Yeah. Carry a lot and clear, Charlie. I think that's why I wanted to frame it in terms of structural and growth. And to that end, the second question is just the opportunity set.

Speaker #5: financing that we're providing. And as I said if we don't see And as I said, if we don't see that, then we can that then we can certainly pull back on some of that certainly pull back on some of that activity and improve the activity and improve the NIM, but as I said, in our NIM but as I said in our prepared remarks we are seeing prepared remarks, we are seeing the payoff certainly on the market side at this the payoff certainly on the market side at this point even though it's early.

Speaker #6: In your areas where you're focusing growth, so maybe talk a little bit about the investment banking pipeline, but also in terms of the equities opportunity?

Speaker #5: But But that's a decision point that we have that's a decision point that we have to make and we'll be very conscious to make and we'll be very conscious of what the impact is both on of what the impact is both on NIM but also on this balance NIM, but also on this balance between what you see in terms of between what you see in terms of NIM profit growth but NIM profit growth, but returns.

Speaker #6: So we're hearing that a lot of your peers are a little bit more limited in terms of prime equities financing capacity, given the hyperscaler trade in Asia.

Speaker #6: Of course, you're not quite big globally yet. And you did mention it in your prepared remarks in terms of financing-related activity. Maybe describe a little bit more the prime financing opportunity that lies ahead, especially if the sort of traditional counterparties have more limited capacity because of activities outside of the US.

Speaker #6: Yeah. Charlie I think that's why I Yeah. I think that's why I was afraid in terms of was afraid you might interrupt it. structural and Structural in growth and to that end the growth.

Speaker #6: And to that end, the question is just opportunity set question is just the opportunity set in in your areas where your areas for your focus on you're focusing growth.

Speaker #6: growth. So maybe talk a little bit about the So maybe talk a little bit about investment pipeline the investment pipeline but also in terms of the equities also in terms of the equities opportunity so we're opportunity to we're hearing that a lot of your hearing that a lot of fears are more limited in peers are more limited in terms of time equities terms of time equities financing capacity given the hyper fuel or financing capacity given the hyperfuel or trade in Asia.

Speaker #4: Yeah. It's like Erica, I'll start, and start on both parts of it. So on the investment banking pipeline, the pipeline is quite strong. And I think we see that now very consistently for a while now.

Speaker #6: Of course Of course, you're not quite big globally you're not quite big globally yet, and you did mention it in your yet and you did mention it in your prepared remarks in terms of financing related prepared remarks in terms of financing-related activity.

Speaker #4: And I think the environment is very supportive of deals, of the markets are wide open, both on the equity side and sort of the debt side.

Speaker #6: activity. Maybe describe a little bit more the prime Maybe describe a little bit more the prime financing opportunity that lies financing opportunity that lies ahead especially ahead especially if the sort of if the sort of traditional counterparties traditional counterparties have more limited capacity because have more limited capacity because of activities outside of of activities outside of the the US.

Speaker #4: And I think the art of the possible on the M&A in the M&A space is quite alive, right? And I think there's a lot of active dialogue there.

Speaker #4: And I think you can see our investment banking business had a really good quarter. And I think that all the investments that we've made over the last three or four years of positioned us to take advantage more than we would have take advantage of this environment more than we would have been able to three, four, five years ago by a lot.

Speaker #6: US.

Speaker #4: Yeah that's why Erica I'll start Yeah. It's like Erica, I'll start and start on both and start on both parts of this. parts of this.

Speaker #4: I mean that's the banking pipeline the pipeline, the pipeline is quite strong. And I think pipeline is quite strong. And I we see that very think we see that very consistently for a while consistently for a while now.

Speaker #4: now. And I think the And I think the environment is very supportive environment is very supportive of appeals of the of appeals of the markets are wide open on the equity markets are wide open on the equity side and the debt side and the debt side.

Speaker #4: And I think we're continuing to make more investments in targeted areas across different coverage sectors and in some of the product areas. And so we feel good about the trajectory there.

Speaker #4: side. And I think the art of the possible on And I think the art of the possible on the M&A in the the M&A in the M&A space is M&A space is quite alive.

Speaker #4: quite alive. And I think there's a lot of I mean I think there's a lot of active dialogue there. active dialogue there and I think you can And I think you can see our investment banking see our investment banking business had a really good business had a really good quarter.

Speaker #4: And we'll see how it progresses.

Speaker #5: And just on the broader question, I would just say, listen, I think what we've said in the past still holds true, which is that there's a lot of great competition out there.

Speaker #4: And I think that all And I think that all the investments that we've made over the last three the investments that we've made over the last three or four years have positioned us to take or four years have positioned us to take advantage more than we would have take advantage more than we would have take advantage of this environment more than we would have been advantage of this environment more than we would have been able to three, four, five able to three, four, five years ago by a lot.

Speaker #5: There are people that are very, very large in some of these businesses, including prime. But what we have found is that people want they want more options.

Speaker #4: And I And I think we're continuing to think we're continuing to make more investments make more investments in targeted areas across different in targeted areas across different coverage sectors and in some of the product areas.

Speaker #5: They want more counterparties. We have relationships with the broad set of these customers, and they generally like doing business with us. And so they want to do more.

Speaker #4: coverage sectors and in some of the product areas which we feel good about the trajectory And so we feel good about the trajectory there.

Speaker #4: coverage sectors and in some of the product areas which we feel good about the trajectory And so we feel good about the trajectory there. there.

Speaker #5: And so for us, it's a question of just pacing that addition in terms of the amount of business that we do properly. We're still very, very early in terms of growing out our prime business.

Speaker #4: And we'll see how it And we'll see how it progresses. progresses.

Speaker #5: And just on the And just on the broader question I would just say I think broader question, I would just say, I think it's what we said in the past still it's what we said in the past still holds true which is holds true, which is that there's a lot of great competition out that there's a lot of great competition out there.

Speaker #5: So there's nothing really material in this current quarter relative to that. But it is an opportunity that we're going to be careful about. But that, along with other trading flow opportunities that we have and the investment banking opportunities that we've talked about, we still think are incredibly significant for us.

Speaker #5: There are people that are very, very large in some of There are people that are very, very large in some of these businesses, including these businesses including prime.

Speaker #5: prime. But what we've found But what we have found is that people is that people want they want they want more options. They want more want more options they want more counterparties.

Speaker #5: We have relationships with a broad set of these customers, and they set of these customers and they generally like doing business with us and so they want to generally like doing business with us.

Speaker #5: And so they want to do more. And so for us the do more. And so for us, the question of just pacing that pacing that addition in terms of the amount of business that we do addition in terms of the amount of business that we do properly.

Speaker #6: Thank you.

Speaker #5: Okay.

Speaker #2: The next question. We'll come from Ibrahim Punoala of Bank of America. Your line is open.

Speaker #5: properly. There's still very, very There's still very, very early in terms of growing out our early in terms of growing out our prime business.

Speaker #5: prime business. So there's nothing So there's nothing really material in this current really material in this current quarter relative to that. quarter relative to that.

Speaker #7: Hey. Good morning. So what to beat a dead horse on the margin? And the stock obviously sold off when you started talking about your margin outlook.

Speaker #5: But it is an opportunity that we're going to be careful opportunity that we're going to be careful about. But about. But that along that, along with other trading flow opportunities that with other trading flow opportunities that we have and the investment banking we have and the investment banking opportunities that we've talked about, we still opportunities that we've talked about we still think are incredibly significant for think are incredibly significant for us.

Speaker #7: Understand you're not running the bank on one-day stock reaction. But maybe I think just a bigger picture question. If we take a step back and appreciate Mike, your comments are on the trajectory of the NII, which I think is more important than what the NIM does.

Speaker #5: us.

Speaker #6: you.

Speaker #6: Thank Thank you.

Speaker #5: Okay.

Speaker #3: The next question. We'll come from The next question. We'll come from Abraham for a Abraham. Bank of America. while. Bank of America. Your line is Your line is open.

Speaker #5: Okay.

Speaker #7: Any given quarter, but as we look forward beyond even this year, do you think the net interest margin, given your balance sheet, and the business strategy on going forward, is at a point where the margin should begin to stabilize post that 3Q compression you talked about?

Speaker #3: open.

Speaker #7: Good Good morning. morning. So what do So what do B2 debt B2D work on the margin? And the stock margin and I the stock obviously pulled off and you started talking about your margin obviously pulled off when you started talking about your margin outcome.

Speaker #7: Understanding running the bank Understand running the bank one day's reaction. But maybe one day's reaction. But maybe I think just a bigger picture question.

Speaker #7: Understanding running the bank Understand running the bank one day's reaction. But maybe one day's reaction. But maybe I think just a bigger picture question. I think just a bigger picture question.

Speaker #7: And one of the pushbacks this morning has been the market's revenue growth predominantly NII driven. So I guess the street is struggling to see the cross-sell of deploying that market's balance sheet into lower NIM, and then that translating into better fee growth on the market side.

Speaker #7: If we take If we take a step back a step back and appreciate Mike's comments around the and appreciate Mike's comments around the trajectory of the NII and taking this more trajectory of the NII and tracking is more important than what the NIM does.

Speaker #7: important than what the NIM does. Any given Any given quarter, but as we look quarter but as we look forward beyond even this forward beyond even this year do you year, do you think the net think the net interest margin given your balance interest margin given your balance sheet and the business sheet and the business strategy on the going strategy on the going forward is at a point where the forward is at a point where the margins could begin to stabilize margin should begin to stabilize for that three Q compression you post that three Q compression you talked about?

Speaker #7: So maybe help us understand that from a market standpoint, and then how should we think about just normalized NIM for your balance sheet or business strategy?

Speaker #5: Sure. I think on the NIM side, as I said earlier on the call, we do expect it to stabilize after you get through the third quarter.

Speaker #7: And one of the pushbacks this morning again And one of the pushbacks this morning again, like the next market revenue like the next market revenue growth predominantly growth, predominantly NII driven, so I NII driven so I guess the street of study cross guess the street of cross-sell of deploying that market balance sell deploying that market balance sheet into lower low and then sheet into lower low and then that transfer instead of on the that transfer instead of on the market side.

Speaker #5: And so that's definitely the case. And as Charlie mentioned, there's over a slightly longer time period, there's opportunity to expand the NIM, not just stabilize.

Speaker #7: market side. Maybe help Maybe help us understand that our market us understand that our market standpoint and then how should we think standpoint and then how should we think about this normalized about this normalized NIM for your balance sheet for business NIM for your balance sheet for business strategy.

Speaker #5: And so I think that's certainly what we expect as we sort of look at the rest of the year. I think when you start looking at the overall trading business there, you certainly see some growth in NII, but it's not all because of the rate move that we saw.

Speaker #4: Sure. I think on the Sure. I think on the NIM NIM side, as I said earlier on the call, we do side as I said earlier on the call we do expect it to stabilize after you get expect it to stabilize after you get through the third quarter.

Speaker #5: You get paid in some of these trading businesses through NII. You think mortgages, mortgage trading, and other areas of that business. And so you do really need to look at overall sort of revenue in the markets business.

Speaker #4: And so that's And so that's definitely the case. And as definitely the case. And as Charlie mentioned, there's over a Charlie mentioned there's over a slightly longer time period like there's opportunity slightly longer time period, there's opportunity to expand the NIM to expand the NIM, not just stabilize.

Speaker #4: not just stabilize. And so I think And so I think that's certainly what we expect as that's certainly what we expect as we sort of look at the rest of the we sort of look at the rest of the year.

Speaker #5: And when you look at the financing and I'll break it down a little bit for you. You look at the financing side of the business, that's up.

Speaker #4: year. I think when you I think when you start looking at the overall start looking at the overall trading business trading business there, you certainly see some growth there you certainly see some growth in NII, but it's not all because in NII but it's not all because of the rate move that we saw.

Speaker #5: That's up a it's not quite a double, but it's pretty close when you sort of look at the year-on-year performance and the overall financing revenue within the business.

Speaker #4: of the rate move that we saw. You get paid in some of You get paid in some of these trading businesses these trading businesses through NII.

Speaker #4: of the rate move that we saw. You get paid in some of You get paid in some of these trading businesses these trading businesses through NII. through NII.

Speaker #5: And then you saw roughly a 20-plus percent increase in sort of the trading-related revenue off the back of that. And so I think we've seen quite a bit of quite a bit of growth across these parts of the business within trading.

Speaker #4: You think You think mortgages mortgage trading mortgages, mortgage trading, and other areas of that and other areas of that business. And so you do really need to look at business.

Speaker #4: And so you do really need to look at overall sort of overall sort of revenue in the markets business. revenue in the markets business.

Speaker #4: And when you look at the look at the financing and I'll break it down a little bit for you. financing and I'll break it down a little bit for you.

Speaker #4: You look at the financing side of the You look at the financing side of the business that's business, that's up up that's up a it's not quite a a it's not quite a double but it's pretty close when you sort of look double, but it's pretty close when you sort of look at the year-on-year performance and the at the year-on-year performance and the overall financing revenue within the overall financing revenue within the business.

Speaker #5: And then more importantly, when you start looking at the individual clients, where deploying some of this incremental financing balance sheet to every single one of them, all but a couple, have done significantly more business with us than they did just a year ago.

Speaker #4: business. And then you And then you saw roughly a saw roughly a 20 plus percent increase in sort of 20-plus percent increase in sort of the trading-related the trading related revenue off the back of that.

Speaker #5: And that's just getting started in terms of ramping up some of the volumes. And so I think you'll continue to see that across the markets business, I think, for into the coming quarters.

Speaker #4: revenue off the back of that. And so I think we've And so I think we've seen quite a bit seen quite a bit of quite a bit of of quite a bit of growth across growth across these parts of the these parts of the business within trading.

Speaker #5: But we feel really good about what we're seeing and the trend that we're seeing there. Let me just add one thing slightly different words, but kind of reinforcing a point that I made earlier, which is what we're seeing in NIM is not happening to us.

Speaker #4: business within trading. And then more importantly when you start looking at And then more importantly, when you start looking at the individual clients the individual clients where deploying some of this incremental financing balance sheet incremental financing balance sheet to every single one of to, every single one of them, all but a them all but a couple have done significantly more couple, have done significantly more business with us than they did just a year business with us than they did just a year ago.

Speaker #5: What we're seeing in NIM is because things that we're doing and those are things that we don't have to continue to do, or we can unwind at some point as well.

Speaker #4: And that's just getting And that's just getting started in terms of ramping up some of the started in terms of ramping up some of the volumes and so I think volumes and so I think you'll continue to see you'll continue to see that across the markets business I think that across the markets business, I think, for into the for into the coming quarters.

Speaker #5: And again, the reason why we're doing it is because we believe that it'll lead to stronger NIM in some of these businesses in the future by attracting more non-interest-bearing deposits, or by attracting additional trading.

Speaker #4: coming quarters. But we feel really good about But we feel really good what we're seeing and the trend that we're seeing about what we're seeing and the trend that we're seeing there.

Speaker #4: there.

Speaker #5: And let me just add one And let me just add one thing slightly different words, but kind thing slightly different words but kind of reinforcing the point that I made of reinforcing a point that I made earlier, which is what earlier.

Speaker #5: And that's either going to drive the kind of profit growth and higher returns that we believe we can deliver, or that's a decision point that we can make.

Speaker #5: Which is what we're seeing in NIM is we're seeing in NIM is not happening to us. not happening to us. What we're seeing in NIM is because things What we're seeing in NIM is because things that we're doing and those are things that we're doing.

Speaker #5: And so we understand that it's hard to see that as clearly from the outside. So we've got to do a good job of doing our best to show you how that's actually playing itself out.

Speaker #5: And those are things that we don't have to continue to that we don't have to continue to do or we can unwind at some do or we can unwind at some point as well.

Speaker #5: And again, the point as well. And again the reason why we're doing it is because reason why we're doing it is because we believe that it'll lead we believe that it'll lead to stronger NIM in some of these to stronger NIM in some of these businesses in the future by businesses in the future by attracting more non-interest-bearing attracting more non-interest-bearing deposits.

Speaker #5: But as Mike said, when it comes to the financing as an example, we look client by client, and we're providing more financing; we're getting more share, higher trading revenues.

Speaker #5: deposits. Or by attracting Or by attracting additional trading. additional trading. And And that's either going to drive the kind that's either going to drive the kind of profit growth and higher of profit growth and higher returns that we believe we can returns that we believe we can deliver or that's a decision deliver, or that's a decision point that we can make.

Speaker #5: And so that's when I said on the last call, we're either going to get paid for it or we're not going to do it.

Speaker #5: And that very much holds true. And so the fact that that is in our control is something I think that's critically important. And is a tool for us to help grow the returns and the profit of the company, or we can either slow things down or reverse course if we had to, but nothing suggests that we should do that because we believe that we're getting the payoff for it.

Speaker #5: point that we can make. And so we understand And so we understand that it's hard that it's hard to see that as clearly from the outside.

Speaker #5: point that we can make. And so we understand And so we understand that it's hard that it's hard to see that as clearly from the outside. to see that as clearly from the outside.

Speaker #5: So we've got to do a good So we've got to do a good job of doing our best to show you job of doing our best to show you how that's actually playing itself how that's actually playing itself out.

Speaker #5: out. But as Mike said, when it But as Mike said when it comes to the financing as an example we comes to the financing as an example, we look client by client and we're providing look client by client and we're providing more financing.

Speaker #5: And we'll have to show that to you.

Speaker #7: So I think that's a great point, Charlie. That the NIM is due to the deliberate actions you're taking. And I think the one point of discussion that's come up repeatedly with investors over the last month or two is no one doubts when they think about can wells achieve a higher end of your 17 to 18.

Speaker #5: We're getting We're getting more more share higher trading share, higher trading revenues. And so that's when I said on the revenues. And so that's when I said on the last call, we're either going to get paid for it or we're not last call we're either going to get paid for it or we're not going to do it.

Speaker #5: going to do it. And that very And that very much holds true. And so much holds true. And so the fact that that is in our the fact that that is in our control is something I control is something I think that's critically important.

Speaker #7: So let's call it 18% Roth 3 over the next few years. I think as the street is trying to digest what the execution around this growth strategy may imply, I think the timing of that has become a bit more uncertain, I would say, over the last six months.

Speaker #5: And is a tool for us to help grow And is a tool for us to help grow the returns and the profit of the the returns and the profit of the company or we can either company or we can either slow things down or reverse course if slow things down or reverse course if we we had to.

Speaker #5: had to, but nothing suggests that we should do But nothing suggests that we should do that because we believe that that because we believe that we're getting the payoff for it.

Speaker #5: we're getting the payoff for it. And we'll have to show And we'll have to show that to you. that to you.

Speaker #7: And so to the extent you can address that, just through your crystal ball, how do you think about when you could achieve that target, maybe towards that 18%, which also if I recall, you've talked about as a waypoint, and we could go even higher than 18%.

Speaker #7: So I So I think that's a great point Charlie. think that's a great point, Charlie. That the NIM is due to the That the NIM is due to the deliberate actions you're taking.

Speaker #7: deliberate actions you're taking. And I And I think the one point think the one point of discussion that's come up repeatedly with of discussion that's come up repeatedly with investors over the last month or two investors over the last month or two is no one doubts when they think is no one doubts when they think about higher end of about higher end of 17 to 17 to 18, so let's call it 18% gross revenue over the next few years.

Speaker #7: Maybe if you can provide some color around the timing of how you think about it, I think that would be very helpful to your shareholders.

Speaker #7: I think as the street is trying think as the street is trying to digest what the to digest what the execution around this growth strategy execution around this growth strategy may imply, I think the timing of may imply I think the timing of that has become a bit more that has become a bit more uncertain, I would say, over the last six months.

Speaker #7: Thank you.

Speaker #5: Sure. Sure. And listen, I know it's a very busy day, and you guys are trying to juggle lots of different companies. I did talk a little bit about this in my prepared remarks where I talked about the fact that I know that people ask about timing.

Speaker #7: uncertain I would say over the last six months. And And so to the extent you can address so to the extent you can address that, just through your crystal that just through your crystal ball how do you think about when you ball, how do you think about when you could achieve that target towards could achieve that target towards that 18%, that 18% which if I recall, you talked about as a which if I recall you talked about as a way to.

Speaker #5: It's difficult to answer because what I don't want to do what we don't want to do as a company is give you a definitive date, and then have the interest rate environment change, the markets environment change, credit change, and then you believe that we haven't actually delivered on something.

Speaker #7: way to. And we could go even higher And we could go even higher than 18%. Maybe if you can provide than 18%. Maybe if we can provide some color around some color around the timing of how you think about it, I think that would the timing of how you think about it I think that would be very helpful.

Speaker #5: Because the fact is we are subject to those things. But assuming that the markets continue to behave and that conditions continue to be favorable, what I said is that we would expect it to achieve in a reasonable time frame.

Speaker #7: Thank Thank you.

Speaker #5: Sure.

Speaker #5: Sure. Sure.

Speaker #6: As a As a reminder. Very busy day and you guys are trying to reminder, very busy day and you guys try to tell them lots of different tell them lots of different companies.

Speaker #6: As a As a reminder. Very busy day and you guys are trying to reminder, very busy day and you guys try to tell them lots of different tell them lots of different companies. companies.

Speaker #6: I did talk a little bit I did talk a little bit about my prepared remarks where I talked about my prepared remarks where I talked about the fact that I know that people ask about about the fact that I know that people ask about timing.

Speaker #5: And then what I think I would say, which is as time goes on and from last quarter's underlying performance in our business trends in this quarters, we feel even more confident about being able to deliver it.

Speaker #6: timing. It's difficult to It's difficult to answer because what I don't want to answer because what I don't want to do what we don't want to do as a company do, what we don't want to do as a company is give you a definitive date and then is give you a definitive date and then have the interest rate environment have the interest rate environment change, the markets environment change, credit change.

Speaker #5: And what I said in my prepared remarks is that our intention is to get there, and then raise the bar higher for the future.

Speaker #6: The markets environment change. Credit change. And then you believe that change, and then you believe that we haven't actually delivered on we haven't actually delivered on something.

Speaker #6: The markets environment change. Credit change. And then you believe that change, and then you believe that we haven't actually delivered on we haven't actually delivered on something. something.

Speaker #5: So if we didn't have the kind of confidence that we can get there in a reasonable period of time, we wouldn't be saying that.

Speaker #6: Because the fact is we are Because the fact is we are subject to those things. But assuming subject to those things. But assuming that the that the markets continue to behave in markets continue to behave in that condition continue to be that condition, continue to be favorable what I said is favorable, what I said is that we would expect it to that we would expect it to achieve in a reasonable time frame.

Speaker #5: And again, what gives us that confidence is looking at the underlying business drivers that we tried to lay out in the first two pages of the presentation, because it's those things which are going to drive the continued growth of the franchise, regardless to some extent of outsized performance in the markets.

Speaker #6: achieve in a reasonable time frame. And the And the one other thing I would say, which is as one other thing I would say which is as time goes on and from last time goes on and from last quarter's underlying performance in our quarter's underlying performance, our business trends in this quarter, we can even business trends in this quarter we should be even more confident about being able to more confident about being able to deliver.

Speaker #6: And what I said in my prepared And what I said in my prepared remarks is that our intention is to get there and remarks is that our intention is to get there and then raise the bar higher for the future.

Speaker #5: So I know it's not giving you a definitive time frame, but what I want I think what's important to read is our confidence is higher, not lower, as each quarter goes by.

Speaker #6: then raise the bar higher for the future. So if we didn't have the kind of confidence that So if we didn't have the kind of confidence that we can get there at a reasonable period of we can get there at a reasonable period of time we wouldn't be saying time, we wouldn't be saying that.

Speaker #6: And again, what gives us that And again what gives us that confidence is confidence is looking at the underlying looking at the underlying business drivers that we tried to lay out business drivers that we tried to lay out in the first two pages of the in the first two pages of the presentation because those things which are going to presentation.

Speaker #7: Appreciate you going through it again. Thank you.

Speaker #2: The next question will come from Anand Gosalya of Morgan Stanley. Your line is open.

Speaker #6: Because if those things which are going to drive the continued drive the continued growth of the growth of the franchise regardless to some franchise regardless to some extent of outsized extent of outsized performance in the markets.

Speaker #6: Hi. Good morning. I wanted to dig in a little bit on loan growth. Clearly, very strong this quarter. You noted upside to the original loan growth guide for the full year.

Speaker #6: So I know it's not giving you a So I know it's not giving you a definitive time frame. but what I want I think But what I want I think what's important to read is our confidence what's important to read is our confidence is higher, not lower, as each quarter goes is higher not lower as each quarter goes by.

Speaker #6: Can you just walk us through some of the drivers on what you're seeing now? How much of the commercial loan growth reflects high utilization versus new customer activity?

Speaker #7: I appreciate Appreciate you going through it again. Thank you going through it again. Thank you. you.

Speaker #6: And I guess your willingness and ability to lead more on the auto side going forward.

Speaker #2: The next question will come The next question will come from Fernando Salia of

Speaker #1: from Fernando Salia of

Speaker #2: Your line is

Speaker #5: Sure. I'll start maybe on the consumer side, and then I'll bring it back on the commercial side. So on the consumer side, we continue to see really good growth in auto.

Speaker #1: Morgan Stanley. Your line is Morgan Stanley.

Speaker #1: open.

Speaker #8: Hi. Good open. Hi, good morning. I morning. I wanted to dig in a little bit on wanted to dig in a little bit on loan growth.

Speaker #8: Hi. Good open. Hi, good morning. I morning. I wanted to dig in a little bit on wanted to dig in a little bit on loan growth. loan growth.

Speaker #8: Clearly very Clearly, very strong this morning in order to upside to strong this quarter. You noted upside to the original loan growth the original loan growth tracking for Can you just walk us price for the year.

Speaker #5: We see steady growth in card. And the home lending business is kind of pretty stable at this point. And I think those trends, like we would expect to continue as you sort of look at the rest of the rest of the year.

Speaker #8: Can you just walk us through some of the drivers on what you're through some of the drivers on what you're seeing now? How much of seeing now?

Speaker #8: How much of the commercial loan growth reflects how the commercial loan growth reflects how utilization versus new utilization versus new customer customer activity? activity?

Speaker #5: And so steady as you go in terms of what we've been seeing quarter to quarter there. I think on the commercial loan side, it's really not utilization.

Speaker #8: And I guess your willingness and ability guess your willingness and ability to lead more on the auto to lead more on the auto side going side going forward.

Speaker #8: And I guess your willingness and ability guess your willingness and ability to lead more on the auto to lead more on the auto side going side going forward. forward.

Speaker #5: Sure. Sure. I'll start maybe on the consumer I'll start maybe on the consumer side. I'll bring it back on the commercial side. So on side.

Speaker #5: We see a little bit in pockets of slightly more utilization here or there, but it's really not substantially higher utilization of revolvers. It is new business we've been bringing on that drives a lot of it in the CNI space.

Speaker #5: I'll bring it back on the commercial side. So on the consumer side we the consumer side, we continue to see really good growth in continue to see really good growth in auto.

Speaker #5: auto. We see steady We see steady growth in cars. And the home growth in cars and the home lending business has been stable at this lending business pretty stable at this point.

Speaker #5: point. And I And I think those trends like we would expect think those trends, like we would expect to continue as you sort of look at the rest to continue as you sort of look at the rest of the rest of the of the rest of the year.

Speaker #5: And I think we'll see how the rest of the year progresses. As I mentioned in the script, we know we certainly have seen higher loan growth than what we had assumed in the beginning of the year.

Speaker #5: And so steady as you go in terms of And so steady as you go in terms of what we've been seeing quarter to quarter what we've been seeing quarter to quarter there.

Speaker #5: And that's a positive. We'll have to see how the rest of the year goes. I think you definitely see tariff refunds coming through impacting some commercial bank clients.

Speaker #5: there. I think on I think on the commercial loan the commercial loan side it's really not side, it's really not utilization. We see a little bit of utilization.

Speaker #5: We see a little bit of pockets of slightly more pockets of slightly more utilization here or there. But it's really utilization here or there, but it's really not substantially higher utilization not substantially higher utilization of revolvers.

Speaker #5: In terms of the utilization, you see a bunch of other factors there. But I think it's been good so far, and we'll see how it progresses for the rest of the year.

Speaker #5: of revolvers. It is new business we've been It is new business we've been bringing on that drives a lot of it in the bringing on that drives a lot of it in the CNI CNI space.

Speaker #5: of revolvers. It is new business we've been It is new business we've been bringing on that drives a lot of it in the bringing on that drives a lot of it in the CNI CNI space. space.

Speaker #5: And importantly, with that, we're not we're seeing really good performance from a credit perspective across really all the portfolios. And I think that supports continued sort of execution across each of the businesses and growing those portfolios.

Speaker #5: And I think we'll see And I think we'll see how the rest of the year progresses. how the rest of the year progresses. As I mentioned in the script As I mentioned in the script, we certainly have seen we know we certainly have seen higher loan growth than what we had higher loan growth than what we had assumed in the beginning of the year.

Speaker #5: And that's And that's a positive. a positive. We'll have We'll have to see how the rest of the year goes. I think to see how the rest of the year goes.

Speaker #5: I think you definitely see tariff refunds coming you definitely see tariff refunds coming through impacting some commercial bank through impacting some commercial bank clients.

Speaker #6: Got it. Thank you. And then maybe on the capital side, 3 billion of buybacks this quarter, a little bit. Below the recent pace. How should we think about where you want to manage to in your CT1 target range and how should we think about repurchases going forward here?

Speaker #5: clients. In terms of the In terms of the utilization, you see a bunch of other factors there. utilization you see a bunch of other factors there.

Speaker #5: But I think it's been good But I think it's been good so far and we'll see how it progresses so far. And we'll see how it progresses for the rest of for the rest of the year.

Speaker #5: But I think it's been good But I think it's been good so far and we'll see how it progresses so far. And we'll see how it progresses for the rest of for the rest of the year. the year.

Speaker #5: And importantly with that we're not we're And importantly, with that, we're not we're seeing really good performance from a credit seeing really good performance from a credit perspective across really all the perspective across really all the portfolios.

Speaker #5: Sure. I mean, we're really comfortable in the range that we put out there of 10 to 10 and a half, really anywhere in that range.

Speaker #5: And I And I think that think that supports continued sort of supports continued sort of execution across each of the businesses and execution across each of the businesses and growing those growing those portfolios.

Speaker #5: We're comfortable with. And we approach buybacks the same way we do every quarter. We look at what we expect to do from a client perspective and what growth we expect to see across the portfolios and the business.

Speaker #5: portfolios.

Speaker #8: Got it. Thank you. And Got it. Thank you. And then maybe on the capital then maybe on the capital side 3 billion of buybacks in Florida a side, 3 billion of buybacks in Florida a little bit.

Speaker #8: little bit. Below the Below the recent date. recent date. How should we think How should we think about where you want to manage about where you want to manage to in your to in your CE1 target range and how should we CE1 target range and how should we think about retail business think about resources as portfolio?

Speaker #5: We think about all the different risks that are out there, including the rate environment and the volatility that may be there and how that impacts capital.

Speaker #5: And then we'll make decisions on how much we will buy back each quarter. And so we'll sort of keep that progression as we go this quarter, and we'll see where we get to.

Speaker #8: well?

Speaker #5: Sure. I Sure. I mean, we're really comfortable in the range that mean we're really comfortable in the range that we put out there of 10 to 10 and a half, really we put out there of 10 to 10 and a half.

Speaker #5: Really anywhere in that range. We're anywhere in that range. We're comfortable with. comfortable with. And we approach buybacks the same way we do And we approach buybacks the same way we do every quarter.

Speaker #5: But we certainly as we mentioned, we bought back 7 billion in the first half of the year. And I think we still have capacity to buy back more as we go, and we'll make the decision as we go in the quarter.

Speaker #5: every quarter. We look We look at what we expect to do from client at what we expect to do from a client perspective and what growth we expect to perspective and what growth we expect to see across the see across the portfolios and the business.

Speaker #5: And also keep in mind, Mike's talking about this absent the finalization of the capital rules. And as we said on the past, the capital rules might not necessarily change that CET1 minimum plus buffers.

Speaker #5: portfolios and the business. We We think about all the different risks that are out there, think about all the different risks that are out there including the rate including the rate environment and the volatility that may be there environment and the volatility that may be there and how that impacts and how that impacts capital.

Speaker #5: And then And then we'll make decisions on how much we'll make decisions on how much we will buy back each quarter. And so we will buy back each quarter.

Speaker #5: But it could certainly change what goes into the calculation relative to freeing up capital through the RWA calculation for us. Yeah. And just as a reminder, we still expect our RWA to go down as a result of at least what was proposed.

Speaker #5: And so we'll sort of keep we'll sort of keep that progression as we go this quarter and we'll that progression as we go this quarter.

Speaker #5: And we'll see where we get to. see where we get to. But we're But we're certainly as we mentioned we bought certainly as we mentioned, we bought back 7 billion in the back 7 billion in the first half of the year.

Speaker #5: capacity to buy back more as we go and make the And we have the decision as we go in the quarter. decision as we go in the quarter.

Speaker #5: first half of the year. And I think we still have And I think we still have capacity to buy back more as we go.

Speaker #5: By about 7%. So we'll see how it gets finalized.

Speaker #8: And And also keep in mind Mike's talking also keep in mind, Mike's talking about this about this absent finalization of absent finalization of the capital rules.

Speaker #6: Got it. And if I can ask a quick clarification on that. So you would need to see the rules being finalized before you act on that lower CET1 ratio?

Speaker #8: And as we the capital rules. And as we said on the past the capital rules might said on the past, the capital rules might not necessarily not necessarily change that change that CE1 minimum plus CE1 minimum plus buffers.

Speaker #8: buffers. But it could certainly But it could certainly change what goes into the change what goes into the calculation relative to freeing up calculation relative to freeing up capital through the RWA calculation for capital through the RWA calculation for us.

Speaker #6: Or sorry, on the higher capital on the ability for the new capital rules to give you more CET1, you would only act on that in terms of buybacks or capital deployment once the rules are finalized?

Speaker #5: Yeah. And just as a reminder we still expect Yeah. And just as a reminder, we still expect our RWA to go down as a result our RWA to go down as a result of at least what was of at least what was proposed by about 7%.

Speaker #5: Yeah. I think we need to see the rule get finalized. But hopefully, that'll get done pretty quickly.

Speaker #5: So we'll see how it So we'll see how it gets finalized.

Speaker #5: gets finalized. Got

Speaker #6: Got it. Thank you.

Speaker #8: Got it. it. And if I can ask you a quick clarification on And if I can ask you a quick clarification on that. You would need to see the that.

Speaker #8: So you would need to see the rules being finalized rules being finalized before you act on before you act on that that lower CE1 ratio?

Speaker #8: So you would need to see the rules being finalized rules being finalized before you act on before you act on that that lower CE1 ratio? lower CE1 ratio?

Speaker #2: The next question will come from Matt O'Connor of Deutsche Bank. Your line is open.

Speaker #7: Good morning. Just a quick comment before my question here. As your markets business has gotten bigger, I need to give us a piece of that we can probably calculate it, but showing a min X markets, I think it might be helpful.

Speaker #8: Or sorry. Or sorry, on the higher On the higher capital. On the ability for capital. On the ability for the new capital rules to give you the new capital rules to be more CE1, you more CE1 you would only act on that in terms of would only act on that in terms of buybacks or capital deployment buybacks or capital deployment once the rules are once the rules are finalized?

Speaker #7: And cut a handful of these questions. Related to it. My question is, the new credit card accounts, as you pointed out, are up sharply post-listing of the asset cap.

Speaker #8: finalized?

Speaker #5: Yeah. I think we need to see the rules get finalized. But to see the rules get finalized. But hopefully that'll get done pretty hopefully, that'll get done pretty quickly.

Speaker #5: Yeah. I think we need

Speaker #5: quickly.

Speaker #7: I think it's up 50 to 60 percent now in the four quarters. Any way to estimate how much of a drag there is from those new cards and related promotions as we think about the credit card yield?

Speaker #8: you. The next question will come from Matt

Speaker #8: Got it. Thank Got it. Thank you.

Speaker #2: The next question will come from Matt O'Connor of Deutsche Bank. Your line is

Speaker #2: open.

Speaker #1: O'Connor of Deutsche Bank. Your line is open.

Speaker #7: Good morning. Just a quick morning. Just a quick comment before my questions comment before my questions here. As America's business has here. As a market specialist, I've gotten so I'm going to give a gotten bigger I know you give us completive that we can probably calculate it, but conclusive that we can probably calculate it.

Speaker #7: And then when does that inflect as that backbone kind of starts overwhelming the new accounts?

Speaker #7: But setting a min ex-market might be some and then ex-market and then might be helpful. And cut a handful of helpful. Cut a handful of these questions.

Speaker #7: But setting a min ex-market might be some and then ex-market and then might be helpful. And cut a handful of helpful. Cut a handful of these questions. these questions.

Speaker #5: Yeah. So as Charlie sort of mentioned in his script, we've made some intentional decisions to see the growth. Continue to execute on growing those accounts.

Speaker #7: Related to Related to it. My question it. My question is, the new credit card accounts, is the new credit card accounts as you pointed out are up sharply as you pointed out, are up sharply post listing of the asset cap.

Speaker #7: post listing of the asset cap. I think it's like I think it's 50 to 60 percent now like 50 to 60% now. In the four quarters any way to in the four quarters.

Speaker #5: And I think the good part about what we've seen now for the last almost four quarters, I guess, started really in the third quarter of last year, is a lot of that a lot of those new accounts are actually coming through either our branch network or people coming directly to Wells Fargo dot com.

Speaker #7: Any way to estimate how much of the drag there estimate how much of a drag there is from those new cards is from those new cards related to promotions as we think about the related to promotions as we think about the credit card yield?

Speaker #7: And And then when did that then when did that reflect as that backfill kind of started to reflect as that backfill comes in to overwhelming the new overwhelming the new accounts?

Speaker #7: And And then when did that then when did that reflect as that backfill kind of started to reflect as that backfill comes in to overwhelming the new overwhelming the new accounts? accounts?

Speaker #5: And so the acquisition costs there are lower than if you're doing them through third-party affiliates and others. And so that's a really good thing.

Speaker #5: Yeah. Yeah. So it's probably sort of So it's probably sort of mentioned in your script. mentioned in your script. We've made We've made some.

Speaker #5: some. Intentional Intentional decisions decisions to see the growth continue to to see the growth continue to execute on growing those accounts. And I think the good part accounts.

Speaker #5: And with that comes really high-quality accounts we know these customers the majority of it's stole existing customers that are coming to us for these cards.

Speaker #5: And I think the good part about what we've seen now for the last almost four last almost four quarters, I guess, that started really in the third quarters I guess started really in the third quarter of last year, quarter of last year is a lot of that a lot of those new is a lot of that a lot of those new accounts are actually coming through either our accounts are actually coming through either our branch network or people branch network or people coming coming directly to Wells directly to Wells Fargo dot com. Fargo dot com.

Speaker #5: And so I think that's a good thing. And I think as those vintages are a little bit bigger than the early vintages. And so but overall, we continue to make we'll continue to make those decisions as we go quarter to quarter and decide sort of what we're seeing and how happy we are with the quality of it.

Speaker #5: And so the And so the acquisition costs there are lower acquisition costs there are lower than if you're doing them than if you're doing them through third-party affiliates and through third-party affiliates and others.

Speaker #5: And I think but despite that, I think over the next couple of years, you will see the profitability of that business just continue to increase and the returns increase in the business.

Speaker #5: And so that's a really good And so that's a really good thing. And with that comes really high thing. And with that comes really quality accounts.

Speaker #5: And so that's a really good And so that's a really good thing. And with that comes really high thing. And with that comes really quality accounts. high-quality accounts.

Speaker #5: We know We know these these customers. The majority of it's still existing customers. The majority of it's still existing customers that are customers that are coming coming to us for these cards.

Speaker #5: And that's the way we've been sort of managing it. And then the yield quarter to quarter, in terms of what you see from the credit card deal, that'll move around a little bit depending on sort of what we see from the new acquisitions.

Speaker #5: to us for these cards. And And that's why I think that's a good thing. that's why I think that's a good thing. And And I think those I think those vintages are a little bit bigger than the vintages are a little bit bigger than the early vintages. early vintages.

Speaker #5: And so And so but overall, we continue to make but overall we continue to make we continue to make those decisions as we go we continue to make those decisions as we go quarter to quarter and decide sort quarter to quarter and decide sort of what we're seeing and how happy we of what we're seeing and how happy we are with the quality of it.

Speaker #5: But over a longer period of time, you'll see that continue to increase as those vintages mature and you transition from the intro APRs or the balance transfer APRs into sort of real revolving balances.

Speaker #5: are with the quality of it. And I And I think but despite that I think over the next think but despite that, I think over the next couple of years, you will couple of years you will see the profitability of that see the profitability of that business just business just continue to continue to increase.

Speaker #5: And that'll happen over the next couple of years.

Speaker #7: Okay. Thank you.

Speaker #5: And the returns increase in the And the returns increase in the business. And that's the way we've been sort of business. And that's the way we've been sort of managing it.

Speaker #5: And the returns increase in the And the returns increase in the business. And that's the way we've been sort of business. And that's the way we've been sort of managing it. managing it.

Speaker #2: The next question will come from John Pancary of Evercore ISI. Your line is open.

Speaker #5: And then the yield quarter And then the yield quarter to quarter in terms of what you to quarter, in terms of what you see from the credit card see from the credit card yield that'll move around a little bit depending on sort of yield, that'll move around a little bit depending on sort of what we see from the new what we see from the new acquisitions.

Speaker #7: Good morning. I just want to see if you can comment a bit more just around deposit price competition that you're seeing. How is it trending versus your expectations?

Speaker #5: acquisitions. But over a longer But over a longer period of time you'll see that continue to increase period of time, you'll see that continue to increase as those vintages as those vintages mature and you transition from the mature and you transition from the intro the APRs or intro the APRs or the balance transfer the balance transfer APRs APRs into sort of real revolving into sort of real revolving balances.

Speaker #7: And then related to that, I know you did comment on the growth expectation on the loan front on the mid-single digit side. Do you still have confidence around a mid-single digit pace growth as you look at your deposit strategy?

Speaker #5: And that'll happen And that'll happen over the next couple of over the next couple of years. years.

Speaker #7: Thanks.

Speaker #5: Yeah. I mean, the short answer on the second part is yes. On the deposits. And again, a little more weighted to interest-bearing than non-interest-bearing, as I mentioned, John.

Speaker #7: Okay. Thank Okay. Thank you.

Speaker #2: The next question will come The next question will come

Speaker #2: from John and Carrie of from John Campbell of Evercore ISI. Your line is

Speaker #2: open. Good morning.

Speaker #1: Evercore ISI. Your line is open.

Speaker #5: But we're seeing week to week, month to month, sort of the growth that we expect there. So I think that's good. On the pricing competition question, it really hasn't changed over the last few quarters.

Speaker #7: I Morning. See if you can comment and give me want to see if you can comment on a bit more just around deposit price just around deposit price competition that you're seeing.

Speaker #7: competition that you're seeing. How is How is it trending versus your it trending versus your expectations? And then related expectations? And then related to that I know you did comment on to that, I know you did comment on the growth expectation on the the growth expectation on the loan front on the single digit loan front on the single-digit side.

Speaker #5: On the consumer side, our standard rates haven't moved. We're not seeing shifts in behavior than what we've seen over the last few quarters there in terms of people yield-seeking and in any way.

Speaker #7: Do you feel confident around the These confidence around the mid single digit base growth as you look at mid-single-digit base growth as you look at your deposit your deposit strategy?

Speaker #7: strategy? Thanks.

Speaker #5: Yeah. I mean the short Yeah. I mean, the short answer on the second part is answer on the second part is yes. On the deposit and again yes.

Speaker #5: On the deposit, and again, a little more weighted interest bearing a little more weighted interest bearing than non-interest bearing, as I mentioned, John, than non-interest bearing as I mentioned but we're John.

Speaker #5: So I think that's good. And on the commercial side, rates are always competitive, but we have not seen we've not seen rates get more competitive than what we would have expected normally across those businesses.

Speaker #5: But we're seeing week to week, month to month sort of the growth that seeing week to week, month to month sort of the growth that we expect there.

Speaker #5: we expect there. So I So I think that's think that's good. On the On the pricing competition pricing competition question, it really hasn't changed over the last question it really hasn't changed over the last three quarters.

Speaker #5: And we're really careful to not overpay to attract balances. And so I think we're not seeing that kind of pressure. And there's always an example of something to the contrary to what I said.

Speaker #5: On the consumer three quarters. On the consumer side, our side our standard rates haven't moved. We're not standard rates haven't moved. We're not seeing shifts in seeing shifts in behavior than what we've seen over the behavior than what we've seen over the last few quarters there in terms of last two quarters there in terms of people people yield who yield-seeking in any seeking in any way.

Speaker #5: But I think when you look at the vast majority of the activity we're seeing, it's all very much right in the fairway of what we would have expected to see.

Speaker #5: So I think that's good. And So I think that's good. And then on the commercial side then on the commercial side, rates are always competitive rates are always competitive, but we have not but we have not seen we've not seen rates get more seen we've not seen rates get more competitive than what we would have competitive than what we would have expected normally expected normally across those businesses.

Speaker #7: Okay. Thanks. And then separately on expenses, I appreciate the color you already gave around efficiency and everything. Can you maybe just give us a little update around the risk and reg area of the cost base?

Speaker #7: I know there's still a fair amount of headcount dedicated to that area. Is this broader area now that a lot of the regulatory issues have been worked through becoming a greater expense lever for you?

Speaker #5: And we're really And we're really careful to not careful to not overpay to attract balances. overpay to attract balances. And so I think we're not seeing that kind And so I think we're not seeing that kind of pressure.

Speaker #5: And there's always an example And there's always been example of something to the contrary to what I of something to the contrary to what I said.

Speaker #7: Thanks.

Speaker #5: Yes. Certainly. And I think we talked about that over the last couple of years, right? As we completed the work and moved past the consent orders that we had in place, you'll see us continue to make that profit those processes that we put in place more efficient.

Speaker #5: said. But I think when you look at the vast majority But I think when you look at the vast majority of the activity we're seeing, it's all pretty of the activity we're seeing it's all very much right in the fairway of what we would have much right in the fairway of what we would have expected to see.

Speaker #5: see.

Speaker #7: Okay. Okay. Thanks. On the defensive I appreciate the clarity Thanks. I appreciate the clarity you already gave around efficiency and ity you already gave around efficiency.

Speaker #7: Okay. Okay. Thanks. On the defensive I appreciate the clarity Thanks. I appreciate the clarity you already gave around efficiency and ity you already gave around efficiency. other things.

Speaker #7: Maybe just to follow Maybe just to follow update around the risk and lag area update around the risk and rate area of the cost base.

Speaker #5: And if you think about where we started this journey five or six, seven years ago now, I think there's better technology, there's better ways to do things.

Speaker #7: of the cost base. I know I know there's still a fair amount of headcount there's still a fair amount of headcount dedicated to that area.

Speaker #7: of the cost base. I know I know there's still a fair amount of headcount there's still a fair amount of headcount dedicated to that area. dedicated to that area.

Speaker #5: And so the normal streamlining that sort of happens is happening. But that'll be a very methodical sort of approach. And you'll see that happen over time.

Speaker #7: Is this Is this broader area now that a lot of the broader area now that a lot of the regulatory issues have been worked through becoming a regulatory issues have been worked through becoming a greater expense lever for you?

Speaker #7: Thanks.

Speaker #7: greater expense lever for you? Thanks.

Speaker #5: Yes. Yes. Certainly. And I Certainly. And I think we talked about that over the last couple of years, think we've talked about that over the last couple of years right?

Speaker #5: But it's certainly part of some of the efficiency that you're seeing come through in the last couple of quarters.

Speaker #5: right? As we completed the work and As we completed the work and moved past moved past the consentors that we had in place the consentors that we had in place with CS continue to make with CS continue to make that profit those processes that we've put in that profit, those processes that we've put in place more efficient.

Speaker #7: Okay. Thanks, Mike. Appreciate it.

Speaker #2: The next question will come from Chris McGrady of Keefe Brew Yet and Woods. Your line is open.

Speaker #5: And if And if you think about where we started this journey you think about where we started this journey five, six, seven years ago now I think five, six, seven years ago now, I think there's better technology.

Speaker #5: Oh, great. Just one on credit. It's been questions have been. A little bit on conference calls this quarter and throughout the quarter. Just I guess a check-in on consumer health, the consumer anything incremental you may be seeing.

Speaker #5: there's better technology, there's better ways to There's better ways to do things. And so the do things. And so the normal streamlining that sort of happens normal streamlining that sort of happens is happening.

Speaker #5: is happening. But that'll be a But that'll be a very methodical sort of approach. very methodical sort of approach. And you'll see that happen And you'll see that happen over over time.

Speaker #5: And then conversely on the commercial borrower, demand for credit we talked about, but just any signs within the commercial book of weakening or normalization.

Speaker #5: But it certainly part But it's certainly part of some of the efficiency that you're seeing of some of the efficiency that you're seeing come through in the last couple of come through in the last couple of quarters.

Speaker #5: quarters.

Speaker #7: Okay. Thanks, Mike. Okay. Thanks. I appreciate Appreciate it. it.

Speaker #5: Thanks. Yeah. On the consumer side, it really is good. The delinquency trends are better than we modeled most months. Really, every month that we've seen now for all year, across each of the portfolios.

Speaker #2: will come from Chris McGrady

Speaker #1: The next The next question question will come from Chris McGrady

Speaker #2: of C3 Yet and Woods. of Q3 yet and Woods. Your line is

Speaker #2: open.

Speaker #1: Your line is open.

Speaker #5: I'm still on

Speaker #5: credit. Questions have been fairly limited on conference calls this quarter and throughout the

Speaker #7: Oh. Great. I'm still Oh, great.

Speaker #7: on credit. Questions have been fairly limited

Speaker #5: We're not seeing sign any we're not seeing any cohorts of clients, whether you break it by FICO or other ways to look at higher or lower income levels.

Speaker #7: on conference calls this quarter and throughout the

Speaker #5: I guess a check-in

Speaker #7: quarter. I guess a check in quarters.

Speaker #5: on some more health on your health of

Speaker #5: seeing. And then

Speaker #7: consumer. Anything incremental you may be

Speaker #5: conversely, on the commercial borrower, conversely on the commercial borrower

Speaker #5: We're not seeing any of the trends in any of the cohorts change really at all, certainly not in anything meaningful. And so I think it's supportive of a good second half of the year when you think about sort of delinquencies and charge-offs.

Speaker #5: Just any demand for credit talking about just any

Speaker #5: signs that the commercial signs the commercial

Speaker #7: book of weakening or normalization.

Speaker #5: Yeah. On the consumer side, it really Yeah. On the consumer side it really is is good. good. The delinquency trends are better than we model.

Speaker #7: Thanks. Thanks.

Speaker #5: are better than we model. Months really every month that we've seen Months, really, every month that we've seen now for all year. Across now for all year, across each of the each of the portfolios.

Speaker #5: And so I think that's really good. And that's supported by the strong employment picture that we see more broadly. And we've seen good wage growth to counteract some of the inflationary issues that we've had.

Speaker #5: portfolios. We're not changing We're not changing time any we're not seeing any any we're not seeing any coworker clients whether you break it by coworker clients, whether you predict it by FICO or FICO or other ways to look at higher or lower income levels.

Speaker #5: And so overall, you're seeing really good performance on the consumer side. On the commercial side, same. Really, there's no systemic issues that we're seeing.

Speaker #5: We're not seeing any of the We're not seeing any of the trends in any of the cohorts trends in any of the cohorts changed really at change really at all.

Speaker #5: all. Certainly not anything Certainly not anything meaningful. And so I meaningful. And so I think it's supportive think it's supportive of a good second half of the of a good second half of the year year when you think about sort of when you think about sort of delinquencies and charge offs.

Speaker #5: Come through the portfolio. There's always individual idiosyncratic issues you might see with an individual borrower. But overall, we're seeing really good credit performance. I think people are still being very cautious about big investments they still have more liquidity in most cases than they did maybe historically pre-COVID days.

Speaker #5: delinquencies and charge-offs. And so I think that's really And so I think that's really good. good. And that's And that's supported by the supported by the strong employment picture that strong employment picture that we see more broadly.

Speaker #5: And we've And we've seen good wage growth seen good wage growth. So to counteract some of the to counteract some of the inflationary issues that we've had.

Speaker #5: And we've And we've seen good wage growth seen good wage growth. So to counteract some of the to counteract some of the inflationary issues that we've had. inflationary issues that we've had.

Speaker #5: You're not seeing people make big investments in terms of hiring lots of people, but you're also not seeing people fire a lot of people, at least from what we can tell in our book.

Speaker #5: And so And so overall you're seeing really good performance on the overall, you're seeing really good performance on the consumer side. consumer side. On the On the commercial side, commercial side same.

Speaker #5: same. Really, there's no systemic Really there's no issues that we're seeing. Come through the portfolio. There's seeing. Come through the portfolio. There's always individual always individual idiosyncratic idiosyncratic idiosyncratic issues you might see with an individual issues you might see with an individual borrower.

Speaker #5: And so I think overall, I think people are managing their liquidity and managing their overall balance sheets quite well on the commercial side. And so again, we have not seen anything that would suggest there's a change to that at this point.

Speaker #5: borrower. But overall we're seeing really good But overall, we're seeing really good credit performance. I think people are still being very I think people are still being very cautious about big cautious about big investments.

Speaker #7: Great. Thank you.

Speaker #5: They still have more They still have more liquidity in most cases than they liquidity in most cases than they did maybe historically did maybe historically pre-COVID days.

Speaker #5: They still have more They still have more liquidity in most cases than they liquidity in most cases than they did maybe historically did maybe historically pre-COVID days. pre-COVID days.

Speaker #2: The next question will come from David Chavarini with Jefferies. Your line is open, sir.

Speaker #5: You're not seeing people make You're not seeing people make big investments in terms of hiring lots of big investments in terms of hiring lots of people.

Speaker #6: Hi. Thanks for taking the question. So you mentioned about the market's business asset growth should slow in the second half. Is that a function of this business getting to your comfort level and then from there, the market's business asset growth should be in line with overall balance sheet growth?

Speaker #5: But you're also not seeing people fire a people, but you're also not seeing people fire a lot of people at least from what we can lot of people, at least from what we can tell.

Speaker #5: But you're also not seeing people fire a people, but you're also not seeing people fire a lot of people at least from what we can lot of people, at least from what we can tell. tell.

Speaker #5: In our book. And so I think In our book. And so I think overall, I think people are managing overall I think people are managing their liquidity and managing their liquidity and managing their overall balance sheet their overall balance sheets quite well in the commercial side.

Speaker #5: quite well in the commercial side. And And so again we have not seen so again, we have not seen anything that would suggest there's a change anything that would suggest there's a change to to that at this that at this point.

Speaker #5: point.

Speaker #5: No. It's not necessarily that. I think when you think about what happened pre-asset cap, we really had to constrain that business. And so the financing balances that we added starting in the second half of June last year was at a pace that is just not sustainable for forever.

Speaker #7: you.

Speaker #7: Great. Great. Thank Thank you.

Speaker #2: The next The next question will come from David

Speaker #1: question will come from David Jabarini with Jefferies. Your line

Speaker #2: Jabarini with Jefferies. Your line is open,

Speaker #2: sir.

Speaker #1: is open,

Speaker #6: Hi. Thanks for taking the question. Hi.

Speaker #6: So you mentioned about the Thanks for taking the question.

Speaker #6: market's business asset growth should slow in the second

Speaker #8: So you mentioned about the market's business asset growth

Speaker #6: half. Is that a function of this business getting to your comfort level and then

Speaker #5: And so it really was the reemergence and the reentry, I guess, in some cases into sort of the financing activity that we had just more broadly across that business.

Speaker #8: should slow in the second half. Is that a function of this business

Speaker #6: from there, the market's business asset growth should be in line with

Speaker #8: getting to your comfort level and then from there the market's business asset growth

Speaker #6: overall balance sheet

Speaker #8: should be in line with

Speaker #6: growth? growth?

Speaker #5: And so you'll see it's just start to more get to kind of more of a natural growth rate over the next couple of quarters.

Speaker #5: No. It's not necessarily No.

Speaker #5: I think when you

Speaker #7: It's not necessarily

Speaker #7: that. I think when you that.

Speaker #5: think about what happened think about what happened

Speaker #5: And then we'll see how we'll see and then we'll decide how fast it goes from there based on the opportunity sets that's there. But it really the pace you saw was really a reflection of us coming out of the asset cap and being able to deploy balance sheet at a pace that was just different than normal.

Speaker #7: pre-asset cap we really had to constrain that business. And so the

Speaker #5: And so the financing balances that we added

Speaker #7: financing balances that we added

Speaker #5: half of June last year

Speaker #7: starting in the second starting in the second half of June last

Speaker #7: year was at a pace that is just

Speaker #5: not sustainable

Speaker #5: for forever. And so there really for forever.

Speaker #5: was the reemergence of the

Speaker #7: And just as a reminder, because we haven't mentioned this in a while, that when we had to live with the asset cap, we reduced the balance sheet in markets more significantly than any other place in the company.

Speaker #7: And so it really

Speaker #7: reentry I guess in some cases

Speaker #5: sort of the financing activity that we had just more broadly across that

Speaker #5: business. And so you'll see it just start to more

Speaker #7: had just more broadly across that business. And so

Speaker #7: you'll see it just start to more

Speaker #5: get to kind of more of a natural

Speaker #7: Because we didn't want to limit things like consumer loans, consumer deposits, and things like that. And so a lot of what we're seeing is just kind of a return of the balance sheet that they had originally had.

Speaker #7: growth rate over the

Speaker #7: next couple of quarters. next couple of quarters.

Speaker #5: And

Speaker #5: we'll decide how fast it goes from there based on the opportunities that sit there.

Speaker #7: And then we'll see how we'll see and then

Speaker #7: And we'll have a normal pace of growth going forward. Yeah. And as I mentioned in my commentary, we're up about 200 billion dollars since the end of 2024.

Speaker #7: there based on the opportunities that's just there.

Speaker #5: But it really the pace we

Speaker #7: saw was really a reflection of us coming out

Speaker #5: of the asset cap and being able to deploy

Speaker #5: balance sheet at a pace balance sheet at a pace that was just different than normal. And just as a

Speaker #7: So that's a good clip, I think, over the last 18 months.

Speaker #7: that was just different than normal. And just as a reminder we haven't mentioned this for a while

Speaker #5: reminder, to be able to mention this for a while,

Speaker #6: Got it. That's helpful. And then shifting over, I was curious about advisor hiring. Can you talk about the competitiveness and the pipeline you're seeing there?

Speaker #7: that when we had to live with the

Speaker #5: reduced the balance sheet in

Speaker #7: asset cap we asset cap, we

Speaker #7: in more significantly than any other place in market more significantly than any other place in

Speaker #5: the company. Because we didn't want

Speaker #7: the company. Because we didn't want to limit things like consumer

Speaker #5: to limit things like consumer loans, consumer deposits, and things like

Speaker #5: Yeah. I mean, advisor getting really good advisors and teams of advisors, it's always been competitive. And I think continues to be competitive. We're very disciplined about our approach to that.

Speaker #7: loans, consumer deposits, and things like that. And so a lot of what we're

Speaker #5: that. And so a lot of what we're seeing is just kind of a return of the balance sheet that they had originally had. And we'll have a normal pace of growth going forward.

Speaker #7: balance sheet that they had originally had. And we'll

Speaker #5: Yeah. And as I mentioned in my commentary, we're up about 200 billion dollars at the end of 2024. So that's a good clip, I think, over the last 18 months.

Speaker #7: have a normal pace of growth going forward. Yeah. And as I mentioned in my commentary we're up about 200 billion dollars at the end of 2024.

Speaker #5: We don't overpay. We have not changed our deal to recruit advisors in a while and don't plan to. So we may miss out on some teams if that's the case.

Speaker #7: So that's a good clip I think over the last 18 months.

Speaker #6: Got it. That's helpful. And then shifting over, I was curious about

Speaker #8: Got it. That's helpful. And then shifting over I was curious about advisor hiring. Can you talk about the competitiveness and the

Speaker #5: So what we try to make sure that we're providing is the right platform with the right capabilities to attract these advisors. And I think that's really resonated.

Speaker #6: advisor hiring. Can you talk about the

Speaker #6: competitiveness and the pipeline you're seeing

Speaker #6: there?

Speaker #8: pipeline you're seeing there?

Speaker #5: And if you look at the last three quarters, we've had close to, if not record, recruiting in terms of the amount of business they bring.

Speaker #5: I mean Yeah. I mean, advisor getting really good advisor getting really good advisors and teams of advisors and teams of advisors, it's always been advisors has always been competitive.

Speaker #5: So think about it as revenue that's coming onto the platform over the last three each quarter for the last three quarters. And so it's been quite good to see those advisors.

Speaker #5: And I think continues to And I think it continues to be competitive. We're very be competitive. We're very disciplined about our approach to that.

Speaker #5: We don't overpay. We have that. We don't overpay. We have not changed our not changed our deal to recruit advisors in a while. deal to recruit advisors in a while.

Speaker #5: Yeah. And our attrition is at record low for us in terms of attrition that we're seeing across the advisor space. And what's good about the types of advisors we're attracting is they bring really good investment business, but they also bring the need for banking.

Speaker #5: And don't plan to. So we And don't plan to. So we may miss out on some teams may miss out on some teams if that's the case.

Speaker #5: And don't plan to. So we And don't plan to. So we may miss out on some teams may miss out on some teams if that's the case. if that's the case.

Speaker #5: So what we try to So what we try to make make sure that we're providing sure that we're providing is the right platform with the right is the right platform with the right capabilities to attract these advisors.

Speaker #5: capabilities to attract these advisors. And I And I think that's really resonated. And think that's really resonated. And if you look at the last if you look at the last three quarters we've had close three quarters, we've had close to, if not record, recruiting in terms to if not record recruiting in terms of the amount of of the amount of business they bring.

Speaker #5: Which is both deposits and lending, which I think really rounds out the profitability of the business that's coming onto the platform, which helps improve the margin of that business over a longer period of time.

Speaker #5: So think about it as So think about it as revenue that's coming onto the revenue that's coming onto the platform over the last three quarters.

Speaker #5: So think about it as So think about it as revenue that's coming onto the revenue that's coming onto the platform over the last three quarters. platform over the last three quarters.

Speaker #5: Each quarter for the Each quarter for the last three quarters. And so it's been last three quarters. And so it's been quite good to see quite good to see those advisors.

Speaker #5: And so the teams done a really nice job attracting the right types of advisors. And the pipeline that we've got is quite good in terms of looking at the rest of the year.

Speaker #5: those advisors in our yeah, in our In our yeah in our tradition is tradition is at record low for us in terms of that record low for us in terms of attrition that we're seeing across attrition that we're seeing across the advisor space. the advisor space.

Speaker #6: Very helpful. Thank you.

Speaker #5: And what's good And what's good about the types of advisors about the types of advisors we're attracting is they bring really we're attracting is they bring really good investment business, but they good investment business.

Speaker #2: The next question will come from Vivek Janaja of JP Morgan. Your line is open.

Speaker #5: But they also bring the need also bring the need for banking for banking. which is both deposits and Which is both deposits and lending, which I think really rounds lending.

Speaker #5: Thanks. Can you hear me?

Speaker #7: Yes, we can.

Speaker #5: Yep.

Speaker #5: Which I think really rounds out the profitability of the out the profitability of the business that's coming out of the platform, which helps business that's coming out of the platform.

Speaker #7: Oh, thanks. Charlie, Mike. Sorry. Can I just stepping back on NII? We're stepping away even just from them. Both you and Mike said at conferences in the second quarter you were very confident about the 50 billion NII.

Speaker #5: Which helps improve the margin of that business over a longer improve the margin of that business over a longer period of time. And so the team's done a period of time.

Speaker #5: And so the team's done a really nice job attracting the really nice job attracting the right types of advisors. And the right types of advisors.

Speaker #5: And the pipeline that we've got is pipeline that we've got is quite good in terms of looking quite good in terms of looking at the rest of the at the rest of the year.

Speaker #7: And today you've gone to 50 billion plus or minus. Seems like a little bit of a shift. Any color that? Is that a shift?

Speaker #5: year.

Speaker #6: Very helpful. Very helpful. Thank

Speaker #8: Thank

Speaker #2: The next question will come

Speaker #2: from Vivek Ganesha from Vivek Ganesha

Speaker #1: The next question will come you.

Speaker #2: Your line is of JP Morgan.

Speaker #2: open.

Speaker #1: Your line is open.

Speaker #7: What's driving that little shift?

Speaker #7: Thanks. Can you hear Thanks. Can you hear me? me?

Speaker #7: Oh, thanks. Charlie, Oh. Thanks. Charlie, Mike. Sorry. I'm just stepping Mike. Sorry. I'm just stepping back on NII. I'm stepping back on NII. I'm stepping away even just from them.

Speaker #5: Yes. Yes, we can. We can.

Speaker #5: Hey, Vivek. No shift at all. The 50 billion plus or minus is exactly what we said in January. And exactly what we said in the end of the first quarter.

Speaker #7: away even just from them. What you and Mike said at conferences in the second said at conferences in the second quarter you were very confident about quarter?

Speaker #5: And what I said at Morgan Stanley, the conference and others. And so I think no shift at all. And we're very confident.

Speaker #7: You were very confident about the 50 billion the 50 billion NII. And today, you've gone NII. And today you've gone to 50 billion plus or to 50 billion plus or minus. minus.

Speaker #7: You were very confident about the 50 billion the 50 billion NII. And today, you've gone NII. And today you've gone to 50 billion plus or to 50 billion plus or minus.

Speaker #7: No intention to shift anything or guidance is the same. And we feel confident about it. Okay. That was an important clarification. Commercial loans, your period end growth slowed a little bit.

Speaker #7: Seems like a little bit Seems like a little bit of a shift. of a shift. Any color Any color on what's driving that? on what's driving that?

Speaker #7: Any color on what's driving that? Do you expect that to pick up again and then what would be the driver of that? Anything that you can?

Speaker #7: Is that a shift? What's driving that little Is that a shift? What's driving that little shift? shift?

Speaker #5: Hey Hey, Vivek. No shift at all. The Vivek. No shift at all. 50 billion plus or minus is exactly what The 50 billion plus or minus is exactly what we said in January. we said in January.

Speaker #5: Hey Hey, Vivek. No shift at all. The Vivek. No shift at all. 50 billion plus or minus is exactly what The 50 billion plus or minus is exactly what we said in January.

Speaker #5: Yeah. Look, the period end number is driven by lots of factors, Vivek. You have some seasonality through the quarter. You saw some tariff-related refund-related pay downs.

Speaker #5: And exactly what we And exactly what we said end of the first said end of the first quarter. And what I said at quarter.

Speaker #5: And what I said at Morgan Stanley conference and others. And Morgan Stanley conference and others. And so I think no shift at all. so I think no shift at all.

Speaker #5: But there's nothing that I would highlight as sort of a change in overall sentiment that is impacting the clients. And as I said earlier, I think on the consumer side, you're going to we expect to see more growth in auto and in card.

Speaker #5: And we're very confident. No intention to shift confident. No intention to shift anything or guidance is the same. And we feel anything or guidance is the same.

Speaker #5: And we feel confident about it. confident about it.

Speaker #7: Okay. That was an important Okay. Good. That was an important clarification. Commercial loan, clarification. Commercial loan the pre-rend growth slowed a little bit. the pre-vendor slowed a little bit.

Speaker #5: I think you'll see home lending be stable. And then I think you'll see some growth in the commercial portfolios in the second half of the year.

Speaker #7: Any color on what's driving that do Any color on what's driving that? Do you expect that to pick up you expect that to pick up again?

Speaker #7: Any color on what's driving that do Any color on what's driving that? Do you expect that to pick up you expect that to pick up again? again?

Speaker #7: And then what would be the driver of And then what would be the driver of that? Anything that you that? Anything that you can?

Speaker #5: Yeah.

Speaker #7: can?

Speaker #7: Okay. Thank you.

Speaker #5: Yeah. Look, the period I remember is during when I lost a Look. The period I remember is during when I lost a factor is Vivek.

Speaker #5: Yeah. Look, the period I remember is during when I lost a Look. The period I remember is during when I lost a factor is Vivek. factor is Vivek.

Speaker #2: And the last question for today will come from Gerard Cassidy with RBC Capital Markets. Your line is open, sir.

Speaker #5: You had some You had some seasonality through the quarter and you saw seasonality through the quarter. You saw some tariff-related some tariff-related refund-related pay downs.

Speaker #5: refund-related pay downs. But there's But there's nothing that I would highlight as sort of a nothing that I would highlight as sort of a change in overall change in overall sentiment that is impacting sentiment that is impacting the clients.

Speaker #7: Thank you. Hi, Charlie. Hi, Mike. Can you guys share with us on credit? Obviously, your credit quality is very strong. The industry is experiencing really good credit in this period.

Speaker #5: the clients. And as I said earlier, And as I said earlier I think on the consumer side you're going I think on the consumer side, you're going to expect to see more growth to expect to see more growth in auto and in auto and in in cars.

Speaker #7: Are you seeing any signs of risk-taking by your competitors in terms of underwriting in the commercial loan area? Or it could be in consumer?

Speaker #5: I think you'll see home lending be cars. I think just the home lending will be stable. And then I think you'll see some growth in the stable.

Speaker #5: And then I think you'll see some growth in the commercial portfolios commercial portfolios and second half of the and second half of the year.

Speaker #5: And then I think you'll see some growth in the commercial portfolios commercial portfolios and second half of the and second half of the year. year.

Speaker #7: Okay. Thank Okay. Thank you.

Speaker #7: Okay. Thank Okay. Thank you. you.

Speaker #7: And if not, what are you looking for as we go forward for some aggressive underwriting that could lead to issues in the next credit cycle?

Speaker #2: And the last And the last question for today will come from

Speaker #1: question for today will come from Gerard Cassidy with RBC

Speaker #2: Gerard Cassidy with RBC

Speaker #2: Capital Markets. Your line is open, Capital Markets.

Speaker #2: sir.

Speaker #1: Your line is open, sir.

Speaker #5: Thank you.

Speaker #7: Thanks Thank you. Thanks, Charlie. Hi, Mike. Can Charlie. Hi Mike. Can you kind of share with you kind of share with us on credit?

Speaker #5: Yeah. Let me take a step at it. And Mike, you can either agree, correct me, or not. I think on the consumer side, we would say not really.

Speaker #7: us on credit Obviously, your credit quality is very strong in obviously your credit quality is very strong in the industry. You've been experiencing really good the industry.

Speaker #7: You've been experiencing really good credit in this credit. In this period, are you seeing any period. Are you seeing any signs of risk-taking signs of risk-taking by your by your competitors in terms of underwriting in competitors in terms of underwriting in the commercial loan area the commercial loan area or competing consumer?

Speaker #5: What we see is kind of consistent underwriting versus the people that we compete with. Everyone kind of comes and goes sometimes. And times are good.

Speaker #7: And if not what are you looking And if not, what are you looking for as we go forward for as we go forward for for some aggressive underwriting that could lead some aggressive underwriting that could lead to issues in the to issues in the next credit next credit cycle?

Speaker #5: But not a lot on the consumer side. I think on the wholesale side, it is a very, very different story. And that's where you see the deployment of significant amounts of capital, not just from banks, from non-banks.

Speaker #5: Yeah. Let me take a stab at Yeah. Let me take a stab at it. Mike, you can either it. And Mike you can either agree, correct me, or not.

Speaker #5: agree, correct me, or not. I I think on the consumer side we think on the consumer side, we would would say not really. What we say not really.

Speaker #5: And there is a wide range of risk that people are taking in the lending activities. I kind of try to allude to this in my remarks.

Speaker #5: What we see is kind of see is kind of consistent consistent underwriting versus the people that we underwriting versus the people that we compete compete with.

Speaker #5: with. Everyone kind of comes and goes Everyone kind of comes and goes sometimes. I mean sometimes. I mean, times are times are good. But good.

Speaker #5: We are staying true to who we are in terms of what our risk tolerances are. In the context of growing franchise, but when you look at whether it's things in data centers, some of the strategic transactions that are done, that are being done out there, there is there are more risk assets being created on the wholesale side.

Speaker #5: But not a lot on the not a lot on the consumer side. I think on the wholesale consumer side. I think on the wholesale side it is a very very different side, it is a very, very different story. story.

Speaker #5: And that's where And that's where you see disappointment of you see the deployment of significant amounts of capital. Not just significant amounts of capital, not just from banks, from from banks.

Speaker #5: From non-banks. And there's a wide non-banks, and there's a wide range of risk that range of risk that people are taking in the lending people are taking in the lending activities.

Speaker #5: And there's a lot of capital out there that's there to support that. And we're doing the pieces of the transactions that we're comfortable with that have the credit profile.

Speaker #5: I kind of try to allude to this in my activities. I kind of try to allude to this in my remarks. remarks. We We are staying true to who are staying true to who we are in terms of what our risk we are in terms of what our risk tolerances are.

Speaker #5: That we're used to underwriting. And there are others that are willing to take more risk than we are.

Speaker #5: tolerances are. In the context of In the context of growing growing franchise, but when you look franchise. But when you look at whether it's things in at whether it's things in data centers, some of data centers some of the the strategic transactions that are done that are being strategic transactions that are done, that are being done out there, there done out there.

Speaker #7: And just as a quick follow-up to that answer, Charlie, on the consumer, is there any way you guys measure or can capture the non-bank consumer lenders?

Speaker #5: There is there are more risk assets is there are more risk assets being created on the being created on the wholesale side. And there's a lot wholesale side.

Speaker #7: And I know that it's not primarily your customer because they tend to be a higher risk customer, but is there any way of making sure that there's not a second derivative effect on your better quality consumer customers?

Speaker #5: And there's a lot of capital out there that's of capital out there that's there to support that. there to support that. And we're doing the pieces of the And we're doing the pieces of the transactions that we're comfortable with that have the transactions that we're comfortable with that have the credit profile.

Speaker #5: That we're used to That we're used to underwriting. underwriting. And there are others And there are others that that are willing to take more risk than are willing to take more risk than we we are.

Speaker #5: Well, I mean, I'm not sure. I'm going to make sure I'm following this. I think when it comes to the consumer credit that we're extending, we're making our own credit decision with every single loan based upon everything that we know.

Speaker #5: are.

Speaker #7: And just And just as a quick follow-up to that as a quick follow-up to that, to answer Charlie. On the answer Charlie's, on the consumer, is there any way you guys consumer is there any way you guys measure or kind of capture measure or kind of capture the non-bank consumer the non-bank consumer lenders?

Speaker #5: Including looking at bureau information and things that they might have away from us to the extent we can see it. And so that's totally within our control and we understand that.

Speaker #7: And I And I know there's not primarily your know there's not primarily your customer because they tend to be a higher customers because they tend to be a higher risk customer.

Speaker #7: risk customer, but is there But is there any way of making sure any way of making sure that there's not a second derivative effect that there's not a second derivative effect on on your better quality consumer your better quality consumer customers?

Speaker #5: We do see some of the activities in the non-bank universe through what we do on the wholesale side in terms of who we finance.

Speaker #7: customers?

Speaker #5: Well, I mean, I'm not sure. I'm Well I mean I'm not sure. I'm going to make sure of following this. I think when it comes making sure I'm following this.

Speaker #5: And we've talked about this last quarter. It's good information to have, but we're also selective about who we're lending to. And because not everyone in that space has the same risk tolerances.

Speaker #5: I think when it comes to the to the consumer credit that we're extending we're consumer credit that we're extending, we're making our own credit making our own credit decision with every single loan based decision with every single loan based upon everything that we upon everything that we know.

Speaker #5: know. Including looking Including looking at bureau information and things that they might at bureau information and things that they might have away from us in the extent we can see it.

Speaker #7: Understood. And then just as a last follow-up, final question. I know this is probably hard to answer, but AI has been just so powerful to the US economy.

Speaker #5: And And so that's totally within our so that's totally within our control and we understand control. And then we understand that. We do that.

Speaker #5: We do see some of the see some of the activities in the non-bank universe through activities in the non-bank universe through what we do on the wholesale what we do on the wholesale side in terms of who we side in terms of who we finance.

Speaker #7: In terms of capital expenditures, you mentioned data centers, of course. Is there any way of getting your arms around of second derivative exposures to the AI industry for wells, so that I don't think you or many of your peers have direct data center construction loans, but I'm just wondering that if this when this boom slows down, is there some fallout that we could see potentially down the road on the second derivative of the suppliers or other folks that it's not as clear maybe today that they have that kind of exposure in their business models?

Speaker #5: finance. And we've talked about this last And we've talked about this last quarter. It's good information to quarter. It's good information to have, but we're also selective have.

Speaker #5: But we're also selective about who we're lending about who we're lending to. And to. And because not everyone because not everyone in that space has the in that space has the same risk same risk tolerances.

Speaker #5: tolerance.

Speaker #7: Understood. And just Understood. And just as a last final one final as a last final up, I want to question. I know this is probably hard to question, I know this is probably hard to answer, but answer.

Speaker #7: AI has been so powerful AI has been just so powerful to the US economy in terms to the US economy in terms of capital expenditures.

Speaker #7: AI has been so powerful AI has been just so powerful to the US economy in terms to the US economy in terms of capital expenditures. of capital expenditures.

Speaker #7: And And you mentioned data centers, of you mentioned data centers of course. Is there any way of course. Is there any way of getting your arms around of getting your arms around of second derivative second derivative exposures to the AI exposures to the AI industry for Wells so industry for Wells, so that I think you that I think you or many of your peers have or many of your peers have direct data center construction loans, but direct data center construction loans.

Speaker #5: Yeah. I mean, listen, I think when you look at the exposures that are being created to help finance the build-out, I mean, you're absolutely right.

Speaker #5: There are different types of things that are being financed. Right? There's core and shell. There's power. There are chips. And there are a whole series of things that go into the data center.

Speaker #7: But I'm just wondering that if I'm just wondering that if this when this this when this boom slows down is there some boom slows down, is there some fallout that we could fallout that we could see potentially down the road see potentially down the road on the second derivative on the second derivative of the suppliers or other folks of the suppliers or other folks that it's not as clear that it's not as clear maybe today that they have that kind of exposure maybe today that they have that kind of exposure in their business in their business models?

Speaker #5: And we underwrite those different pieces of those financings very differently. Because we rely on different types of different types of credit support. For those to be paid off.

Speaker #5: Yeah. I mean, listen, I Yeah. I mean listen. I think when you look at the think when you look at the exposures that are being created exposures that are being created to help finance to help finance the build-out, I mean, you're absolutely the build-out I mean you're absolutely right.

Speaker #5: And it's very, very different lending to a chip maker that has 80% margins where we get paid back in a year and a half versus lending to someone else in the supply chain who it's going to take 15 years to get paid back or 10 years to get paid back.

Speaker #5: There are different types of things that are There are different types of things that are being financed. Right? There's being financed. Right? There's core and shell.

Speaker #5: core and shell. There's There's power. There's chips. And there are a whole series of things that power. There's chips. And there are a whole series of things that go into the data go into the data center.

Speaker #5: And And we underwrite those we underwrite those different pieces of those different pieces of those financings very financings very differently because we rely differently because we rely on different on different types types of different types of of different types of credit credit support.

Speaker #5: And hope that the LLM provider who's renting that space is going to be there. And so there are and so that is the complication.

Speaker #5: support. For those to be paid For those to be paid off. And it's off. And it's very, very different lending very very different lending to a chip maker that to a chip maker that has 80% margins where we get paid has 80% margins where we get paid back in a year and a half back in a year and a half versus lending versus lending to someone else in the to someone else in the supply chain who it's going to supply chain who it's going to take 15 years to get paid take 15 years to get paid back or 10 years to get paid back.

Speaker #5: That everyone is working through in terms of who we lend to. And that's when I say that there are different kinds of risk that are being created here.

Speaker #5: And we're working to stay within the lane of the risks that we understand. We're confident not just that we understand it, but we'll obviously get paid back.

Speaker #5: And different people have different risk tolerances. And that's always been the case.

Speaker #5: back or 10 years to get paid back. And hope that the LLM And hope that the LLM provider who's renting that provider who's renting that space is going to be there.

Speaker #7: No. I appreciate the color. Thank you, Charlie.

Speaker #5: space is going to be there. And And so there are and so that is the so there are and so that is the complication.

Speaker #5: complication. That everyone That everyone is working through in terms of who is working through in terms of who we lend to. And that's when I say that there are different we lend to.

Speaker #5: And that's when I say that there are different kinds of risk that are being created kinds of risk that are being created here. And here.

Speaker #5: And we're working to stay within the lane we're working to stay within the lane of the risks that we of the risk that we understand.

Speaker #5: understand when we're When we're confident not just that we understand that we'll confident not just that we understand that we'll obviously get paid back.

Speaker #5: obviously get paid back, And different people have different risk and different people have different risk tolerances. tolerances. And And that's always been the that's always been the case.

Speaker #5: case.

Speaker #7: Yeah. I appreciate the color. Yeah. I appreciate the color. Thanks, Charlie. Thanks Charlie.

Speaker #5: All All righty. All right. Thanks, everyone. righty.

Speaker #7: All right. Thanks everyone.

Speaker #7: We appreciate the We appreciate your time.

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