Wells Fargo 3Q16 Earnings Call Notes

Wells Fargo & Company’s (WFC) CEO Timothy Sloan on Q3 2016 Results

Stumpf “retiring”

“This week, John Stumpf announced that he was retiring from Wells Fargo and the Board. He made this decision because he believed his leadership had become a distraction and, therefore, the best thing for Wells Fargo was for him to retire. This action demonstrates the dedication John has had to Wells Fargo throughout his 34 years with the company, including successfully leading us through the financial crisis and the largest merger in banking history.”

Senior management could have and should have done more

“Our senior management could have and should have done more. I’m fully committed along with the entire leadership team to fixing these issues and taking the necessary actions to restore our customers’ trust.”

How thinking about new incentive sceme

“I’m thinking about what are the drivers of developing those lifelong relationships with our customers. It’s about service. It’s about convenience. So think about our bankers being incented to provide good service, and so we’ll be measuring that on an independent basis, to think about our bankers being focused on helping our customers do more business, but being measured on product usage and activity as opposed to individual product sales and also about an overall growth in assets and balances and also think about it being much more driven to a team approach as opposed to just on an individual basis.”

Explanation for why they didn’t go outside for new management

“It’s a fair question. It’s one we’ve been getting. I think the board, by the changes that we’ve made over the last week and a few weeks is comfortable with and very supportive of the management team. I think over the last few years, really since the financial crisis, we had a huge opportunity years ago to reset the entire team and we selected the best folks that were available for all the roles. Since then, one of the great things about the company has been how we’ve been able to attract many senior leaders from outside the company, not only in our business lines, but also in many of our support functions, including corporate risk. So that’s already really happened from my perspective.”

Sorry if this wasn’t enough for you, Mike Mayo

“Mike, listen, I appreciate your question. And as one of the many stakeholders at Wells Fargo, I’m sorry that we’ve disappointed you. But we just spent 30 minutes talking about what’s going on at the company and we provided a lot of information. We provided new slides that provide a tremendous amount of detail on some of the retail sales practices issue and we deliberately and diligently walked through the performance of all of our businesses. And you know what, if that doesn’t satisfy you, I am sorry.”

John Shrewsberry

Loans grew 6% from a year ago

“loans grew 6% from a year ago and were up $4.1 billion from the second quarter. Commercial loans grew $1.9 billion from the second quarter on higher commercial real estate and C&I loans. Consumers loans were up $2.2 billion with growth in first mortgage loans, auto, credit cards, student lending and securities based lending.”

Non-performing assets only 1.25% of total loans

“Non-performing assets decreased $1.1 billion from second quarter with improvement across our consumer and commercial portfolios and lower foreclosed assets. Non-performing assets were only 1.25% of total loans, the lowest level since the merger with Wachovia in 2008. And for the first time this year, we did not have a reserve build.”

Efficiency ratio going to be at the high end of the range

“ There’s a lot of puts and takes there, which is why we usually revert back to the efficiency ratio of target because while we’re definitely going to have elevated compliance related costs and operational loss related costs, we’ve got a lot of initiatives underway, some of which you alluded to. Some are immediate and some are over the forecast horizon of a couple of years. And it’s designed to keep us in or below the high-end of 55% to 59%. So my guidance at this point is that we’re going to be at the high end of that range accounting for all of those things that we’re showing as levers in order to offset the elevated expense.”

Still in the process of refining implementation approach to DOL rules

“We’re still in the process of refining the overall implementation approach to be compliant with the rules. I think we’re still going to approach every client relationship with an emphasis on every client having a customized plan that guides their investment activity. We’re going to emphasize advisory solutions and continue to offer traditional brokerage for certain clients that include self-directed options. And we’ll be sharing more details as we get closer to implementation. I think with each ensuing quarter between now and later in 17, you should expect to hear a little bit more about the specifics of the implementation. But we haven’t reached the same conclusion in the same timeframe as the comparator that I think you’re referring to.”