Quarterly supplement (PDF) - Wells Fargo

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Jul 15, 2016 - Loans up $9.9 billion on growth in both commercial and consumer loan ..... Community Banking: FastFlexSM
2Q16 Quarterly Supplement July 15, 2016

© 2016 Wells Fargo & Company. All rights reserved.

Table of contents Appendix

2Q16 Results 2Q16 Highlights

Page 2

Real estate 1-4 family first mortgage portfolio

22

Year-over-year results

3

Real estate 1-4 family junior lien mortgage portfolio

23

Balance Sheet and credit overview (linked quarter)

4

Consumer credit card portfolio

24

Income Statement overview (linked quarter)

5

Auto portfolios

25

Loans

6

Student lending portfolio

26

Year-over-year loan growth

7

Common Equity Tier 1 (Fully Phased-In)

27

Deposits

8

2Q16 Revenue diversification

9

Return on average tangible common equity (ROTCE)

28

Forward-looking statements and additional information

29

Net interest income

10

Noninterest income

11

Noninterest expense and efficiency ratio

12

Continued to reinvest in the franchise and innovate for growth

13

Community Banking

14

Wholesale Banking

15

Wealth and Investment Management

16

Credit quality

17

Oil and gas loan portfolio

18

Capital

19

2Q16 Summary

20

Wells Fargo 2Q16 Supplement

1

2Q16 Highlights  Earnings of $5.6 billion  Diluted earnings per common share of $1.01  Revenue up 4% year-over-year (YoY) and

Wells Fargo Net Income ($ in millions, except EPS) 5,719

5,796

5,575

5,462

5,558

stable linked quarter (LQ) - Net interest income up 4% YoY and 1% LQ

- Noninterest income up 4% YoY and down 1% LQ

$1.03

$1.05

 Strong loan and deposit growth $1.00

2Q15

3Q15

4Q15

$0.99

1Q16

$1.01

2Q16

Diluted earnings per common share

- Average loans up 9% YoY and 3% LQ - Average deposits up 4% YoY and 1% LQ  Pre-tax pre-provision profit (PTPP) (1) up 5% YoY and 1% LQ  Credit quality remained solid with net chargeoffs of 39 bps of average loans - Oil and gas portfolio losses were partially offset by improvement in residential real estate

 Strong capital position - Common Equity Tier 1 ratio (fully phasedin) of 10.6% at 6/30/16

(2)

- Total stockholders’ equity exceeded $200 billion for the first time

(1) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. (2) 2Q16 capital ratio is a preliminary estimate. Fully phased-in capital ratios are calculated assuming the full phase-in of the Basel III capital rules. See page 27 for additional information regarding the Common Equity Tier 1 capital ratio. Wells Fargo 2Q16 Supplement

- Returned $3.2 billion to shareholders

through common stock dividends and net share repurchases

2

Year-over-year results ($ in billions, except EPS)

($ in billions)

($ in billions)

21.3

Net Income

Average Loans

Revenue

950.8

22.2

870.4

5.7

$1.03

2Q15

2Q16

Pre-tax Pre-provision Profit ($ in billions)

2Q15

2Q16

Average Deposits

$1.01

2Q15 2Q16 Diluted earnings per common share

Period-end Common Shares Outstanding (shares in millions)

($ in billions) 1,185.3

5.6

1,236.7 5,145.2

9.3

5,048.5

8.8

2Q15

Wells Fargo 2Q16 Supplement

2Q16

2Q15

2Q16

2Q15

2Q16

3

Balance Sheet and credit overview (linked quarter) Loans & interest rate swaps

 Loans up $9.9 billion on growth in both commercial and consumer loan portfolios  Additionally, we continued to employ the strategy of converting floating rate loans to fixed rate through interest rate swaps

Short-term investments/ Fed funds sold

 Down $5.0 billion primarily on growth in investment securities and loans

Trading assets

 Up $6.9 billion, while average balances were up 1% LQ

Investment securities

 Up $18.5 billion as ~$38 billion of gross purchases were partially offset by run-off, including accelerated prepayments of investment securities, and sales

Deposits

 Up $4.0 billion as growth in commercial and mortgage escrow balances were partially offset by seasonally lower consumer balances

Long-term debt

 Up $16.0 billion on ~$24 billion of issuances, including ~$10.7 billion in parent issuance that is anticipated to be Total Loss Absorbing Capacity (TLAC) eligible - TLAC-eligible issuances included: • $8.7 billion of senior debt • $2.0 billion of subordinated debt

Short-term borrowings

 Up $12.6 billion reflecting growth in trading, including higher repurchase agreement balances, as well as higher other funding needs

Common stock outstanding

 Common shares outstanding down 27.4 million on net share repurchases of $1.3 billion -

Credit

Repurchased 44.8 million common shares in the quarter

 Net charge-offs of $924 million, up $38 million driven by higher losses in the oil and gas portfolio  $150 million reserve build (1) primarily driven by loan growth in the commercial, auto and credit card portfolios

Period-end balances. All comparisons are 2Q16 compared with 1Q16. (1) Provision expense minus net charge-offs. Wells Fargo 2Q16 Supplement

4

Income Statement overview (linked quarter) Total revenue

 Revenue of $22.2 billion, down $33 million

Net interest income

 NII up $66 million on loan growth and included the full quarter benefit of assets acquired from GE Capital on 3/1/16  NIM down 4 bps to 2.86% primarily driven by growth in long-term debt, deposits and reduced yield on investment securities

Noninterest income

 Noninterest income down $99 million - Trust and investment fees up $162 million on higher investment banking, retail brokerage asset-based fees and transaction revenue, and trust and investment management - Mortgage banking down $184 million as higher mortgage origination revenue was more than offset by lower servicing income (which included lower mortgage servicing rights (MSR) hedging results and higher unreimbursed servicing costs) - Market sensitive revenue (1) up $276 million as higher gains on debt securities and higher customer accommodation trading results were partially offset by lower equity gains - Insurance down $141 million reflecting the 1Q16 sale of the crop insurance business - Lease income up $124 million driven by the full quarter benefit of the operating leases acquired from GE Capital - Other income down $392 million driven by a decline in hedge ineffectiveness income from $379 million in 1Q16 to $56 million in 2Q16; 2Q16 results also included a $290 million gain on the sale of our health benefit services business vs. a $381 million gain from the sale of the crop insurance business in 1Q16

Noninterest expense

 Noninterest expense down $162 million - Personnel expense down $260 million from a seasonally high 1Q16 - Outside professional services up $186 million from a typically low 1Q and included higher project-related expense - Operating losses down $120 million on lower litigation expense - Insurance expense down $89 million reflecting the 1Q16 sale of the crop insurance business - Operating lease depreciation expense up $117 million due to the leases acquired from GE Capital

All comparisons are 2Q16 compared with 1Q16. (1) Consists of net gains from trading activities, debt securities and equity investments. Wells Fargo 2Q16 Supplement

5

Loans Period-end

Period-end Loans Outstanding ($ in billions)

947.3 888.5

4.20%

903.2

4.11%

957.2

916.6

4.08%

4.16%

 Total loans increased $68.7 billion, or 8%, YoY and $9.9 billion, or 1%, LQ - Commercial loans up $6.3 billion LQ on higher commercial real estate and C&I loans - Consumer loans up $3.6 billion LQ as growth in first mortgage loans, auto loans, credit card and securities-based lending was partially offset by a decline in junior lien mortgage and seasonally lower student lending

4.16%

Average  Total average loans of $950.8 billion up $80.4 billion, or 9%, YoY and $23.6 billion, or 3%, LQ  Total average loan yield of 4.16%, stable LQ as the full quarter benefit of loans and capital leases acquired from GE Capital was offset by lower consumer yields

2Q15

3Q15

4Q15

1Q16

2Q16

Total average loan yield

Wells Fargo 2Q16 Supplement

6

Year-over-year loan growth ($ in billions)

Commercial and Industrial

Commercial Real Estate

340

155 150

290

320

145

270

140

300 280

135

250

130

230

125

260

210

120 115

240

190

110

220

105

200

100

2Q15

150

2Q16

2Q15

 Primarily CRE mortgage growth

 GE Capital acquisitions and organic growth

Automobile

170

2Q15

2Q16

36

2Q16

 Nonconforming mortgage growth

Credit Card 42

64 59

Real Estate 1-4 Family First Mortgage

Other Revolving Credit and Installment

40

32

54 38

49 28

44

36

39

34

24

34

32

29

24

30

20

2Q15

 Origination volume up 2%

2Q16

2Q15

2Q16

 New account openings and increases in active accounts

2Q15

2Q16

 Securities-based lending, personal lines and loans and student loans

Period-end balances. Wells Fargo 2Q16 Supplement

7

Deposits Average

Average Deposits and Rates ($ in billions)



1,185.3

1,219.4

1,236.7

337.9

345.4

353.0

847.4 0.08%

2Q15

874.0

883.7

0.10%

0.11%

1Q16

2Q16

Deposits up $51.4 billion, or 4%, YoY and $17.3 billion, or 1%, LQ - Noninterest-bearing deposits up $15.1 billion, or 4%, YoY and $7.6 billion, or 2%, LQ - Interest-bearing deposits up $36.3 billion, or 4%, YoY and $9.7 billion, or 1%, LQ



Average deposit cost of 11 bps, up 1 bp LQ and up 3 bps YoY driven by commercial deposits



Consumer and small business banking deposits of $726.4 billion, up 8% YoY and 2% LQ

(1)

Noninterest-bearing deposits Interest-bearing deposits Average deposit cost

Period-end

Period-end Deposits ($ in billions)

1,185.8

1,241.5

1,245.5

 Total period-end deposits up $59.7 billion, or 5%, YoY on a $53.7 billion increase in consumer and small business balances (1), and was up $4.0 billion LQ on higher commercial balances  Primary consumer checking customers 4.7% YoY

2Q15

1Q16

(2)

up

2Q16 (1) Total deposits excluding mortgage escrow and wholesale deposits. (2) Data as of May 2016, comparisons with May 2015; customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposits.

Wells Fargo 2Q16 Supplement

8

2Q16 Revenue diversification Balanced Spread and Fee Income

Diversified Fee Generation (% of noninterest income) 13%

Deposit Service Charges

22%

Brokerage Advisory, Commissions and Other

8%

Trust and Investment Management

Noninterest Income

Charges and Fees on Loans Cash Network

1%