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%
