Wells Fargo & Company Q4 2024 Earnings Report

Wells Fargo & Company EPS Results

• Actual EPS: $1.43
• Consensus EPS: $1.34
• Beat/Miss: Beat by +$0.09
• One Year Ago EPS: $0.86

Wells Fargo & Company Revenue Results

• Actual Revenue: $20.38 billion
• Expected Revenue: $20.58 billion
• Beat/Miss: Missed by -$199.40 million
• YoY Revenue Growth: -0.50%

Wells Fargo & Company Announcement Details

• Quarter: Q4 2024
• Date: 1/15/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, January 15, 2025
• Conference Call Time: 10:00AM ET

Wells Fargo & Company (NYSE:WFC) is a diversified financial services holding company that operates through multiple business segments, including Community Banking, Wholesale Banking, Wealth and Investment Management, and Consumer Lending. The company provides a wide range of banking, mortgage, credit card, and consumer finance products for individuals and small businesses, as well as commercial loans, treasury management, and capital markets services for corporate and institutional clients. Its investment and insurance services encompass brokerage, retirement planning, trust and estate administration, and asset management solutions.

Founded in 1852 and headquartered in San Francisco, California, Wells Fargo has grown to become one of the largest banks in the United States by total assets. The company serves millions of customers through an extensive network of branches and ATMs, complemented by online and mobile banking platforms designed to enhance convenience and accessibility. In addition to its core U.S. operations, Wells Fargo offers specialized corporate and investment banking services in select international markets, including offices in Europe, Asia, and Latin America.

Since taking on the role of President and Chief Executive Officer in October 2019, Charles W. Scharf has guided the company’s efforts to strengthen risk management, streamline organizational processes, and advance digital capabilities. Wells Fargo’s senior leadership and board of directors oversee strategic priorities focused on operational excellence, customer experience, and sustainable growth. The company maintains a commitment to environmental, social, and governance (ESG) initiatives, supporting affordable housing, community development, and small business lending across the markets it serves.

Wells Fargo & Company Q4 2024 Earnings Call Transcript

Key Takeaways

• Wells Fargo reported Q4 net income of $5.1 billion and EPS of $1.43, up 11% YoY, with 15% fee revenue growth largely offsetting net interest income declines and a 12% reduction in expenses from efficiency initiatives.
• The bank achieved a major regulatory milestone as the OCC terminated its 2016 consent order on sales practices—its sixth such order closed since 2019—while continuing to invest heavily in strengthening its risk and control infrastructure.
• Customer engagement accelerated with 2.4 million new credit card accounts and $17 billion in additional card spend in 2024, a new Volkswagen/Audi auto‐finance partnership, 1.5 million net mobile users added, and over 40% of consumer checking accounts opened digitally.
• For 2025, Wells Fargo expects net interest income to rise 1%–3% and noninterest expenses around $54.2 billion, supported by $2.4 billion in efficiency savings and targeted investments in technology, branches, and risk capabilities, while aiming to lift ROTCE from 13.4% toward a 15% goal.
• Capital returns remained robust as the bank repurchased $20 billion of common stock in 2024 (a 64% increase YoY), raised its dividend by 15%, and maintained a strong CET1 ratio of 11.1% versus a 9.8% requirement.

Presentation

[Operator]

Welcome and thank you for joining the Wells Fargo 4th Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. 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.

[John Campbell, Director of Investor Relations at Wells Fargo]

Good morning. Thank you for joining our call today where our CEO, Charlie Sharp and our CFO, Mike Sanimasimo will discuss 4th quarter results and answer your questions. This call is being recorded. Before we get started, I would like to remind you that our 4th quarter earnings materials, including the release, financial supplement and presentation deck are available on our website at wellsfargo.com. I'd also like to caution you that we may make forward looking statements during today's call that are subject to risks and uncertainties.

[John Campbell, Director of Investor Relations at Wells Fargo]

Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8 ks filed today containing our earnings materials. Information about any non GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings and the earnings materials available on our website. I will now turn the call over to Charlie.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Thanks, John. Let me start by acknowledging the unbelievable devastation from the Los Angeles wildfires.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Our hearts go out to everyone who's been affected and we're committed to helping rebuild their lives, businesses and communities. I also want to thank our employees who are working hard to support our customers, many of whom who have been impacted themselves. Turning to Wells Fargo's performance, I'll make some brief comments about our results and update you on our priorities. I'll then turn the call over to Mike to review Q4 results as well as our net interest income and expense expectations for 2025 before we take your questions. Let me start with some general comments.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Our solid performance this quarter taps a year of significant progress for Wells Fargo across multiple areas. Our earnings profile continues to improve. We are seeing the benefit from investments we're making to increase growth and improve how we serve our customers and communities. We maintained a strong balance sheet. We returned $25,000,000 capital to shareholders and we made significant progress on our risk and control work.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

We grew net income and our diluted earnings per share was up 11% from a year ago. After I arrived, we reviewed our businesses and sold or scaled back several which reduced revenues in the shorter term and increased investments in others. We also made a conscious effort to diversify revenues and reduce our reliance on net interest income. In 2024, our strong fee based revenue growth of 15% from a year ago largely offset the expected decline in net interest income reflecting these efforts. Our disciplined approach to managing expense levels has been consistent and an important part of our success.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

We increased investments in areas that are important for our future and generated efficiencies to help fund those opportunities. Overall, expenses declined from a year ago, benefiting from lower FDIC and severance expenses as well as the impact of our efficiency initiatives, which have helped drive headcount reductions every quarter since Q3 of 2020. We maintained our strong credit discipline and credit performance was relatively stable throughout the year and consistent with our expectations. Average loans declined throughout the year as credit card as growth in credit card balances was offset by declines in most other asset classes, reflecting weak loan demand as well as credit tightening actions. Average deposits grew from Q4 2023 with growth in our deposit gathering businesses enabling us to reduce higher cost CDs issued by corporate treasury.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

We've been actively returning excess capital over the past 5 years and that has resulted in average common shares outstanding decreasing by 21% since Q4 2019. This year, we increased our common stock dividend per share by 15% and repurchased approximately $20,000,000,000 of common stock, up 64% from a year ago. Regarding our strategic priorities, I'm very proud of the progress we've made on our risk and control work and it remains our top priority and closing consent orders is an important sign of progress. Early last year, the OCC terminated a consent order it issued in 2016 regarding self practices. The closure of this order was an important milestone and is confirmation that we operate much differently today.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

This was the 6th consent order terminated by our regulators since I joined Wells Fargo in 2019. Our operational risk and compliance infrastructure is greatly trained changed from when I arrived. And while we are not done, I'm confident that we will successfully complete the work required in our consent orders and embed an operational risk and compliance mindset into our culture. Our results also show our progress on the other strategic priorities that we have. Improving our credit card platform is an important strategic objective and our progress here is clear.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Since 2021, we have rolled out a total of 11 new cards, including 4 new consumer cards and a new small business card in 2024. Our new product offerings continue to be well received by both existing customers and customers new to Wells Fargo with over 2,400,000 new credit card accounts opened in 2024. We've done this while maintaining our credit standards. The momentum in this business is also demonstrated by strong credit card spend, up over $17,000,000,000 from a year ago. In our auto business, we announced a multiyear co branded agreement where we will be the preferred purchase finance provider for Volkswagen and Audi brands in the United States starting in the first half of this year.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

We continued to reposition our home lending business as we execute on the strategic direction we announced in early 2023. We've reduced headcount by 47% and the amount of third party mortgage loan service by 28% since the announcement as we continue to streamline this business. The business is more profitable today and opportunities remain to improve. After several years of little to no growth as we focused on satisfying the requirements of our consent orders, we are starting to generate growth and increased customer engagement in our Consumer, Small and Business Banking segment. We had a more meaningful growth in net checking accounts in 2024 and importantly, most of that growth came in the form of more valuable primary checking accounts.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

We had over $10,000,000,000 debit card transactions last year, up 2% from a year ago, the highest annual volume in our history. We accelerated our efforts to refurbish our branches, completing 730 in 2024. We continued to make enhancements to our mobile app, including making it significantly easier to open accounts. And in the Q4 over 40% of consumer checking accounts were opened digitally. We grew mobile active customers by 1,500,000 in 2024, up 5% from a year ago.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Our customers are also increasingly using Zelle and we had over $1,000,000,000 Zelle transactions in 2024, up 22% from a year ago. We introduced Wells Fargo Premier to better serve our affluent clients. We're starting to see some early benefits from the enhancements we've made. We increased the number of Premier bankers by 8% and branch based financial advisors by 5% from a year ago. We focus with a focus on increasing the number of bankers and advisors in top locations.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

We have enhanced our customer relationship management capabilities for our bankers and advisors. This has increased collaboration driving $23,000,000,000 in net asset flows into wealth and investment management Premier channel last year. Deposit and investment balances for Premier clients grew steadily throughout the year and increased approximately 10% from a year ago. This remains a significant area of opportunity for us. Turning to our commercial business.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

In the commercial bank, we're focused on adding relationship managers and business development officers in underpenetrated and growth markets to drive new client acquisition, future revenue growth and we expect to hire even more in 2025. We created a strategic partnership with Centerbridge Partners and introduced Overland Advisors to better service our commercial bank customers with a direct lending product. We have targeted our investment banking capabilities towards our commercial banking clients. We're still early in these efforts, but we're starting to see results, including our investment banking market share with our commercial banking clients increasing by approximately 150 basis points in 2024, which includes helping some clients access capital markets for the first time. Additionally, we've been working closely with our clients to support their M and A activity, driving higher M and A related revenue.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

The opportunity remains significant. We continue to make investments in talent and technology to strengthen corporate investment banking. More than 75 new hires joined CIB since 2019 with many of these in key coverage and product groups within Trading and Banking and our revenue and share in many important areas is increasing, including in our Markets business where we've grown our U. S. Market share, including in credit trading, commodities and our equity cash and derivatives business.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

We also continue to make steady progress in growing our FX business with strong growth in both our institutional client base and volumes in 2024. We also grew our U. S. Market share in Investment Banking with share gains in debt and equity capital markets and increased revenue in our advisory business in 2024. We entered 2025 with solid pipeline in both capital markets and advisory, although market conditions can always change.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

I feel great about our progress and continue to believe we're just beginning to see the benefits of our investments. We've also continued to exit or sell businesses that are not in sync with our strategic priorities. And last year, we entered into a definitive agreement to sell the non agency third party servicing segment for our commercial mortgage servicing business. More broadly, the U. S.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Economy has performed very well and remained strong and lower inflation and unemployment position the economy well into 2025. We are predominantly a U. S. Bank. We succeed when the country succeeds.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

So the incoming administration support of U. S. Businesses and consumers gives us optimism as we look forward. Additionally, the incoming administration has signaled a more business friendly approach to policies and regulation, which should benefit the economy and our clients. Mike will talk more about our expectations for 2025.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

But as we start the New Year, I'm enthusiastic about the opportunities we have to drive higher returns across our businesses by growing revenue and managing expenses. I'm proud of the progress we made in 2024. I want to conclude by thanking everyone who works at Wells Fargo, their hard work for what they do every single day to support our customers, clients and communities. I'm excited about the momentum we're building and all that we can accomplish together in 2025. I will now turn the call over to Mike.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Thank you, Charlie, and good morning, everyone. We had solid results in the Q4, including net income of 5,100,000,000 or $1.43 per diluted common share. Underlying business performance was strong compared to a year ago. We grew fee income across most categories, maintained our expense and credit discipline and grew customer counts activity levels as we benefited from the investments that Charlie highlighted. We also grew net interest income from the 3rd quarter.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Our 4th quarter results included $863,000,000 or $0.26 per share of discrete tax benefits related to resolution of prior period matters. This benefit was largely offset by $647,000,000 or $0.15 per share of severance expense and $448,000,000 or $0.10 per share of net losses on the sale of debt securities as we took the opportunity to further reposition a portion of the investment portfolio. This includes the sale of approximately $80,000,000,000 of securities, which we reinvested into higher yielding securities. The estimated payback period for this repositioning is approximately 2.5 years. Turning to Slide 4.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Net interest income grew $146,000,000 or 1% from the 3rd quarter, the first linked quarter increase since the Q4 of 2022. The increase was driven by higher customer deposit balances, which enabled us to continue to reduce higher cost target funding. Moving to Slide 5. Average loans were down from both the 3rd quarter and a year ago. Period end balances grew $3,000,000,000 from the 3rd quarter with growth in commercial and industrial loans and credit card loans more than offsetting declines in most other categories.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Average deposits increased both from the 3rd quarter and a year ago with growth in our customer deposits enabling us to reduce higher cost of corporate treasury deposits. Average deposit cost declined 18 basis points from the 3rd quarter as deposit cost stabilized or declined across all of our deposit gathering businesses. In response to the Federal Reserve rate cuts, we have reduced standard pricing for commercial clients as well as pricing for promotional deposit offers and CDs in our consumer businesses. Lower deposit costs also reflected the slowdown of customer migration to higher yielding deposits. Additionally, lower cost consumer deposit balances and checking and savings accounts have continued to stabilize.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Turning to Slide 6. We had strong growth in non interest income, up 11% from a year ago benefiting from the investments we've been making in our businesses as well as market conditions. This growth was diversified with each of our operating segments generating growth from a year ago. I'll highlight the specific drivers of non interest income when discussing our operating segment results. Turning to expenses on Slide 7.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Non interest expense declined 12% from a year ago driven by the lower FDIC special assessment. Excluding this assessment, expenses were relatively stable as lower severance expense and the impact of our efficiency initiatives was largely offset by higher revenue related compensation, predominantly in wealth and investment management as well as higher technology and equipment expense. Turning to credit quality on Slide 8. Credit performance has been relatively stable with our net loan charge off ratio the same as a year ago and up 4 basis points from the 3rd quarter. Commercial net loan charge offs increased $80,000,000 from the 3rd quarter to 30 basis points of average loans driven by the commercial real estate office portfolio.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Commercial real estate office fundamentals have not changed and remain weak. We still expect commercial real estate office losses to be lumpy as we continue to actively work with our clients. Consumer net loan charge offs increased $20,000,000 from the Q3 to 85 basis points of average loans driven by higher losses in the credit card portfolio, which was consistent with our expectations. Non performing assets declined 5% from the 3rd quarter, driven by a $390,000,000 decline in commercial real estate office non accrual loans, which includes pay downs and net loan charge offs. Moving to Slide 9.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Our allowance for credit losses from loans was down $103,000,000 from the 3rd quarter with modest declines across most asset classes, partially offset by the increase in allowance for credit card loans driven by higher loan balances. Our allowance coverage for total loans has been relatively stable over the past 5 quarters as credit trends have remained fairly consistent. Our allowance coverage for our corporate and investment banking commercial real estate office portfolio increased 12% as loan balances continued to decline and allowance levels were relatively stable. Turning to capital and liquidity on Slide 10. Our capital position remains strong and our CET1 ratio of 11.1% continues to be well above our CET1 regulatory minimum plus buffers of 9.8%.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

We've repurchased $4,000,000,000 of common stock in the Q4 and approximately $20,000,000,000 for the year, reducing common shares outstanding by 9% from a year ago. Turning to our operating segment starting with Consumer Banking and Lending on Slide 11. Consumer Small and Business Banking revenue declined 7% from a year ago, driven by lower net interest income, reflecting the impact of customers migrating to higher yielding deposit products. However, the pace of the migration continues to slow. Home lending revenue grew 2% from a year ago driven by higher mortgage banking fees.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Credit card revenue grew 3% from a year ago as loan balances increased and card fees grew from a higher point of sale volume. We continue to be pleased with the performance of new products that we launched over the last three and a half years with credit performing as expected and strong growth in new accounts and usage. Auto revenue decreased 21% from a year ago driven by lower loan balances reflecting previous credit tightening actions and continued loan spread compression. The decline in personal lending revenue from a year ago is also driven by lower loan balances and loan spread compression. Turning to some key business drivers on Slide 12.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Retail mortgage originations increased 31% from a year ago with higher purchase volume as well as stronger refinance volume early in the quarter when interest rates were lower. Debit card spending was strong in the 4th quarter and increased $4,900,000,000 or 4% from a year ago and credit card spending was up 9% from a year ago with growth in all categories except fuel. Turning to Commercial Banking results on Slide 13. Middle Market Banking revenue was down 2% from a year ago driven by lower net interest income reflecting higher deposit costs, partially offset by growth in treasury management fees. Asset based lending and leasing revenue decreased 12% from a year ago, driven by lower net interest income and lease income, partially offset by improved results from our equity investments.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Average loan balances in the 4th quarter were down 1% compared with a year ago as growth in middle market banking was more than offset by lower balances in asset based lending. While our commercial clients are generally more optimistic, we did not see a meaningful change in loan demand in the 4th quarter as many clients remain cautious. Turning to Corporate and Investment Banking on Slide 14. Banking revenue was down 4% from a year ago driven by higher deposit costs and lower loan balances. This decline was partially offset by higher investment banking revenue from increased activity in in Equity and Debt Capital Markets as well as higher advisory fees.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Commercial Real Estate revenue decreased 1% from a year ago reflecting the impact of lower loan balances partially offset by higher capital markets revenue from higher volumes in commercial mortgage backed securities, real estate loan syndications and multifamily capital as market sentiment improved. Markets revenue was down 5% from a year ago driven by lower revenues in equities and municipals, partially offset by stronger performance than most other fixed income products. Our 4th quarter results reflected the implementation of a change to incorporate funding valuation adjustments for our derivatives, which resulted in a loss of $85,000,000 The decline from the Q3 was also driven by seasonally lower trading activity across most asset classes. Average loans declined 6% from a year ago, driven by continued reductions in our commercial real estate portfolio, driven by office as well as lower loan balances in banking as clients continue to access capital markets for funding. On Slide 15, Wealth and Investment Management revenue increased 8% compared with a year ago due to higher asset based fees, driven by increased market valuations.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

As a reminder, the majority of Wynn advisory assets are priced at the beginning of the quarter, so first quarter results will reflect market valuations as of January 1, which were about from both a year ago and from October 1. Average deposits increased by 16% and average loans grew by 2% from a year ago, which have both benefited from product enhancements and pricing improvements that provide value to our clients. The growth in deposits also reflected the slowdown in migration of cash alternatives with balances in those products lower than a year ago. Slide 16 highlights our corporate results. Revenue increased from a year ago driven by improved results from our venture capital investments.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

After having impairments on these investments for the past 2 years, we had net gains every quarter in 2024 with improved performance in the second half of the year. Now turning to our outlook on Slide 17. I'll go into more detail on our 2025 expectations for net interest income and non interest expense in the next few slides. But first, I want to highlight the progress we've made on improving our returns. When we first started discussing the outlook for our returns in the Q4 of 2020, we had an 8% ROTCE.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Over the past 4 years, we have been successfully executing on our efficiency initiatives, diversifying our sources of revenue by investing in our businesses to better serve our customers and drive growth and returning excess capital to shareholders. These actions helped to improve our ROTCE to 13.4% in 2024. We still believe we have an achievable path to a sustainable ROTCE of 15% as we continue to make progress on transforming the company including the priorities highlighted earlier on the call. On Slide 18, we provide our expectations for net interest income for 2025. We had $47,700,000,000 of net interest income in 2024, which was within the expected range we provided at the start of last year.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Net interest income declined sequentially for the 1st 3 quarters of the year before growing modestly in the Q4. Our 4th quarter annualized net interest income was $47,000,000,000 or approximately $700,000,000 lower than full year 2024. Our current expectation is that full year 2025 net interest income will be approximately 1% to 3% higher than full year 2024 or approximately 3% to 5% higher than the annualized Q4 of 2024 net interest income. We expect net interest income will be relatively stable in the first half of twenty twenty five, which includes the impact from 2 fewer days in the Q1 with more growth in second half of the year. Underpinning our expectations are a series of key assumptions including using the recent forward rate curve, which includes between 12 reserve rate cuts, given our modestly asset sensitive position, this will be a slight headwind to net interest income.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Average loans are expected to grow modestly from Q4 2024 to Q4 2025, driven by anticipated growth in the Corporate Investment Bank Markets Group and CIB Banking, as well as anticipated growth in our auto and credit card portfolios. Deposits in all our deposit gathering businesses are expected to grow modestly, which would allow us to further reduce higher cost market funding. Reinvestment of lower yielding securities into higher yielding assets. Our expectation also reflects the benefits of the actions we took in the second half of twenty twenty four to reposition the investment portfolio and trading related net interest income is expected to be higher due to lower interest rates, which would largely be offset by lower trading related non interest income. As we've done in prior years for the purposes of estimating net interest income, we are also assuming the asset capital remain in place throughout the year.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Ultimately, the amount of net interest income we earn in 2025 will depend on a variety of factors, many of which are uncertain, including the absolute level of interest rates, the shape of the curve, deposit balances, mix and pricing and loan demand. Now turning to our 2025 expense expectations on Slide 19. Following the waterfall on the slide from left to right, we reported $54,600,000,000 of non interest expense in 2024, which includes the $647,000,000 of severance expense in the Q4 that was not contemplated in our guidance. Our 2025 expense expectation includes operating losses of approximately $1,100,000,000 which is approximately $700,000,000 lower than operating losses in 2024. Looking at the next bar, we expect severance expense to be approximately $500,000,000 lower in 2025 given the expense accrual we took in the Q4 of 2024.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

We expect Wealth and Investment Management revenue related expenses to increase by approximately $600,000,000 in 2025. As a reminder, this is a good thing as these higher expenses are largely offset by higher non interest income. Actual revenue related expenses will be a function of market levels with the biggest driver being the equity markets. Our outlook assumes the S and P 500 will be up modestly at the current levels, but clearly the ultimate performance of the markets is uncertain. We expect all other expenses to be up approximately $200,000,000 with the impact of efficiency initiatives more than offset by higher investments and other expenses.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

We expect approximately $2,400,000,000 of gross expense reductions in 2025 due to efficiency initiatives. We've successfully delivered on more than $12,000,000,000 of gross expense saves since we started focusing on efficiency initiatives 4 years ago and we continue to believe we have opportunities to get more efficient across the company. Keep in mind, however, the resources needed to address our risk and control work are separate from our efficiency initiatives. There are 3 primary areas where we're expected to invest. First, we expect approximately $900,000,000 of incremental technology expense, including investments in infrastructure or business capabilities.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

2nd, we expect approximately $900,000,000 of incremental other investments, including the specific areas we highlight on the next slide. Finally, we expect other expenses to increase by approximately $800,000,000 including expected merit increases and performance based discretionary compensation. As a reminder, the Q1 has seasonally higher personnel expenses, which are expected to be $650,000,000 to $700,000,000 Putting this all together, we expect 2025 non interest expense to be approximately $54,200,000,000 On Slide 20, we provide some examples of our areas of focus for the investments, which are critical to better serving our customers and generating growth. Let me highlight a few. Building the right risk and control infrastructure remains our top priority and we will continue to invest in this important work.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

We continue to invest in technology and digital platforms to transform how we serve our both our consumer and commercial customers. This includes continuing the transition of our applications to the cloud, migrating into new data centers and investing in data platforms to drive more insights. We are continuing to upgrade our core lending capabilities, including improvements to our fulfillment and servicing systems, enhancing credit decisioning and strengthening fraud capabilities. To drive customer growth in the consumer businesses, we plan to continue scaling our marketing efforts, modernizing our branch footprint and increasing the number of premier bankers and financial advisors. We are also focused on onboarding more independent advisors as we continue building out our independent brokerage channel.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

In addition, we continue to improve our digital capabilities for our customers, specifically our mobile account opening and onboarding as well as Zelle. We plan to continue hiring in priority sectors to help drive growth in Investment Banking Capital Markets. We also plan to continue hiring relationship bankers within Commercial Banking to build out coverage in underpenetrated markets in key industries. In summary, our results in 2024 demonstrated the continued progress we've been making to improve our financial performance. We generated strong fee based revenue growth, reduced our expenses, maintained strong credit discipline, increased capital returns to shareholders and returned retained our strong capital position. I'm very pleased with the progress we've made so far.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

I'm excited about the additional opportunities we have to continue to drive improved performance. We will now take your questions.

[Operator]

At this time, we will now begin the question and answer session. Our first question comes from John McDonald of Truist Securities. Your line is open.

[John McDonald, Senior Research Analyst at Truist Securities]

Hi, good morning guys.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Hi, John.

[John McDonald, Senior Research Analyst at Truist Securities]

Mike, I was hoping you could unpack, the deposit expectations embedded in Slide 18 in the NII outlook. You talked about stabilization of retail volumes and mix. Just kind of wanted to get a little more detail about what you're assuming for retail deposit growth mix and how that plays into the pay down of higher cost borrowings throughout the year in your plan?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes, sure. Thanks, John. And welcome back to and welcome to your new seat.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Look, I think as we've sort of talked about now, I guess, for the last 3 or 4 quarters, we've been seeing less and less migration out of non interest bearing to interest bearing. You got to look through some of the product consolidations we did in the Q3. So there's some noise there that we talked about last quarter. But so we've seen continued sort of stabilization of the mix between non interest bearing and interest bearing. And so that's sort of helpful as you go into this year.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And we expect that to continue as we look forward and then start to see absolute growth across the consumer franchise. As you know, in the interest bearing products and the consumer side, pricing hasn't really moved much through the cycle. And so you're not seeing standard pricing change much, but you are seeing the promotional savings and CD rates continue to come down over the last 90, 120 days as rates have started to move. And so we would expect that mix to stabilize. We expect some absolute growth and we don't expect pricing pressure to come through on the consumer side.

[John McDonald, Senior Research Analyst at Truist Securities]

Okay. Got it. And then just wanted to shift gears and ask about credit card profitability. When you're in growth mode, credit card experience is a drag from accounting on the upfront acquisition costs and provision. Where are you on card profitability now?

[John McDonald, Senior Research Analyst at Truist Securities]

Is that an upside driver to ROE as more of the balances roll off teasers and some of that upfront expense wanes?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes, certainly is. I think as you look backwards a little bit, we started launching the new products three and a half years ago. So the first of the vintages came on starting in August July, August a few years ago. And so we're just starting to kind of see those earliest vintages mature and become more profitable. So we're still early days in terms of seeing that profitability really come through in the P and L.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

I'd say, obviously, the factors you got to think about as you sort of look through that is the credit box and the credit performance. That's all behaving right on top of what we would have modeled. So we're not seeing any concerns flow through from what we modeled across all of the different new products. And we're seeing as Charlie highlighted in his script, we're seeing good new account growth continue across the different products there. And so it's just a matter of time for that to really sort of more meaningfully come into the P and L.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

It really hasn't contributed much at all yet as you sort of look at it, but it will start to come through over the next year or 2.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

And John, this is Charlie. The only thing I would add, I mentioned this in my prepared remarks, but the two places that we think of is where we've already taken actions and assist execution now which will improve profitability. 1 is card as you pointed out. And the second I referenced is we're still not at the level of profitability where we should be in home lending.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Just given as we continue to wind down that servicing book. And so we think those two things will be helpful for us as we look forward.

[John McDonald, Senior Research Analyst at Truist Securities]

Got it. Thank you.

[Operator]

The next question will come from Ebrahim Poonawala of Bank of America. Your line is open.

[Ebrahim Poonawala, Managing Director - Head of North American Banks Research at Bank of America Merrill Lynch]

Hey, good morning. I guess I just wanted to go back maybe Charlie to something you talked about back in December on the back of the lifting of the OCC consent order. As we think about just the ROE trajectory for the bank, it will be useful if you can maybe give some tangible examples of things that you've been able to do post the lifting of that consent order in terms of incenting branch employees? And where in the balance sheet or in the P and L we should expect that to show up maybe as early as 2025?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes. Ebrahim, it's Mike. Maybe I'll start and Charlie can chime in if he wants to add. I think what you're referencing just to make sure everyone's clear is the sales practices consent order that got lifted last February. As part of the work we had to do when that came on, we dialed back much of what you would expect to see in the branch system around incentive plans and sales goals and the like and to make sure that we built rebuilt the control framework and all of those things that we would do there in a way that would make sure that the problems of the past don't reoccur.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And so as we saw that concentrator go away, we've been able to more fully roll out a standard sort of incentive framework across the branches. We have been piloting it for a while in a small subset. And as you would expect, you would see different performance and better performance in those pilot branches. And that's across new checking growth, credit card accounts and the like. And so we're still in the early days to see the benefits of that system be put in place because it got rolled out as throughout 2024.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And so we would expect to kind of see the results start to come through more meaningfully over the near term, medium term.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Maybe just a little more color to what Mike said. I think again if you think back that was hugely important that we satisfied the obligations that existed in that consent order and that we were comfortable with the control environment that existed. And so, we took away, as Mike said, a whole series of things. It's not just one thing, it was compensation, it's reporting, goals, just the whole way we manage the system.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

As we were building out everything that would make us and our regulators comfortable as we managed the system in the future similar to the way other people manage their system that if something if someone were to be doing something that wasn't appropriate that we had the right controls and reporting in place to cash it. So it took a long time to build that out, but to have the confidence that we could add back a lot of these management mechanisms that you have in place. And so, no one individual thing is earth shattering. But when you take compensation, when you take reporting, when you take management routines, when you take all those things and put them together, at the same time, you're monitoring all the controls that you've built. That's what gives us the confidence to go forward with the system that we think can attract more customers and do more with our existing customers.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

But within a very tightly controlled framework that we feel comfortable relative to how we manage the risk that's there.

[Ebrahim Poonawala, Managing Director - Head of North American Banks Research at Bank of America Merrill Lynch]

All right. Thank you, George.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And Ebrahim, I'd say, Charlie and a lot of other folks here have seen this before and we're confident we're going to get the results we think out of it.

[Ebrahim Poonawala, Managing Director - Head of North American Banks Research at Bank of America Merrill Lynch]

That's helpful color. Thanks for that. And I guess just maybe following up, So thanks Mike for running through the expense investment priorities. As we think about the severance charge in the Q4 and runway to extract additional efficiencies relative to your $54,000,000,000.2 expense guide, How should we think about like are we getting to a point where some of the low hanging fruit is done and expenses generally move higher given the investments and we should at least anticipate positive operating leverage on the way forward? Or do you still see opportunities to meaningfully cut costs, make things more efficient, especially in the consumer bank?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes. I think Ebrahim as we sort of look at what you see there and what we're doing in 2025, it's no different than the thinking is no different than it's been now for the last 4 or 5 years that we've both been here. I think as you look at the company, we still feel like there's a significant amount of opportunity to drive efficiency and that's what you see in 2025. And I know we've used this analogy a lot, but it is just like peeling an onion. And as you sort of look at the next layer down, you find more efficiency, you bring better technology, you bring better automation, which by the way saves us money, but also in a lot of cases improves the client experience for our customers.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And so we as we come in every day, we still think about it the same way that we've been thinking about for a while and that's what you see in the expectations for this year.

[Ebrahim Poonawala, Managing Director - Head of North American Banks Research at Bank of America Merrill Lynch]

Got it. Thank you.

[Operator]

The next question comes from John Pancari of Evercore. Your line is open.

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

Good morning.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Hi, John.

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

On the 2020 on the NII outlook, I know you said it includes modest loan growth expectation for 2025. I just want to see if you can elaborate a little bit on how we could think about that in terms of level and trajectory. Should it be near GDP?

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

Or how should we think about that? And then can you in addition to the maybe sizing up the most likely drivers, maybe can you also give us a little bit of color on the pace of expected incremental runoff of balances as we look at the growth outlook? Thanks.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes. So maybe I'll start on the loan side. So as I said in my commentary like we're expecting to see a little bit more of it as we get to the middle and second half of next year. So we may see a little bit in the first half, but it's not it will be more meaningful as we go later in the year. I would think of it as like low to mid single digits depending on the category of loans, but obviously some of that will be dependent upon the overall backdrop that we're in.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

As you look at the consumer side of the picture, mortgages will likely continue to decline a little bit given sort of the rate environment we're in. We did see a little bit of incremental refinance activity in the Q4, but now with rates back up that seems to be back down again. We should see some card growth as we go through the year. And we should start to see some growth in the auto portfolio as well. On the commercial side, some of it will be new account growth new client growth as we go through the year.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

We've been adding bankers across different categories. We do expect to see some growth in the markets business as well that drives some loan growth. And so it should come from a lot of a little bit from a lot of different areas across the population, but I would expect to see that a little bit more as we go into middle and second half of the year.

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

Great. Thanks, Mike. And then separately on capital, 11.1 percent CE T1, pretty solid and you still bought back about $4,000,000,000 this quarter. How should we think about the buyback appetite as you look at 2025? Assuming that you do see some improvement in organic growth opportunities, how could that influence your pace of buyback?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Thanks. Yes. I mean, look it's the standard sort of waterfall of decision making that goes into it, right? If we've got good organic growth opportunities across loans and other categories, we're going to to serve customers that's always first. We still have the asset cap in place.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

So there's some limits to that. We'll look at all the different risks that are out there across the different categories of items that we got to be concerned about. And then buybacks will kind of be the rest. And given we've got the asset cap and given we've got limited organic growth that depending on the quarter you're in, I think you'll see us continue to return capital back to shareholders like we've done now for the last number of years. At this point, we don't believe we need to be higher than where we are from a CET1 percentage.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And so we'll manage that based on those opportunities and those decisions that we talked about.

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

Great. Thanks, Mike.

[Operator]

The next question comes from Erika Najarian of UBS. Your line is open.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

Hi, good morning. Clearly, the way the stock has reacted, the message from your shareholders has been an embrace of Wells Fargo is more than a remediation story. And thinking about the return improvement even beyond the asset cap resolution and the consent order. And I guess to that end, Charlie and Mike, you have a medium term ROTI target of 15%. In 2024, you generated almost 13.5%.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

And by your own commentary, you still have places like card and home lending where your profitability should improve from here. You're carrying excess capital. You're under the asset cap. Obviously, you're making great efforts in CIB in terms of really using your balance sheet to generate even more fees and off of your relationships as well. And as we think about that 15%, especially in the context of you have one money center that has to hold more capital than you that has a 17% target and another money center that has to hold more capital than you and has a 15% target.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

I guess I'm wondering if your shareholders are thinking about fully realized wells beyond the remediation story. What is the true natural return of this business?

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Yes. Let me, Eric, thanks for that. I think I guess what we would say is, well, let me just repeat what we've said in the past, right, which is, when we look at our businesses, we look at each one individually and we compare ourselves to the best people out there in terms of performance. And it's both returns and growth that we look at because, again other than our home lending business, and I would say the auto business generally, we do expect, that our businesses given the quality should be growing at rates commensurate with some of the best out there in addition to having some of the strongest returns. So when you compare us to other people, right, you've got to look at the mix of business, you've got to look at the size of our different businesses versus others.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

But when we think about where we ultimately what our aspirations are, it is based upon where the others are by business and what our business mix looks like. Relative to how we think about our own targets and what the timing is, I guess we would just say, we got to think about it one step at a time. And we don't want to get ahead of ourselves. We've said we want to get to 15%. We're close, but we're not there.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

And so we want to achieve that for sure. We have to get out of these orders that we still have that do constrain us. And so there's a point at which we've said that not just yourself, but we too will address where we think we go from the 15% but in due time.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

Great. Thank you.

[Operator]

The next question comes from Betsy Graseck of Morgan Stanley. Your line is open.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Betsy, you there?

[Betsy Graseck, Managing Director at Morgan Stanley]

Sorry. Hi, good morning. Thank you. So two questions. 1, just to follow-up on the last question that Eric asked.

[Betsy Graseck, Managing Director at Morgan Stanley]

On the drivers, we're in the last mile. So congratulations, you're in the last mile to the 15%. And are you thinking about that last mile as being driven by revenue growth happening faster in the businesses that have the higher returns? Or are there still expenses to be cut out such that the expense ratio and the expense focus is what's going to drive that?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Betsy, it's Mike. I'll start. I'll go back to what we said at some point last year as reference point. But obviously there's multiple paths to get there depending on sort of the environment and what happens. But if you look at where we were talking about earlier in the call, you have the credit card business, you have the home lending business.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

As those two things get to sort of more mature a more mature return profile in the card business and we get to sort of the profitability improvement we want to see in home lending, You can make your own assumptions, but those two things alone probably get you pretty darn close. You can then look at growth we're getting in the Investment Bank, in Capital Markets, in Wealth. And so there's lots of different combinations that get you there. And that's why we feel very confident that we'll get to that 15%. And then reasonable people can have different opinions on exactly what gets you there first.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

But I think there are multiple paths to get there.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Let me just add to that which is Betsy for a second if I can. If you just look at what we've said for next year, right? We've given you an expense number, in terms of what our expectations are which are pretty close to what they are this year. And so we've given you our NII guidance which is also up from the prior year.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

So make your own assumptions on credit and fee income and you'll get a sense for what we to your question if it's expenses or revenues how we think we're going to get there. I mean, in terms of what those dynamics look like. The one thing I just do want to say though, when we think about returns, I think we feel really great about the prospects here. But as I said, we don't want to get ahead of ourselves. We've been very, very careful to make sure that we've got the latitude to spend whatever it is we need on all of the risk and operational things.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

And so that's still the case. And so even though we feel great about the progress and I've tried to give an indication of how we feel about that, We have to maintain that flexibility because that is the gating factor and the top priority. The second thing is, we've been very careful not to provide multi year guidance for expenses. And that's because as we continue to peel the onion back, we find opportunities. We try to also lay out in the presentation the point that we're not just reducing expenses and funding inflationary increases across the place. We're increasing the level of investment in technology and other things. And as we look towards the success that we have in different parts of the company as we invest. So as we see the positive results, we want the ability to make those decisions at each point in time as to how much more we want to invest.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

So, yes, if we didn't increase the level of investment or if we kind of cap that out, you could sit here and say, yes, lots of things with margins would continue to expand, returns would expand. You could get to some pretty significant numbers. But we're building the company for the future. And as long as we see the payoffs there, we want the latitude to do that. So we're very conscious of what our investors expect from us.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

We're very conscious of what we think the franchise can produce. But we do intend to build both a higher returning and a higher growth franchise and you're just starting to see that. And how that plays out from a timing perspective, that's what we're trying hard not to get boxed in on.

[Betsy Graseck, Managing Director at Morgan Stanley]

Totally get it. And it does feel like there's a bit of a shift at the margin to rev led profitability growth, my opinion, which is great. A lot of low hanging fruit is already on the expense side. And then just lastly on credit card, I understand Get It More Mature. There was the announcement during the quarter, I believe that Ray Fisher is stepping down. Could you help us understand what drove that decisioning?

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Sure.

[Betsy Graseck, Managing Director at Morgan Stanley]

Yes. And new management and what I assume it's going to be the same goals and everything. But if you we could just have a few thoughts on that whole situation. Thank you.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Yes, yes, yes. So, listen, when I Ray I've known Ray a long time. We've worked together for many, many years. When I came to Wells literally the I think it was the 1st or second day I was at Wells, the person who was running the card business told me that they had already accepted another job outside the company. So that had nothing I wasn't a part of that change.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

That was a decision that was made. And so asked Ray to join us and he's done a fabulous job. Ray, I think I don't know his exact age. I want to say We can give away his exact age, but he's old enough to deserve to retire. Yes.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Very well. Thank you, Mike. Very well put. He's done a great job. And so this is a very natural progression and something that we've talked about relative to his timing and what his expectations are.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

So, we've got a great team in place that he's built out. We've recruited a great leader from outside the company, Ed O'Lip, who joins us, I believe sometime in February. And the strategy is the same. Nothing is going to change. We've had lots of conversations about what we're doing and what the opportunities are.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

And I think Ed's super excited about both what we've done but continuing to execute along the lines that we've laid out for you all.

[Betsy Graseck, Managing Director at Morgan Stanley]

Okay. And you'll announce the new head when the time is appropriate, right?

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

We have already.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

It's in the we have Betsy. John will send you the press release.

[Betsy Graseck, Managing Director at Morgan Stanley]

Thank you. Sorry about that.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

We sent it out. To be fair, we sent it out internally and there was an article this past week pointing it out.

[Betsy Graseck, Managing Director at Morgan Stanley]

That picked it up. Okay. All right. Thank you.

[Operator]

The next question comes from Matt O'Connor of Deutsche Bank. Your line is open.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Good morning. Obviously, rate volatility is quite high here. So how do we think about the rate sensitivity to your net interest income if rates end up being a little bit higher? Obviously, it seems like it's structurally good. But help frame some of the sensitivity to the guidance that you put out there from changes in rates? Thanks.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes, Matt. And obviously, we'll update the sensitivity in the Q or the K, I guess, when you get it. But we're still marginally asset sensitive, as I said in my script. But the balance sheet has sort of naturally gotten less sensitive over the last number of quarters. So rates coming down as I said in the guidance is a slight headwind to sort of our estimates.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And if they hold a little bit higher than what was in the forwards then I think that will be a slight positive. So obviously, we're a little less we've become less rate sensitive over the last number of quarters, but it's still a little bit asset sensitive.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Okay. That's helpful. And then just on trading, obviously, you guys have been executing really well for a few years now. And I don't want to make too much of just 1 quarter. But even if we strip out the fair value adjustment, the trading was still down year over year.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Obviously, the peers are kind of implying up, I don't know, 15%, 20% plus. So just maybe talk a bit about was there anything unusual this quarter that saw weaker trading? And again, I appreciate last year was a strong quarter, but it did jump out. Thanks.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes. It was really about last year being a strong quarter then this year being a weak quarter. Nothing's changed. There's no there's nothing abnormal underneath the surface. Nothing's changed in sort of our approach there.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And obviously, the businesses are quite different when you look at peers. So I do think you have to look through the results a little bit given the global nature and maybe the risk that some of the others take.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Okay. Actually just on that last point, obviously we know you're more domestic, but your comment that others might take more risk. But how do you think you're being more conservative in trading?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Well, I just said you have to look at the risks they're taking. I'm not suggesting that I'm not going to I'm not trying to say anybody is taking more risk or not. But when you look at our business, we've been very, very disciplined about sort of the risk appetite that we have across the trading businesses. And much of the focus has been in places that are balance sheet friendly like FX given the asset cap and other areas.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

What we're seeing is just that the size of our business is materially smaller than the biggest folks out there.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

The complexity of the products is very, very different both because of the global nature but also some of the things we do. So it's just that. We just have a smaller less complex business.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Okay. That's helpful. Thank you.

[Operator]

The next question comes from David Long of Raymond James. Your line is open.

[David Long, Managing Director at Raymond James Financial]

Good morning, everyone. As it relates to auto, it just seems like a bit of a strategic shift after 3 years of seeing that portfolio decline. What are you seeing in that business that is increasing your appetite to grow it here forward?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes. I wouldn't position it as a strategic shift. But a couple of years ago now we took some tightening actions based on credit tightening act. There were 2 things going on. We took some credit tightening actions based on what we were seeing as what was happening in the market.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And that had an impact on originations. We also saw some pretty significant spread compression at different points over the last couple of years. And so our focus is not to be big. Our focus is to have a good returning sort of profitable business there. And so we backed away in certain areas.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

I think over time that starts to evolve and change and spreads we still spreads are a little bit better than they were a couple of years ago in some pockets. And so that's part of it. 2nd, Charlie highlighted it as well. We are continuing to invest in the auto business. We've been continuing to build out better capabilities to be a little bit more of a full spectrum lender across different pockets.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

That's a very small piece of what you're seeing in there. And then obviously the deal we signed with Volkswagen and Audi hasn't had any impact at this point. That will start to have a small impact as we get later in the year. And so it's still relatively small growth in the originations. We're only talking a couple of 1,000,000,000 year on year.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And so we'll see as it progresses throughout the year.

[David Long, Managing Director at Raymond James Financial]

Got it. Thanks for that color. And then the second question I had relates to the investment securities portfolio repositioning. And do you have certain internal payback maximums that you're willing to look at? Or do you need to have, a gain elsewhere in the bank before you look to take a loss in making some adjustments?

[David Long, Managing Director at Raymond James Financial]

What are the thought process that you go through to get you to the decision to actually act?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes. Look, I think we've acted twice. We're in the 3rd and the 4th quarter as we've sort of looked at different opportunities. We've been pretty disciplined about payback periods. So far in total, it's roughly 2, 2.5 year payback period across both of the repositionings we've done.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Could we do something that has a longer payback period? Maybe, but it's something we'll continue to evaluate based on what we're seeing in the market. But so far, we've been pretty disciplined about when we do it.

[David Long, Managing Director at Raymond James Financial]

Got it. Thank you. Appreciate it.

[Operator]

The next question comes from Vivek Janajah of JPMorgan. Your line is open.

[Vivek Juneja, Analyst at JP Morgan]

Thanks. Thanks for taking my question. Mike, a follow-up for you. On your guide for NII of plus 1% to plus 3% for 2025 full year, can you give us the guide for NII ex markets for 2025?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes. Vivek, that's not something we've historically provided. Again, given the size of our markets business and the contribution, and obviously, it's very sensitive to where short rates will end up going. There is an improvement embedded in the guide for trading related NII. That becomes that is very sensitive to where rates end up going.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

So it's not something we're going to disaggregate at this point.

[Vivek Juneja, Analyst at JP Morgan]

Okay. Thanks.

[Operator]

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

[Gerard Cassidy, Managing Director at RBC Capital Markets]

Hi, Charlie. Can you guys share with us, obviously there's geopolitical risks all around and I think many investors obviously are aware of those. Can you list for us the risks that you guys talk about outside of the geopolitical risk when you're running your business? What are the things because the outlook I think we all share the optimism for you and your peers for the upcoming year for banking. And what are the risks though that could maybe throw a curveball at us?

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Well, listen the biggest risk that we have that we spend the most time talking about is cyber at this point. Just away from the normal kicking around credit, interest rate, operational risk, all the types of things you would talk about. And so which is why we spend so much time on that and have the level of investment that we haven't put the resources into it. Listen, as I said, I think in my remarks, we feel optimistic about where we are going into 2025 both because of where the economy is and the strength that has existed as well as the business friendly approach from the incoming administration. What can I mean, bad things can happen? It could be related to conflict. It could be related to a surprise in the market. I mean those things are out there. We're prepared for them as we think about just the way we run the company.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

But there's no one risk that sticks out relative to just the things that you would do relative to how you run the business. The most important thing for us relative to just risk management and performance of the company away from these big tail risks is the strength of the U. S. Economy. The strength of the U.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

S. Economy will drive the levels of success for our customers both on the consumer and the wholesale side. And then we follow from their success. So anything that risks that is a risk for us.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

Very good. No, I'm very clear. As a follow-up and I apologize if this is putting the cart before the horse. You guys have obviously made great progress in resolving your regulatory issues. You talked on the call today about the OCC lifting obviously the cease and desist order earlier last year.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

And so when we get beyond these issues for you folks, obviously everybody talks about the asset cap and the Federal Reserve's cease and desist order. Can we talk about strategic planning going forward in terms of how you might because you have plenty of excess capital, how you might consider acquisitions? And in particular, what I'm interested in is pre pandemic and pre year asset cap, Wells deposit market share was over 10%, which is we all know no bank is permitted to buy a depository with the market shares over 10%. But now with the growth of the industry's deposits and you guys have been flat, you're below 10%. So would there and again, I apologize if this is the cart before the horse.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

But is there any consideration once this is all behind you as you guys look to grow through maybe acquisitions, depositories or investment banks? How are you guys looking at it from that standpoint?

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

Yes. Hey, Gerard, it's Mike. Look, we're 100% focused on all of the organic growth opportunities we have across each of the businesses. And that's and the plan that we have been executing that Charlie started when he got here 5 years ago is the same plan we're going to be executing post asset cap. And I think it just involves basic execution across all the priorities, whether it's in card, wealth, IB, capital markets, etcetera, etcetera.

[Michael Santomassimo, Senior EVP & CFO at Wells Fargo]

And so that's our focus. And because we think there's a tremendous amount of opportunity to build off of the positions we have in each of these businesses across the country.

[Gerard Cassidy, Managing Director at RBC Capital Markets]

Very good. Thank you.

[Operator]

And the last question for today's call will come from Saul Martinez of HSBC. Your line is open, sir.

[Saul Martinez, Head of US Financials Research at HSBC]

Hey, good morning. Thanks for taking my question. So, there was, you addressed in response to an earlier question, changes in the incentive framework across the branches. And there is this debate about the extent and how quickly an asset cap removal would kick start and allow for balance sheet growth. But I'm curious to hear if you think there are still operationalcultural constraints that you need to address to really capitalize on the growth opportunities across your businesses.

[Saul Martinez, Head of US Financials Research at HSBC]

In response to the sales scandal, you changed the compensation structure of the branches. As you mentioned, you've built in safeguards to prevent abuses. And maybe there is more of a cultural predilection to be more risk averse. But do you feel like these are factors you still need to address to sort of remove the shackles, create incentives that help you grow as you change more two way the growth mindset? If you could just maybe elaborate on those questions, please.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

Yes. Let me take a shot at it, Saul. I think, just knowing we think about it is, we are and we've been this way since I got here, which is very deliberate about how we go about business expansion. And whether it's an area like the card business where we started 5 years ago or the CIB, whether it's in trading or banking or in the private credit space that we're offering, something in the direct lending world for our commercial. We do we're very focused on doing all these in a very controlled way with the right risk framework and with all the right processes in place behind it.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

And so, I said in my remarks, we're not done yet in terms of all the things we have to deliver. But we are a very, very different company relative to the types of controls that exist today versus then. And so it's having those controls in place. It's just doing the testing and seeing that they're actually effective, is what gives us the confidence to grow. And so when we talk about the opportunities that we have and the things that we're doing, it's because we have the confidence in those things that we put in place.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

So when you talk about the shackles off and where we go, we just I mean those aren't things that we talk about. Those aren't things that we think about. What we think about is, that we are very disciplined in our approach in a very linear way towards where we are today versus where we want to go. And when we have the ability to grow the balance sheet from this point of view, we would expect to see the same. It's not we're not going to sit here and say the shackles are off.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

So therefore, the following 10 things are going to change materially. It's going to be disciplined, thoughtful, piece by piece in a very controlled way and only in places that are supported by the controls that we have in place.

[Saul Martinez, Head of US Financials Research at HSBC]

Okay. That's very helpful. Thank you.

[Charles Scharf, President and Chief Executive Officer at Wells Fargo]

All right. Well, listen, everyone, thank you very much. We appreciate it and we'll talk to you next quarter. Take care.

Participants

Executives

• Charles Scharf, President and Chief Executive Officer

Analysts

• John Campbell, Director of Investor Relations at Wells Fargo
• Michael Santomassimo, Senior EVP & CFO at Wells Fargo
• John McDonald, Senior Research Analyst at Truist Securities
• Ebrahim Poonawala, Managing Director - Head of North American Banks Research at Bank of America Merrill Lynch
• John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI
• Erika Najarian, Managing Director & Equity Research Analyst at UBS Group
• Betsy Graseck, Managing Director at Morgan Stanley
• Matthew O'Connor, Managing Director at Deutsche Bank
• David Long, Managing Director at Raymond James Financial
• Vivek Juneja, Analyst at JP Morgan
• Gerard Cassidy, Managing Director at RBC Capital Markets
• Saul Martinez, Head of US Financials Research at HSBC