2Q17 Quarterly Supplement
July 14, 2017
© 2017 Wells Fargo & Company. All rights reserved.
Wells Fargo 2Q17 Supplement 1
Appendix
Real estate 1-4 family mortgage portfolio 28
Consumer credit card portfolio 29
Auto portfolios 30
Student lending portfolio 31
Common Equity Tier 1 (Fully Phased-In) 32
Return on average tangible common equity
(ROTCE) 33
Forward-looking statements and
additional information 34
Table of contents
2Q17 Results
2Q17 Highlights Page 2
Year-over-year results 3
Balance Sheet and credit overview (linked quarter) 4
Income Statement overview (linked quarter) 5
Loans 6
Commercial loan trends 7
Consumer loan trends 8
Deposits 9
Net interest income 10
Noninterest income 11
Trading-related net interest income &
noninterest income 12
Noninterest expense and efficiency ratio 13
Noninterest expense analysis (reference for slides 15 &16) 14
Noninterest expense – linked quarter 15
Noninterest expense – year over year 16
Targeting $2 billion expense reduction by YE18 17-18
Community Banking 19
Community Banking metrics 20-21
Wholesale Banking 22
Wealth and Investment Management 23
Credit quality 24
Capital 25
2Q17 Summary 26
Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the quarter ended June 30,
2017, and may differ materially from the results and disclosures in this document due to, among other things, the completion of
final review procedures, the occurrence of subsequent
events, or the discovery of additional information.
Wells Fargo 2Q17 Supplement 3
5,048.5
4,966.8
2Q16 2Q17
1,236.7
1,301.2
2Q16 2Q17
11.7
12.5
2Q16 2Q17
5.6
5.8
2Q16 2Q17
950.8 956.9
2Q16 2Q17
22.2 22.2
2Q16 2Q17
Year-over-year results
Diluted earnings per common share
Net Income
($ in billions, except EPS)
Revenue
($ in billions)
Period-end Common Shares
Outstanding (shares in millions)
Average Deposits
($ in billions)
Average Loans
($ in billions)
Net Interest Income
($ in billions)
$1.01
$1.07
Wells Fargo 2Q17 Supplement 4
Balance Sheet and credit overview (linked quarter)
Loans 
Down $982 million driven by lower consumer loans
- Consumer loan balances reflected the anticipated decline in auto on tighter credit
underwriting standards, as well as continued paydowns in junior lien mortgage
loans
Cash and short-term
investments
Down $43.5 billion reflecting lower deposit balances and wholesale funding
paydowns
Trading assets Up $3.3 billion
Investment securities
Up $2.0 billion as ~$37 billion of gross purchases, a majority of which were
agency MBS, were largely offset by the sale of lower-yielding short-duration
securities, as well as run-off
Deposits Down $19.6 billion driven by seasonally lower consumer and commercial deposits,
partially offset by higher mortgage escrow
Long-term debt Down $17.6 billion as issuances were more than offset by maturities and net
Federal Home Loan Bank (FHLB) prepayments of $13.0 billion
- Issuances included $6.5 billion of parent TLAC-eligible senior debt securities
Short-term borrowings
Up $485 million
Common stock
outstanding
Common shares outstanding down 30.0 million on net share repurchases of $1.5
billion
Credit Net charge-offs of $655 million, down $150 million to 27 bps of average loans
(annualized)
Nonperforming assets of $9.8 billion, down $827 million
$100 million reserve release (1) reflected credit improvement across auto,
residential mortgage and commercial portfolios, partially
offset by deterioration in
unsecured consumer exposure, primarily credit card
Period-end balances. All comparisons are 2Q17 compared with 1Q17.
(1) Reserve build represents the amount by which the provision for credit losses exceeds net charge-offs, while reserve release represents the amount by which
net charge-offs exceed the provision for credit losses.
Wells Fargo 2Q17 Supplement 6
957.2 961.3 967.6 958.4 957.4
2Q16 3Q16 4Q16 1Q17 2Q17
950.8 957.5 964.1 963.6 956.9
2Q16 3Q16 4Q16 1Q17 2Q17
Loans
Total average loans of $956.9 billion up $6.1
billion, or 1%, YoY and down $6.7 billion,
or 1%, LQ
– Commercial loans down $1.1 billion LQ on
modestly lower commercial & industrial and
commercial real estate
– Consumer loans down $5.6 billion LQ driven by
a $2.4 billion decline in auto and a $2.1 billion
decline in consumer real estate
Total average loan yield of 4.36%, up 10 bps LQ
on
higher rates
Total loans increased $266 million YoY, and
declined $982 million LQ on a $2.5 billion decline
in auto
- Please see pages 7 and 8 for additional
information
Period-end
Average
Total average loan yield
Period-end Loans Outstanding
($ in billions)
Average Loans Outstanding
($ in billions)
4.16% 4.17% 4.20%
4.26% 4.36%
Wells Fargo 2Q17 Supplement 9
883.7 935.5 934.9
353.0 363.7 366.3
1,236.7 1,299.2 1,301.2
2Q16 1Q17 2Q17
Interest-bearing deposits Noninterest-bearing deposits
1,245.5
1,325.4 1,305.8
2Q16 1Q17 2Q17
Deposits
Deposits up $64.5 billion, or 5%, YoY and $2.0
billion LQ
- Noninterest-bearing deposits up $13.3 billion, or
4%, YoY and up $2.6 billion, or 1%, LQ
- Interest-bearing deposits up $51.2 billion, or
6%, YoY and down $522 million LQ
Average deposit cost of 21 bps, up 4 bps LQ and
10 bps YoY driven by increases in commercial
deposit pricing
Consumer and small business banking deposits (1)
of $760.1 billion, up 5% YoY and stable LQ
Total period-end deposits up $60.3 billion, or 5%,
YoY on an increase in commercial deposits, as well
as higher consumer and small business banking
balances (1)
Deposits down $19.6 billion, or 1%, LQ on
seasonality, partially offset by higher mortgage
escrow deposits
Primary consumer checking customers (2) in May
up 0.7% YoY
Average deposit cost
(1) Total deposits excluding mortgage escrow and wholesale deposits. Period-end and average consumer and small business banking deposits for 2Q17 included
$1.6 billion and $2.1 billion, respectively, and 1Q17 included $1.3 billion and $2.1 billion, respectively, of deposits related to our new Payments, Virtual
Solutions, and Innovation Group that involved realignment in fourth quarter 2016 of some personnel and business activities from Wholesale Banking to the
Community Banking operating segment.
(2) Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposits.
Average
Period-end
Average Deposits and Rates
($ in billions)
Period-end
Deposits
($ in billions)
0.11%
0.17%
0.21%
Wells Fargo 2Q17 Supplement 10
11,733 11,952
12,402 12,300
12,483
2Q16 3Q16 4Q16 1Q17 2Q17
Net interest income increased $750 million, or
6%, YoY, and increased $183 million, or 1%, LQ
as the benefit of repricing earning assets in
response to higher short-term interest rates
exceeded the cost of repricing liabilities, as well
as on one additional day in the quarter; variable
income was flat LQ
Average earning assets down $3.8 billion LQ
- Loans down $6.7 billion
- Investment securities down $3.0 billion
- Short-term investments/fed funds sold down
$2.2
billion
- Trading assets up $4.3 billion
- Other earnings assets up $3.8 billion
NIM of 2.90% up 3 bps LQ as the benefit from
higher short-term interest rates, disciplined
deposit pricing and a reduction in long-term debt,
was partially offset by the impact from lower loan
and investment securities balances
Net interest income
Net Interest Margin (NIM)
Net Interest Income
($ in millions)
2.86% 2.82% 2.87% 2.87%
2.90%
Wells Fargo 2Q17 Supplement 11
Noninterest income
Deposit service charges down $37 million LQ on
higher Earnings Credit Rate on higher interest rates,
and lower consumer and business checking service
charges
Trust and investment fees up $59 million primarily
on an 11% increase in investment banking fees
driven by higher equity and debt originations, as well
as higher asset-based fees
Card fees up $74 million on higher credit and debit
card purchase volumes
Other fees up $37 million on higher commercial real
estate brokerage commissions and higher loan fees
Mortgage banking down $80 million reflecting lower
servicing income and mortgage origination revenue
- Servicing income down $56 million primarily due to
lower net hedge results and higher prepayments
- Residential mortgage origination revenue down
$24 million reflecting lower production margins
while originations increased 27% due to
seasonality
Trading gains down $202 million
- Please see page 12 for additional information
Gains from equity investments down $215 million on
lower venture capital results
Other income up $249 million on a $309 million gain
on the sale of a Pick-a-Pay PCI loan portfolio, as well
as a favorable result from net hedge ineffectiveness
accounting ($21 million gain in 2Q17 vs. $193 million
loss in 1Q17), partially offset by lower income on
investments accounted for under the equity method
10,429 10,376
9,180
9,702 9,686
2Q16 3Q16 4Q16 1Q17 2Q17
($ in millions) 2Q17
vs
1Q17
vs
2Q16
Noninterest income
Service charges on deposit accounts $ 1,276 (3) % (4)
Trust and investment fees:
Brokerage advisory, commissions
and
other fees 2,329 - 2
Trust and investment management 837 1 -
Investment banking 463 11 10
Card fees 1,019 8 2
Other fees 902 4 -
Mortgage banking 1,148 (7) (19)
Insurance 280 1 (2)
Net gains from trading activities 237 (46) (28)
Net gains on debt securities 120 n.m. (73)
Net gains from equity investments 188 (53) (1)
Lease income 493 2 (1)
Other 394 n.m. (18)
Total noninterest income $ 9,686 - % (7)
Wells Fargo 2Q17 Supplement 12
Trading-related revenue of $839 million was down $151 million from 1Q17:
– Net interest income increased $51 million
• $44 million in net interest income associated with the periodic dividends and carry income on positions in
our equity and RMBS books, with offsetting losses in net gains on trading activities from the resulting
valuation on the associated assets (neutral to total trading-related revenue)
• Average trading asset balances up 5%
– Net gains/(losses) on trading activities decreased $202 million primarily on:
• $81 million lower deferred compensation plan investment results (largely offset in employee benefits
expense) ($86 million gain in 2Q17 vs. $167 million gain in 1Q17)
•
Lower market-making results reflected:
o Lower credit trading on weaker trading volumes in investment grade, high-yield and distressed debt
o Lower asset-backed finance trading on lower trading volumes in RMBS, ABS and CMBS
• $44 million trading loss resulting from RMBS and equity-related activity which is offset by carry income
and dividends from the associated assets that were recognized in net interest income
• $24 million decline in credit valuation adjustments (CVA) and debt valuation adjustments (DVA) ($20
million in 2Q17 vs. $44 million in 1Q17)
Trading-related revenue was up $22 million from 2Q16 driven by an increase in deferred
compensation plan investment results
Trading-related net interest income and noninterest income
($
in millions) 2Q17 1Q17 2Q16
Trading-related revenue
Net interest income $ 602 551 489 $ 51 9 % $ 113 23 %
Net gains/(losses) on trading activities 237 439 328 (202) (46) (91) (28)
Trading-related revenue $ 839 990 817 $ (151) (15) % $ 22 3 %
Linked Quarter Change Year-over-year Change
Wells Fargo 2Q17 Supplement 13
Noninterest expense and efficiency ratio (1)
Noninterest expense down $251 million LQ
- Personnel expense down $522 million
• Salaries up $82 million reflecting the impact of
annual salary increases
• Commission and incentive compensation down
$226 million from a seasonally high 1Q17,
partially offset by higher revenue-based incentive
compensation
• Employee benefits expense down $378 million
from a seasonally high 1Q17, and included $75
million lower deferred compensation expense
(partially offset in net trading gains)
- Equipment expense down $48 million from
typically high 1Q levels
- Outside professional services (2) up $225 million
reflecting higher project and consulting spend
- Other expense (2) up $107 million
• Contract services up $24 million on higher
project spend
• Operating losses up $68 million on higher
litigation accruals
• Advertising expense up $23 million from typically
low 1Q levels, as well as the launch of a new
marketing campaign
• $94 million donation to the Wells Fargo
Foundation, up $59 million LQ
• Foreclosed asset, postage, and travel and
entertainment expenses down $53 million
2Q17 efficiency ratio of 61.1%
Efficiency Ratio
(1) Efficiency ratio
defined as noninterest expense divided by total revenue (net interest income plus noninterest income). Noninterest expense and our efficiency
ratio may be affected by a variety of factors, including business and economic cyclicality, seasonality, changes in our business composition and operating
environment, growth in our business and/or acquisitions, and unexpected expenses relating to, among other things, litigation and regulatory matters.
(2) The sum of Outside professional services expense and Other expense equals Other noninterest expense in the Consolidated Statement of Income, pages 18
and 19 of the press release.
12,866 13,268 13,215
13,792 13,541
2Q16 3Q16 4Q16 1Q17 2Q17
58.1%
59.4%
61.2%
62.7%
61.1%
($ in millions) 2Q17
vs
1Q17
vs
2Q16
Noninterest expense
Salaries $ 4,343 2 % 6
Commission and incentive compensation 2,499 (8) (4)
Employee benefits 1,308 (22) 5
Equipment 529 (8) 7
Net occupancy 706 (1) (1)
Core deposit and other intangibles 287 (1) (4)
FDIC and other deposit assessments 328 (2) 29
Outside professional services (2) 1,029 28 34
Other (2) 2,512 4 5
Total noninterest expense $ 13,541 (2) % 5
Wells Fargo 2Q17 Supplement 14
Noninterest expense analysis (reference for slides 15 and 16)
For analytical purposes, we have grouped our noninterest expense into six
categories:
Compensation & Benefits: Salaries, benefits and non-revenue-related incentive
compensation
Revenue-related: Incentive compensation directly tied to generating revenue; businesses
with expenses directly tied to revenue (operating leases, insurance)
“Running the Business” – Non Discretionary: Expenses that are costs of doing
business, including foreclosed asset expense and FDIC assessments
“Running the Business” – Discretionary: Travel, advertising, postage, etc.
Third Party Services: Expenses related to the use of outside parties, such as legal and
consultant costs
Infrastructure: Equipment, occupancy, etc.
Wells Fargo 2Q17 Supplement 15
$13,792
$13,541
($570)
$37
$266 $65 $3
($52)
$6,000
$7,000
$8,000
$9,000
$10,000
$11,000
$12,000
$13,000
$14,000
$15,000
Third Party
Services:
Higher
project
spending,
consulting,
contract
services
and
legal expense
included
spending for:
Infrastructure:
Lower equipment
expense from
typically high 1Q
Compensation
& Benefits:
Seasonally
lower personnel
expense and
lower deferred
compensation
expense
“Running
the
Business” –
Non
Discretionary:
Higher
operating losses
on higher
litigation
accruals
“Running the
Business” –
Discretionary
Revenue-
related:
Higher
commissions
and incentive
compensation
on increased
mortgage
production and
retail
brokerage
asset-based
revenue
1Q17 2Q17
Noninterest expense – linked quarter
($ in millions)
Technology +$84
Consent Orders +$56
Resolution & Recovery
Planning +$30
Legal Expense +$24
Wells Fargo 2Q17 Supplement 16
$12,866
$13,541
$339
($152)
$339
$185
($60)
$24
$8,000
$9,000
$10,000
$11,000
$12,000
$13,000
$14,000
$15,000
Third Party
Services:
Higher project
spending,
consulting,
contract
services
and
legal expense
Infrastructure:
Higher
equipment
expense
“Running the
Business” –
Discretionary:
Lower travel &
entertainment,
postage, and
advertising
expenses
Compensation
& Benefits:
Higher salaries
from annual
salary increases
and a 1%
increase in FTEs
“Running the
Business” –
Non
Discretionary:
$94 million
donation to
Wells Fargo
Foundation, and
higher FDIC
expense
Revenue-
related:
Lower
commissions
and other
incentives,
and lower
operating
lease
expense
2Q16 2Q17
Noninterest expense – year over year
($ in millions)
Considerations: ~ $110 million of third party services
expense was sales-practices related in 2Q17
Wells Fargo 2Q17 Supplement 17
Targeting $2 billion expense reduction by year-end 2018 (Slide 1 of 2)
Centralization and
Optimization
($1.3 billion)
Initiative and
Targeted Savings
Areas include: Human Resources, Finance, Marketing, Communications, Technology, Operations and
Data & Analytics
Highlights:
Enterprise-wide
• Moved 113,000 team members as we aligned business and functional areas in the last 18 months
Human Resources (HR)
• As of 2Q 2017, 20% of all HR applications / tools across the company have been decommissioned
• Through 2Q17, operating costs reduced by ~12% since the beginning of 2016
Finance
• Over 250 transformation projects underway
• Created new teams to support common
activities centrally, focusing on opportunities to streamline
work
Marketing
• Created new organizational structure with five teams performing centralized, streamlined work as
well as five business-specific marketing groups
• Reduced the number of marketing agency vendors and negotiated enterprise-wide contracts,
resulting in a fee reduction of 12% (2Q17 vs. 2Q16)
• Simplified over 20 existing marketing communication development processes into one, resulting in
improved controls and faster time-to-market
Technology
• Created four new teams performing centralized, streamlined work; defined operating models
• Increased infrastructure and platforms available on-demand for self service from 85 to 845
Examples of Initiatives Include:
We expect
efficiency initiatives will reduce expenses by $2 billion annually by
year-end 2018 and that those savings will support our investment in the business
Wells Fargo 2Q17 Supplement 18
Targeting $2 billion expense reduction by year-end 2018 (Slide 2 of 2)
Branch Optimization
($170 million)
Professional Services and
Third Party Expenses
($200 million)
Travel
($100 million)
Risk
($100 million)
Initiative and
Targeted Savings
Plan to close ~450 branches in 2017–2018 to eliminate overlap and improve performance of the
network
- 93 branches closed YTD 2017 through June
• Appointed dedicated relationship manager for largest consulting engagements, and began in-depth
review process
• Operating monthly governance process to approve new consulting engagements
• Adding internal capabilities and capacity to replace more expensive consulting firms where
appropriate
Reduction in non-customer
facing travel and expenses with focused efforts on virtual conferences and
telepresence, as well as leveraging internal meeting spaces and services
Capturing efficiencies as the corporate risk structure matures
Examples of Initiatives Include:
We expect efficiency initiatives will reduce expenses by $2 billion annually by
year-end 2018 and that those savings will support our investment in the business
Facilities
($150 million)
Anticipate $130MM in 2017 savings from gains on building dispositions and workforce optimization with
an additional $20MM in 2018
We expect an additional $2 billion in annual expense reductions by the end of 2019;
these savings are projected to go to the “bottom line”
Wells Fargo 2Q17 Supplement 19
Community Banking
Net income of $3.0 billion, down 6% YoY and
down 1% LQ
Key metrics
See pages 20 and 21 for additional information
5,977 retail bank branches reflect 54 branch
consolidations in 2Q17
Credit card penetration (1)(2) of 45.5% stable LQ
Consumer auto originations of $4.5 billion, down
17% LQ and 45% YoY reflecting our tighter
underwriting standards
Mortgage originations of $56 billion, up 27% LQ
due to seasonality, and down 11% YoY
- 75% of originations were for purchases,
compared with 61% in 1Q17 and 60% in 2Q16
- Correspondent channel was 55% of originations
vs. 50% in 1Q17 and 44% in 2Q16
- 1.24% residential held for sale production
margin (3) reflected competitive environment and
mix shift
(1) Metrics reported on a one-month lag from reported quarter-end; for example 2Q17 data as of May 2017 compared with May 2016. (2) Penetration defined as the
percentage of Retail Banking households that have a credit card with Wells Fargo. Retail Banking households
reflect only those households that maintain a retail
checking account, which we believe provides the foundation for long-term retail banking relationships. Credit card household penetration rates have not been
adjusted to reflect the impact of the potentially unauthorized accounts identified by PwC late in 2016 because the maximum impact in any one quarter was not
greater than 86 bps, or ~2%. (3) Production margin represents net gains on residential mortgage loan origination/sales activities divided by total residential held-
for-sale mortgage originations.
($ in millions) 2Q17
vs
1Q17
vs
2Q16
Net interest income $ 7,548 (1) % 2
Noninterest income 4,741 6 (2)
Provision for credit losses 623 (4) (10)
Noninterest expense 7,223 - 9
Income tax expense 1,404 25 (16)
Segment net income $ 2,993 (1) % (6)
($
in billions)
Avg loans, net $ 477.2 (1) (2)
Avg deposits 727.2 1 3
($ in billions) 2Q17
vs
1Q17
vs
2Q16
Auto Originations $ 4.5 (17) % (45)
Home Lending
Applications $ 83 41 % (13)
Application pipeline 34 21 (28)
Originations 56 27 (11)
Residential HFS production margin (3) 1.24 % (44) bps (42)
($ in billions) 2Q17 1Q17 2Q16
Key Metrics:
Total Retail Banking branches 5,977 6,028 6,111
Credit card penetration (1)(2) 45.5 % 45.5 45.6
Wells Fargo 2Q17 Supplement 20
Community Banking metrics
(1) A customer communication or transaction qualifies as a customer traffic interaction, which is consistent with the definition used by management for each
customer channel presented. Preparation of customer traffic interaction metrics requires the application of interpretive judgement for each communication or
transaction. Management uses these metrics to monitor customer traffic trends within the Company’s Retail Banking business.
(2) Metrics reported on a one-month lag from reported quarter-end; for example, 2Q17 data as of May 2017 compared with May 2016.
(3) Customers who actively use their checking account with transactions such as debit card purchases, online bill payments, and direct deposit.
(4) Accounts having at least
one POS transaction, including POS reversal, during the period.
(5) Credit card metrics shown in the table are for general purpose cards only.
In 2Q17 existing customers continued to actively use their accounts
Branch and ATM interactions (1) of 379.9 million in 2Q17 up 3% LQ reflecting seasonality, and down 3% YoY
on lower branch and ATM interactions, primarily reflecting continued customer migration to virtual channels
Total digital secure sessions (2) of 1,436.2 million, up 2% LQ and 5% YoY reflecting continued increases in
digital adoption
Customers and Active Accounts
(in millions, unless otherwise noted) 2Q17 1Q17 4Q16 3Q16 2Q16
vs.
1Q17
vs.
2Q16
Digital (Online and Mobile) Active Customers 27.9 27.9 27.4 27.4 27.4 0% 2%
Primary Consumer Checking Customers (2) (3) 23.6 23.5 23.6 23.6 23.5 0.7%
Consumer General Purpose Credit Card Active Accounts (4)(5) 7.7 7.6 7.9 7.8 7.6 2% 2%
Digital (online and mobile) active customers of 27.9 million, stable LQ and up 2% YoY
- 20.4 million mobile active customers, up 1% LQ
• Mobile active customers surpassed our desktop active customers for the first time in May
Primary consumer checking customers (2) (3) of 23.6 million, up modestly LQ, and up 0.7% YoY
Consumer general purpose credit card active accounts (4) (5) of 7.7 million, up 2% LQ on seasonality and up
2% YoY on stronger customer engagement
Branch and Digital Activity
(in millions, unless otherwise noted) 2Q17 1Q17 4Q16 3Q16 2Q16
vs.
1Q17
vs.
2Q16
Branch and ATM Interactions (1) 379.9 367.4 382.7 396.3 393.3 3% -3%
Digital (Online and Mobile) Secure Sessions (2) 1,436.2 1,401.2 1,427.0 1,428.8 1,369.1 2% 5%
Wells Fargo 2Q17 Supplement 21
Community Banking metrics
Average consumer and small business banking deposit balances (1) stable LQ and up 5% YoY
Debit cards (2) and consumer general purpose credit cards (3):
- Point-of-sale debit card transactions up 7% LQ on seasonality and up 4% YoY on stronger POS usage per account
- Point-of-sale debit card purchase volume up 6% LQ on seasonality and up 6% YoY on stronger usage per account and
a modest increase in the average transaction amount
- Point-of-sale consumer general purpose credit card purchase volume up 11% LQ on seasonality and up 4% YoY on
active account growth and increased
spend per account
- Consumer general purpose credit card average balances of $27.1 billion down 1% LQ, and up 7% YoY on higher spend
per active account and higher transaction volume
With over 400,000 branch customer experience surveys completed during the second quarter, ‘Overall Satisfaction
with Most Recent Visit’ and ‘Loyalty’ scores in June reached highest levels since August 2016
Customer Experience Survey Scores
with Branch (period-end) 2Q17 1Q17 4Q16 3Q16 2Q16
vs.
1Q17
vs.
2Q16
Customer Loyalty 58.8% 57.9% 55.5% 57.7% 62.3% 80 bps (358)
Overall Satisfaction with Most Recent Visit 77.8% 77.6% 76.4% 75.7% 77.7% 12 10
(1) Average consumer and small business banking deposits for each of 2Q17, 1Q17 and 4Q16 included
$2.1 billion of deposits related to our new Payments, Virtual
Solutions, and Innovation Group that involved realignment in fourth quarter 2016 of some personnel and business activities from Wholesale Banking to the
Community Banking operating segment.
(2) Combined consumer and business debit card activity.
(3) Credit card metrics shown in the table are for general purpose cards only.
Balances and Activity
(in millions, unless otherwise noted) 2Q17 1Q17 4Q16 3Q16 2Q16
vs.
1Q17
vs.
2Q16
Deposits ($ in billions)
Consumer and Small Business Banking Deposits (1)
(Average) $ 760.1 758.8 749.9 739.1 726.4 0% 5%
Debit Cards (2)
POS Transactions 2,101 1,964 2,040 2,030 2,018 7% 4%
POS Purchase Volume (billions) $ 80.6 75.7 78.4 76.0 76.4 6% 6%
Consumer General Purpose Credit Cards (3) ($ in billions)
POS Purchase Volume $ 17.9 16.2 18.0 17.4 17.2 11% 4%
Outstandings (Average) 27.1 27.3 27.1 26.4 25.3 -1% 7%
Wells Fargo 2Q17 Supplement 23
Wealth and Investment Management
Net income of $682 million, up 17% YoY and up
9% LQ
Net interest income up 5% LQ, and up 21% YoY on
loan and deposit growth and higher interest rates
Noninterest income down 2% LQ primarily due to
lower gains on deferred compensation plan
investments (offset in employee benefits expense),
and lower other fee income, partially offset by
higher asset-based fees
Noninterest expense down 4% LQ reflecting lower
personnel expense from a seasonally high 1Q17,
lower other non-personnel expense, and lower
deferred compensation plan expense (offset in
trading revenue), partially offset by higher
operating losses
WIM Segment Highlights
WIM total client assets reached a record-high of
$1.8 trillion, up 8% YoY driven by higher market
valuations and continued positive net flows
2Q17 average closed referred investment assets
(referrals resulting from the WIM/Community
Banking partnership) were up 12% LQ
Retail Brokerage
Advisory assets of $503 billion, up 3% LQ, and up
13% YoY primarily driven by higher market
valuations and positive net flows
Wells Fargo Asset Management
Total AUM (2) up 1% LQ, and up 1% YoY primarily
due to higher market valuations and assets
acquired during 2016, partially offset by net
outflows
Strong performance in active equity with 70% of
active equity mutual funds outperforming their
respective benchmarks YTD through the end of
June
(1) WIM Client Assets reflect Brokerage & Wealth assets, including Wells Fargo
Funds holdings and deposits.
(2) Wells Fargo Asset Management Total
AUM not held in Brokerage & Wealth client
assets excluded from WIM Client Assets.
($ in millions) 2Q17
vs
1Q17
vs
2Q16
Net interest income $ 1,127 5 % 21
Noninterest income 3,055 (2) 2
Provision for credit losses 7 n.m. n.m.
Noninterest expense 3,075 (4) 3
Income tax expense 417 15 16
Segment net income $ 682 9 % 17
($ in billions)
Avg loans, net $ 71.7 1 7
Avg deposits 188.2 (4) 3
($ in billions, except where noted) 2Q17
vs
1Q17
vs
2Q16
Key Metrics:
WIM Client assets (1) ($ in trillions) $ 1.8 1 % 8
Retail Brokerage
Financial advisors 14,527 (1) (3)
Advisory assets $ 503 3 13
Client assets ($ in trillions) 1.6 1 8
Wealth Management
Client assets 236 - 5
Wells
Fargo Asset Management
Total AUM (2) 487 1 1
Wells Fargo Funds AUM 193 (1) (11)
Retirement
IRA assets 390 2 6
Institutional Retirement
Plan assets 375 4 11
Wells Fargo 2Q17 Supplement 24
Credit quality
Nonperforming Assets
($ in billions)
Provision Expense and Net Charge-offs
($ in millions)
Net charge-offs of $655 million, down $150
million, or 19%, LQ
$100 million reserve release reflected credit
improvement across auto, residential mortgage
and commercial portfolios, partially offset by
deterioration in unsecured consumer exposure,
primarily credit card
0.27% net charge-off rate
- Commercial losses
of 6 bps, down 5 bps LQ on
lower losses in the oil and gas portfolio
- Consumer losses of 51 bps, down 8 bps LQ
driven by lower auto losses and consumer real
estate recoveries
NPAs decreased $827 million LQ
- Nonaccrual loans decreased $703 million on a
$321 million decline in commercial nonaccruals
and a $382 million decline in consumer
nonaccruals
- Foreclosed assets declined $124 million
Allowance for credit losses = $12.1 billion
- Allowance covered 4.6x annualized 2Q17
net charge-offs
Oil and gas loan portfolio of $12.7 billion, stable
LQ and down 25% YoY
- $20 million of net charge-offs in 2Q17, down
$81 million LQ
- Nonaccrual loans of $1.8 billion, down $232
million LQ
- Criticized loans of $4.6 billion, down $559
million, or 11% LQ
- Allowance for credit losses allocated for the oil
and gas portfolio = 7.5% of total oil and gas
loans outstanding
1,074
805 805
605
555
924
805
905
805
655
0.39% 0.33% 0.37% 0.34% 0.27%
2Q16 3Q16 4Q16 1Q17 2Q17
Provision Expense Net Charge-offs Net Charge-off Rate
12.0 11.0 10.4 9.8 9.1
1.1
1.0 1.0 0.9
0.8
13.1 12.0 11.4
10.7
9.8
2Q16 3Q16 4Q16 1Q17 2Q17
Nonaccrual loans Foreclosed
assets
Wells Fargo 2Q17 Supplement 26
2Q17 Summary
Strong earnings of $5.8 billion
- Diluted EPS of $1.07
Revenue of $22.2 billion on higher net interest income
Solid returns
- ROA = 1.21%
- ROE = 11.95%
• ROTCE (1) = 14.26%
Strong balance sheet with high levels of capital and liquidity, and record average deposits
Growth in long-term drivers of the business
- Average loans up $6.1 billion, or 1%, YoY
- Average deposits up $64.5 billion, or 5%, YoY
Diversified and high quality loan portfolio
- Strong credit quality with net charge-offs of 0.27% of average loans (annualized)
- Maintained our risk and pricing discipline
Returned $3.4 billion to shareholders through common stock dividends and net share repurchases
- Net payout ratio of 63%
Received a non-objection to our 2017 Capital Plan from the Federal Reserve
- Expect to increase
3Q17 common stock dividend to $0.39 per share from $0.38 per share, subject to approval
by the Company’s Board of Directors
- Plan included up to $11.5 billion of gross common stock repurchases, subject to management discretion,
for the 4 quarter period from 3Q17-2Q18
(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain
identifiable intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage
servicing rights), net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management
believes that
return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and
others to assess the Company's use of equity. See page 33 for additional information.
Appendix
Wells Fargo 2Q17 Supplement 28
Real estate 1-4 family mortgage portfolio
(1) Nonconforming mortgages originated post February 2009.
(2) The current loan-to-value (LTV) ratio is calculated as the net carrying value divided by the collateral value.
First lien mortgage loans up $1.9 billion LQ as
nonconforming mortgage growth was partially
offset by a decline in Pick-a-Pay loan balances
- Nonconforming mortgage loans increased
$7.3 billion to $177.1 billion (1)
- First lien home equity lines of $14.3 billion,
down $434 million
First lien credit performance
- Nonaccrual loans
down $330 million, or 13
bps, LQ
- Net charge-offs down $23 million LQ to a net
recovery of $16 million
Pick-a-Pay non-PCI portfolio
- Loans of $14.8 billion, down 5% LQ primarily
reflecting loans paid-in-full
- Nonaccrual loans decreased $169 million, or
12%, LQ
- Net recovery of $12 million, up $4 million LQ
- Current average LTV of 51% (2)
Junior lien mortgage loans down $1.6 billion, or
4%, LQ as paydowns more than offset new
originations
- Junior lien nonaccrual loans down $58 million,
or 5%, LQ
- Junior lien net charge-offs down $27 million
LQ to a net recovery
of $4 million
Pick-a-Pay PCI portfolio
- Sold $569 million of loans in 2Q17
- Remaining nonaccretable difference of $448 million
- Accretable yield balance of $9.1 billion, down $916
million LQ driven by 2Q17 accretion and the sale of
loans in 2Q17
• Weighted average life of 6.4 years down from 6.7
years in 1Q17 reflecting run-off
• 2Q17 accretable yield percentage of 9.47%
expected to decline to ~9.32% in 3Q17 reflecting
the 2Q17 sale of loans
($ in millions) 2Q17 1Q17
Real estate 1-4 family first
mortgage loans: $ 276,566 274,633
Nonaccrual loans 4,413 4,743
as % of loans 1.60 % 1.73
Net charge-offs $ (16) 7
as % of average loans (0.02) % 0.01
Real estate 1-4 family junior
lien mortgage loans: $ 42,747 44,333
Nonaccrual loans 1,095 1,153
as % of loans 2.56 % 2.60
Net charge-offs $ (4) 23
as % of average loans (0.03) % 0.21
Wells Fargo 2Q17 Supplement 29
Consumer credit card portfolio
Credit card outstandings up 2% LQ reflecting
seasonality, and up 3% YoY; general purpose
credit card outstandings up 2% LQ and 6% YoY
reflecting active account growth
- Credit card household penetration (3) (4) of
45.5%, flat LQ and down 14 bps YoY
- Purchase dollar volume up 12% LQ reflecting
seasonality, and up 3% YoY
- New accounts (1) up 10% LQ and down 42%
YoY
Net charge-offs up $11 million, or 13 bps, LQ on
seasonality, and up $50 million, or 42 bps, YoY
principally from portfolio growth and seasoning
of newer vintages
POS active accounts (2) up 1% LQ on seasonality
and 1% YoY
(1) Includes consumer general purpose credit card as well as certain co-brand and private label relationship new account openings.
(2) Accounts having at least one POS transaction, including POS reversal, during the period.
(3) Penetration as of May 2017 and defined as the percentage of Retail Banking households that have a credit card with Wells Fargo. Retail Banking households
reflect only those households that maintain a retail checking account, which we believe provides the foundation for long-term retail banking relationships.
(4) Credit card household penetration rates have not been adjusted to reflect the impact of the potentially unauthorized accounts identified by PwC late
in 2016
because the maximum impact in any one quarter was not greater than 86 bps, or ~2%.
($ in millions) 2Q17 1Q17
Credit card outstandings $ 35,305 34,742
Net charge-offs 320 309
as % of avg loans 3.67 % 3.54
Key Metrics:
Purchase volume $ 19,996 17,917
POS transactions (millions) 297 271
New accounts (1) (thousands) 395 358
POS active accounts (thousands) (2) 8,560 8,442
Penetration (3)(4) 45.5 % 45.5
Wells Fargo 2Q17 Supplement 31
Student lending portfolio
$12.2 billion private loan outstandings down
3% LQ and 1% YoY
- Average FICO of 760 and 82% of the total
outstandings have been co-signed
- Originations down 26% YoY driven by lower
customer sentiment
Net charge-offs increased $5 million LQ
due to seasonality of repayments and increased
$2 million YoY
30+ days past due decreased $28 million LQ
and decreased $18 million YoY
($ in millions) 2Q17 1Q17
Private outstandings $ 12,177 12,493
Net charge-offs 36 31
as % of avg loans 1.18 % 1.00
30+ days past due $ 178 206
as % of loans 1.46 % 1.65
Wells Fargo 2Q17 Supplement 32
Common Equity Tier 1 (Fully Phased-In)
Wells Fargo & Company and Subsidiaries
COMMON EQUITY TIER 1 UNDER BASEL III (FULLY PHASED-IN) (1)
Estimated
(in billions, except ratio)
Jun 30,
2017
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Total equity $ 206.1 202.5 200.5 204.0 202.7
Adjustments:
Preferred stock (25.8 ) (25.5 ) (24.6 ) (24.6 ) (24.8 )
Additional paid-in capital on ESOP
preferred stock (0.1 ) (0.2 ) (0.1 ) (0.1 ) (0.2 )
Unearned ESOP shares 2.1 2.5 1.6 1.6 1.9
Noncontrolling interests (0.9 ) (1.0 ) (0.9 ) (1.0 ) (1.0 )
Total common stockholders' equity 181.4
178.3 176.5 179.9 178.6
Adjustments:
Goodwill (26.6 ) (26.7 ) (26.7 ) (26.7 ) (27.0 )
Certain identifiable intangible assets (other than
MSRs) (2.1 ) (2.4 ) (2.7 ) (3.0 ) (3.4 )
Other assets (2) (2.2 ) (2.1 ) (2.1 ) (2.2 ) (2.0 )
Applicable deferred taxes (3) 1.6 1.7 1.8 1.8 1.9
Investment in certain subsidiaries and other (0.2 ) (0.1 ) (0.4 ) (2.0 ) (2.5 )
Common Equity Tier 1 (Fully Phased-In)
under Basel III (A) 151.9
148.7
146.4
147.8
145.6
Total risk-weighted assets (RWAs) anticipated under
Basel III (4)(5) (B) $ 1,312.6
1,324.5
1,358.9
1,380.0
1,372.9
Common Equity
Tier 1 to total RWAs anticipated under
Basel III (Fully Phased-In) (5) (A)/(B) 11.6 % 11.2
10.8
10.7
10.6
(1) Basel III capital rules, adopted by the Federal Reserve Board on July 2, 2013, revised the definition of capital, increased minimum capital ratios, and introduced a minimum
Common Equity Tier 1 (CET1) ratio. These rules established a new comprehensive capital framework for U.S. banking organizations that implements the Basel III capital
framework and certain provisions of the Dodd-Frank Act. The rules are being phased in through the end of 2021. Fully phased-in capital amounts, ratios and RWAs are
calculated assuming the full phase-in of the Basel III capital rules. Fully phased-in regulatory capital amounts, ratios and RWAs are considered non-GAAP financial
measures that are used
by management, bank regulatory agencies, investors and analysts to assess and monitor the Company’s capital position.
(2) Represents goodwill and other intangibles on nonmarketable equity investments, which are included in other assets.
(3) Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income
tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.
(4) The final Basel III capital rules provide for two capital frameworks: the Standardized Approach, which replaced Basel I, and the Advanced Approach applicable to certain
institutions. Under the final rules, we are subject to the lower of our CET1 ratio calculated under the Standardized Approach and under the Advanced
Approach in the
assessment of our capital adequacy. Because the final determination of our CET1 ratio and which approach will produce the lower CET1 ratio as of June 30, 2017, is subject
to detailed analysis of considerable data, our CET1 ratio at that date has been estimated using the Basel III definition of capital under the Basel III Standardized Approach
RWAs. The capital ratio for March 31, 2017, and December 31, September 30 and June 30, 2016, was calculated under the Basel III Standardized Approach RWAs.
(5) The Company’s June 30, 2017, RWAs and capital ratio are preliminary estimates.
Wells Fargo 2Q17 Supplement 33
Return on average tangible common equity (ROTCE)
Wells Fargo & Company and Subsidiaries
TANGIBLE COMMON EQUITY (1)
Quarter ended
(in millions, except ratios) Jun 30, 2017
Return on average tangible common equity (1):
Net income applicable to common stock (A) $ 5,404
Average total equity 205,968
Adjustments:
Preferred stock (25,849 )
Additional paid-in capital on ESOP preferred stock (144 )
Unearned ESOP shares 2,366
Noncontrolling interests (910 )
Average common stockholders’ equity (B) 181,431
Adjustments:
Goodwill (26,664 )
Certain identifiable intangible assets (other than MSRs) (2,303 )
Other assets (2) (2,160 )
Applicable
deferred taxes (3) 1,648
Average tangible common equity (C) $ 151,952
Return on average common stockholders' equity (ROE) (A)/(B) 11.95 %
Return on average tangible common equity (ROTCE) (A)/(C) 14.26
(1) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, and goodwill and certain identifiable
intangible assets (including goodwill and intangible assets associated with certain of our nonmarketable equity investments but excluding mortgage servicing rights), net of
applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible
common equity, which utilizes tangible common equity, is a useful financial measure because it enables investors and others to assess the
Company's use of equity.
(2) Represents goodwill and other intangibles on nonmarketable equity investments, which are included in other assets.
(3) Applicable deferred taxes relate to goodwill and other intangible assets. They were determined by applying the combined federal statutory rate and composite state income
tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.
Wells Fargo 2Q17 Supplement 34
Forward-looking statements and additional information
Forward-looking statements:
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition,
we may make forward-looking statements in our other documents filed or furnished with the SEC, and our management may make forward-
looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can be identified by
words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target,” “projects,” “outlook,” “forecast,” “will,”
“may,” “could,” “should,” “can” and similar references to future periods.
In particular, forward-looking statements include, but are not
limited to, statements we make about: (i) the future operating or financial performance of the Company, including our outlook for future
growth; (ii) our noninterest expense and efficiency ratio; (iii) future credit quality and performance, including our expectations regarding
future loan losses and allowance levels; (iv) the appropriateness of the allowance for credit losses; (v) our expectations regarding net
interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan portfolios; (vii) future capital or
liquidity levels or targets and our estimated Common Equity Tier 1 ratio under Basel III capital standards; (viii) the performance of our
mortgage business and any related exposures; (ix) the expected outcome and impact
of legal, regulatory and legislative developments, as
well as our expectations regarding compliance therewith; (x) future common stock dividends, common share repurchases and other uses of
capital; (xi) our targeted range for return on assets and return on equity; (xii) the outcome of contingencies, such as legal proceedings; and
(xiii) the Company’s plans, objectives and strategies. Forward-looking statements are not based on historical facts but instead represent our
current expectations and assumptions regarding our business, the economy and other future conditions. Investors are urged to not unduly
rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of
the date made, and we do not undertake to update them to reflect changes or events that
occur after that date. For more information about
factors that could cause actual results to differ materially from expectations, refer to the “Forward-Looking Statements” discussion in Wells
Fargo’s press release announcing our second quarter 2017 results and in our most recent Quarterly Report on Form 10-Q, as well as to Wells
Fargo’s other reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors” in our Annual Report
on Form 10-K for the year ended December 31, 2016.
Purchased credit-impaired loan portfolios:
Loans acquired that were considered credit impaired at acquisition were written down at that date in purchase accounting to an amount
estimated
to be collectible and the related allowance for loan losses was not carried over to Wells Fargo’s allowance. In addition, such
purchased credit-impaired loans are not classified as nonaccrual or nonperforming, and are not included in loans that were contractually 90+
days past due and still accruing. Any losses on such loans are charged against the nonaccretable difference established in purchase
accounting and are not reported as charge-offs (until such difference is fully utilized). As a result of accounting for purchased loans with
evidence of credit deterioration, certain ratios of Wells Fargo are not comparable to a portfolio that does not include purchased credit-
impaired loans.
In certain cases, the purchased credit-impaired loans may affect portfolio credit ratios and trends. Management believes that the
presentation of information adjusted to exclude the purchased credit-impaired
loans provides useful disclosure regarding the credit quality of
the non-impaired loan portfolio. Accordingly, certain of the loan balances and credit ratios in this document have been adjusted to exclude
the purchased credit-impaired loans. References in this document to impaired loans mean the purchased credit-impaired loans. Please see
page 31 of the press release announcing our 2Q17 results for additional information regarding the purchased credit-impaired loans.
