Wells Fargo CFO Mike Santomassimo Talks Earnings

**SPEAKER_1** (0:02)
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**Katie Greifeld** (0:07)
Well, let's also talk a little bit about Wells Fargo, one of the big banks reporting today. Taking a look at their shares, actually down slightly today, even though when you take a look at non-interest income, a big recovery there, we've been following that story. That measure hitting $10.3 billion in the most recent quarter reported. That is a four-year high. It's ahead of analysts' expectations, but not giving much of a lift to the stock today because the focus really seems to be around margin, that NIM measure, which is coming under some pressure, Romaine.

**Romaine Bostick** (0:40)
All right, well, let's talk about that pressure. Mike Santomassimo joins us right now, the CFO over at Wells Fargo. And obviously on the surface, Mike, obviously a lot of progress in the quarter, a lot of progress over the last couple of years. But when we talk about average loan growth, growing in that 12% range here over a year, but net interest income only up 5%.
I know you've said in the past that this is temporary, but how long should investors expect that disparity?

**Mike Santomassimo** (1:11)
Well, thanks for having me, Romaine. And when you look at the backdrop of the quarter, it was actually a really good quarter in broad-based revenue growth across every single business. And we can sort of dig into aspects of it, but really good performance across every one of them. And on net interest income, it's progressing exactly as we thought it would. So our full-year net interest income guidance is still $50 billion. That's where we set at the beginning of the year. You're seeing loan growth be a little bit higher than what we had projected in the year. We're also seeing higher interest-bearing deposit growth, which is actually a good thing for the long run. So we're deepening our client relationships in the commercial side of the house, in particular. We're expecting non-interest-bearing deposits to be more stable, and we were thinking they would grow a little bit more earlier in the year. And part of that's the rate environment, as rates stay a little bit higher for longer.
And so we'll see how that progresses. And then we're seeing really good growth across the markets business, where you see NII contributions coming through a lot of the financing we do there. So overall, actually quite good. You did see net interest margin decline as expected, three or four basis points this quarter. We expect that to happen just a little bit more in the third quarter than stabilized from there.
But all of the underlying inputs and trends that we're seeing across the business are actually quite good.
And really what we expected to see now that we're about a year off of coming out of the asset cap.

**Romaine Bostick** (2:42)
Well, let's talk a little bit about that because that's obviously opened up a lot of growth opportunities for you beyond just the basic loan book here. Let's talk about the wealth management side of this business. The growth there, but also the expenses that come along with it in order to build it out.

**Mike Santomassimo** (3:01)
Yeah, like the wealth business, as we've talked about a number of times, is actually seeing really good momentum now. If you go back a number of years, we were seeing high levels of attrition of advisors. That's completely turned around. We've had our three best quarters maybe ever in terms of recruiting that we put onto the platform the last three quarters. We are seeing net flows as well the last couple quarters, just broadly across that business.
The markets have really helped in terms of equity values. You see wealth management revenues up in 13-14 percent year on year. So quite good there in terms of the overall trends underneath that business. Now, that does bring expenses too. You got commissions, you pay advisors, and other volume-based fees that are there, but revenue more than offsets that.
That's what you saw in the quarter, which was really good performance. Then lastly on wealth is you're starting to see really good growth in deposits and lending as well. We've talked about that for a while as something we want to do to broaden what we do with our clients, and you're really starting to see that come through the results. So a lot of the effort the teams had there the last couple of years is really coming through.

**Katie Greifeld** (4:08)
Mike, I want to talk a little bit about M&A when it comes to Wells Fargo, because you think about that asset cap that has now been removed from the Fed. How big would you say that M&A is for you at this moment?