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IBM Narrator
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Bloomberg Announcer
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Katie
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. Ramon.
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Host
All right, well let's talk about that pressure, Mike. Santa Massimo 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 the that 12% range year over 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?
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Mike Santa Massimo
Well, thanks, thanks for having me. Remain. And you know, when you look at like the backdrop of the quarter, it was actually a really good quarter and broad based revenue growth across every single business. And you know, we can sort of dig into aspects of it but, but really good performance across every, every one of them. And on net income, you know, it's progressing exactly as we thought it would. Right. So our full year net interest income guidance is still $50 billion. That's where we sat at the beginning of the year. You're seeing, you know, 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 and the commercial side of the house in particular. We're expecting, you know, non interest bearing deposits to be more stable. And we were, we were thinking they would grow little bit more earlier in the year. And you know, 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, you know, NII contributions coming through, a lot of the financing we do there. So overall actually quite, quite good. You did see net interest margin decline as, as expected, you know, three or four basis points this quarter. We expect that to happen just a little bit more in the third quarter than stabilize from there. But, but all of the underlying and trends that we're seeing across the business are actually quite, quite good. And, and really what we expected to see, you know, now that we're about a year off of coming out of the asset cap.
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Host
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.
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Mike Santa Massimo
Yeah, like the wealth business, as we've talked about a number of times, is seeing really good momentum now. You know, if you, 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, you know, our three best quarters maybe ever in terms of recruiting that we've put onto the platform the last three quarters. We are seeing net flows as well the last couple of quarters just broadly across that business and the markets have really helped in terms of equity values. And so you see, you know, wealth management revenues up in, you know, 13, 14%, you know, year on year. And so quite, quite good there, you know, in terms of the overall, you know, trends underneath that business. Now that does bring expenses too. Right. So you got commissions, you pay advisors and other, other volume based fees that are there, but revenue more than offsets that. And so that, and that's what you saw in the quarter which was really good performance. And 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. And so a lot of the effort the teams had there the last couple of years is really, really coming through.
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Katie
Mike, I want to talk a little bit about M and 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 and A is for you at this moment?
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Mike Santa Massimo
Yeah, we're mostly focused, Katie, on, on organic growth. I think the opportunity we have across each one of the business is just big, you know, to grow organically. And that's what you've seen us really do now, the last number of quarters. And I think, you know, when you think about, you know, opportunities, M and A, you know, there could be some, you know, product capabilities or other, you know, payments related stuff that could be interesting, but, but it'll be very, you know, very much just adding capabilities to our, what we do, you know, our main focus is really growing sort of organically across each of the businesses understood
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Katie
there with the focus on organic growth. But I do want to talk a little bit about the pipeline because you did say when it comes to the M and A pipeline for Wells Fargo, it looks robust here and I'd love to dig into that a little bit more. Are there any industries which particularly stand out to Wells Fargo at this moment or that you're pursuing more aggressively than others?
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Mike Santa Massimo
Well, you know, across the investment banking space, you know, we've been adding, you know, people in equity and debt capital markets, our M and A practice and all the coverage groups, you know, just sector by sector over the last few years. And the pipelines are quite healthy, you know, now they've been that way for a while across really all the products set there, including M and A. And you're certainly seeing, you know, across a number of different industries, sort of, you know, deals that may not have been, you know, totally possible, you know, a couple of years ago. And so I think that that idea of pursuing those strategic goals across really, you know, in a pretty broad way is definitely alive. And the conversations the team's having, it really spans everything from health care to tech to media to, you know, a whole different, you know, all industrial sectors as well. And so I think you're seeing, you're seeing it in a pretty broad based way now. We'll have to see what actually happens in terms of deals getting announced and done. But, but I think the activity level is quite high and I think people see this as an opportunity to, you know, think broadly about their strategic goals. And M and A is definitely part of it.
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Host
Well, overall, I mean, just looking at this business, a year of kind of post, that asset cap being lifted with loan growth going well, obviously the M and A business and fees, they're also strong here. Is there a certain part of this business right now that you and Charlie Sharp, the CEO, are really Looking to where maybe. You don't think Wells Fargo, at least right now, punches up to the weight of its competitors?
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Mike Santa Massimo
Well, I think there's opportunity to grow and improve the returns everywhere. Still, that, that doesn't take away from the progress we've made because we've made a lot of progress, you know, in our, in our corporate investment bank. You've seen that progress in our investment banking business. We had a record fee quarter for investment banking fees this quarter across the firm. We've grown our balance sheet in the markets business by almost 200 billion DOL dollars since the end of 2024. And you're seeing the revenue in that business grow 24% in the quarter. You've, you've seen our wealth management business, as we talked about a minute ago, grow. Our commercial bank was up 6% in the quarter. Year on year, our consumer businesses were up. You know, we saw really good growth in credit card acquisition, in auto loans, really across the board. And so I think we're excited to kind of see the results of all the investments we've been making now for a while across, across each one of the businesses. And I think each of them have a lot of opportunity to continue to deepen the relationship, deepen what we do with a lot of the relationships we have and really grow beyond that in the, over the coming quarters and years. So it is, it is an exciting time to be here.
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Katie
And Mike, just quickly, before we let you go, I do want to talk a little bit about AI because we heard from JP Morgan cfo, actually talking about how the bank is being a little bit more strategic when it comes to using some of these AI models. He said exactly that. You really don't. The latest cutting edge, incredibly expensive model to summarize an analyst report. And I wonder, you know, how you're thinking through some of these token expenses and costs when it comes to Wells Fargo.
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Mike Santa Massimo
Yeah, that just comes with any investment, I think really is being smart about sort of how you deploy the capabilities. And with an AI is no different. Right. There's a, there's a wide range of models, capabilities, use cases, you know, for AI. And I think it's just you need to be really thoughtful, smart, you know, focused on sort of using the right solution for the right, for the right problem. And we're certainly doing that. And I think you need to look at, you know, token costs and sort of the cost of broader AI sort of, you know, very closely. But, but it's clear that the benefit you're going to get from AI in terms of improving what we do for customers, driving more efficiency across the firm is real. And it really has just, just getting started in terms of, you know, those capabilities being rolled out across, you know, different, you know, different business groups. And so I think it's going to be very exciting to see that come to fruition over the next 12 or 18 months or thereabouts. And so, so, and I do think, you know, it's going to be quite significant in terms of the impact it'll have, you know, just more broadly at our company and just, you know, lots of different companies there. But like any investment, you got to be really thoughtful and smart about how you prioritize, you know, the resources you put against it. And certainly across these different large language models, there's a range of outcomes and a range of cost. Got to be really careful about as you look forward. And I think our teams have done a really, really good job on that, being making sure that our tech people are using the right, use the right tools for the right solutions and then just broadly across the businesses doing the same thing. So that's something we've been doing for a while now.
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Host
All right, Mike, always a pleasure. Always appreciate you taking time for us. Wells Fargo CFO Mike Santa Massimo there.
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