Wells Fargo & Company (NYSE:WFC) Chief Financial Officer Mike Santomassimo said the bank continues to see strong consumer spending, healthy credit trends and expanding business activity as it pursues growth following the removal of its asset cap.
Speaking at a financial conference, Santomassimo said consumer activity has remained consistently strong despite uncertainty around interest rates, geopolitics and the broader economic outlook. Debit- and credit-card spending has risen year over year each week, he said, while consumer credit performance has remained favorable.
On the commercial side, Santomassimo said middle-market customers remain cautious but healthy, with solid liquidity and no broad-based credit concerns. While revolving-loan utilization has not increased sharply, he said the bank has continued to see healthy client activity and no systemic problems across its commercial portfolio.
Growth Opportunity After Asset Cap Removal
Santomassimo said the company is operating from a “very different place” after completing work tied to its former consent orders and the removal of its asset cap. The bank is focused on growth initiatives it has been building for several years across investment banking, wealth management, credit cards, consumer banking and branches.
He said Wells Fargo has recently seen growth in core checking accounts, wealth-management flows, investment-banking activity and markets revenue. The bank has also added a couple hundred commercial bankers over the past several years, which he said has supported commercial client acquisition and loan growth.
Loan growth was strong in the first half, with gains across cards, auto lending and commercial portfolios. Santomassimo said the home-lending portfolio also remained consistent after several years of being resized. However, he said the bank does not expect the 12% first-half growth rate to continue through the full year, although growth could exceed the guidance provided earlier in the year.
“The opportunity we have is much bigger and should play out over the coming years,” Santomassimo said, characterizing the company’s growth effort as still in its early stages.
Deposits, Payments and Margin Outlook
Deposit growth has been led by interest-bearing commercial deposits, Santomassimo said. He explained that the bank had been unable to grow its commercial deposit base as much as competitors while it was under the asset cap, but it has gained traction with operating-business customers since the restriction was lifted.
That mix has contributed to higher deposit costs, he said, but Wells Fargo views the relationships as valuable over the long term because they can generate payments activity, fee opportunities and eventually more noninterest-bearing deposits.
The company is also preparing to put a tokenized-deposit product into production the following week, according to Santomassimo. The offering is designed primarily to help U.S.-based customers improve cross-border payments through longer operating hours and greater visibility into when payments arrive.
Santomassimo said Wells Fargo sees tokenized deposits as a way to address a larger cross-border payments market than it could reach through traditional rails, given its lack of a global branch network. He said stablecoins could have narrower uses, such as cross-border remittances into countries with high inflation, and that the technologies may complement one another.
For net interest margin, Santomassimo said third-quarter results were tracking better than the company’s prior expectation of a 3- to 4-basis-point decline. He said the margin could be down about 1 basis point or be roughly flat, depending on the remainder of the quarter. The bank still expects margin stability in the fourth quarter.
Wells Fargo maintained its outlook for about $50 billion in net interest income for the full year, including approximately $2 billion from its markets business. Santomassimo said loan growth, higher asset yields and securities portfolio reinvestment have been constructive factors.
Fee Growth and Expense Discipline
Santomassimo said fee income has benefited from wealth-management growth, investment advisory fees, investment banking and deposit-related fees. The company recorded roughly $850 million in venture portfolio gains during the first half, though he said the current quarter was likely to be closer to flat in that portfolio.
Investment-banking hiring has also begun to produce results, he said. Wells Fargo has hired roughly 150 senior managing directors during the past three to four years, and investment-banking fees exceeded $900 million in the second quarter. Santomassimo said the company’s market share has risen from the 2% range to 4.3%, while its position in announced M&A league tables improved to sixth from 14th several years ago.
The bank kept its full-year expense guidance unchanged at $55.7 billion. Higher wealth-management commissions associated with improved market performance are being offset by efficiency initiatives, Santomassimo said.
He identified artificial intelligence as a significant opportunity for additional efficiency, particularly in technology development, legal work, finance, operations and call centers. Wells Fargo is using autonomous coding agents in some cases instead of adding employees or contractors, he said.
Capital, Credit and Returns
Credit quality remains favorable, Santomassimo said, with consumer delinquencies performing better than the bank’s models and no systemic commercial credit concerns. He said reserve needs should rise as card, auto and other loan portfolios grow, while commercial real estate reserve releases could continue as the bank gains more certainty on remaining office-related exposures.
On capital returns, Santomassimo said Wells Fargo remains committed to a 10% to 10.5% common equity tier 1 ratio and expects to continue repurchasing shares. The company expects pending regulatory changes to have a positive impact on risk-weighted assets, with a prior estimate of roughly 7%, though he said the rules must be finalized before they are incorporated into buyback plans.
Santomassimo said the bank’s focus remains on organic growth rather than bank acquisitions, although a smaller acquisition in payments or technology could be considered. He said the company has a high bar for acquisitions and sees substantial room to expand within its existing businesses.
The CFO reiterated confidence in reaching Wells Fargo’s medium-term return on tangible common equity target of 17% to 18% and said the company believes returns can move higher over a longer period through continued execution on growth investments and efficiency efforts.
About Wells Fargo & Company (NYSE:WFC)
Wells Fargo & Company is a diversified financial services company that provides banking, lending, investment, and wealth management services to consumers, businesses, and institutions. Its offerings include checking and savings accounts, credit cards, mortgages, auto loans, personal lending, commercial financing, and treasury management services.
The company operates through businesses that include consumer and small-business banking, commercial banking, corporate and investment banking, and wealth and investment management.
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