Overview

Wells Fargo & Company is a leading financial services company with approximately $1.9 trillion in assets. The company provides a diverse range of banking, investment, and mortgage products and services through its four reportable operating segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management.

Wells Fargo’s top priority remains building a strong risk and control infrastructure to address a number of regulatory actions and consent orders the company is subject to. Addressing these regulatory actions is expected to take multiple years, and the company may continue to face issues or delays along the way. Failure to satisfy the requirements of these actions could result in significant consequences.

Financial Performance

In the second quarter of 2024, Wells Fargo generated $4.9 billion in net income and $1.33 in diluted earnings per share (EPS), compared to $4.9 billion in net income and $1.25 in diluted EPS in the same period a year ago. For the first half of 2024, the company generated $9.5 billion in net income and $2.53 in diluted EPS, compared to $9.9 billion in net income and $2.48 in diluted EPS in the first half of 2023.

Table 1: Consolidated Financial Highlights

The financial performance for the second quarter and first half of 2024, compared to the same periods in 2023, was driven by the following:

• Total revenue increased due to higher noninterest income, partially offset by lower net interest income.
• Provision for credit losses decreased, reflecting decreases in the allowance for auto loans, commercial real estate loans, and residential mortgage loans, partially offset by increases for credit card loans.
• Noninterest expense increased due to higher operating losses and technology/equipment expense, partially offset by lower professional services expense.
• Average loans and deposits both decreased, driven by declines in both the commercial and consumer loan portfolios, as well as reductions in Consumer Banking and Lending and Wealth and Investment Management deposits.

Capital and Liquidity

Wells Fargo maintained a strong capital position in the first half of 2024, with total equity of $178.1 billion at June 30, 2024. Key capital and liquidity metrics included:

• Common Equity Tier 1 (CET1) ratio of 11.01% under the Standardized Approach, exceeding regulatory minimums.
• Total loss absorbing capacity (TLAC) ratio of 24.78%, above the regulatory minimum of 21.50%.
• Liquidity coverage ratio (LCR) of 124%, above the regulatory minimum of 100%.

Credit Quality

Credit quality reflected the following:

• The allowance for credit losses (ACL) for loans of $14.8 billion at June 30, 2024, decreased $299 million from December 31, 2023.
• Provision for credit losses for loans was $2.2 billion in the first half of 2024, compared to $3.0 billion in the same period a year ago.
• Commercial portfolio net loan charge-offs were 35 basis points of average commercial loans in Q2 2024, compared to 15 basis points in Q2 2023, driven by higher losses in the commercial real estate portfolio.
• Consumer portfolio net loan charge-offs were 88 basis points of average consumer loans in Q2 2024, compared to 58 basis points in Q2 2023, due to higher losses in the credit card portfolio.
• Nonperforming assets (NPAs) of $8.7 billion at June 30, 2024, increased 2% from December 31, 2023, driven by an increase in commercial real estate nonaccrual loans.
• Criticized loans in the commercial portfolio were $35.5 billion at June 30, 2024, compared to $33.0 billion at December 31, 2023, predominantly driven by increases in criticized commercial and industrial loans and commercial real estate loans.

Earnings Performance by Segment

Consumer Banking and Lending

• Revenue decreased 5% in Q2 2024 and 4% in H1 2024, driven by lower net interest income due to lower deposit and loan balances.
• Provision for credit losses reflected an increase in the allowance for credit card loans, partially offset by decreases for auto and residential mortgage loans.
• Noninterest expense decreased 5% in Q2 2024 and 3% in H1 2024, due to lower operating costs and the impact of efficiency initiatives.

Table 6a: Consumer Banking and Lending - Income Statement and Selected Metrics

Commercial Banking

• Revenue decreased 7% in Q2 2024 and 6% in H1 2024, driven by lower net interest income reflecting the impact of higher deposit costs.
• Provision for credit losses increased, reflecting higher net charge-offs.
• Noninterest expense decreased 8% in Q2 2024 and 6% in H1 2024, due to lower personnel expense and operating costs.

Table 6c: Commercial Banking - Income Statement and Selected Metrics

Corporate and Investment Banking

• Revenue increased 4% in Q2 2024 and 3% in H1 2024, driven by higher noninterest income from investment banking fees and trading activities.
• Provision for credit losses decreased, reflecting lower allowance builds.
• Noninterest expense increased 4% in Q2 2024 and 5% in H1 2024, due to higher operating losses and technology/equipment expense.

Wealth and Investment Management

• Revenue increased 6% in Q2 2024 and 4% in H1 2024, driven by higher asset-based fees reflecting higher market valuations.
• Provision for credit losses reflected a decrease in the allowance.
• Noninterest expense increased 7% in Q2 2024 and 6% in H1 2024, due to higher revenue-related compensation expense.

Outlook

Wells Fargo continues to face significant regulatory challenges as it works to address the requirements of various consent orders and build a stronger risk and control infrastructure. The company expects this process to take multiple years, and it may continue to identify new issues that could result in additional regulatory actions and consequences.

Despite these headwinds, the company’s core businesses generally performed well in the first half of 2024, with strength in areas like investment banking, wealth management, and credit card. However, the higher interest rate environment has put pressure on net interest income and loan balances.

Going forward, Wells Fargo will need to balance its regulatory remediation efforts with maintaining the performance of its business lines. Key areas of focus will likely include:

• Continuing to invest in risk management and control systems to satisfy regulatory requirements.
• Adapting its product and service offerings to the changing interest rate and economic environment.
• Driving efficiency and cost savings through technology and process improvements.
• Capitalizing on growth opportunities in its wealth management, investment banking, and commercial banking franchises.

Overall, Wells Fargo faces a challenging path ahead, but the company’s diversified business model and strong capital and liquidity position provide a foundation for navigating the current environment. Successful execution on its regulatory and business priorities will be critical to restoring the company’s reputation and delivering sustainable performance for shareholders.