Wells Fargo mpany : Q3 2021 news release (PDF)

News Release | October 14, 2021

Wells Fargo Reports Third Quarter 2021 Net Income of $5.1 billion, or $1.17 per Diluted Share

Company-wide Financial Summary

		Quarter ended
		Sep 30,	Sep 30,
		2021	2020
Selected Income Statement Data
($ in millions except per share
amounts)
Total revenue	$	18,834	19,316
Noninterest expense		13,303	15,229
Provision for credit losses		(1,395)	769
Net income		5,122	3,216
Diluted earnings per		1.17	0.70
common share
Selected Balance Sheet Data
($ in billions)
Average loans	$	854.0	931.7
Average deposits		1,450.9	1,399.0
CET11		11.6%	11.4

Operating Segments and Other Highlights

	Quarter		Sep 30, 2021
	ended		% Change from
($ in billions)	Sep 30,		Jun 30,	Sep 30,
2021	2021	2020
Average loans
Consumer Banking and Lending	$ 325.6	(2)%	(14)
Commercial Banking	178.6		-	(12)
Corporate and Investment	257.3	2	3
Banking
Wealth and Investment	82.8	1	5
Management
Average deposits
Consumer Banking and Lending	848.4	2	12
Commercial Banking	199.2	3	11
Corporate and Investment	189.4	(1)	(16)
Banking
Wealth and Investment	176.6	1	4
Management

Performance Metrics

ROE2	11.1%	7.2
ROTCE3	13.2	8.7

Third quarter 2021 results included:

Capital

• Repurchased 114.2 million shares, or $5.3 billion, of common stock in third quarter 2021
• Increased the common stock dividend to $0.20 per share, up from $0.10 per share in the prior quarter

• $1.7 billion, or $0.30 per share, decrease in the allowance for credit losses
• $(250) million, or $(0.05) per share, impact of an operating loss associated with the September 2021 Office of the Comptroller of the Currency (OCC) enforcement action

Chief Executive Officer Charlie Scharf commented on the quarter, "The actions we're taking to improve operating effectiveness and financial returns are coming through in our results, in addition to the benefits we're experiencing from the economic recovery. We recorded a $1.7 billion pre-tax reduction in the allowance for credit losses and had strong equity gains. More importantly, charge-offs were low, net interest income stabilized and period-end loans grew for the first time since first quarter 2020. Expenses continued to decline as we made progress on our efficiency initiatives, and we increased our capital return to shareholders by repurchasing

$5.3 billion of common stock and increasing our dividend."

"While the recent expiration of the 2018 CFPB consent order regarding retail sales practices is an important milestone in our progress to correct our past practices, the recent OCC enforcement actions are a reminder that the significant deficiencies that existed when I arrived must remain our top priority. We are a different company today and the operational and cultural changes we've made are enabling us to execute with significantly greater discipline than we have in the past. I believe we are making significant progress, and I remain confident in our ability to continue to close the remaining gaps over the next several years, though we may continue to have setbacks along the way," Scharf continued.

"The investments we're making in risk and regulatory-related work come alongside investments we're making in customer experience. These include new digital and mobile capabilities, a new digital infrastructure strategy, and new products with unique value propositions, including the Wells Fargo ReflectSM Card, which is the second new product in our redesigned portfolio of consumer credit cards," Scharf added.

"Finally, we continue to invest in our communities. We have donated $305 million from our Open for Business Fund, which has helped nearly 150,000 small businesses across the country navigate the challenges posed by the COVID-19 pandemic. Business owners have used the funding to pay their employees, pivot to new business models, buy needed supplies, and meet other business needs. We're really proud of it," Scharf concluded.

1 Represents the lower of our Common Equity Tier 1 (CET1) ratio calculated under the Standardized Approach and under the Advanced Approach. See tables on pages 27-28 of the 3Q21 Quarterly Supplement for more information on CET1. CET1 is a preliminary estimate.

2 Return on equity (ROE) represents Wells Fargo net income (loss) applicable to common stock divided by average common stockholders' equity.

• Tangible common equity and return on average tangible common equity (ROTCE) are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on pages 25-26 of the 3Q21 Quarterly Supplement.

Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, 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.

Selected Company-wide Financial Information

					Quarter ended			Sep 30, 2021
							% Change from
			Sep 30,	Jun 30,	Sep 30,		Jun 30,	Sep 30,
			2021	2021	2020	2021	2020
Earnings ($ in millions except per share amounts)
	Net interest income	$	8,909	8,800	9,379	1 %	(5)
	Noninterest income		9,925	11,470	9,937	(13)	-
	Total revenue		18,834	20,270	19,316	(7)	(2)
	Net charge-offs		257	379	731	(32)	(65)
	Change in the allowance for credit losses		(1,652)	(1,639)	38	(1)	NM
	Provision for credit losses		(1,395)	(1,260)	769	(11)	NM
	Noninterest expense		13,303	13,341	15,229		-	(13)
	Income tax expense (benefit)		1,521	1,445	(83)	5	NM
	Wells Fargo net income	$	5,122	6,040	3,216	(15)	59
	Diluted earnings per common share		1.17	1.38	0.70	(15)	67
Balance Sheet Data (average) ($ in billions)
	Loans	$	854.0	854.7	931.7		-	(8)
	Deposits		1,450.9	1,435.8	1,399.0	1	4
	Assets		1,949.7	1,939.9	1,945.9	1	-
Financial Ratios
	Return on assets (ROA)		1.04 %	1.25	0.66
	Return on equity (ROE)		11.1	13.6	7.2
	Return on average tangible common equity (ROTCE) (a)		13.2	16.3	8.7
	Efficiency ratio (b)		71	66	79
	Net interest margin on a taxable-equivalent basis		2.03	2.02	2.13

NM - Not meaningful

1. Tangible common equity and return on average tangible common equity are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on pages 25-26 of the 3Q21 Quarterly Supplement.
2. The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

Third Quarter 2021 vs. Third Quarter 2020

• Net interest income decreased 5%, primarily due to lower loan balances reflecting soft demand and elevated prepayments and the impact of lower yields on earning assets, partially offset by a decrease in long-termdebt and lower mortgage-backedsecurities premium amortization
• Noninterest income decreased slightly and included an increase in investment advisory and other asset-based fees primarily driven by higher market valuations, and improved results in our affiliated venture capital and private equity businesses, as well as higher card, deposit-related and investment banking fees. These increases were more than offset primarily by lower mortgage banking revenue, lower gains on the sale of securities, and lower Markets revenue in Corporate and Investment Banking
• Noninterest expense decreased 13%, due to lower restructuring charges, operating losses, and occupancy expense. Additionally, salaries expense and consultant and contractor spend were lower due to efficiency initiatives. These decreases were partially offset by higher incentive and revenue-related compensation
• Provision for credit losses in third quarter 2021 included a $1.7 billion decrease in the allowance for credit losses due to continued improvements in the economic environment, as well as a significant decrease in net charge-offs

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Selected Company-wide Capital and Liquidity Information

				Quarter ended
($ in billions)		Sep 30,	Jun 30,	Sep 30,
	2021	2021	2020
Capital:
Total equity	$	191.1	193.1	181.7
Common stockholders' equity		169.8	171.5	160.8
Tangible common equity (a)		142.0	143.6	132.9
CET1 ratio (b)		11.6 %	12.1	11.4
Total loss absorbing capacity (TLAC) ratio (c)		23.7	25.1	25.8
Supplementary Leverage Ratio (SLR) (d)		6.9	7.1	7.8
Liquidity:
Liquidity Coverage Ratio (LCR) (e)		119	123	134

1. Tangible common equity and return on average tangible common equity are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the "Tangible Common Equity" tables on pages 25-26 of the 3Q21 Quarterly Supplement.
2. Represents the lower of our Common Equity Tier 1 (CET1) ratio calculated under the Standardized Approach and under the Advanced Approach. See tables on pages 27-28 of the 3Q21 Quarterly Supplement for more information on CET1. CET1 for September 30, 2021, is a preliminary estimate.
3. Represents TLAC divided by the greater of risk-weighted assets determined under the Standardized and Advanced Approaches, which is our binding TLAC ratio. TLAC for September 30, 2021, is a preliminary estimate.
4. SLR for September 30, 2021, is a preliminary estimate.
5. Represents high-quality liquid assets divided by projected net cash outflows, as each is defined under the LCR rule. LCR for September 30, 2021, is a preliminary estimate.

Selected Company-wide Credit Information

				Quarter ended
($ in millions)		Sep 30,	Jun 30,	Sep 30,
	2021	2021	2020
Net charge-offs	$	257	379	731
Net loan charge-offs as a % of average total loans (annualized)		0.12 %	0.18	0.29
Total nonaccrual loans	$	7,058	7,371	8,022
As a % of total loans		0.82 %	0.86	0.87
Total nonperforming assets	$	7,179	7,500	8,178
As a % of total loans		0.83 %	0.88	0.89
Allowance for credit losses for loans	$	14,705	16,391	20,471
As a % of total loans		1.70 %	1.92	2.22

Third Quarter 2021 vs. Second Quarter 2021

• Net loan charge-offs decreased in both our commercial and consumer portfolios. Commercial net loan charge-offs as a percentage of average loans was 0.03% (annualized), down from 0.07%, and the consumer net loan charge-off rate was 0.23% (annualized), down from 0.32%
• Nonperforming assets decreased 4%. Nonaccrual loans declined $313 million predominantly driven by a decrease in commercial nonaccrual loans, partially offset by an increase in residential mortgage-first lien nonaccrual loans

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Business Segment Performance

Consumer Banking and Lendingoffers diversified financial products and services for consumers and small businesses with annual sales generally up to $5 million. These financial products and services include checking and savings accounts, credit and debit cards, as well as home, auto, personal, and small business lending.

Selected Financial Information

					Quarter ended		Sep 30, 2021
						% Change from
			Sep 30,	Jun 30,	Sep 30,		Jun 30,	Sep 30,
			2021	2021	2020	2021	2020
Earnings (in millions)
	Consumer and Small Business Banking	$	4,822	4,714	4,721	2 %	2
	Consumer Lending:
	Home Lending		2,012	2,072	2,527	(3)	(20)
	Credit Card		1,399	1,363	1,345	3	4
	Auto		445	415	404	7	10
	Personal Lending		126	122	149	3	(15)
	Total revenue		8,804	8,686	9,146	1	(4)
	Provision for credit losses		(518)	(367)	640	(41)	NM
	Noninterest expense		6,053	6,202	7,345	(2)	(18)
	Net income	$	2,451	2,138	871	15	181
Average balances (in billions)
	Loans	$	325.6	331.9	379.8	(2)	(14)
	Deposits		848.4	835.8	756.5	2	12

NM - Not meaningful

Third Quarter 2021 vs. Third Quarter 2020

• Revenue decreased 4%
• • Consumer and Small Business Banking was up 2% primarily due to an increase in consumer activity, including higher debit card transactions, and lower fee waivers provided in response to the COVID-19 pandemic. Net interest income declined as a result of lower interest rates, partially offset by higher deposit balances
  • Home Lending was down 20% primarily due to lower mortgage banking income and lower net interest income primarily driven by lower loan balances. The decline in mortgage banking income was primarily due to lower gain on sale margins and lower originations, as well as a decline in servicing fees, partially offset by higher gains from the re- securitization of loans we purchased from mortgage-backed securities last year
  • Credit Card was up 4% on higher point-of-sale volume and lower customer accommodations and fee waivers provided in response to the COVID-19 pandemic
  • Auto was up 10% on higher loan balances, while Personal Lending was down 15% due to lower loan balances
• Noninterest expense was down 18% primarily due to lower operating losses and lower personnel expense due to efficiency initiatives, as well as a decline in occupancy expense on lower cleaning and other expenses related to the COVID-19 pandemic

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Commercial Bankingprovides financial solutions to private, family owned and certain public companies. Products and services include banking and credit products across multiple industry sectors and municipalities, secured lending and lease products, and treasury management.

Selected Financial Information

					Quarter ended		Sep 30, 2021
						% Change from
			Sep 30,	Jun 30,	Sep 30,		Jun 30,	Sep 30,
			2021	2021	2020	2021	2020
Earnings (in millions)
	Middle Market Banking	$	1,165	1,151	1,196	1 %	(3)
	Asset-Based Lending and Leasing		911	957	1,030	(5)	(12)
	Total revenue		2,076	2,108	2,226	(2)	(7)
	Provision for credit losses		(335)	(382)	339	12	NM
	Noninterest expense		1,396	1,443	1,623	(3)	(14)
	Net income	$	759	784	192	(3)	295
Average balances (in billions)
	Loans	$	178.6	178.6	201.9		-	(12)
	Deposits		199.2	192.6	179.0	3	11

NM - Not meaningful

Third Quarter 2021 vs. Third Quarter 2020

• Revenue decreased 7%
• • Middle Market Banking was down 3% primarily due to lower loan balances on reduced client demand and line utilization, and the impact of lower interest rates, partially offset by higher deposit balances and deposit-related fees
  • Asset-BasedLending and Leasing was down 12% driven by lower loan balances as a result of lower line utilization reflecting reduced client financing needs due to lower inventory levels, as well as lower lease income, partially offset by improved loan spreads
• Noninterest expense decreased 14% primarily driven by lower salaries expense and a decline in consulting expense due to efficiency initiatives, as well as lower lease expense

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