Wells Fargo & Company

Operator: Welcome. Thank you for joining the Wells Fargo Second Quarter 26 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. There will be a question and answer session. If you would like a question during this time, simply press *1. If you would like to withdraw your question, please note that today's call is being recorded. I would now like to turn the call over to John Campbell, Director of Investor Relations. Sir, you may begin the conference. John Campbell: Good morning, everyone. Thank you for joining our call today where our CEO, Charles W. Scharf and our CFO, Michael Santomassimo, will discuss second quarter results and answer your questions. This call is being recorded. Before we get started, I would like to remind you that our second quarter earnings materials including the release, financial supplement and presentation deck are available on our website at wellsfargo.com. I would also like to caution you that we may make forward looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings including the Form 8-Ks filed today containing our earnings materials. Information about any non GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings and the earnings materials available on our website. I will now turn the call over to Charles. Charles W. Scharf: Thanks, John. I am going to provide some comments about our results and the momentum we are seeing across our business I will then turn the call over to Mike to review second quarter results in more detail before we take questions. Let me start with Slide 2 of the presentation deck, I will walk you through the broad based strength we see in our business. We grew diluted earnings per share to $2 in the second quarter up 25% from a year ago. Revenue grew 9% from a year ago, Growth was broad based with every 1 of our operating segments generating higher net interest income and non interest income. We are clearly benefiting from the economic strength we see in the US, but the investments we are making, our improved operating discipline drove strong momentum and continued to result in improved performance. Net interest income grew 5% from a year ago, and noninterest income grew 13% as we are making good progress against our goal to create a more balanced revenue mix by growing fee based revenues. Expenses increased 2% from a year ago, reflecting investments we are making offset by continued expense discipline. Expenses, excluding revenue related compensation, declined. 1 of the ways you can clearly see the results of our efficiency initiatives is through headcount, which has declined for 24 consecutive quarters and in the second quarter, our headcount was 197 thousand down 79 thousand from 6 years ago, 15 thousand from last year, and 3.5 thousand from last quarter. We are using these efficiencies to offset broad based investments across the company to drive growth including adding branch bankers, investment advisers, commercial banking relationship managers, investment bankers, and traders. We are also increasing our marketing investments accelerating product development, investing in AI, and increasing our cyber defenses. Consumer and commercial credit quality remains strong, across all portfolios, and net loan charge offs declined 10 basis points from a year ago. After years of not being on a level playing field with our competitors because we could not grow our balance sheet, We had strong growth during the first half of this year, including in the second quarter, with average loans up 12% and average deposits up 10% from a year ago. Just a reminder, growth can be risky and we are carefully deploying capital to grow and support our clients by taking risks that we think are prudent through economic cycles not just the strong environment we see today. We returned over $9.8 billion of capital to shareholders in the first half of this year, including repurchasing $7 billion of common stock while continuing to maintain the significant amount of excess capital. As we previously announced, we expect to increase our third quarter common stock dividend by 11% to $0.50 per share subject to approval by our Board of Directors at its meeting later this month. Our continued focus on improving returns was evident with RoTCE increasing from 15.2% a year ago to 17.7% in the second quarter and 16.1% in the first half of 26. While outsized venture capital equity gains favorably affected our returns this quarter, we have said that they can be lumpy, but that we do expect strong returns from these investments over time. But more importantly, the growth and efficiency improvements that we have seen over the past several years are now broader based and it is these trends that give us confidence in reaching our goal of a sustainable ROTE of 17% to 18%. We are often asked about the timing of achieving this goal, and I know you all understand that interest rates, markets, and credit impact us, and are hard to predict, making it difficult to give a definitive answer. But assuming favorable conditions continue to exist, we remain confident that our favorable trends will allow us to achieve this goal in a reasonable time frame and then reset the bar higher for the future. As we show on Slide 3, our strategy is driving growth across all of our businesses. Let me start with consumer banking and lending, with 6% revenue growth from a year ago. After years of little to no growth in checking accounts, our investments in marketing and digital account openings are paying off. And we have grown consumer primary checking accounts year over year for 13 consecutive quarters. We have significant opportunity to increase the pace of growth and this along with offering our broad set of products including credit cards, and mortgages, should drive low cost deposits higher over time. Over the past 5 years, we have enhanced our credit card products and improved the customer experience which has driven new account and balance growth including new accounts increasing 46% in the second quarter from a year ago. Building a larger credit card business is an investment that pressures on profitability in the initial years, with new products having significant upfront costs related to marketing, promotional rates, onboarding, and allowance. It takes approximately 2 to 3 years for Vintage's to season and earn through these upfront costs. Our 2022 through 2024 vintages are now adding to profitability. Our 2025 and 2026 vintages are bigger, as account openings have accelerated so they offset some of the positive contribution from the earlier vintages Importantly, we have seen strong performance versus our original assumptions regarding new account acquisition and credit performance, which gives us confidence that we should see profitability and returns increase. I do want to note that the rate of growth is a decision point for us. We could have higher profitability in the shorter term, by reducing our growth but we are prioritizing longer term results given the quality of accounts we are generating. We evaluate this each quarter we will continue to do so. The momentum in our digital offerings continued, with mobile active users increasing to 33.7 million in the second quarter, that is 1.6 million more a year ago. Investments we have been making to improve the customer experience were reflected in the 2026 J.D. Power mobile app study where we moved up to number 2 in mobile app satisfaction. We were also doing more for our affluent clients. We have been hiring licensed bankers and branch-based financial advisers and that investment is helping to drive better results, with premier client assets up 13% from a year ago. Our auto business returned to growth last year, after intentionally scaling back to improve our capabilities. And the momentum has continued. Originations increased 41% from a year ago, and average balances were up 31%. In part, to becoming the preferred financing provider for Volkswagen and Audi vehicles in the US. Importantly, credit performance has remained strong, and in line with our expectations. Turning to wealth and investment management. Revenue grew 13% from a year ago, Wealth and Investment Management client assets grew 15% from a year ago to over $2.4 trillion driven by increased market valuations and also benefiting from 4 consecutive quarters of positive net flows. We have invested over $1 billion over the past several years to modernize the technology platform, and in the second quarter, we launched Advisor Gateway, a new desktop technology with GenAI capabilities that gives advisers better tools to serve clients and grow their practices. Investments like this are improving productivity, strengthening the client experience, and driving improved adviser hiring and retention. We are also working to be our clients' primary bank, by expanding our deposit and lending capabilities and are seeing strong results with average deposits up 10% and average loans up 12% from a year ago, Securities based lending has been a key driver of loan growth, with average balances up 31% from a year ago, reflecting our success in increasing the number of financial advisers offering this product to their clients. Importantly, the opportunity in this business to grow investments and banking remains significant. We estimate that our existing customers hold trillions in assets at other financial institutions and their lending, deposit, and payment needs are large and growing. Turning to our commercial businesses. Starting with the Corporate and Investment Bank. Revenue grew 16% from a year ago, In our markets business, revenue grew 24% from a year ago. We have been growing our balance sheet to support our clients with average trading related assets increasing 41% from a year ago driven primarily by financing related activity. While this financing activity impacts our net interest margin because it is lower spread, it has good returns and profitability, and positions us to attract more flow business. We track this by client, and we are seeing higher trading revenue and wallet share gains from customers we are providing financing to. While the most immediate revenue benefits are expected within markets, including trading, hedging and risk management products, these deeper client relationships also enhance opportunities across the broader Corporate and Investment Banking platform over time. In our banking business, revenue grew 20%, as our focus on providing a broader set of capital and advisory solutions is working. This was a record quarter for investment banking teams across the firm, Our willingness to invest more in senior talent and in technology, and dedicate more balance sheet to these activities is paying off. what is important here is having a growth plan that is properly paced, and leverages the broader strengths of Wells Fargo. The team has executed with discipline, has hired and promoted the right people, and is taking risks that are in line with our risk tolerance. The favorable environment for M&A financing is helping drive higher revenues across the industry, but our investments are also delivering strong results and we are increasing market share in key areas. In leveraged finance, our year to date market share is 7.2%, and we ranked number 3. In equity capital markets, our shares increased 74 basis points from a year ago to 3.8%. In M&A, we have climbed from number 9 to number 4, among U. S. Advisers by announced deal volume, reflecting our active role in advising our clients on franchise defining transactions. We also have strong share in CRE capital markets, including being the number 1 non agency CMBS bookrunner, number 1 in real estate loan syndications, and number 1 in CRE CLOs. This was a strong quarter across Corporate and Investment Banking, and we still have significant opportunity to grow each of the businesses. Finally, let me highlight Commercial Banking, generated 6% revenue growth from a year ago. The investments we have been making in the business over the past couple of years are driving strong results. Absent the transfers of loans and deposits to consumer banking and lending last year. Average loans grew 9% and average deposits grew 10% from a year ago. Our investments include targeted hiring, in 20 high density markets where we are underpenetrated relative to the rest of the country. The plan is working, as we are seeing incremental client growth and higher loan and deposit balances and we expect this momentum to continue as we execute on our plan. We have also focused on delivering investment banking and markets products for commercial banking clients. We have had success, which has helped drive revenue growth, but we still see significant opportunities to grow revenue here. While commercial banking is 1 of our more mature businesses, we still have significant opportunities to grow. Our treasury management and payments revenues are embedded in our commercial bank and Corporate and Investment Bank results, Across both segments, revenue was up 5% from a year ago. We have been investing in coverage teams and payment platforms, that are beginning to innovate using blockchain technology, to create better payment solutions for our commercial customers. These solutions will use blockchain based payment rails to make cross border payments faster, more transparent, and more predictable. And over time, will extend operating hours to 24 hours, 7 days a week. As we look ahead, consumers and businesses remain strong. Consumer spending is higher, charge-offs are lower. And savings and investments are growing across customer segments. Businesses are cautious, but balance sheets and cash flows remain strong, resulting in strong credit performance. Equity indices are at or near all time highs, and credit spreads are narrow. Concerns around affordability and inflation exist, but the labor market and wage growth remain strong. The markets and US economy have absorbed macroeconomic and geopolitical uncertainty well. Strong environments like this do not last forever, and we see large amounts of capital being deployed by both banks and nonbanks across a broad range of risk assets. Often, when times like this continue, leverage and risks develop that are sometimes hard to see. We are proud of the progress we have made and remain excited about our competitive position and ability to execute and drive towards our goal of industry leadership in the U.S. We will watch carefully for signs of outsized risks and stress and continue to deploy our resources carefully and deliberately to serve our clients, and build sustainable, high returns and higher growth that can endure inevitable market shocks and economic cycles. In closing, we and most financial institutions are benefiting from today's environment However, we are also seeing the benefits in our results from the actions we have taken which should endure through cycles, as I said. Our metrics clearly show our momentum across all business segments, and we will continue to remain focused on driving towards higher sustainable returns. I will now turn the call over to Mike. Michael Santomassimo: Thank you, Charles, and good morning, everyone. Since Charlie covered the drivers of our improved financial results and the momentum we are seeing across our businesses that we highlighted in the first 2 slides, I will start my comments on Slide 4. Our second quarter results were strong with broad based revenue growth disciplined expense management and improved credit performance. Our earnings increased 17% from a year ago to $4.1 billion and our diluted earnings per share grew to $2 up 25% from a year ago. Our second quarter results included $132 million or $0.04 per share of discrete tax benefits related to the resolution of prior period matters. Turning to slide 6. Net interest income increased $690 million or 5% from a year ago and increased 2% from the first quarter. The growth from the first quarter was driven by higher loan and investment securities balances as well as 1 additional day in the quarter. As expected, the net interest margin declined 4 basis points from the first quarter, and down from the 13-basis-point decline we had last quarter. The biggest driver of the decline in NIM in the second quarter and over the past year has been growth in interest bearing deposits as well as continued growth in our markets business. The success we are having growing interest bearing deposits deepens our relationships with clients in the commercial bank and the Corporate and Investment Bank and gives us the opportunity to attract noninterest bearing deposits in the future And as Charles mentioned, while financing balances in the markets business are lower spread, they have good returns and profitability and position us to grow other activities with those clients. We see it in our results, including total revenue in the markets business growing 24% from a year ago as well as returns starting to increase along with our market share. I would also note that even with the NIM compression, we grew net interest income versus last year and last quarter. While we will talk more about our expectations for net interest income later on the call, we expect modest net interest margin compression in the third quarter broadly in line with second quarter's decline from the first quarter before stabilizing the fourth quarter. Moving to Slide 7. Average loans increased $110 billion or 12% from a year ago, driven by growth in commercial and industrial loans as well as growth across our consumer portfolios except for residential mortgage loans. Turning to deposits. Average deposits increased $134 billion or 10% from a year ago, with growth across our consumer and commercial businesses as well as higher corporate deposits. Average deposits declined 1 basis point from a year ago and were up 8 basis points from the first quarter driven by growth in interest bearing deposits. Turning to Slide 8. We had broad based growth in noninterest income, up $1.2 billion or 13% from a year ago. We generated over $10 billion in noninterest income in the quarter with growth across most fee categories. We had strong performance from our venture capital investments, with $847 million in both unrealized and realized net equity gains, or $640 million after noncontrolling interest. it is important to look at these results after the impact of noncontrolling interest. We also had double digit growth in investment advisory fees brokerage commissions, and investment banking fees from a year ago, We had over $900 million in investment banking fees in the second quarter, a new record. Turning to expenses on slide 9. Noninterest expense increased $282 million or 2% from a year ago, and our efficiency ratio improved to 60%, down 4 percentage points from a year ago. points from a year ago. The increase in expenses from a year ago was driven by higher revenue related and incentive compensation expense which I like to remind you is a good thing as these higher expenses are more than offset by higher revenue. We also have higher technology and advertising costs driven by the investments we are making in our businesses to generate growth. These higher expenses were partially offset by the impact of efficiency initiatives including a 7% reduction in headcount from a year ago. We are pleased to see the continued execution of our efficiency initiatives quarter after quarter. This is the 24th consecutive quarter of headcount reductions and along with other meaningful efficiency initiatives, we have been able to continue to invest in our businesses while managing overall expense levels. In fact, as Charles highlighted, nonrevenue related expenses were actually down from a year ago. Turning to credit quality on slide 10. Our credit performance in the second quarter remained strong with our net loan charge off ratio down 10 basis points from a year ago to 34 basis points of average loans. Commercial credit continued to be strong with net loan charge offs declining to 10 basis points. Consumer performance was also strong with loan charge offs declining 74 basis points with improvements across the portfolio from the first quarter and continued net recoveries in the residential mortgage portfolio. Nonperforming assets as a percentage of total loans declined from the first quarter and from a year ago with improvements in both commercial and consumer portfolios. Our allowance coverage ratio for loans was relatively stable from the first quarter credit card and auto loan growth drove a modest increase in our allowance which was largely offset by lower allowance for commercial real estate office loans. Turning to capital and liquidity on slide 11. Our capital levels remain strong with our CET1 ratio at 10.3%. Within our stated 10% to 10.5% target range. And well above our CET1 regulatory minimum plus buffers at 8.5%. While the Federal Reserve stress test results do not impact capital requirements this year, results continue to be below the stress capital buffer floor of 2.5%. We repurchased $3 billion of common stock in the second quarter, and common shares on outstanding declined 6% from a year ago. We continue to have capacity to repurchase shares while also supporting our clients. Moving to our operating segments, starting with consumer banking and lending on Slide 12. Consumer, Small and Business banking revenue increased 8% from a year ago driven by higher deposit and loan balances. Wider deposit spreads, and growth in noninterest income. Credit card revenue grew 2% from a year ago due to higher loan balances. Home lending revenue declined 7% from a year ago, reflecting lower home loan balances, However, the rate of reduction has continued to slow, with balances relatively stable from the first quarter. Lower revenue also reflected a continued reduction in the size of our servicing business with third party mortgage loans serviced for others down 21% from a year ago. Auto revenue increased 33% from a year ago due to higher loan balances, Auto originations increased 41% year over year, but were stable from the first quarter. Turning to commercial banking results on Slide 13. Revenue increased 6% from a year ago driven by noninterest income growth from equity investments, revenue from the financing we do for renewable energy projects that come in the form of tax credits, and investment banking as well as growth in net interest income from higher loan and interest bearing deposit balances. Loan growth was broad based with increased demand from both new and existing customers. Turning to corporate investment banking on slide 14. Banking revenue increased 20% from a year ago with growth in investment banking fees and equity and debt capital markets, as well as higher loan and interest bearing deposit balances. Commercial real estate revenue declined 1% from a year ago as higher capital market activity and loan balances were more than offset by the impact of lower interest rates. Markets revenue grew 24% from a year ago driven by stronger performance in equities and higher revenue across most fixed income products, including the impact of balance sheet growth. As you know, we have been growing our balance sheet in the markets business. It has increased $198 billion since the end of 24 with approximately 60% in financing balances, 20% on the trading side, and 20% for the lending we do in this business. We extend these balances to clients who can also bring us additional business in our early tracking shows that is what is occurring. We track this on a granular basis and we will continue to optimize with clients to drive growth and returns. Average loans in Corporate and Investment Banking grew 26% from a year ago with growth across all businesses, while utilization rates were relatively stable. On slide 15, wealth and investment management revenue increased 13% from a year ago driven by growth in investment advisory fees, from increased market valuations as well as higher net income due to lower deposit pricing and higher deposit and loan balances. As a reminder, the majority of WIM advisory assets are priced at the beginning of the quarter, so third quarter results will reflect market valuations as of July 1. Which were up from April 1 and from a year ago. Turning to our 2026 outlook on slide 17. We are maintaining our guidance of $50 billion plus or minus of net interest income for the full year And similar to last year, we expect stronger growth in the second half of the year compared to the first half. We still expect net interest income, excluding markets, to be approximately $48 billion for the full year, Looking at the key drivers, starting with loans, as I highlighted, average loans in second quarter grew 12% from a year ago. So year over year, average loan growth in the fourth quarter will likely be higher than the mid single digit increase we assumed in our outlook, back in January. This is a positive versus our original expectation. We have also successfully grown interest bearing deposits which is a good thing since these higher balances help us deepen relationships with our customers, And as I mentioned earlier, it gives us the opportunity to attract non interest bearing deposits in the future We had originally assumed some growth in noninterest bearing deposits, but we now expect them to be relatively stable, which is a negative to our original expectation. Interest rates are currently not a significant factor in or out of this year. While interest rates have been higher than we expected in our original outlook, which benefits NII excluding markets, the rate cuts we had originally assumed were expected later in the year so the change is only a modest impact on this year's net interest income expectations. In terms of markets, NII, as we all know, it is always hard to forecast. Higher short term rates typically result in lower markets NII, but as of now, we still expect market NII to be approximately $2 billion in 2026. So putting this all together, while the drivers have moved around since our original outlook, which is always the case, our current outlook is still $50 billion plus or minus of NII for 2026. Regarding our expense outlook, we still expect 2026 noninterest expense to be approximately $55.7 billion. Expenses in the first half of the year were in line with our expectations As we look at the second half of the year, we expect revenue related expenses to be somewhat higher than we expected at the beginning of the year, but we expect expenses in other areas to be lower through our continued focus on efficiency initiatives. In summary, we had strong second quarter results clearly demonstrate that the strategy we have been implementing to drive growth is working. Revenue growth was broad based with every 1 of our operating segments generating higher net interest income and noninterest income from a year ago. Our continued focus on improving efficiency drove positive operating leverage. The asset cap came off last year, and we had double digit growth in both average loans and deposits from a year ago. Credit quality was strong with improved performance in both our commercial and consumer portfolios. We continue to return significant capital to shareholders while maintaining our strong capital position. As Charlie highlighted, we are seeing strong momentum in key business drivers in every 1 of our businesses. And the steady improvements in our returns continue to give us confidence in achieving our medium term 17% to 18% RoTCE target. We will now take your questions. Operator: If you would like to ask a question, please first unmute your phone and then press *1. Please record your name at the prompt. If you would like to withdraw your question, you may press *2 to remove yourself from the question queue. Once again, please press *1 and record your name. The first question comes from Ken Usdin of Autonomous Research. Your line is open. Ken Usdin: Hey, thanks. Good morning. And Mike, thanks for the color on the second half expected NIM trends. 2 questions I have 1 is just again, to get to 50 billion I think we need to assume that the average earning assets continue to grow at around this 3% pace And given your comments about loan growth and the deposit growth, is that kind of what we need to need to foot forward to get there? Any other things we need to think about in terms of within? Thanks. Michael Santomassimo: Yeah. Sure. Yeah. I mean, look. If when you look at what is gonna progress for the second half of the year, it is very similar to what we saw last year. Right, in terms of the step-up as we went through each of the quarters. You do benefit from an extra day as you sort of go into the third quarter, so you sort of have to account for that. But we expect to see some growth in loans, securities, You get the benefit of, you know, the fixed asset turnover given where rates are. And so I think it is all progressing. So it is not a bad assumption sort of relative to what to expect, but we still feel very good about getting to that 50 billion in total. Ken Usdin: Got it. And then the second question is just on that NIM stabilizing in the fourth quarter, what are the pieces that kind of get there? Meaning, like, is it that 1 piece slows relative to the growth rate? Is it just that you kind of lap some comps? You know, what are the helpful things underneath that can give us the confidence that stabilization happens? Michael Santomassimo: Yeah. Sure. And, know, we have talked about this a little bit over, like, throughout the quarter, but you know, we do not expect to see the market's balance sheet to grow at the same pace. And so the impact that we have seen over the last, you know, few quarters moderates. And that is certainly part of the story as you get into the latter part of the part of the year. And then I think you continue to get the benefit of all what we just talked about in terms of the growth in earning assets, the repricing, and then you sort of, you know, see the rest of the growth across the, you know, the balance sheet. But at this point, you know, as I said, we expect just a small you know, decline potentially in the third quarter. You know, hopefully, it ends maybe even being better than that, and then we sort of stabilize from there. Ken Usdin: Okay. Got it. Thanks, Mike. Operator: The next question will come from John McDonald of Truist Securities. Your line is open. John McDonald: Hi, thanks. Yes, I was wondering, Mike, on expenses and efficiency, what is the outlook? I mean, you have done a great job with the outlook on headcount So from here, are you still looking to keep that flat to down? And just the broader commentary about the opportunity for efficiency improvement from here. To keep going. Thanks. Michael Santomassimo: Yeah. Sure. I will I will take a shot and start Charles can add if he wants. The you on the headcount side or just more broadly we still come into the, you know, environment thinking the same thing we have now done now for a number of years, which is we have got a lot of room to go to continue to make the place more efficient. And in part, that drives headcount down. And so the size of our business, the activity levels we have got, we expect that you should we should be able to run this company, you know, with less headcount than we have got today. Certainly, you know, technology and AI helps us get out aspects of that you know, in a different way or faster than maybe in the past, but we expect that we will continue to see more efficiency, you know, from here. Then just more broadly, you know, it applies to just about everything we do. And I know we keep talking about this over and over and over, but as you peel back the onion, there is more opportunity to make things more automated to improve the client experience, to, you know, make more efficient in terms of how we serve clients every day, and I think there is a lot still to go. And we, you know, we are we just come in every day and every week sort of make sure that we continue to execute like we have done over the last few years. John McDonald: Okay. Thanks. And then maybe just a follow-up on Ken's line of questioning around the net interest income drivers. The change in noninterest bearing from what you saw what you were expecting earlier in the year, Mike, is that related to any developments in your checking account growth, or is it more attributable to rate seeking behavior on customers and just the rate environment? What do you attribute the change in your NIV outlook to? Michael Santomassimo: Yeah. No. it is it is actually not related to the checking account growth. that is actually progressing quite well and is as Charles mentioned, you know, we are up we are up in sort of the checking account growth now for a number of quarters. And months in a row. And so I think that is actually going quite well. I think when you look at just the broader backdrop in terms of the rate environment, we expected a little bit more growth than we are seeing. You know, we did see a little bit of growth you know, from the first quarter and the second quarter, so that is good. But we expect it to be pretty stable from here. You know, we are seeing really good success in growing interest bearing deposits and growing other business with, you know, with clients, you know, in the payments space and the treasury management space. And so those things will bring net interest, noninterest bearing deposits with them over time. It just takes a little bit longer for that stuff to get onboarded and to see the results there. But we are not seeing we are not seeing pricing pressure sort of or client behavior drive any of the results. Okay. Thank you. Operator: The next question will come from Erika Najarian of UBS. Your line is open. Erika Najarian: Hi, good morning. Thanks for all the color so far. As we think about the trajectory of net interest income and net interest margin, I am wondering if we could maybe just take a step back because obviously, there is a lot of focus on this number. But I am wondering if you could sort of separate sort of the structural factors versus the cyclical factors. So you know, first, you know, what are you expecting for deposit costs in the second half of the year? Is there a rate hike priced in? I think you removed the cuts but, Mike, I just want to make sure what you were I understood what you were assuming for the short end. So what should we expect from deposit cost standpoint from here? And additionally, you have 2 strategies that are sort of a competing factors on the NIM. 1 is this great growth in markets, is obviously NIM dilutive. And also strong momentum in card, in theory could be NIM accretive, especially once the accounts mature. So, you know, as we think of all of those facts you know, how should we think about you know, whether or not we should expect more secular pressure on the NIM beyond the macro factors with rates and deposit costs in the second half of the year? Michael Santomassimo: Yeah. Okay. There is a lot in there. So I will, I will try to get it. And if I if I miss a piece, please, please point me in the right direction. So I think when you when you look at what is happening across NIM, obviously, what we have got baked in to the second half of the year is, you know, the market's pricing in a little over a 1 increase at this point. And so I think we will see how that actually plays out, but that will have very little impact on the on the full year results just given, you know, the timing of it depending on when that happens. And so I think that is not like a huge driver 1 way or the other. I think what is what is what is happening in our in our deposit book, though, is that we are seeing the pace of interest bearing deposits grow. At a really good clip, and you can see that in the results quarter after, quarter after quarter. And I think if even if you just look at the CIB and the Corporate and Investment Bank and the commercial bank deposits where you have seen you know, really good deposit growth year on year and sequentially. And the majority of those deposits are gonna be interest bearing deposits. And so since they are growing faster and you are seeing slower growth in the consumer side and pretty stable noninterest bearing deposits, you are gonna see, you know, the deposit cost inch up a little bit. And that is actually fine and expected and frankly, not a bad thing because we are growing these profitable balances, you know, across the business So I would expect the deposit cost to move just move up a little bit as you go in the second half of the year, but ultimately, I think that is actually a good thing from a profitability point of view and supports the broader set of business that we do, you know, with those customers. And then as I sort of mentioned in the commentary, you know, we expect a little bit more, you know, NIM compression in the third quarter, and then things start to stabilize, and you get the benefit of all of the other impacts of, you know, you know, that we have talked about in terms of the earning asset growth, the repricing that is happening across a large portion of the book, of the securities book. And so and all and all of that, I think, contributes quite well. And I think just keep in mind as we sort of look at NII, you know, what we are we are most focused on here is really growing NII over a long period of time that will generate really profitable business and relationship that I think would, you know, we will see, you know, benefit us for you know, for many years to come. And you may see a little bit of volatility in the NIM number, you have seen over the last, you know, few quarters. And that is to be expected just given where we came from last year with the asset cap coming off and the pace of growth that you have seen know, since then. Charles W. Scharf: Me just add, Erika, this is Charles, I can. Just a couple of things. Number 1 is, you know, I think the way we think about this is to separate out our balance sheet and what you are seeing into a couple of different components. 1 is just the business that we have, which generates the majority of NII. That is very stable. And then we have these businesses we are looking to grow, both in the markets business, but also ultimately expanding relationships and treasury management on the consumer side. And there, as we talked about, you are seeing growth in interest bearing liabilities. And so it is those additional businesses that have narrower margin NIM that is, that is bringing down the NIM, But we are looking at it in terms of what it means in the shorter term for profit growth and for returns. And we feel good about that. At this point, But more importantly, over time, that should also help us grow NIM as we attract more noninterest bearing over a period of time and away from NIM, we generate stronger trading revenues. And so that is the flywheel effect of that financing that we are providing. And as I have said, if we do not see that, then know, we can certainly pull back on some of that activity and improve the NIM. But as we said in our prepared remarks, are seeing the payoffs certainly on the markets side at this point, even though it is early. But that is a decision point that we have to make and we will be very conscious of what the impact is both on NIM but also on this balance between what you see in terms of NIM profit growth but returns. Erika Najarian: Yep. Hear you loud and clear, Charles. I think that is why I wanted to frame it in terms of you know, structural in growth. And to that end, the second question is just the opportunity set in your areas of where you are focusing growth. So maybe talk a little bit about the investment banking pipeline, but also in terms of the equities opportunity So we are hearing that a lot of your peers are a little bit more limited in terms of prime equity financing capacity given the hyperscaler trade in Asia. Of course, you are not quite big globally yet, and you did mention it in your prepared remarks in terms of financing related activity. Maybe describe a little bit more the prime financing opportunity that lies ahead, especially if the sort of traditional, counterparties, have more limited capacity because of activities outside of The US. Michael Santomassimo: Yeah. it is Mike. Erika, I will start and start on both parts of it. So on the on the investment banking pipeline, you know, the pipeline's quite strong. And I think we see that now very consistently for a while now. And I think, you know, the environment is very supportive of deals. The markets are wide open both on the equity side and sort of the debt side. And I think, you know, the art of the possible on the M&A, you know, in the M&A space is quite alive. Right? And I think there is a lot of active dialogue there. And I think you can see our investment banking, you know, business had a really good quarter. And I think, you know, that all the investments that we have made the last 3 or 4 years have positioned us to take more advantage of this environment more than we would have been able to know, 3, 4, 5 years ago by a lot. And I think we are continuing to make, you know, more investments in, you know, targeted areas across different coverage sectors and in some of product areas. And so we feel good about the trajectory there, and we will see how it how it progresses. And just on the broader question, I would just say, listen. I think, you know, what we have said in the past, you know, still holds true, which is that there is a lot of great competition out there. There are people that are very, very large in some of these businesses, including prime. But what we have found is that people want more options, They want more counterparties. We have relationships with a broad set of these customers, and they generally like doing business with us and so they want to do more. So for us, it is a question of just pacing that addition in terms of the amount of business that we do properly. We are still very, very early in terms of growing out our prime business. So there is nothing really material in this current quarter. Relative to that, but it is an opportunity that, you know, we are gonna be careful about you know, that along with you know, other trading flow opportunities that we have and the investment banking opportunities that we have talked about, we still think are incredibly significant for us. Thank you. Operator: The next question will come from Ebrahim Poonawala of Bank of America. Your line is open. Ebrahim Poonawala: Hey, good morning. So not to beat a dead horse on the margin. And I, the stock obviously sold off when you started talking about your margin outlook. Understand you are not running the bank on a 1-day stock reaction. But maybe I think just a bigger picture question. If we take a step back and, appreciate, Mike, your comments around the trajectory of the NII, which I think is more important than what the NIM does in any given quarter. But as we look forward beyond even this year, do you think the net interest margin given your balance sheet and the business strategy on the going forward, is at a point where the margin should begin to stabilize post the 3Q compression you talked about? And 1 of the pushbacks this morning has been, like, the ex-markets revenue growth predominantly NII driven. So I guess the street is struggling to see the cross sell of deploying that market's balance sheet into lower NIM and then that translating into better fee growth on the markets side. So maybe help us understand that from a market standpoint and then how should we think about this normalized NIM for your balance sheet or business strategy? Michael Santomassimo: Sure. You know, I think on the on the NIM side, know, as I said earlier on the call, you know, we do expect it to stabilize. After you get through the third quarter, and so that is definitely the case. And as Charles mentioned, you know, there is, you know, over a slightly longer time period, like, there is opportunity to expand the NIM, not just stabilize. And so I think that is that is certainly what we expect as we sort of look at, the rest of the year. I think when you start looking at the overall, you know, trading business, there, you certainly see some growth in that NII, but it is not all because of the rate move that we saw. You get the paid, you know, in some of the in some of these trading businesses through NII. You think mortgages, you know, mortgage trading and other areas of the of that business. And so you do really need to look at overall sort of revenue in the markets business. When you look at, you know, the financing, you know, and I will break it down a little bit for you. You look at you know, the financing side of the business, you know, that is up. it is not it is not quite a not quite a double, but it is pretty close when you sort of look at you know, the year on year performance in the overall financing revenue within the business. And then you saw, you know, roughly a 20 plus percent, you know, increase in sort of the trading related revenue you know, off the back of that. And so I think we have seen know, quite a bit of quite a bit of, you know, growth across you know, these, you know, these parts of the business within trading. And then more importantly, when you start looking at the individual clients where we are deploying some of this incremental financing balance sheet to, every single 1 of them, all but a couple, you know, have done significantly more business with us than they did just a year ago. And that is just getting started in terms of ramping up some of the volumes. And so I think you will, you know, you will continue to see that, you know, across the markets business, I think, for into the coming quarters. But we feel really good about what we are seeing and the trend that we are seeing there. Charles W. Scharf: Let me just add 1 thing that slightly different words but kind of reinforcing a point that I made earlier, which is what we are seeing in NIM is not happening to us. What we are seeing in NIM is because things that we are doing, and those are things that we do not have to continue to do or we can unwind at some point as well. And again, the reason why we are doing it is because we believe that it will lead to stronger NIM in some of these businesses in the future. By attracting more noninterest bearing deposits or by attracting additional trading. And that is either gonna drive the kind of profit growth and higher returns that we believe we can deliver or that is a decision point that we can make. And so we understand that you know, it is hard to see that as clearly from the outside. So we have got to do a good job of doing our best to show you how that is actually playing itself out. But as Mike said, when it comes to financing, as an example, we look client by client, and we are we are providing more financing. We are getting more share, higher trading revenues, And so that is when I said on the last you know, we are either gonna get paid for it or we are not gonna do it. And that very much holds true. And so the fact that like that is in our control is something I think that is critically important and is a tool for us to help grow the returns and the profit of the company or we can either slow things down or reverse course if we had to, but nothing suggests we should do that because we believe that we are getting the payoff for it, and we will have to show that to you. Ebrahim Poonawala: So I think that is a great point, Charles. that the NIM is due to the deliberate actions you are taking. And I think the 1 point of discussion that is come up repeatedly with investors over the last month or 2 is no 1 doubts when they think about can Wells achieve higher end of your 17% to 18%, so let's call it 18% RoTCE over the next few years. I think as the street is trying to digest what the execution around this growth strategy may imply, I think the timing of that has become a bit more uncertain, I would say, over the last 6 months. And so to the extent you can address that? Just with your crystal ball, like, how do you think about when you could achieve that target maybe towards that 18%, which also I recall, you have talked about as a waypoint, and we could go even higher than 18% Maybe if you can provide some color around the timing of how you think about it, I think that would be very helpful to your shareholders. Thank you. Charles W. Scharf: Sure. And listen, I know it is a very busy day, and you guys are trying to juggle lots of different companies. I did talk a little bit about this in my prepared remarks where I talked about the fact that I know that people ask about timing. it is difficult to answer because what I do not want to do--what we do not want to do is a company is give you a definitive date and then have interest rate environment change, the markets environment change, credit change, and then you believe that we have not actually delivered on something, because the fact is we are subject to those things. But assuming that the markets continue to behave and that conditions continue to be favorable. What I said is that you know, we would expect to achieve it in a reasonable time frame. And the 1 other thing I would say, which is as time goes on and from last quarter's underlying performance in our business trends in this quarter's, we feel even more confident about being able to deliver it. What I said in my prepared remarks is that our intention is to get there and then raise the bar higher for the future. So if we did not have the kind of confidence that we can get there in a reasonable period of time, you know, we would not be saying that. And, again, what gives us that confidence is looking at the underlying business drivers that we tried to lay out in the first 2 pages of the presentation, because it is those things which are gonna drive the continued growth of the franchise you know, regardless to some extent of outsized performance in the markets. So I know it is not giving you a definitive time frame, but what I want you to know--I think what is important to read is our confidence is higher, not lower, as each quarter goes by. Ebrahim Poonawala: Appreciate you going through it again. Thank you. Operator: The next question will come from Manav Gosalia of Morgan Stanley. Your line is open. Manav Gosalia: Hi, good morning. I wanted to dig in a little bit on loan growth Clearly, very strong this quarter. You noted upside to the original loan growth guide for the full year. Can you just walk us through some of the drivers on what you are seeing now? How much of the commercial loan growth reflects high utilization versus new customer activity? And I guess, your willingness and ability to lead more on the auto side going forward? Michael Santomassimo: Sure. I will start maybe on the consumer side, and then I will bring it back on the commercial side. So on the consumer side, you know, we continue to see really good growth in auto. We see steady growth in card. The home lending business is pretty stable at this point. And I think those trends, like, we would expect to continue as you sort of look at the rest of the rest of the year. And so steady as you go in terms of what we have been seeing quarter to quarter there. I think on the commercial loan side, it is really not utilization. You know, we see a little bit in pockets of, like, slightly more utilization here or there, but it is really not, you know, you know, substantially higher utilization of revolvers. It is it is new business we have been bringing on that drives a lot of it in the C&I space. And I think, you know, we will see how the rest of the year progresses, you know, as I mentioned in the script, you know, we know we certainly have seen you know, higher loan growth than what we had assumed in the beginning of the year, and that is a that is a positive. You know, we will have to see how the rest of the year goes. I think, you know, you definitely see tariff refunds coming through impacting some commercial bank clients. In terms of the utilization. You see a bunch of other factors there, but I think it is been it is been good so far, and we will see how progresses for the rest of the for the rest of the year. And, you know, importantly, with that, we are not you know, we are seeing really good you know, performance from a credit perspective across really all the portfolios. And I think that supports, you know, you know, continued sort of execution across each of the businesses and growing, you know, those portfolios. Got it. Thank you. Manav Gosalia: And then maybe on the capital side, 3 billion of buybacks this quarter, little bit below the recent base. How should we think about where you want to manage to in your c d 1 target range? And how should we think about repurchases going forward here? Michael Santomassimo: Sure. I mean, we are we are really comfortable in the range that we put out there. 10 to 10 and a half, really anywhere in that range. We are we are comfortable with And we will we approach buybacks the same way we do every quarter. You know, we look at, you know, what we expect to do from a client perspective and what growth we expect to see across the portfolios and the business. We, you know, think about all the different risks that are out there, including the rate environment and the volatility that may be there and how that impacts capital. And then, you know, we will we will we will make decisions on how much we will buy back each quarter. And so we will sort of keep that you know, progression as we go this quarter, and we will see where we get to. But we certainly as we mentioned, we bought back 7 billion in the in the in the first half of the year, and I think we still have capacity to buy back more as we go. We will make the decision we go in the quarter. Charles W. Scharf: And also keep in mind, Mike's talking about this absent the finalization of the capital rules, And as we said in the past, you know, the capital rules might not necessarily change you know, that CET1 minimum plus buffers, but it could certainly change what goes into the calculation relative to freeing up capital through the RWA calculation for us. Michael Santomassimo: Yep. And just as a reminder, we still expect our RWA to go down as a result of you know, at least what was proposed by about 7%. So we will we will see how it gets finalized. Got it. Manav Gosalia: And if I can ask a quick clarification on that So you would need to see the rules being finalized before you act on that lower CET 1 ratio? Or sorry. On the on the higher capital on the ability for the new capital rules to give you more CET1, you would only on that in terms of buybacks or capital deployment once the rules are finalized? Yeah. I think we need to see the rule get finalized. But we hopefully, that will get done pretty quickly. Got it. Thank you. Operator: The next question will come from Matthew O'Connor of Deutsche Bank. Your line is open. Matt O'Connor: Just a quick comment before my question here. As your markets business has gotten bigger, I know you give us the pieces that you could probably calculate it, but showing the NIM ex markets, I think, might be helpful in kind of handful of these questions. Related to it. My question is, the new credit card accounts, as you pointed out, are up sharply post listing of the asset cap. I think it is up 50% to 60% now. In the 4 quarters. Any way to estimate how much of a drag there is from those new cards and related promotions as we think about the credit card yield? And then when does that inflect as the backbulk kind of starts overwhelming the new accounts? Michael Santomassimo: Yeah. So it is as Charles sort of mentioned in his script, like, we have made some you know, intentional decisions to, you know, see the growth like, you know, continue to execute on growing those accounts. And I think you know, the good part about what we have seen now for the last you know, almost 4 quarters, I guess, started really in the third quarter of last year. Is a lot of that a lot of those new accounts are actually coming through our either our branch network or, you know, people coming directly to wellsfargo.com. And so the acquisition cost there are lower than, you know, if you are if you are doing them through, you know, third party affiliates and others. And so that is a really good thing, you know. And with that comes really high quality, you know, accounts. We know these customers. You know, the majority of it is still existing customers that are, you know, coming you know, coming to, you know, us for these, you know, these cards. And so I think that is a good thing. And I think as, you know, those vintages are a little bit bigger than the, you know, the early vintages. And so but overall, we continue to make you know, we will continue to make those decisions as we go quarter to quarter and decide sort of you know, what we are seeing and how happy we are with the quality of it. And I think, you know, both but despite that, I think over the next couple years, will you will see you know, the profitability of that business, you know, just you know, continue to increase, and the return increase in the business, and that is, you know, the way we have been sort of managing it. And then, you know, the yield quarter to quarter, you know, in terms of, you know, what you see from the credit card deal, that will that will move around a little bit depending on sort of what we see from the new acquisitions. But over a longer period of time, you will see that continue to increase as those as those vintages mature, and you transition from the intro, the APRs or the you know, balance transfer APRs into sort of real revolve revolving balances. And that will happen over the next couple of years. Okay. Thank you. Operator: The next question will come from John Pancari of Evercore ISI. Your line is open. John Pancari: Morning. I just want to see if you can comment a bit more just around deposit price competition that you are seeing. How is it trending versus your expectations? And then related to that, I know you did comment on the growth expectation on the loan front on the mid single digit side. Do you still confidence around a mid single digit pace growth as you look at your deposit strategy? Thanks. Michael Santomassimo: Yeah. I mean, the short answer on the second part is yes. On the deposits. And again, a little more weighted to interest bearing than non interest bearing as I mentioned, John, but we are seeing, you know, week to week, month to month sort of the growth that we expect there. So I think that is that is good. You know, on the on the pricing competition question, you know, it really has not changed over the last few quarters. Know, on the consumer side, you know, our standard, you know, rates have not moved. We are not seeing, you know, shifts in behavior than what we have seen over the last few quarters there in terms of you know, people yield seeking in any in any way. So I think that is that is good. And then on the commercial side, know, rates are always competitive, but what we have not seen we have not seen rates get more competitive than what we would have expected. Normally, you know, across those businesses, and we are really careful to you know, not overpay to attract And so I think, yeah, we are not we are not seeing that kind of pressure and, you know, there is always there is always an example of, yeah, of something to the contrary to what said. But I think when you look at the vast majority of the activity we are seeing it is all very much right in the fairway of what we would have expected to see. Okay. Thanks. John Pancari: And then separately on expenses, I appreciate the color you already gave around efficiency and everything. Can you maybe just give us a little update around the risk and reg area of the of the cost base? I know there is still a fair amount of dedicated to that area. Is this broader area now that a lot of the regulatory issues have been worked through becoming a greater expense lever for you? Thanks. Michael Santomassimo: Yes. Certainly. And I think, you know, we talked about that over the last couple years. Right? As we completed the work and moved past, you know, the consent orders that we had in place, you will see us continue to make that prop those processes that we put in place more efficient. And if you think about where we started this journey 5, 6, 7 years ago now, you know, I think there is better technology. there is better ways to do things. And so the normal streamlining that sort of happens is happening. But that will be a very methodical sort of approach, and you will see that happen over, you know, over time. But it certainly part of some of the efficiency that you are seeing come through in the last couple of quarters. Okay. Thanks, Mike. Appreciate it. Operator: The next question will come from Chris McGratty of Keefe, Bruyette and Woods. Your line is open. Chris McGratty: Great. Just 1 on credit. it is been questions have been fairly limited on conference calls this quarter and throughout the quarter. Just I guess, a check-in on consumer health of the consumer, anything incremental you may be seeing? And then conversely on the commercial borrower, demand for credit we talked about, but just any signs within the commercial book of weakening or normalization. Thanks. Michael Santomassimo: Yeah. On the on the consumer side, it really is good. You know, the delinquency trends are better than we model most months. Really, every month that we have seen now for the for all year, across each of the portfolios. We are not seeing sign any you know, we are not seeing any cohorts of clients whether you break it by FICO or other ways to look at higher or lower income levels. We are not seeing any of the trends in any of the cohorts change really at all. Certainly not anything meaningful. And so I think, you know, it is supportive of, you know, a good second half of the year, you know, when you think about sort of delinquencies and charge offs. And so I think that is really good, and that supported you know, by, you know, the strong, you know, employment know, picture that we see more broadly, and we have seen, you know, good wage growth to counteract some of the inflationary, you know, issues that we have that we have had. And so overall, you are seeing really good performance on the consumer side. On the commercial side, same. Really, there is no issues that we are seeing, you know, come through the portfolio. there is always you know, individual idiosyncratic issues you might see with an individual borrower. But overall, we are seeing really good credit performance. I think people are still being very cautious about, you know, big investments. They still have more liquidity in most cases than they did know, maybe historically, you know, pre COVID days. Yeah. You are not seeing people, you know, make big investments in terms of hiring lots of people, but you are also not seeing people fire a lot of people, at least in what we can tell in our book. And so I think overall, you know, I think people are managing their liquidity and managing their, you know, overall balance sheets quite well in the commercial side. And so, again, you know, we have not seen anything that would suggest there is a change to that at this point. Great. Thank you. Operator: The next question will come from David Chiaverini with Jefferies. Your line is open, sir. David Chiaverini: Hi, thanks for taking the question. So you mentioned about the markets business. Asset growth should slow in the second half. Is that a function of this business getting to your comfort level? And then from there, the markets business asset growth should be in line with overall balance sheet growth? Michael Santomassimo: No. it is not necessarily that. I think, you know, you know, when you think about what happened, you know, pre asset cap, we really had to constrain that business. And so, you know, the financing balances that we added, you know, starting in the second half of June last year, know, was at a pace that is just not, you know, sustainable for, you know, forever. And so it really was the reemergence and the, you know, the reentry, I guess, in some cases into sort of the financing activity that we had just more broadly across that business. And so you will see it just start to more get to kind of more of a natural, you know, growth rate over the next step, you know, couple quarters. And then we will see how we will see and then we will we will decide, you know, how fast it goes from there based on the opportunity sets that is there. But it really you know, the pace you saw was really a reflection of us coming out of the asset cap and being able to deploy balance sheet at a pace that was just different than normal. Charles W. Scharf: And just as a reminder, because we have not mentioned this in a while that when we had to live with the asset cap, we reduced the balance sheet in markets more significantly than any other place in the company. Because we did not wanna limit things like consumer loans, consumer and things like that. And so, you know, a lot of what we are seeing is just kinda a return of the balance sheet that they would originally had, and we will have a normal pace of growth going forward. Michael Santomassimo: Yeah. And I and as I mentioned in my commentary, we are we are up about 200 bill $200 billion since the end of 24. So that is a good clip, I think, over the last 18 months. David Chiaverini: Got it. that is helpful. And then, shifting over, I was curious about advisor hiring. Can you talk about the competitiveness and the pipeline you are seeing there? Michael Santomassimo: Yeah. I mean, advisor--you know, getting really good advisers and teams of advisers, you know, has always been competitive. And I think continues to be competitive. We are very disciplined about our approach to that. We do not overpay. We have not changed our deal, you know, you know, to recruit advisers in a while and do not plan to. So we may miss out on some teams if that is the case. So what we try to make sure that we are providing is the right platform with the right capabilities to attract these advisers, and I think that is really resonated. And if you look at the last you know, 3 quarters, you know, we have had close to, if not record recruiting in terms of the amount of business they bring. So think of it as, like, revenue that is coming onto the platform over the last 3 core each quarter for the last 3 quarters. And so it is been quite good to see those advisers our yeah. And our attrition is at, you know, record low for us in terms of attrition that we are seeing, you know, across the adviser space. And what is good about the types of advisers we are attracting is they bring really good investment business, but they also bring, you know, the need for banking, which is, you know, both deposits and lending. Which I think really rounds out the profitability of the business that is coming out of the platform, which helps improve the margin of that business over a longer period of time. And so the team's done a really nice job attracting you know, the right types of advisers, and the pipeline that we have got is quite good in terms of looking at, you know, the rest of the year. Very helpful. Thank you. Operator: The next question will come from Vivek Janaeja of JPMorgan. Your line is open. Vivek Janaeja: Thanks. Can you hear me? Yes, we can. Yep. Thanks. Charles, Mike. Sorry. I am just stepping back on NII. We are stepping away even just from them. Both you and Mike said at conferences in the second quarter, you were very confident about the $50 billion NII. And today, gone to 50 billion plus or minus. Seems like a little bit of a shift. Any color on what is driving that? Michael Santomassimo: Is that a shift? what is driving that little shift? Charles W. Scharf: David, that no shift at all. The 50 billion plus or minus is exactly what we said in January and exactly what we said, you know, in the fur end of the first quarter. And what I said at Morgan Stanley, you know, conference and others. And so I think no shift at all, and we are very confident. No intention to shift anything or guidance is the same, and we feel confident about it. Vivek Janaeja: Okay. That was an important clarification. Commercial loans, your period-end growth slowed a little bit. Any color on what is driving that? Do you expect that to pick up again? And then, of course, what would be the driver of that? Anything? That you can Yeah. Michael Santomassimo: Look at look, the period end number is driven by lots of factors, Vivek. You have some seasonality through the quarter. You saw some you know, tariff related, refund related pay downs, but there is nothing that I would highlight as sort of a change in overall sentiment that, you know, is impacting the clients. And as I, you know, said earlier, I think on the consumer side, we expect to see more growth in you know, in auto and in card. I think you will see home lending be stable. And then I think you will see some growth in the commercial portfolios in the second half of the year. Thank you. Operator: And the last question for today will come from Gerard Cassidy with RBC Capital Markets. Your line is open, sir. Gerard Cassidy: Thank you. Hi, Charles. Hi, Mike. Can you guys share with us on credit Obviously, your credit quality is very strong. The industry is experiencing really good credit. In this period? Are you seeing any signs of risk taking by your competitors in terms of underwriting in the commercial loan area or it could be in consumer If not, what are you looking for as we go forward for some aggressive underwriting that could lead to issues you know, in the next credit cycle. Charles W. Scharf: Yeah. Let me take a stab at it. And, Mike, you can either agree, correct me, or not. I think on the side, we would say, not really. What we see is kind of, you know, consistent underwriting versus the people that we compete with. Know, everyone kind of comes and goes sometimes, and you know, times are good. But not a lot. On the consumer side. I think on the wholesale side, it is a very, very different story. And, you know, that is where you see the deployment of significant amounts of capital, not just from banks and from non-banks. And there is a wide range of risk that people are taking in the lending activities. I kinda try to allude to this in my remarks. You know, we are you know, staying true to who we are in terms of what our risk tolerances are. In the context of a growing franchise. But when you look at whether it is, you know, things in data centers, some of the, you know, the strategic transactions that are done you know, that are being done out there. There is, you know, there are more risk assets being created on the wholesale side, and there is a lot of capital out there that is you know, there to support that. And you know, we are doing, you know, the pieces of the transactions that were comfortable with that have the credit profile. That we are used to underwriting, and there are others that are willing to take more risks than we are. Gerard Cassidy: And just as a quick follow-up to that, answer, Charles, on the consumer, is there any way you guys measure or can capture the nonbank consumer lenders? And I know that as not primarily your customer because they tend to be a higher risk customer. But is there any way of making sure that there is another second derivative effect on your better quality consumer customers? Charles W. Scharf: Well, I mean, I am not sure. I will make sure I am following this. I think know, when it comes to, you know, the consumer credit that we are extending, we are making our own credit decision with every single loan based upon everything that we know, including looking at bureau and things that they might have away from us to the extent we can see it. And so you know, that is that is totally within our control, and we understand that. We do see some of the activities in the nonbank universe through what we do on the wholesale side in terms of who we finance. We have, you know, we have talked about this last quarter. it is good information to have, but we are also know, selective about who we are lending to, and because not everyone in that space has the same risk tolerances. Understood. Gerard Cassidy: And then just as a last follow-up, final question, I know this is probably hard to answer, but AI has been just so powerful to The US economy. In terms of capital expenditures. You mentioned, you know, data centers, of course, Is there any way of getting your arms around of second derivative exposures to the AI industry for Wells. So that, you know, I do not think you or many of your peers have direct data center construction loans, but I am just wondering that if this when this boom slows down, is there some fallout that we could see, potentially, down the road on the second derivative of the suppliers or other folks that it is not as clear maybe today that they have that kind of exposure in their business models? Charles W. Scharf: Yeah. I mean, listen. I think, you know, when you look at the exposures that are being created to help finance the build out, I mean, you are you are you are absolutely right. There are different types of things that are being financed. Right? there is core and shell. there is power. There are chips, and there are a whole series of things that go into the data center. And, you know, we underwrite those different pieces of those financings very differently. We rely on, you know, different types of you know, different types of credit support for those to be paid off. And, you know, it is very, very different lending to a chipmaker that has 80% margins where we get paid back in a year and a half versus lending to you know, someone else in the supply chain where it is going to take, you know you know, 15 years to get paid back or 10 years to get paid back, in the hope that the LLM provider who is renting that space is gonna be there. And so, there are and so that is the complication. That, you know, everyone is working through in terms of, you know, who we lend to. And that is when I say that, you know, they are different kinds of risks that are being created here, and we are working to stay within the lane of the risks that we understand. We are confident not just that we understand it, but we will obviously get paid back, And different people have different risk tolerances. And you know, that is that is always been the case. No. I appreciate the color. Thank you, Charles. Operator: Alrighty. Alright. Thanks, everyone. We appreciate the time.