Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wells Fargo Second Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] 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.

Thank you, Regina. Good morning, everyone. Thank you for joining our call today where our CEO, Charlie Scharf; and our CFO, Mike 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'd 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-K 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 Charlie.

Thanks, John. Good morning. I will make some brief comments about our second quarter results, the operating environment and update you on our priorities. I will then turn the call over to Mike to review second quarter results in more detail. Let me start with the second quarter. We are in $6 billion or $1.38 per common share in the second quarter. These results included $1.6 billion decrease in the allowance for credit losses as credit quality continued to outperform our expectations. Charge-offs continued to decline as the economy continues to improve and our customers continue to have high levels of liquidity. Revenue increased compared with the first quarter. While net interest income was stable, we had sizable gains from equity securities and card and deposit-related fees increased, reflecting increased spending. Expenses declined, reflecting a decline in personnel expense, which is typically highest in the first quarter and progress on our efficiency initiatives. If you look through the reserve release and outsized gains from equity securities, we are pleased that our results continued to show progress, even though high levels of liquidity, weakness in supply chains and low interest rates remained as headwinds. Economic growth was robust in the second quarter with real GDP estimated to have increased at an 8% annual rate with especially strong gains in consumer spending. We continued to see supply chain shortages impacting both supply and prices across many sectors. Home prices are estimated to have increased at a 24% annual rate as scarcity of properties for sale persisted and half of unit sales exceeded asking price. Used car prices continued to increase due to ongoing supply constraints with the second quarter Manheim Index increasing 17% from first quarter 2021 and 45% from a year-ago. However, prices may have peaked in May after four consecutive…

Thanks, Charlie, and good morning, everyone. Charlie highlighted many of the ways we are actively helping our customers and communities on Slide 2, so I’m going to start with our second quarter financial results on Slide 3. Net income for the quarter was $6 billion or $1.38 per common share. As Charlie highlighted, our second quarter results included $1.6 billion decrease in the allowance for credit losses. Pre-tax, pre-provision profit grew from both a year-ago and from the first quarter as we grew revenue and reduced expenses. We had $2.7 billion or approximately $2 billion after non-controlling interests of pre-tax equity gains predominantly coming from our affiliated venture capital and private equity businesses, approximately $2 billion was due to unrealized gains from follow-on financing rounds reflecting significantly higher valuations in a number of portfolio companies. The remaining approximately $700 million was realized gains. Given the nature of these businesses, these gains tend to be episodic however, since 2017 these businesses have generated annual gains in excess of $1 billion in every year except 2020, which was impacted by the pandemic. We completed the sale of student loans in the second quarter, which resulted in a $140 million gain and a $79 million write-down related goodwill. Our effective income tax rate in the second quarter was 19.3%, which reflected accounting policy changes for certain tax-advantaged investments. We elected to make these changes to better align the financial statement presentation of the economic impact of these investments with the related tax credits. Prior period financial statement line items have been revised, which had a nominal impact in net income on an annual basis. The changes did improve our efficiency ratio and increased our effective income tax rate from what was previously reported. We provide details regarding these changes on Slide 16 in…

[Operator Instructions] Our first question will come from the line of Betsy Graseck with Morgan Stanley.

Hey. Good morning.

Good morning.

Can you hear me okay?

Yes.

All right. Thanks. Hey, so I did just want to understand a little bit about the commentary that you’re making earlier around the 10% ROTCE that you're expecting you will be able to do that in 2022 without reserve release, which is – seemingly a pretty bold statement given what consensus is looking for. If I ex out the reserve release, it feels like there's a percentage point or so differential there. Can you help us understand what the drivers are going to be to do that? And if it's in the expenses, can you give us some sense as to which parts of your business is going to be feeding that 10% most? Thanks.

Yes. So let me start out and then Mike can chime in. I guess, the way we thought about it is to just – let's first start and think about the earnings of this quarter and do our best to look through all of those things, which we know aren't really recurring. And so if you think about the sale of the student loan business, the change in allowance, and even – obviously, we've got those outsized gains in NEP, NVP. But at the same time, we don't assume they go to zero over the course of the following year. And then you could even normalize for charge-offs, getting them to somewhat of a higher level. But if you do that, what we've said is that with our expense reductions that we've contemplated with the ability to return capital, you can get to that level. And so we've obviously had the ability now to return to significant amount of excess capital that we have. That's an extremely meaningful driver of the improvement in ROTCE, and it's a – I think about it is like a somewhat modest improvement and the rest of the performance to get there from – in terms of the company from where we sit today. So we don't want to talk in any level of specificity at this point about the specifics about expenses. But we're working extremely hard not just to get the efficiencies that were important to meet our expectations for this year, but to position us properly next year to reduce expenses on a net basis while we have the ability to invest significantly inside the company.

Yes. And I would just point out, Betsy. It's not a full-year 2022. What he said was it’s the run rate in 2022 at some point, right, so?

Yes.

Right. So it could be your 4Q exit run rate?

Could be.

Okay. And then just separately, could you speak to the flexibility on the buybacks? I know you indicated that $18 billion or $18.5 billion under the SCB framework. Should we be taking that as a minimum buyback level? Because I think that reflects your ask in the – or at least what you – not in ask, but what you put into the test, and you've got earnings that you're generating and the environments improving. So could you imagine that buybacks could be higher than that over the course of the next four quarters?

Yes. I think the signal is that it could be higher or lower depending on exactly how our results turn out and what we think the outlook for the economy is and potentially where the stock price is even though that's really not a factor in our thinking today given our view of the valuation. We obviously would hope that it would be more, not less and we have the flexibility under the SCB framework to do that. So I think you all can do your calculations on what you think we'll learn next year. We've given you the guidelines for how we're thinking about where we're targeting our capital ratios to be, and we'd like to – we don't see any need to have excess capital sitting around the company at this point, especially given the fact that we have the asset cap.

Yes. Okay. Charlie, Mike, thanks so much. Appreciate it.

Sure.

Your next question will come from the line of Steven Chubak with Wolfe Research.

Hey. Good afternoon. So I wanted to start-off with a question just on the headcount trajectory. You started to make some real progress, driving some of the headcount reductions that you've spoken to. It sounds about 6% year-on-year, but if I look – comp you against the peer group, BoA probably being the closest comp. You still have 50,000 more employees despite a similar business mix and scale. I recognize that certainly some of that's going to be tied to the consent order. But I was hoping, Charlie, you can maybe just give us some context or perspective on. As you start to execute on the plan of optimizing that headcount, what's the right level to support your strategic vision for the franchise?

Yes. I think it's a great question. I think your numbers are accurate for sure. Just a couple of things I'd say. I think, first of all, you can imagine we try and do all those numbers ourselves. And between other places that we've all worked at the senior management team, it is very hard to get apples-to-apples because different people in-source different functions. And so – but directionally, your point is still right. So I'm not sure the magnitude is exactly right versus just Bank of America. But directionally, I think it's a fair statement. And I think that is a simple driver that gets everyone's attention here as well as, frankly, just as we look around the company and we see our processes and we see the things that we haven't done nearly as well. And so that's why when we think about the future that we have, we still continue to believe that there are significant efficiencies on a gross basis that we'll be able to continue to drive out the company. Over time, we would love to do as much of it through natural attrition as possible given the size of the company, we have significant attrition. And people self-select because of how we're going about doing things. But I think – we think about where we're going and our ability to reinvest in the company. We think that there's a lot there. And I think, again, as we get towards the end of the year, we'll talk about next year with some more specificity and at some point give you a little more clarity. I think we're still in the stage of peeling the onion back. And every time you peel a layer of the onion back, you see the next layer even more clearly. And I think we're still in that stage. But it does give us a pretty good feeling about our ability to continue to drive this forward.

Thanks for that perspective, Charlie. And just for my follow-up on the NII outlook. Mike, I was hoping you could just unpack the NII guidance a bit further. Specifically, what is the contemplate in terms of premium am and excess liquidity deployment? And are there - is there any noise relating to some of the loan sales that could drive some volatility in the back half as we think about the trajectory?

Yes. There is no noise from loan sale per se. But let me break out aspects of it and kind of talk through what was included there. So obviously the curve is going to be an important element of it. And what we said in the remarks, right, at this point, we're assuming it's about where it is, right. It's been bouncing around the last few days, but sort of think about it as about where it is right now. And then as you sort of look forward on loans and you assume that overall loan stay sort of flattish where we exited the quarter, that does require a little bit of growth – modest growth on the commercial side. And so that's sort of embedded in the assumption. I think on premium amor, you saw it come down a bit in the quarter versus the first quarter, we're still expecting that to come down. I think it could bounce around slightly versus what the assumptions are given where rates are, but we think the direction is still the right direction. And then you may have a little bit of noise between Q3 and Q4 given some of the PPP related forgiveness that may happen. But that's sort of what we're assuming overall to get to and that gets you towards the bottom of the range that we've given. Hopefully, we're surprised by loan growth or a backup in rates again. But that's we're assuming at this point.

That's great color. Thanks for taking my questions.

Your next question will come from the line of Ken Usdin with Jefferies.

Thanks. Hey, Mike, on the mortgage business, I wanted to ask you, you said that you had the loans that were in the loan book that you moved into and resecuritized. Can you help us understand how much of a benefit that might've been in mortgage banking this quarter and just your general outlook for origination trends and what's happening in the gain-on-sale market? Thank you.

Yes. Good questions, Ken. So I'll try and pick it. If I miss something, let me know. But as you sort of think about gain-on-sale, the gain-on-sale continues to come down each quarter and we would expect that to continue. And at this point, what that's driven by is just the capacity that's been built up in the industry and as people get a little more competitive on price, that's going to drive gain-on-sale down. Now, I think what you've also seen us do there is really focused on the retail channel. And to some degree deemphasize the correspondent channel or use it to kind of fill in the capacity that we've got. And so that should be helpful as we sort of think about gain-on-sale, but the direction is certainly going down. And I think, as I said at this point, I think it's really capacity-driven more than anything else from here forward. As you look at the – and I also said in the remarks that we think origination volumes were going to be down a bit in Q3 versus Q2. Now there is lots of different prognostications on the market. We think based on what we're seeing, we think we'll be down less than the market. But nonetheless, will be a little bit down. Now, if we could see a little bit of a gap of refi activity that could change that a little bit. But right now, we think it's probably down just a little. As you look at the impact of the [ETDO] gains, it was about $150 million increase on a linked quarter basis. We do expect to continue to have some gains in the third and fourth quarter. It probably comes down a bit from where it was in the second quarter as we sort of look quarter-by-quarter, but maybe a little bit less than what it increased versus the first quarter, but we do expect those to continue. And you'll see, we've still got about a little under $20 billion of those loans on the balance sheet. And you'll see the exact number when we put out the Q.

All right. Great. Thanks. And just one follow-up on consumer-related fees. Good to see the deposit-related side and card rebounding. Can you just talk about the type of momentum that you're seeing there and just – or should we expect ongoing improvements from here in those areas? Thanks.

Yes. Look, it’s just activity levels picking up and you can see that in the card volume metrics that we put out there. And so I think, assuming, we continue to see the recovery take hold and activity levels pick up and there should be – those are highly correlated there, so…

And this is Charlie, I would just add. I would say slightly different dynamics on debit and credit, right. Debit, if you look at the remarks that I made, consumers still have a substantial amount of cash you see it in overall deposit levels and the willingness to spend as things open up, it’s certainly what you're saying. And so that should continue to drive debit spend upward. And then credit is having similar benefits from reopening that the whole industry is seeing.

Understood. Thanks guys.

Your next question comes from the line of John Pancari with Evercore ISI.

Good morning. I want to see if you can give a little bit more color just around the loan growth outlook. Maybe if you can talk about commercial versus consumer on the commercial side? Are you starting to see utilization trends turn and as CapEx beginning to contribute to some increased willingness to draw down? And then on the consumer side, just curious what you're seeing in terms of payment rates specifically in the card businesses? Or are we starting to see the payment rates inflect? And do you think that's sustainable? Thanks.

Yes. Hey, John, it's Michael. I'll take that and Charlie can jump in if he wants. I'll try to pick it apart piece by piece. In the commercial bank loans are still down and utilization rates are pretty low on a historic basis. And I think overall that has not inflected yet. And there's lots of reasons, high liquidity, supply chain issues, demand for product in certain industries. Lots of things that sort of underpin that, but we haven't really seen that influx yet. There's a little bit of maybe differences by size of clients or by sector, but overall it's still not quite there yet. Now there is lots of good conversations, so I think people are really thinking about investments and really are thinking about building inventory levels over the coming quarters. But I think that'll take some time before it starts to translate into loan growth in the commercial bank. In the corporate investment bank, we do see loans there are up a little bit. So you're seeing some activity in subscription, finance, real estate and a few places. But again, relatively small so far, but you are seeing a little bit of activity there and we'll see how that progresses. On the consumer side, I know, a lot of others are talking about this too. If you look at through the end of period balances, you're seeing a little bit of growth in auto. We had a really good quarter from an origination point of view in the auto business, but it's a relatively small portfolio in the scheme of the balance sheet. You're seeing little bit of growth in card. Although the activity has really picked up there, it hasn't quite translated into bigger volumes given the payment rates as you sort of pointed out. Payment rates are still really high. And I think they'll come down and normalize eventually, but they're still pretty high. So I think we'll see how that progresses. And then we still expect a further decline albeit at a much slower pace in the home lending space as we work out of the EPB – the early buyout loans and see prepayment activity start to stabilize in that business. So we'll see how it all comes together over the next quarter or two.

Okay, Mike. Thanks. That's helpful. And then separately on the consumer front, can you maybe elaborate a little bit on the rationale for exiting the personal credit lines as a product and if there's any other areas like that within your lending products suite that you might be considering similarly to exit? Thanks.

Sure. This is Charlie. That was a product of a pretty exhaustive effort that we went through across the whole company to look at what we thought was core, where we had some kind of strategic advantage or where it really was important for the customer relationships as we look forward. And so out of that exercise came our decisions to sell corporate trust to exit the international wealth business, sell the asset management businesses and a couple of other things that we have announced. The things that we've announced to the things that we're actively working on and so there's really – there's nothing more in progress now. The way we looked at the business was quite simple. It was very, very small business for us. We have products in our card products as well as we're still in the personal loan business. And so we have the ability to continue to serve customers who either want access to credit or actual being able to draw down and fund it over term. And so again, the idea of just simplifying the company around focusing on products that are most important to the broadest set of customers. That's what led us to the decision.

Got it. All right. Thank you for taking my questions.

Your next question comes from the line of Gerard Cassidy with RBC.

Thank you. Good morning, gentlemen. Mike, can you share with us – I think, I don't think you've addressed this. But your loan loss reserves remain very strong. You guys have very strong credit as evidenced by this quarter in the history of this company. And your reserves are about a 100 basis points I think above where they were at day one in January of 2020 when you guys did the CECL true up? Can you share with us the outlook for reserves? Could they get back down to that level? And if the outlook is even better than it was in January of 2020, could the reserves actually fall below the CECL levels?

Yes. Look, Gerard, I think that's a – first on the reserves, we need to be reserve for a whole bunch of different scenarios on any given time. And so as we sort of look at the path that we're on, there's a lot to be optimistic about, but there are still some risks there that we need to be mindful of and from where we are today. But if things keep progressing, look we should have future releases as we have noted. As you think about where you end up, I think that's a hard thing to call right now in terms of any degree of certainty at a point in time because it will be a function of – as you mentioned, the outlook that you have at that point. The mix of your balance sheet and other factors that go into sort of the – your view on the future and what could happen. But could we end up a little bit higher, maybe could we end up a little bit lower, maybe – I think it's – they're all possible scenarios depending on what point in time you're talking about. And as you know, there's a lot of things like elements of the office market in commercial real estate, that'll take a while to really play out. And so we'll see how that progresses over time, but I think it will be a function of all those things of exactly where we end up.

Very good. Thank you. And I know this question is putting the cart before the horse and I'm not asking you guys to predict when the asset cap will be lifted. But when the asset cap is lifted, how do you think you'll proceed going forward? There's been some talk in the markets that some of your peer banks are being stretched with their supplementary leverage ratio. In fact, JPMorgan now has told us that this is their binding constraint. And you have to wonder if the wholesale deposit market is going to be disrupted because of this freeing up Wells Fargo without the asset cap may give you guys the opportunity to pick up some wholesale deposits. So again, not asking when the asset cap is going to be lifted, but how does it look after it is lifted? What are you guys thinking?

Well, again, I think it's very hard to answer the question because as you know, we don't know the timing of the asset cap just as if we don't know the timing of any changes, which could potentially happen on SLR or the way other banks will deal with that. So there are a whole series of unknowns that go into the question that I'm not sure that we're in a position to answer this, quite frankly.

Yes. And I would just add two things. If you think about the actions and we've been very public about this, a lot of the actions we've taken as a result of the asset cap is to work with clients to manage deposits to other vehicles or other institutions in some cases and we continue to do that. So there's likely to be opportunity there with clients and we've managed areas like our market's business down. And think a lot of that could be financing type trades. And some of that, we think there'll be demand at the right time. And so I think as you sort of look at that, there should be plenty of opportunity for us as we look forward. But as Charlie said exactly, what shape that will take is a little bit of a function of when it happens.

Thank you. Appreciate the color.

Your next question will come from the line of Matt O'Connor with Deutsche Bank.

Hi guys. Some of those has been kind of weaved throughout the call. But I was hoping you could just put together. If we look at the next two or three years and obviously assuming you're well past the asset cap, what are some of the key organic revenue growth drivers for Wells Fargo and how meaningful can they be? You mentioned credit card, you just mentioned some of the markets and wholesale business, the wild card. But maybe kind of list like three or four of them if there are and what might move the needle as we think about the next few years because you're probably one of the few stories where yes, you've got leverage to rising rates, but there's also an organic cost opportunity like you talked about and probably from organic revenue opportunity too. So hoping it's just kind of packaged that together for us? Thanks.

Yes. I appreciate the question. And again, so I'll just put aside the interest rate environment for a second. And I think, listen, the reality is for a – I'm not sure what the right period of time is, but I'll just say for a period of time, we have been laggards across most of our businesses at growing revenues. For many, many years we had very, very strong financial performance. It's been a while since that's been the case. And when you look at the underlying trends of the businesses, while I personally think we've done remarkably well in terms of our share stats across the franchise given all of this company has been through which says an awful lot about the people on the front lines that do it day in and day out. There's just been very little that we've really done to focus on growing the franchise. And I do want to be fair to everyone here, right, which is that given all the issues that we've had, whether it's sales practices and the consumer bank, as an example, Mary Mack’s job when she was put into that role was to fix that problem, not to focus on growing the business. And we continue to have other issues around the company. So as we've talked about where our priorities are, as I said in my remarks, we understand that continuing to build the risk and control infrastructure and satisfy the regulatory requirements is a gate to a really successful future of ours that we need to get through. But at the same time, just answering your question, I really do believe the opportunities exist in every one of our core businesses. And when we go through and we think about the consumer segment again, we've been…

So it obviously sounds very broad-based in terms of the opportunity, but any way to size it either if you didn't have the asset cap, your balance would be, say $200 billion bigger now or if loan growth for the industry is 4% over the next several years per year you can do 50% better than that. Just any sound bites on sizing or where you could be now if you didn't have it or [indiscernible] longer-term?

Matt, honestly, like we're not even thinking about what life is like without the asset cap. We quantify for ourselves and what the impact is on having it in this environment because that's the reality of it. But there are plenty of opportunities. I mean, if you go through all the things that I spoke about before, very few of those require balance sheet. Now, it doesn't mean that there's not opportunity costs for having it, but that's not an excuse for us not to do some other things. And when we get to the future, we'll talk about it when we get there.

Understood. Thank you.

Yes. And Matt, I've quantified some of the actions we've taken in the past that in other forums. And so I'd go back to some of that, but it's significant, and it's hundreds of billions of dollars of actions we've taken to help manage through the asset cap. So that should give you a pretty good sense of what the impact has been.

Okay. Thank you.

Your next question will come from the line of Vivek Juneja with JPMorgan.

Hi. Thanks for taking my questions Charlie and Mike. Quick clarification through your onset to this – the last question, as soon as Charlie has said you aren't contemplating life without the asset cap, does that mean that the $18 billion buyback that you're talking about in the CCAR that does not – that assumes the current situation, it does not assume the lift of the asset cap?

Yes. Vivek, that's what I think he meant was, we're not playing a bunch of what ifs, like where we would have been right now if like the asset cap wasn't in place, right. So I think that's – I would take that in that context. And I think as we sort of look for our capital planning, we're assuming that it's in place during the period.

Okay. Second quick one for you, Mike. Hedge ineffectiveness gain you meant – how much was it and could it continue?

Yes. The hedge ineffectiveness absolute impact in the quarter is very small. You do have a bit of a linked quarter variance because we had a negative hedge ineffectiveness result in the first quarter given what happened with rates during the first quarter. But the absolute impact that's embedded in the second quarter is actually really small Vivek.

Okay. So then something else drove down that long-term debt costs by 50 basis points?

Yes. I think if you look at long-term debt, right, part of it is we reduced our long-term debt. If you look at the absolute long-term debt costs, we reduced the rate and we reduced the amount and the rates down.

Okay, great. Thanks, Mike.

Your next question will come from the line of David Long with Raymond James.

Hi, everyone. As it relates to the buybacks, it seems like you guys are pretty optimistic on your capital levels and the economic backdrop. Can you accelerate the pace of buybacks here in the near-term? By that, I mean, is it possible that you could buyback a higher fraction in the third quarter, meaning $5 billion or $6 billion worth of your stock?

Yes. Look, we're always looking at like the pace and we're not going to get into specifics of what we're going to do before. But when you say fast, like we haven't said how much we intend to do by core, yes. And so obviously we're going to be mindful of how with the pacing that we do it and we're going to be prudent about that. And we start with a lot of extra capital. So we feel really confident that we'll be able to get that moving at the right pace soon.

Got it. Thanks for that color. And then my second question relates to the PPP forgiveness, and it's not going to be huge to the bottom line for you guys. Did you disclose what the impact was on forgiveness fees in the quarter specifically to the second quarter?

We did not, but you did see – we did see our PPP balance has come down from roughly about $12 billion to about $8 billion, and we'll see those continue to come down and we'll continue to have some impact from as the remaining loans start to get forgiven over the next few quarters.

And also keep in mind that we had said that we are giving away the fees and so very little if any net bottom line impact from that.

Yes. So we're giving away the fees for – the gross fees for the loans that are originated in 2020. And that's mostly what's been forgiven now.

Got it. Appreciate it. Thank you.

Your next question will come from the line of Ebrahim Poonawala with Bank of America.

Hi. Just had a very quick follow-up. And I know this is a few years out on Charlie, but I think you mentioned, over time you think the bank can achieve a 15% ROTCE. Is that – how much of that is dependent on interest rates moving higher and does that eventually need the asset cap to move higher for Wells to get to that 15% kind of ROTCE?

Yes. It certainly does. Assume that the asset cap has gone and it assumes higher rates and we haven't really been specific about exactly what that means. And what we've said is, listen, we first want to get to double-digits, this is a – we're on a journey and that's kind of where we're headed. And once we get to 10%, then we can talk with some more clarity about what's next.

Got it. And just in terms of clarifying your guidance on expenses. As we think about beyond 2022, is it safe to assume that incremental expense growth would be driven by revenue generation as opposed to further investment, so there maybe some room in terms of cost expense savings beyond this year?

Yes. We haven't talked about our outlook on expenses past this year. I think what we've said, which I think is continuing to be true is that we've got a – we're in the middle of a multi-year efficiency program. And even with some of the investments that we need to make that we should be able to bring expenses down on a net basis for the next couple of years. So I think that still stands.

That's helpful. Thank you.

Your final question will come from the line of John McDonald with Autonomous.

Hey, Mike. I wanted to just do another quick follow-up on the expense comments for this year. Could you just repeat what you said about the revenue-related expenses and where they're trending relative to what you baked in and kind of how that ties to the $53 billion target for this year?

Yes. Sure, John. Thanks. Embedded in our original outlook of about $53 billion, we assume that revenue-related would increase about $500 million. And at this point, we think that's probably more like $1 billion, so an incremental $500 million, and that's really largely driven by the advisory assets and business that we have in our wealth management group that's doing really well, particularly given where the market levels have been. And so that's putting pressure on the $53 billion. So it's possible if that holds that we could be a little over $53 billion, and obviously that excludes restructuring and the cost of business exit. So that's the way to think about it.

Okay. And it also includes the expense benefit of business exits too, right, so that's not factored into that?

Yes. The $53 billion, John, assumes that those businesses were here the full-year except for the student loan business. But for corporate trust and asset management assume they were there the full-year. Once we get to closing, which should happen later this year, we'll update how we think that's going to progress based on how we think the transition service agreements will play out.

Okay. And then just looking at your year-to-date expense numbers, the cadence then implies that you're stepping down in the back half of the year to something that kind of averages closer to $13 billion a quarter. I'm just kind of playing out the math. Is that right way to think about it?

Yes. I think that's what the math would imply.

Okay. Thank you.

Thanks, John.

With that I'll turn the conference back over to management.

Right. Well, listen, thank you all so much for the time. We appreciate it. And if we don't talk to you during the quarter, we'll talk to you next quarter. Take care.

Thank you all for joining today's call. You may now disconnect.