Wells Fargo & Company (WFC) Q1 2025 Earnings Report, Transcript and Summary

Welcome, and thank you for joining the Wells Fargo & Company First Quarter 2025 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. If you would like to withdraw your question, press star two. 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.

Good morning. Thank you for joining our call today where our CEO, Charlie Scharf, and our CFO, Mike Santomassimo, will discuss first quarter results and answer your questions. This call is being recorded. Before we get started, I would like to remind you that our first 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. I'll make some brief comments about our results, update you on our priorities, and provide some observations on what we're seeing in the current environment. I'll then turn the call over to Mike to review first quarter results in more detail before we take your questions. Let me start with first quarter highlights. We had solid first quarter results with diluted earnings per share up 16% from a year ago, including some items noted in the earnings release. While revenue declined from a year ago driven by lower net interest income as expected, we grew our fee-based revenue across many of our businesses reflecting the benefit of the investments we've been making to diversify revenues and reduce our reliance on net interest income. We continue to take a disciplined approach to expenses with expenses declining from a year ago as we executed on our efficiencies initiatives, which have helped drive headcount reductions for 19 consecutive quarters. We maintained our strong credit discipline and credit performance improved during the quarter, with lower net charge-offs from both the year ago and the fourth quarter driven by improved performance in our commercial portfolio, while consumer losses were relatively stable. We've been actively returning excess capital and in the first quarter, we returned $4.8 billion of capital to shareholders through dividends and share repurchases. And our diluted average common shares outstanding were down 8% from a year ago. Regarding our strategic priorities, I'm very proud of the significant progress we've made on our risk and control work. It remains our top priority, and closing consent orders is an important sign of progress. Five consent orders were terminated in the first quarter. Some of these were longstanding, and others were resolved with time frames that are much improved from other historical orders. Which is an indication that our team is establishing the right processes and controls to meet our regulators, and our own expectations. Since 2019, eleven orders have been terminated. We are a different company today than when this new management team arrived. These recent closures reflect that we have completed much of the common risk and control infrastructure work across the company that is required by other orders. I'm incredibly proud of the work done by our teams and remain confident that we will complete the work needed to close our other open consent orders. We've also continued to show progress on our other strategic priorities, which are helping to improve Wells Fargo & Company's returns. Our investments in our card business have continued to drive higher balances and spend from a year ago. While credit results have continued to be within our expectations. During the first quarter, Ed Oly joined us as the head of cards and merchant services. I want to thank Ray Fisher for his leadership of our card business over the last five years. Ray was my first hire when I joined Wells Fargo & Company, and I worked with Ray for much of the 38 years we've known each other. So I'm not surprised at the great job he did in transforming our card and merchant business. He brought great talent into the business, transformed our product offerings, and greatly improved the customer experience while making the card business an important strategic part of Wells Fargo & Company. I'm equally excited to welcome Ed to the company. He brings more than 25 years of financial services, and credit card experience. And his expertise will be invaluable as we continue to grow our credit card business and expand our payment capabilities across merchant services. Turning to our auto business, we've started to launch our partnership with Volkswagen and Audi brands as their preferred purchase financing provider in the United States. Following the termination of the sales practices consent order, over a year ago, we've been taking measured actions in consumer small and business banking that started to generate modest growth across a number of metrics, including net checking account growth, work credit cards originated in our branches, and improved customer experience scores. We've also continued to invest in refurbishing our branches while at the same time making enhancements toward account opening experience in both our digital and branch channels. In the first quarter, active mobile customers grew 4% from a year ago, and digital account openings continue to grow. We continue to increase collaboration between our bankers and advisors that is helping drive an increase in net asset flows into the wealth and investment management premier channel. We've also seen more of our clients investing in alternative products, which is one of our goals. Turning to our commercial business, we continue to generate strong growth in investment banking fees, driven by strength in debt capital markets. I want to thank John Weiss, who announced his retirement earlier this year and started leading corporate investment banking in 2020. John has built a great management team, and together, they have taken a good corporate investment bank and have made it an important driver of growth and strong returns for the company. We are a better and stronger company because of John's leadership and he is leaving corporate investment banking well positioned for future growth. Fernando Rivas, joined Wells Fargo & Company last year with nearly 30 years of industry experience is now the sole CEO of a corporate and investment banking. We are also focused on expanding our commercial banking business and the investments we've made in relationship managers and business development officers has helped to attract new clients and we've seen some early success in offering our investment banking capabilities to our commercial bank clients. Now let me turn towards what we're seeing from our customers. Through the first quarter, our internal indicators continued to point towards the strength of our customers' financial position. Consumers have remained resilient, and debit and credit card spending patterns have remained stable. More affluent customers continue to show strength while less affluent customers show more stress. Consumer credit also continues to perform well. Delinquencies appear to have leveled at historical norms, and payment rates on unsecured portfolios have been quite strong. Deposit flows for both consumer and commercial clients have been consistent and in line with seasonal trends. And while overall loan growth was modest, we've seen pockets of increased loan demand from our commercial clients resulting in modest growth in both average and period-end commercial loan balances from the fourth quarter. All of this points to the strength of our customer base through the end of the first quarter. Some broader comments now on what we see currently. I'm encouraged by the willingness of the administration to take on some very difficult issues. It's been over 15 years since the financial crisis, and we greatly support willingness to look at the cumulative impact of the regulatory changes that have been made during this period and evaluate where changes are needed to better support a growing US economy. This is not just a bank issue. We also hear from our corporate clients that they experience significant regulatory barriers to growth and support the effort to look at regulations and make meaningful changes. We believe the changes that are being discussed allow us to better support our customers. That means make more loans, take more deposits, and provide more liquidity to the markets while still preserving robust regulatory oversight. Regarding trade, we also support the administration's willingness to look at barriers to fair trade in the United States. Though there are certainly risks associated with such significant actions, and we see concern playing out in the markets, and the economic uncertainty that now exists. Timely resolution, which benefits the US, and would be good for businesses, consumers, and the markets, and therefore good for Wells Fargo & Company, since we're predominantly a US bank. Wells Fargo & Company prospers when the US prospers. Though we have heard a great deal from our clients as they work through this transitionary environment, we have not seen an impact on their condition yet. This is a complicated issue, and it is our current expectation we will face continued volatility and uncertainty and are prepared for a slower economic environment in 2025. But the actual outcome will be dependent on the results and timing of policy changes. We and our customers come into the current environment from a position of strength and that should serve us well. We've managed credit well over many cycles, over the past couple of years, we have taken several credit tightening actions that have reduced our origination volume and improved our credit performance. Which should position us well if there is an economic downturn. We have a strong balance sheet, including our capital and liquidity levels. Which allow us to support our customers and clients in a variety of economic scenarios. We will continue to react to both known and anticipated policy changes and their potential effects on the economy and will continue to carefully monitor these trends and respond accordingly. Our focus is unwavering. We want to be an important partner for our clients, communities, and governments in driving sustainable economic growth in the US. We are transforming Wells Fargo & Company by investing to build a well-controlled, faster-growing, and higher-returning company while we work to better serve our customers to become more efficient. I'm proud of all that we've accomplished, and even more excited about our future as we build one of the most respected financial institutions in the country. I will now turn the call over to Mike.

Thank you, Charlie, and good morning, everyone. Our first quarter results were solid, or $1.39 per diluted common share. Both up from a year ago. These results reflect the consistent execution on our strategic priorities, we continue to see growth in fee-based revenue across many of our core businesses, had a focus on reducing expenses, and maintain strong credit discipline and continue to return excess capital to shareholders. Our first quarter results included $313 million or $0.09 per share of discrete tax benefits related to resolution of prior period matters, and a $263 million or $0.06 per share gain on the previously announced sale of the non-agency third-party servicing segment of our commercial mortgage servicing business. These benefits were partially offset by $149 million or $0.03 per share of losses related to $2.6 billion of debt securities as we continue repositioning the investment portfolio. Turning to slide four. Net interest income was down $341 million or 3% from the fourth quarter driven by two fewer days in the quarter as well as the impact of lower rates in floating rate assets. I will update you on the full year net interest income expectations later on the call, Moving to slide five. Both average and period-end loans grew slightly from the fourth quarter driven by growth in commercial and industrial loans. While still quite modest, it's the first time we've seen growth in average loans since the first quarter of 2023. Average deposits increased from a year ago across our commercial and consumer businesses enabling us to reduce higher cost overcharging deposits by $69 billion or 58%. Average deposits declined 1% from the fourth quarter as higher consumer balances were more than offset by a reduction in higher cost corporate treasury deposits as well as seasonal declines in our commercial businesses. Average deposit costs declined 15 basis points in the fourth quarter with declines across all of our businesses. Turning to slide six. Noninterest income was stable compared to a year ago. The impairments in the venture capital portfolio and losses from the investment portfolio repositioning were offset by growth across many of our businesses, where we have been investing, resulting in higher advisory and investment banking fees. We also benefited from the gain on the sale of a part of our commercial mortgage servicing business. Turning to expenses on slide seven. Noninterest expense declined 3% from a year ago driven by lower operating losses and lower FDIC special assessment as well as the impact of our efficiency initiatives. Noninterest expense was relatively stable compared to the fourth quarter which included $647 million of severance expense, while the first quarter included approximately $700 million of seasonally higher expenses including payroll taxes, restricted stock expense for retirement eligible employees, and 401(k) matching contributions. Turning to credit quality on slide eight. Credit performance improved with our net loan charge and eight basis points from the fourth quarter to 45 basis points of average loans. Commercial net loan charge-offs decreased $192 million from the fourth quarter to 16 basis points of average loans. Driven by lower losses in the commercial real estate office portfolio, Consumer net loan charge-offs declined $10 million from the fourth quarter and were 86 basis points of average loans, as declines in auto and other consumer loans were partially offset by higher losses in the credit card portfolio reflecting seasonality which was consistent with our expectations. Non-performing assets increased 4% from the fourth quarter driven by an increase in commercial and industrial non-accrual loans. Moving to slide nine. Our allowance for credit losses for loans was down $84 million from the fourth quarter reflecting a lower allowance for commercial real estate loans and lower loan balance Although we haven't seen evidence of weakness in our consumer or commercial portfolios, When setting the allowance in the first quarter, we made a modest adjustment to reflect the potential economic weakness that could develop. Our allowance coverage for our corporate and investment banking commercial real estate office portfolio declined to 11.2%. Was in line with the coverage ratio we had in this portfolio for most of the last year. Turning to capital and liquidity in slide ten. Our capital position remains strong with our CET1 ratios stable at 11.1%. Well above our CET1 regulatory minimum plus buffers of 9.8%. We repurchased $3.5 billion of common stock in the first quarter and have the capacity to continue to repurchase shares. Moving to our operating segments, starting with consumer banking and lending on slide eleven. Consumer small and business banking revenue declined 2% from a year ago driven by higher deposit costs, reflecting the impact of customer migration and higher yield in deposit products, Of note, deposit balances grew from a year ago, marking the first year over year gains since fourth quarter 2022, as the average balance per checking account stabilized and the pace of migration to higher yielding products continue to slow. Debit card spending remained strong, up 4% from a year ago, consistent with the fourth quarter growth rate. Home lending revenue was stable from a year ago, Mortgage loan originations increased 26% with increases in both purchase and refinance line. We continue to streamline the business with headcount down 47% and the amount of third-party mortgage loan service for others down 31%. Since the end of 2022. Credit card revenue grew 2% year from a year ago on loan as loan balances increased. Auto revenue decreased 21% from a year ago, driven by lower loan balances and loan spread compression. The spread compression reflects our previous credit tightening actions which have resulted in an increased concentration of higher FICO borrowers in our portfolio as well as improved credit performance. The decline in personal lending revenue from a year ago was driven by lower loan balances. Commercial bank turning to commercial banking results in slide twelve. Revenue was down 7% from a year ago as growth in non-interest income driven by higher treasury management fees increased revenue from tax credit investments, and higher investment banking fees was more than offset by lower net interest income due to the impact of lower rates. Average loan balances in the first quarter were stable from a year ago and up 1% for the fourth quarter. Turning to corporate and investment banking on slide thirteen. Banking revenue was down 4% from a year ago, driven by the impact of lower interest rates. This decline was partially offset by lower deposit pricing and higher investment banking revenue, from increased activity in debt capital markets. Commercial real estate revenue grew 18% from a year ago, driven by the gain on the sale of a part of our commercial mortgage servicing increased capital markets activity and higher revenue in our low-income housing business also benefited revenue in the first quarter. Markets revenue was stable from a year ago as higher revenue from activity across most commodity products as well as foreign exchange was offset by lower results in structured products and credit trading. The 22% from the fourth quarter reflected seasonality and higher trading activity across most asset classes. Average loans declined 2% from a year ago but increased 1% from the fourth quarter as growth in markets and banking, more than offset continued declines in commercial real estate as transaction activity remained muted, capital markets remained liquid, and our office portfolio continued to decline. On slide fourteen, wealth and investment management revenue increased 4% compared with a year ago, as higher asset-based fees, driven by increased market valuations were partially offset by lower non-interest income due to higher deposit costs. As a reminder, the majority of Wynd advisory assets are priced beginning of the quarter, so second quarter results will reflect market valuations as of April first which were down from January first, but up from a year ago. Despite the market volatility during the first quarter, the mix of our client's assets allocation was relatively stable, Average deposit balances continue to increase and the migration of deposits to Castle alternatives continued to slow. Slide fifteen highlights our corporate results. Revenue declined compared to a year ago driven by lower results from our venture capital investments, and higher net losses on debt securities related to the repositioning of the investment portfolio. Turning to our 2025 outlook in slide sixteen. We've not changed our net interest income outlook and we still expect 2025 net interest income will be approximately 1% to 3% higher than in 2024, However, given what has occurred over the past three months, we currently expect our full year 2025 net interest income to be in the low end of the range. It is still early in the year, and clearly, we are entering a period with more volatility So we will need to see how the key variables driving an interest income such as rates, deposit flows, and mix. As well as loan growth play out, and we will continue to update you over the remainder of the year. I would also point out that the amount of trading related in interest income will be impacted by rate and asset levels, which would be largely offset by trading related non-interest income. Regarding our expense outlook, we still expect 2025 non-interest expense to be approximately $54.2 billion. In summary, our results in the first quarter reflected the progress we have been making to improve our financial performance, Compared with a year ago, we had double-digit growth in diluted earnings per share grew fee-based revenue across many of our businesses, reduced our expenses, and improved our credit performance. Lastly, the strength of our balance sheet, including our capital and liquidity positions, our risk discipline, our diversified business model allows us to be a source of strength for our customers throughout economic cycles. We will now take your questions. At this time, we will now begin the question and answer session.

Please record your name at the prompt. If you would like to withdraw your question, you may press star two to remove yourself. Once again, please press star one and record your name if you would like to ask a question at this time. Please stand by for our first question. Will come from Scott Siefers of Piper Sandler. Your line is open.

Thank you. Good morning, everybody. Appreciate you taking the question. Charlie, maybe I was hoping you could start by perhaps expanding on your thoughts regarding current customer sentiment. Is your sense that you know, customers are still eager to do things once we get past all this turmoil? In other words, we just sort of need a finite termination to some of this uncertainty, or are they now beginning to, like, gear themselves for a more prolonged slowdown that would sort of dial back some of their plans.

Yeah. Listen. I would say I think they're trying to figure it out. I mean, I think you know, everything that we see in our you know, the behavior both in terms of both our consumers as well as our corporate customers has been discontinued strength. Which is a great position to start from. But everyone is trying to assess the situation in terms of will there be resolution to some of these things, What does it mean for their business? And that's not completely clear. So, you know, business hasn't come to a halt in any way at this point, but people are certainly taking stock of what it means, figuring out where to sit and wait and where to continue to move forward, And I think there is still a hope that the positives of regulation, positives of tax reform, the long-term positives of changes in trade. Can put us in a position to feel better about the future and a growing economy. But people are cautious. So I just kinda put it in the wait and see category. Cautious in the shorter term, but probably still bullish for the longer term.

Okay. Perfect. Thank you very much. And then, Mike, I was hoping you could unpack a little more on the NII commentary, you know, a few caveats in there and appreciate your thinking more toward the lower end of the range given what we see currently. But, you know, maybe as you look at sort of some of the puts and takes, regarding rates, the forwards, anticipated loan growth, or lack thereof. If you could just maybe point to where you feel like you're most confident and try contrast what might need to be right to get a little stronger performance as the year plays out.

Yeah. No. I appreciate it. And there are a lot of puts and takes. And certainly a lot of uncertainty just more broadly around, like, where the path is. You know, if you start and think about where, you know, where rates are relative to the expectations we set in January, Really, the difference is on the short end of Fed funds, really the difference is in the second half of the year. The first half of the year is pretty close. And that's moving around a lot. Right? And you just look at, you know, the the faux implied forwards for year-end on fed funds, and it's you know, you got a 30 basis point plus or minus move. Like, over the last, you know, six, seven days. And so that'll I think that's gonna continue to evolve a bit as we kinda look forward. On the long end, right now, rates are a little bit lower than what we projected, but it's not a huge driver of what's gonna, you know, be success for NII. We're up 50 basis points in the last seven days, and so that could move you know, pretty or a little over that actually as of now. And so that can move pretty quickly. So we'll see, and it's hard to predict exactly where rates gonna go just given sort of the volatility that we've seen. On the loan side, you know, like we said in January, you know, we didn't expect to see a lot in the first half weeks expected to see more in the second half. You know, and call it sort of mid-single-digit kind of growth rates. You know, kind of, you know, three-ish, four-ish percent sort of growth rates, that kind of plays You know, when you look at the fourth quarter versus fourth quarter. And that's still like an open question, you know, due Charlie sort of highlighted a little bit of the uncertainty that's there. Know, we did see a little bit of growth in the first quarter, so that's a positive. As I mentioned in my remarks, we haven't seen that in a while. So that's good. And so we'll see how that progresses. And hopefully, we get a little bit more clarity and things, you know, calm down a bit and we start to see some of that growth that we expect to happen. But that's certainly gonna be a place that could move around a little bit. And then when you look at deposits, you know, we come into the first quarter. You see non-interest bearing down a little, interest-bearing up a little bit. So you got a little bit of you know, on a negative side, you got a little bit of mix, you know, changes there. On the positive side, though, you know, as we look at the consumer business, we a little bit of growth Plus, we're doing we're getting better results when we look at the retention of some of the savings you know, promotions that we had on or the CDs that are rolling over. So we're retaining more of those deposits than we'd model. So there's some puts and takes there as well. And so as you look forward and then you have, like, trading NII that's gonna move around a little bit. You see a little bit of that in the first quarter. We had higher trading assets driving a little bit lower NII. That's but that's offset in fees. And so you see you know, you'll there's lots of puts and takes. And so we at this point, we still feel like that low end of the range is kinda what it looks like now. But it could move around a little bit as we go into the middle of the year, both in a positive or negative way. Yeah. I just wanna emphasize just what Mike just said. We are trying to be as transparent as we can be. About what the outcomes can be in terms of NII. But there are huge unknowns, and the huge unknowns can, you know, can go both ways in this. Right? You can make know, you can make arguments, if I look at the forward curve in terms of, you know, how many rate cuts there'll be. You can also make an argument that suggests there just won't be nearly the amount of rate cuts that are embedded in the forwards. And, you know, you see what's happened to the curve over the last couple of days, let alone the past couple of hours. Same holds true relative to, you know, what happens in terms of just loan balances. You know, there are scenarios where for a host of reasons, both posit you know, could be positive or negative in terms of, you know, customers wanting to borrow. And so it's just it's a volatile time. It is a time of unknowns. Again, we're trying to be as clear as we can about what we think today. As we think about what the future is, there's, you know, there's you know, we're not locked in on one scenario. That's locked in on the low end of NII. It's you know, how could this play out? It could play out multiple ways and know, as we see here next quarter, we'll hopefully have you know, be able to share you know, more because you know, time won't just have passed. But hopefully, know, the issues that are driving rate curve out there, we'll have a little bit more clarity on.

Perfect. Thank you all for the additional color.

The next question will come from Ken Usdin of Autonomous Research. Your line is open.

Thanks. Good morning. Charlie, your the continued progress on knocking down more ten orders. And I just wanna ask a bigger question about the regulatory backdrop. And does anything in the moving parts that we're you know, all watching happen in terms of the appointments and new heads and such impact how you move forward on trying to get the rest of them done, and just you know, if you have to make any adjustments, like, what are those adjustments that you to just be thinking about? Thanks.

Yeah. Listen, I don't think we need to make any kind of adjustment I mean, I've been you know, I was asked in the past about how I felt about you know, the willingness of people in leadership positions in the prior administration to close orders And I was very consistent in my belief that you know, the regulators are very objective when it comes to these things. They're very fact-based. They want us to see to do the work. They want us to do their validation. And if we do that, they'll close the orders. And, you know, we've seen that. We've had, you know, eleven closed since 2019. And so I think no. I don't think the change in administration you know, suggests that we need to do anything differently. I do think, certainly, you know, the view that this administration has and the people that are both, whether they're acting or those that have denominated or those that are, you know, in new positions, you know, would certainly wanna be constructive when it comes to not just regulation, but supervision. And so I presume that, you know, they will react a very positive way to the progress that they've seen us made. And I, you know, I would point you to the quote in the press release about, you know, our view on the importance of the work that's been completed in the closed consent orders and what that means for, you know, some of the orders that are outstanding. And so I think, you know, these things come together to, you know, not have us know, feel any different, meaning we still are extremely confident in our ability to do what we to get done here.

Great. And, Mike, one for you. You mentioned that you did a little bit of adjustment on the reserve. I think people are noticing that the reserve there was a bit of a reserve release. You guys are one of the more conservatives in your scenarios, but can you kinda just talk through just how you feel about where you stand now and how the environment also just makes you think about whether that was fully captured in the first quarter reserve or are there any things we should be thinking about going forward? Thanks.

Yeah. Sure. You know, I think first, you know, in terms of the adjust so we would have had a bigger release given know, both the change in balances we saw in the quarter, but also sort of the credit performance. Which has been really, really good. And you can kinda see that come you look at look at the charge-offs And so it would have been, you know, a bigger release. I think when you take a step back and look at the way we've approached the allowance now for you know, consistently now for a number of years, You know, we start with a pretty significant weighting on the downside scenarios. We have a baseline scenario. We have a couple downside scenarios. And we've had a pretty significant weighting on those scenarios now for a number of years. When you look at, you know, how that projects out and you can see a little bit of this in the queue, but it's not It doesn't quite give you the whole time series. But when you look at you know, what that shows is it shows unemployment kinda getting to a little over 5.8%, so a little under 6%. Out a couple quarters versus what you might see in the queue. So it already is pretty you know, a pretty significant uptick in sort of unemployment running through the models. But I would also point out, like, that's, like, step one. So running the models, getting, you know, 5.8% as, like, the unemployment You know, that's step one in terms of, you know, where we get with the allowance. Step two is then know, really being thoughtful about all of the things the models might not, you know, capture you know, appropriately. And so we increase the allowance based on a lot of the judgment that we then apply across the different, you know, risk that might be there within the scenario. So I would sort of take, you know, comfort that, you know, one, you know, we do have a pretty good weighting there in the downside. It is 5.8% of employment. And then we add more allowance on top of it. Now will that change based on, you know, the path of the economy? Maybe. Right? We've gotta see where this starts to go. We have a much deeper recession. Would you see allowance uptick? Probably. But I think, you know, it if something's gotta change, you know, pretty, you know, changes in terms of the outlook in a pretty significant way. And I'd sort of bring it back to where Charlie was before. When know, clients coming into this are in really pretty good shape. Right? And you can see that through the charge-off performance. And so both on the consumer side, you know, on in good shape, we're not seeing deterioration happen in any meaningful way relative to what trend that we've had over the last couple of quarters even on that lower end consumer. And on the corporate side, same thing, you know, very consistent performance now for a number of quarters. And really the only place that we've seen, you know, any systematic stress is still the office portfolio. Portfolio. And even there, it's been pretty stable in terms of the trends and what our expectations have been.

Let me just add a couple of things if I can, and emphasize a couple things Mike said. First of all, when you look at our change in reserve this quarter, it came down because loan balances came down, and because we had charge-offs really in our commercial property portfolio where we have substantial reserves. And so it's appropriate to use those. As Mike said, our modeling which we think is very well, you can argue, but, you know, we think is appropriate and probably on the conservative side given the unemployment numbers and the way we weighed our scenarios, would have suggested release. And so away from those two places where we did reduce the reserve, we kept it what we think are relatively conservative assumptions for unemployment and the weighting of scenarios and didn't release. So it's more conservative today than it was at the end of last quarter. Which is, you know, which was an intentional reaction to what we see going on out there. As Mike said, you know, would that be enough under a range of scenarios? Depends on how bad the scenario were to get.

Great color. Thank you.

The next question will come from John McDonald of Truist Securities. Your line is open.

Yes. Hi. Good morning. Mike, I was wondering if you could give a little more color on what you saw with the commercial loan growth this quarter. It seemed like it picked up a little bit. You change in utilization or a build out of customers Just give a little color there, please.

Yeah. Sure, John. You know you know, first, in the commercial bank, it was mostly a utilization story. There may have been a few new customers as well. Where we saw kind of a slight uptick there in utilization. Mostly in kind of the bigger client segments of the know, the mid-corporate segment, not the smaller clients in the commercial bank. We also saw some upticks in our asset-based lending, you know, portfolio as well, both in the all in the commercial bank. You know, again, mostly utilization, but a little bit of, you know, a couple new clients. And then we also saw some uptick in the corporate investment bank. Again, a mix there of utilization and a couple new clients that sort of came into the, you know, portfolio. And so, you know, it was encouraging to see that. And, you know, the question I got earlier in the day too was, you know, was it related to kinda tariffs or was it related just BAU sort of borrowing? And it appears like it was mostly just BAU you know, activities out there. You know, we haven't really seen any evidence of people prepositioning significantly that, you know, that caused significant borrowing, at least, know, as it relates to their expectations around tariffs.

Got it. Thanks. And I was wondering if you could give some more color on what you saw this quarter in terms of the market-sensitive fee businesses across trading, IB and venture capital. How did the environment impact this quarter, and what should we keep in mind we think about the outlook for those items?

Yeah. First on the venture portfolio, what you saw was a couple of things in that portfolio. One, you know, we had an exit event late last year and we're in a lock-up period on an IPO. And so you saw some mark-to-market losses on that stock, and that'll you know, that's been moving around a little bit, but that was part of it. That's still, by the way, an amazing return on that investment even with, you know, the noise there. And then you had some impairments across a number of portfolios. And given the volatility that we've seen you know, in the equity market in particular, but also just more broadly, that's gonna have an impact on exits coming out of that venture portfolio and kinda pushing them back in time. And so you really have to know, that number can be a little volatile, you know, quarter to quarter, so you really have to look at that over a, you know, a slightly longer period of time. But overall, we still we feel really good about the portfolio. We feel good about the investments that are made there, and it's just gonna take some time to monetize it given some of the volatility. You look at, you know, trading, which I guess is part of the other piece. We had a good, you know, decent quarter in trading. Really across a number of different, you know, desks there, and that's just a continuation of what we've, you know, seen now for the better part of, you know, I guess, two or three years almost now where we've gotten, you know, better and better and more consistent at driving good results there. And then, obviously, we have some volatility coming into this quarter and early April at least, and so we'll see how that progresses through the rest of the quarter.

Okay. And just again on the on the IB, obviously, things have kind of ground to a halt a bit on activity levels, but you guys are building out your investment bank and adding people kinda some thoughts there would be helpful. Thanks.

Yeah. No. The look. The investments that we're making continue We've announced a few more over the last number of weeks, with different people joining in different roles. You know, we've got a really disciplined plan there, and, you know, we'll continue to make those. And as you know, you really have to have consistent coverage and product capabilities over a long period of time. And we're gonna continue to do that. I think in the activity, what you saw in the quarter was really led by debt capital markets. Not surprising. Probably, you did see a little bit of equity capital markets activity. At this know, with the volatility that we've seen over the last two weeks, you know, it's gonna be hard to see much activity in the equity capital market space until that comes down a bit. I think I do expect you'll continue to see good activity in debt capital markets. And then M&A, know, the conversations are good. The pipeline's good. And to Charlie's point earlier, I think it's gonna be dependent on when people start to get a little bit more certainty in around the policy adjustments that are being made and how that's gonna impact their business. So we'll see how that goes. But it's a you know, as you know, in investment banking, it's a long game. And so yeah, we need to be consistent there over a long period of time, and that's the goal.

Got it. Thank you.

The next question will come from Steven Chubak of Wolfe Research. Your line is open.

Hi. Thanks for taking my questions. Maybe just a follow-up to the discussion around the fee outlook, maybe within expense lens or framing it with an expense lens, just given the better core expense outcome in the quarter versus the quarterly run rate implied by the full year guide, and some of the headwinds you cited just on the fee side from various impairments or negative AUM marks. I was hoping you could speak to the expense flexibility in the model if the fee outlook or backdrop continues to deteriorate further?

Yeah. Sure. Look, I think there's always a degree of flexibility as you go through as you the year. We want to try to make sure that we stay consistent and execute on all a lot of the core investments we're making. But, you know, if you start with, like, the easy ones, right, if the market you know, continues to decline from where it is today, you'll see less revenue-related expense particularly in wealth and investment management. The IB, you know, comp will be a function of sort of activity and revenue that we see throughout the year, and so there's flexibility obviously there depending on sort of where revenues you know, come in. I think, you know, we've seen really good performance in the quarter on operating losses. So we gave you an estimation there. That's obviously running below sort of the run rate. So there's hopefully, that will continue as well. And so I think it's an active it's you know, we're actively managing that, you know, as, you know, each week, each month, each quarter as we have now for the last, you know, four, five years. And so you know, we'll take action if we think this is gonna be sustained in some way. And but while we protect some of the core investments that we need to make.

Thanks for that color. And, Mike, for my follow-up, I was hoping to drill down to some of the NII comments you made around the second half ramp and some of the video factors like the CD roll-off you cited. You know, it's certainly encouraging guide, especially given the changes in the forward curve. But myself and others appear to be struggling to reconcile some of the resiliency in Italy with all the incremental cuts that are now in the forward curve. And I was hoping you could maybe just speak to the exit rate on NII once those cuts are fully absorbed just as we try to think about the jumping-off point looking ahead to 2026.

Yeah. I mean, that's a difficult one, right, to catch to give you a lot of specificity. I can understand why you'd want me to try to do that. But I think, obviously, rates are one factor that go into sort of the jumping-off point. I think as you just sort of look at you know, where the forwards are relative to what we showed you in January. As I said earlier, you know, your, you know, your 40 or 50 basis points, you know, lower potentially on the forwards and part of the second half of the year. But remember, know, the fourth quarter, you know, the cut usually comes in later in the quarter. So it doesn't have a lot it doesn't have a big impact in you know, in 2025. And then I think, you know, loan growth you know, we're still expecting to see some loan growth. We think some of it will be resilient to the environment, but some of it, obviously, in the commercial bank and some of the corporate franchise. Is gonna be a function of, you know, the broader macro view here. And so we'll see how it sort of plays out, but I think trying to estimate where 2025 and where we're gonna exit 2025 is not something. I think we're gonna try to get very specific on at this point.

And I would just remind everyone, that, you know, just as we plan for different scenarios, you all should plan for different scenarios. As opposed to just what the forward curve says.

Yeah. Forward curve is usually wrong. And changes dramatically. You know?

It's almost always wrong.

And is always changing. But so I could certainly appreciate that sentiment. Thanks so much for taking my questions.

The next question comes from Betsy Graseck of Morgan Stanley. Your line is open.

Hi. Good morning. Charlie, a couple of questions for you. One is on the five consent orders that were closed so far year to date 2025. And I'm just wondering, how does that impact you? Does that give you more management time? Does it enable you to take down expenses at all? Does it make you more efficient? Or not? I'm just wondering if there's any tangible impact that we should see from this.

Yeah. That's a good question. I would listen. I think you know, as we've done been doing the all of the work that needs to get done individually on consent orders, takes up a lot of management time. And a lot of internal and external resources. So as we complete the work, we have to dedicate fewer resources towards, like, the project aspect of getting these things done. And, you know, the fact that, like, the operating committee spends, you know, the first chunk of time at every management committee meeting we have operating committee we have going through where we are on these things. Absolutely, it clears up time for us to do other things and focus on other things. You know, what the fact that the consent orders are closed doesn't mean we're gonna stop doing the work. It doesn't mean that we're stuck, you know, committed to doing what's underlying that work. But we do then have a chance to figure out, are we doing everything as efficiently as we can? Because now we have a much better understanding of the control environment, and how to run it properly. So wouldn't put a number on it per se, but it does give us more degrees of freedom certainly in terms of how we run the place.

Okay. And then the follow-up is you mentioned in your remarks about being excited about the future. And it would be helpful to understand how you're thinking about that. You know? What underlies that statement especially given you still do have the asset cap on. I mean, we're all expecting at some point it'll be taken off, but you know, in an environment with the asset cap still on, what underlines that statement? The environment without it, what underlines that statement would be helpful to unpack a bit. Thanks.

Sure. So in an environment where the asset cap is still on, I think what you've seen us do over the past four or five years is to focus on growing businesses where we don't rely on balance sheet. Which by the way are things we should be doing anyway because they're important strategic things for us to grow to round out our franchise. And so whether it's been focused on spending in the card business, whether it's focused on our investing in the wealth business, whether it's building out the fee-based businesses in the corporate investment bank, know, be it underwriting, be it advisory, be it our treasury management businesses, the focus we have on delivering those products and services into the commercial bank You know, those are all things we've been investing in significantly. And have helped our, our noninterest revenues. And those things are gonna continue with or without an asset cap. And know, we think all, you know, give us a significant opportunity. In a world without an asset cap, as I've talked about multiple times, we have know, limited our ability to grow the ability to finance customers in our trading businesses and associated inventory. Know, we wouldn't look first you know, don't expect any kinda step functions in how we think about risk there. Just facilitating more customer activity, balance sheet certainly would be very helpful. And as loan demand picks up across all of our businesses, it has you know, gives us the opportunity you know, to grow there as well as not having to you know, limit deposits as we've had to limit deposits all along. So just, you know, the financial dynamics, you know, with and without an asset cap, I think, lead us to feel very, very good about the future. And I've talked in the past and in the shareholder letters, you know, strategically about why we think we're so well positioned in all of our businesses. Hopefully, that's helpful.

And is there an opportunity for an even more elevated ROE Broadsy outlook here. As you progress through that opportunity set.

Listen, I would say you know, we're you know, we aren't gonna be happy until we get to the 15% that we told you we were gonna get to. Which we in terms of having it be sustainable. And then we've said when we get there, we're gonna look at where we should be. And we don't think our businesses you know, are let me say differently. Our business each business individually has the opportunity to have the returns amongst the best in the industry. And then you wait that to look at, like, what we think about in terms of where we you know, answer the question why we shouldn't get there eventually. That's how we think about it. But we also know that we're gonna know, continue to grow investments and things like that. So you know, we feel very good about, you know, what's in front of us. Regardless of the short-term volatility that we see in the economic environment in the markets.

Thanks so much.

The next question will come from Ebrahim Poonawala of Bank of America. Your line is open.

Hey. Good morning. I guess maybe just on the last thing you mentioned, Charlie, around each business should have best in class ROE. You've talked about that for a while. Like, the consumer business obviously stands out there. Give us a sense of how much of that improvement in the consumer business on ROE is removal of the asset cap, maybe some efficiency opportunities that arise out of that versus better using your branch network after the consent order that got lifted last Feb. Just would love to hear how we should think about that ROE gap relative to best in class peers narrowing from here and if there's a time frame that you have in mind?

Well, I'm not gonna talk about a time frame because what again, what we've said very consistently is get to 15%. And so, you know, that's what we're focused on. And when we get there, then we'll talk about how we think of you know, the overall returns at that point. But I'm just, you know, trying to provide some context for how we think about what the, you know, what the longer-term opportunities here are. When we talk about internally the opportunity to increase ROE. And I just wanna also make the statement that we're focused not only on growing sustainable ROTCE, but we're focused on sustainable growth. Because it'd be very easy for us to get to a much higher ROTCE number without investing to build the kind of growth we wanna build into the franchise. And so that does elongate the time, theoretically, that it takes to get to you know, some of these industry-leading numbers because it's not lost on us that some of our great competitors have both very high ROTCEs while investing significantly And they've been doing that over a long period of time to get to where they are. But when I think about just specifically the consumer business, and I refer to some of these, you know, some of these things in our shareholder letter. When we think about our consumer lending business, you know, almost all of our businesses in our consumer lending segment are earning far below the ROTCEs that they should be earning. For different, you know, for different reasons. We're in a growth phase in the card business. We've talked about just what that means in terms of how so many of the expenses for front-loaded Balances get built over a period of time. But as long as the results play out on top of the models that we assumed, we know that's just a matter of time until those returns increase significantly. Our auto business is on a journey. Programs, obviously, we've got some, you know, question mark in terms of what tariffs will mean to some, you know, our partner out there. But you know, the deal that we've done to be the captive on new cars with Volkswagen Audi, we think, you know, certainly is a significant plus. Will help us become more of a full spectrum lender where we can increase profitability of that business. And we're still on a journey which we're very confident we're gonna get there, not just to run a better home lending business, but that business does not have the returns that it should, and that's just as we transition to this different model. So we look at those things. And then when we look at our consumer and small business bank, returns are very strong, but we've not had the kind of growth that other people have had. And I've talked about the constraints that we've had there. But we feel really good about what we're doing. And so, you know, there as you see that growth, given the nature of the business, it's not capital intensive per se, so it increases returns. And so we see know, a pretty clear path in our consumer businesses for some material improvements.

It's helpful. And just a second question. Would love to hear how you're thinking about capital management. Now your SCB went up 90 basis points last year, and will we see what the results have come end of June. But would assuming we have a similar size or some decline this year, is there an internal philosophy around where you think the right CET1 is for Wells Fargo & Company regardless of where the SCB shakes out? And the there's potential changes in the sort of the regulatory backdrop I reduce the need for a 100 basis point buffer in terms of how you've thought about that.

Yeah. Listen. I would say Mike, Mike, I'll start, and then you either correct me or add to it based on what you think. Listen. Our SCB went up 90 basis points last year, and we have no idea why. When we look at this, you know, the company, we look at the balance sheet of the company, when we look at the businesses, we're a less risky business today. We have higher margins, higher returns. Than we had. And so, you know, trying to understand why our SCB went up just it's illogical. When we look at the scenarios in this c car, you've obviously seen them. They're different scenarios. Less severe. And so hopefully, that produces a different outcome, but who knows? Because we haven't had the kind of transparency that we think is appropriate. So wait and see. So we've gotta get through c card before we actually make any of those determinations. And then layer on top of that the comments that we've heard from regulators of their commitment to increase transparency, to relook at a lot of these things, both from the Fed as well as administration's desire to look at these things. And it appears that we have more aligned regulators across the different regulators have to agree on some of these things away from what's just specifically in the fifth per view. So I think all of these things align to a better capital environment, which means it gives us more flexibility to serve customers. I said this in my comments, that means make loans take deposits, provide more liquidity in the markets which banks are supposed to do. But I think it would be wrong for us to get too specific about what that all looks like and how that know, determines what we think about buffers, until we know what they're actually thinking. But directionally, it's certainly a positive not just from what was proposed, hopefully from where we are today.

Thank you.

The next question will come from John Pancari of Evercore. Your line is open.

Good morning. Thanks for taking my questions. Just related to that last topic, I just wanted to get your thoughts on how you're feeling about the pace of buybacks here. We saw you bought back $3.5 billion in the quarter and you just talked about your CET1 level where it stands now. How are you feeling about the pace of buybacks as you look forward, particularly if we are looking at some softening in the economic backdrop. Does that make you feel any different in terms of how you're approaching the pace of buybacks? Thanks.

Yeah, John. It's Mike. I'll take a shot at that. And, you know, I like, our approach is no different in this environment than it is every quarter, you know, since we've been here. You know, we start with, like, what's the opportunity that set we have in terms of you know, providing, you know, supporting clients either through loans or other activity. We go through a series of conversations around risks that are there, you know, in short and medium and longer term. And then, you know, whatever's left is sort of know, goes towards, you know, buyback if we think it's appropriate. And I think we'll go through that same process. You know, we've tried really hard not to get in this game of trying to predict, like, each quarter what we're gonna buy back. But I think, you know, as we've said, we've got capacity to do more. It's been a priority. For us over the last number of years, and we'll, you know, continue to go through the same process we go through and see where we end up.

And just to emphasize what Mike said just to, you know because we each said this, I think, in our remarks is we have a very strong capital position now. We have, you know, significant excess capital and that's been very, very intentional. Both be well, at the time, we were, you know, unsure whether or not capital requirements were gonna go up. What was necessary there. That seems to be off the table. And directionally, it looks like it'll go the other way. But we're also in this period of uncertainty. So we have the flexibility certainly to continue to buy stock back. Given the position that we have, and we're just gonna have to evaluate it throughout the quarter as time goes on. But more you know, we'll certainly you know, tell you when there's more to talk about.

Got it. Okay. Thanks, Charlie. And then separately on credit, on the commercial front, are you seeing any indications of borrowers beginning to drawdown lines as a precaution given the economic backdrop and recessionary fears And then secondly, on the commercial front, I guess, this will apply to consumer as well. Is there any areas that you're tightening lending standards incrementally now post the tariff announcements and the economic implications where you're looking at things more cautiously and therefore tighten?

Yeah. Let me take a step. So on the draws, we're monitoring it really, really closely. Both on a commercial banking side and the CIB side. There's been one I mean, literally one draw that we've actually talked about, and we don't really think it relates to COVID. But frankly, tariffs Oh, definitely, sorry. COVID. It definitely doesn't relate to COVID. We don't think it relates to tariffs. It's just the situation of that company and not something that anyone is worried about, but it just gives you a sense for how actively we're monitoring draw activity. You know, the moment it happens, we're talking about it. There's communication across everything. Second part of the question was oh, credit tightening actions. You know, listen. You know, one of the things and I we and I referred to this in remarks We have made a whole series of tightening actions which have reduced volume. That's part of the reason why we're seeing such strong credit performance, including on the card side. So know, we've, you know, gone into this environment with what we think are pretty conservative underwriting parameters. We had been having some about whether or not we should reverse some of those. So we'll certainly be, you know, slower in terms of nor willingness to do that. And we will sit and have a conversation as you would expect us to do of, you know, if we really were nervous about how this could affect the consumer, what we should be doing. But we haven't made any decisions at this point. But it's a living, breathing thing, which I hope you'd expect us to do.

Got it. Alright. Thank you, Charlie. Appreciate it.

The next question will come from Matt O'Connor of Deutsche Bank. Your line is open, sir.

Good morning. I just wanted to follow-up on expenses in terms of how much benefit there is still to come from know, call it natural passage of time. You referenced the legacy servicing costs were down significant from the top. But how much more kind of building savings are there from things like that, decisions that you've already made and taken, but just take time to play out.

Yeah. I no. I'm not gonna quantify specifically, but, you know, as we said probably, I don't know, over and over and over in different forums, you know, we still feel like there's a significant amount of opportunity to make the company more efficient. That's you know, in better automating, you know, what could be manual processes today. It's continuing to take down, you know, excess real estate that we might have, which just takes some time to work through. It's, you know, continuing to work on third-party expenses, operating losses, and on and on and on. And I'd say there's really almost no part of the company that we feel is like, is completely optimized at this point. And so we're gonna continue to just, you know, methodically focus on it and you know, it's not one or two things. It's hundreds of different, you know, activities that are underway at any given point that sort of drive a lot of that efficiency work and we still have more to do.

And I guess taking, like, a more medium-term outlook my sense has been those opportunities will allow you to self-fund kind of rest of your expense base. So that conceptually, you're kind of relatively stable on cost as hopefully, revenue growth picks up a little bit. Is that still a reasonable framework as you think out over the next several years?

Yeah. I mean, we're not gonna project out into the future. But I think, certainly, if you look backwards, you know, for the last number of years, like, we've cut you know, $12 or $13 billion of expenses and reinvested in significant amount of that back into the businesses. And so we'll see as and we'll continue to give a view each year in of what it looks like. But as I said, we still feel like we've got opportunity to make the place more efficient than we'll decide each year how that sort of gets allocated between investments and other stuff.

Okay. Thank you.

The next question will come from Saul Martinez of HSBC. Your line is open.

Hey. Hey, good morning, guys. Thanks for taking my question. I just wanted to maybe follow-up on the auto business. It's obviously not a big part of your total loan book, but the delta on growth has changed a lot and it is, you know, it's no longer declining as much as it was, and that's helped the overall loan growth trajectory. But curious what your views are from here. My sense is, you know, that this business has become more rational in terms of the competitive landscape, but you also mentioned in the prepared remarks that you saw the results were impacted by loan spread compression and obviously you have tariffs in the background. So just if you can give us an update on what you're thinking for this business, what the outlook is, how you're strategically positioned, and yeah, just any color.

Sure. It's Mike. I'll try to answer that. So again, just maybe I'll start with the last piece on the loan spread compression. What I said in my remarks was that, you know, really the bulk of that is driven by the fact that, you know, the book has migrated to higher FICO clients. Over time as we've done a bunch of credit tightening two or three years ago. And I think that served us quite well, you know, over the last couple of years, and you can see the credit performance coming through. And over the you know? But what we've been really focused on now for the better part of a couple years is two things. One, you know, finding opportunities like the Volkswagen relationship that Charlie referenced before, which is again, a great way to sort of improve the not only the growth, but the return of that business over time. And then to some degree, becoming a more full spectrum lender there as we've built out, you know, other capabilities to do that in a very methodical, rational way. And so it'll always likely be a relatively small part of the balance sheet, but I do think that you should over time see that trough in terms of the balances start to grow some and see better returns over time. Our focus there is not growth at any cost. Right? And we've talked about this over the last couple of years too. Like, we're gonna continue to focus on generating solid returns as we sort of grow that business. And so if things get a little irrational at times, we'll pull back and focus you know, in the right places. But I do think you'll start to see over time that those balances to trough grow a little bit and hopefully have better returns.

Okay. Great. Thanks. And then maybe a follow-up on the markets business because obviously you're building those out. The equities piece was flat year on year. I know it's a small business at this point. But, you know, some of your competitors who reported this morning had, you know, reported very big increases year on year. Obviously, you've had a lot of engagement, volatility, Just curious if, you know and I forget if last year the base was you know, very strong or there's a base effect. But just any color on what drove this? Is it a disappointing result? And just what, you know, is there anything in terms of your ability to use balance sheet that is really impairing you to from growing in this business. Just any color would be helpful.

Well, first, the businesses just aren't comparable. Right? So if you look at some of the you know, another peer or two sort of reported today, those the equity businesses are just different. Right? And one, they're more global. We're not. Their prime business is massive. We're not. And so those are a couple of the big differences. And you get very different outcomes depending on the environment you're in. We're actually very happy with the way the team has been managing the markets business overall, and we've seen you know, this consistent sort of performance now for a while. I'd say some of the equity finance business that is resident within Prime is impacted by the asset cap. You know, we don't have the same flexibility to grow that, and that's part of, you know, what we've been talking about for a while in terms of, you know, the opportunity in a post asset cap world. But so I just think you gotta look through a little bit of the differences in the business at this point.

I just wanna pile on just for a second just to do, you know, shout out to our markets team. Run by Dan Thompson, Mike Riley. I mean, these guys have building both our fixed income and our equity business without the luxury of balance sheet. In fact, it's been the opposite. They've gone out of their way to help the rest of the company by giving up balance sheet. And our businesses albeit from, you know, smaller levels, are they're stronger. We're spending money on technology. We're taking share. We're building out broader corporate and institutional relationships. And so know, the gains that we've seen and the, you know, the performance we've seen in terms of our trading revenues, are, you know, being built the right way. Without being you know, based on taking additional risk. It's building additional customer activity and technology.

Okay. That's great. That's helpful. Thank you.

The next question will come from Erika Najarian of UBS. Your line is open.

Hi. Good morning. I know we've run long, so I just had one follow-up question. Mike, just going back to Steve's question, I think in the on the previous call, you talked about a net interest income trajectory that was flattish in the first half of the year. And then sort of ramps in the second half. I'm wondering, number one, if that's still your expectation and perhaps help us frame maybe the impact of the swing in trading NII to this quarter's NII print? And additionally, what impact should the security for repositioning have on your margin as we think about a go-forward basis?

Yeah. Well, the incremental reposition we did is relatively small. So, you know, and the pickup in is pretty similar to what we you know, in terms of yield that we quantified for the stuff we did late last year. So, you know, pretty probably pretty easy model, but pretty small overall. Okay. Just interrupt for a second. Just like, we don't make those decisions because of guidance. We make those decisions based upon what we think is smart economically to do in the investment portfolio relative to where rates are. Yeah. For sure. The you know, and look at the expectation is still pretty similar to what we talked about. Right? It hasn't changed much. So, you know, kinda flattish, you know, with more loan growth in the second half of the year. And then, obviously, rates and the other factors will sort of drive the ultimate outcome And then, you know, we haven't really provided know, a lot of detail on trading NII, Erika. And I think, you know, given how volatile rates are right now, that would probably be a little bit of a mistake for us to do just given it moves around quite a bit. And just keep in mind that whatever NII whatever trading NII you know, is either up or down, there's likely an offset in fee revenue. So a lot of it's revenue neutral.

Got it. And, Charlie, I hear your message loud and clear. Just wanted to know, flag that I'm sure that the investor base will look through some of these questions on NII given everything that you guys laid out on your return trajectory going forward. But thank you for the color, Mike.

Yep. And totally understand, Erika.

Our final question for today will come from Gerard Cassidy of RBC Capital Markets. Your line is open, sir.

Thank you. Good morning, guys. Charlie, you said in your prepared remarks how you're not you're going to be reducing the reliance on net interest income. Can you remind us in on the suggestion or asking when you think the asset cap gonna be released, but in when that happens, what's the optimal mix that you think you guys can get to between that interest income and noninterest income or fee revenues? And then what's the main driver of that fee revenue line?

Yeah. You know, I'm not we've not gone there yet to say exactly what you know, where we think each have to get to because to the point know, until the asset cap is lifted, it's you know, we really don't wanna be talking about you know, what the implication of that can be other than, you know, in general terms, which we've, you know, which we tried to do. Listen, when we think about the things that we're doing in building the fee-oriented businesses, it's the things that we're doing. I referred to these earlier. It's what we're doing in the card business. It's what's happening in the wealth business. It's our advisory, our underwriting businesses, both through larger companies as well as middle market companies. And our payments-related businesses. And those are smart things to do strategically regardless of whether we have the asset cap or not. And, you know, make us you know, a more attractive provider of services for our customers. And so that's the reason to do it. Predominantly. It builds a more diverse and, you know, hopefully, more valuable revenue stream for the company. And ultimately, I think your point is right. We'll have the continued opportunity to both to grow both fee businesses as well as NII with more degrees of latitude on NII without an asset cap.

Very good. And then, Mike, I know you touched on credit quality throughout the call. And in terms of your focus going forward on the C&I loan portfolio, Are there specific, you know, categories within the C&I loan portfolio that you're that you guys are, you know, ensuring that you're checking you know, maybe more rigorously today than twelve months ago, just as a potential, you know, weakness could develop in a slower economy?

We're looking at the whole portfolio, Gerard, as we always do. And it's something, you know, we've got a really long-standing great credit discipline across the company, and it's something I think the team does really well. And it's a focus for all of us, and it's you can't you can't, like, pick and choose. You gotta really look at the whole thing.

Great. Appreciate the color, guys. Thank you.

Alright. Thanks, everyone. We appreciate the call. Take care.

Thank you.