Wells Fargo 3Q21 Financial Results presentation (October 14, 2021)
Full text
3Q21 Financial Results
October 14, 2021
© 2021 Wells Fargo Bank, N.A. All rights reserved.
Actively helping our customers and communities
Clear Access Banking and Overdraft Rewind Taking Additional Actions to Support Our Communities
• Over 1 million customer accounts now benefiting from Clear Access Banking, our • Charitable Donations: $496 million in donations expense during the first nine
checking account with no overdraft or non-sufficient fund fees months of 2021, including support for the Open for Business Fund
– Over 50% of accounts with customers 24 years and younger • 3Q21 contributions and announcements included:
• During 3Q21, our Overdraft Rewind feature helped over 1.3 million customers – Housing Affordability: Granted nearly $11 million to 19 nonprofits offering
avoid overdraft, overdraft protection or non-sufficient fund fees on 2.5 million legal assistance and other resources in support of home ownership, renter
transactions stabilization, and eviction avoidance
Supporting the Small Business Recovery Through Our – Neighborhood Lift: Committed to a $5 million investment to help more than
300 low- and moderate-income residents in Philadelphia with home down
Open for Business Fund payment assistance
• Wells Fargo voluntarily committed to donate the gross processing fees received
– Investing in Workforce Development: Announced a $1 million donation to Kollab,
from Paycheck Protection Program (PPP) loans funded in 2020 to create the
a workforce development program focused on the inclusion of young people
Open for Business Fund
who face employment opportunity challenges, as well as serving more African
• The Fund provides support for Community Development Financial Institutions American youth within the Los Angeles County Alliance for Boys & Girls Clubs
(CDFIs) and other nonprofit organizations that provide capital, training and long-
term support to small businesses – Banking Inclusion Initiative: Offering MoCaFi customers the ability to make
withdrawals with their Angeleno Connect Card at any of Wells Fargo’s ATMs
• Through 3Q21, we have:
nationwide without incurring fees from Wells Fargo
– Fulfilled $305 million of our ~$420 million commitment, which included grants SM
– Helping Women-owned Businesses: Launched Connect to More , a resource
to 215 CDFIs, which in turn is estimated to help nearly 150,000 small business
hub for women-owned businesses and a mentoring program partnering with
owners maintain more than 250,000 jobs
Nasdaq Entrepreneurial Center to empower 500 women-owned businesses
– Over 80% of our funding is projected to reach diverse-owned businesses, which
were disproportionately impacted by the COVID-19 pandemic
– $55 million of the $305 million was provided to 93 nonprofits that offer small Enhancing Transparency on Environmental, Social and
business owners access to experts to help grow their businesses Governance Matters
• Business owners have used the funding to keep paying their employees, pivot to
• In July 2021 published our updated ESG Report and Goals and Performance Data
new business models, buy needed supplies, close the gap on rent and utilities, and which feature information regarding sustainability, human rights, diversity, equity
meet other business needs and inclusion and other social impacts among many other categories, and included
• Additionally, we have committed to donate any net profits from processing fees new disclosures on our workforce by race, gender and job category
1
received from PPP loans funded in 2021
1. Aligned to job categories as defined by government job category definitions and descriptions as outlined by the U.S. Equal Employment Opportunity Commission (EEOC).
3Q21 Financial Results 2
3Q21 results
• Net income of $5.1 billion, or $1.17 per diluted common share
– Revenue of $18.8 billion, down 2%
– Noninterest expense of $13.3 billion, down 13%
– Results included:
Financial Results
($ in millions, except EPS) Pre-tax Income EPS
ROE: 11.1% Change in the allowance for credit losses $1,652 0.30
1
ROTCE: 13.2% Impact of an operating loss associated with the September 2021 Office of the Comptroller
2
Efficiency ratio: 71% of the Currency (OCC) enforcement action (250) (0.05)
• Effective income tax rate of 22.9%
• Average loans of $854.0 billion, down 8%
• Average deposits of $1.5 trillion, up 4%
• Provision for credit losses of $(1.4) billion, down $2.2 billion
– Total net charge-offs of $257 million, down $474 million
Credit Quality
◦ Net loan charge-offs of 0.12% of average loans (annualized)
– Allowance for credit losses for loans of $14.7 billion, down $5.8 billion from 3Q20 and down $1.7 billion from 2Q21
3
Capital and Liquidity • Common Equity Tier 1 (CET1) capital of $141.6 billion
3
3 • CET1 ratio of 11.6% under the Standardized Approach and 12.4% under the Advanced Approach
CET1 ratio: 11.6%
LCR: 119%
4 • Increased common stock dividend to $0.20 per share
5
TLAC ratio: 23.7% • Repurchased 114.2 million shares of common stock, or $5.3 billion, in the quarter
Comparisons in the bullet points are for 3Q21 versus 3Q20, unless otherwise noted.
1. Tangible common equity and return on average tangible common equity (ROTCE) are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the “Tangible
Common Equity” table on page 16.
2. The efficiency ratio is noninterest expense divided by total revenue.
3. See page 17 for additional information regarding Common Equity Tier 1 (CET1) capital and ratios. CET1 is a preliminary estimate.
4. Liquidity coverage ratio (LCR) represents high-quality liquid assets divided by projected net cash outflows, as each is defined under the LCR rule. LCR is a preliminary estimate.
5. Represents total loss absorbing capacity (TLAC) divided by the greater of risk-weighted assets determined under the Standardized and Advanced Approaches, which is our binding TLAC ratio. TLAC is a preliminary estimate.
3Q21 Financial Results 3
3Q21 earnings
$ in millions (mm), except per share data 3Q21 2Q21 3Q20 vs. 2Q21 vs. 3Q20
Net interest income $8,909 8,800 9,379 $109 (470)
Noninterest income 9,925 11,470 9,937 (1,545) (12)
Total revenue 18,834 20,270 19,316 (1,436) (482)
Net charge-offs 257 379 731 (122) (474)
Change in the allowance for credit losses (1,652) (1,639) 38 (13) (1,690)
Provision for credit losses (1,395) (1,260) 769 (135) (2,164)
Noninterest expense 13,303 13,341 15,229 (38) (1,926)
Pre-tax income 6,926 8,189 3,318 (1,263) 3,608
Income tax expense (benefit) 1,521 1,445 (83) 76 1,604
Effective income tax rate (%) 22.9 % 19.3 (2.6) 359 bps nm
Net income $5,122 6,040 3,216 ($918) 1,906
Diluted earnings per common share $1.17 1.38 0.70 ($0.21) 0.47
Diluted average common shares (# mm) 4,090.4 4,156.1 4,132.2 (66) (42)
Return on equity (ROE) 11.1 % 13.6 7.2 (253) bps 386
1
Return on average tangible common equity (ROTCE) 13.2 16.3 8.7 (307) 448
Efficiency ratio 71 66 79 482 (821)
nm - not meaningful
1. Tangible common equity and return on average tangible common equity are non-GAAP financial measures. For additional information, including a corresponding reconciliation to GAAP financial measures, see the “Tangible
Common Equity” table on page 16.
3Q21 Financial Results 4
Credit quality
Provision for Credit Losses and Net Charge-offs ($ in millions) Allowance for Credit Losses for Loans ($ in millions)
20,471
769 731 19,713
584 8,929 18,043
523 8,197
16,391
379 7,361 14,705
0.29% 257 6,821
0.26% 0.24% 0.18% 2.22% 2.22% 2.09% 6,140
1.92%
0.12% 1.70%
11,542 11,516
10,682
9,570
(179) 8,565
(1,048)
(1,260) (1,395)
3Q20 4Q20 1Q21 2Q21 3Q21
Commercial Consumer Allowance coverage for total loans
3Q20 4Q20 1Q21 2Q21 3Q21
Provision for Credit Losses Net Charge-offs Net Loan Charge-off Ratio
• Commercial net loan charge-offs down $42 million driven by net recoveries in the • Allowance for credit losses for loans down $1.7 billion due to continued
energy portfolio and in commercial real estate improvements in the economic environment
• Consumer net loan charge-offs down $80 million as lower losses in credit card and – Allowance coverage for total loans down 22 bps from 2Q21 and down 52 bps from
auto were partially offset by higher other consumer losses 3Q20
• Nonperforming assets decreased $321 million, or 4%, predominantly driven by a
$529 million decline in commercial nonaccruals, which was partially offset by a
$241 million increase in residential mortgage – first lien nonaccruals
Comparisons in the bullet points are for 3Q21 versus 2Q21, unless otherwise noted.
3Q21 Financial Results 5
Average loans and deposits
Average Loans Outstanding ($ in billions) Average Deposits and Rates ($ in billions)
931.7 1,435.8 1,450.9
899.7 1,399.0 1,380.1 1,393.5 37.3
873.4 41.7
854.7 854.0 68.0 56.4 46.5
175.0 176.6
169.4 169.8 173.7
Corporate
190.8 189.4
434.0 194.5 Wealth and
423.2 396.8 226.1 205.8
377.7 375.9 Investment
192.6 199.2
189.4 Management
179.0 184.9
Corporate and
Investment
Banking
3.41% 3.43% 3.34% 3.33% 3.29% Commercial
789.4 835.7 848.4 Banking
497.7 476.5 476.6 477.0 478.2 756.5 763.2
Consumer Banking
and Lending
3Q20 4Q20 1Q21 2Q21 3Q21 3Q20 4Q20 1Q21 2Q21 3Q21
Average
Commercial Loans Consumer Loans Total Average Loan Yield Deposit Cost 0.09% 0.05% 0.03% 0.03% 0.03%
• Average loans down $77.7 billion, or 8%, year-over-year (YoY), and down • Average deposits up $51.9 billion, or 4%, YoY as growth across most businesses
$723 million from 2Q21 as a $6.3 billion decline in consumer real estate loans was was partially offset by targeted actions to manage to the asset cap, primarily in
largely offset by modest growth in most other categories Corporate Treasury and Corporate and Investment Banking
• Total average loan yield of 3.29%, down 4 bps from 2Q21 and down 12 bps YoY • Average deposit cost of 3 bps, stable with 2Q21 and down 6 bps YoY reflecting
reflecting the repricing impacts of lower interest rates, as well as lower consumer the lower interest rate environment
real estate loans
3Q21 Financial Results 6
Net interest income
Net Interest Income ($ in millions)
• Net interest income decreased $470 million, or 5%, YoY reflecting the
impact of lower loan balances due to soft demand and elevated
9,379 9,355 prepayments, and the impact of lower yields on earning assets, partially
8,808 8,800 8,909 offset by a decline in long-term debt and lower mortgage-backed securities
(MBS) premium amortization
– 3Q21 MBS premium amortization was $499 million vs. $668 million in 3Q20
and $587 million in 2Q21
• Net interest income up $109 million, or 1%, from 2Q21
2.13%
2.16% 2.05% 2.02% 2.03%
3Q20 4Q20 1Q21 2Q21 3Q21
1
Net Interest Income Net Interest Margin on a taxable-equivalent basis
1. Includes taxable-equivalent adjustments predominantly related to tax-exempt income on certain loans and securities.
3Q21 Financial Results 7
Noninterest expense
Noninterest Expense ($ in millions)
• 3Q21 noninterest expense included a $250 million operating loss associated
15,229 14,802 with the September 2021 OCC enforcement action
13,989
13,341 13,303 • Noninterest expense down 13% from 3Q20
104
4,668 4,452 79 – Personnel expense up 1% as lower salaries expense driven by reduced
4,101 headcount reflecting efficiency initiatives was more than offset by higher
718 4,145 4,072
781 13 incentive and revenue-related compensation
(4) 1 Goodwill Write-down
1,219 621 213 303 – Non-personnel expense down $2.0 billion, or 30%, largely driven by lower
540 All Other Expenses
restructuring charges and operating losses, lower consultant and contractor
Restructuring Charges spend reflecting efficiency initiatives, and lower COVID-19-related expenses
Operating Losses that primarily impacted occupancy expense
8,624 8,948 9,558 8,818 8,690
Personnel Expense • Noninterest expense down modestly from 2Q21
– Personnel expense down 1% as lower incentive compensation and employee
benefits expense was partially offset by higher revenue-related compensation
and higher salaries expense on one additional day in the quarter
– Non-personnel expense up $90 million, or 2%, as higher operating losses were
3Q20 4Q20 1Q21 2Q21 3Q21
partially offset by lower technology, telecommunications and equipment
Headcount (Period-end, '000s) expense, lower professional and outside services expense, and lower other
expense
3Q20 4Q20 1Q21 2Q21 3Q21
275 269 265 259 254
3Q21 Financial Results 8
Consumer Banking and Lending
Summary Financials
• Total revenue down 4% YoY and up 1% from 2Q21
$ in millions (mm) 3Q21 vs. 2Q21 vs. 3Q20 – CSBB up 2% YoY primarily due to an increase in consumer activity, including
higher debit card transactions, and lower COVID-19-related fee waivers; up 2%
Revenue by line of business:
from 2Q21 primarily driven by higher deposit-related fees and higher net
Consumer and Small Business Banking (CSBB) $4,822 $108 101 interest income on higher deposits
Consumer Lending:
– Home Lending down 20% YoY primarily due to lower mortgage banking income
Home Lending 2,012 (60) (515)
on lower gain on sale margins, origination volumes, and servicing fees, as well as
Credit Card 1,399 36 54 lower net interest income on lower loans outstanding, partially offset by higher
Auto 445 30 41 gains from the re-securitization of loans purchased from MBS last year
Personal Lending 126 4 (23) – Credit Card up 4% YoY on higher point-of-sale volume and lower customer
Total revenue 8,804 118 (342) accommodations and fee waivers provided in response to COVID-19
Provision for credit losses (518) (151) (1,158) – Auto up 10% YoY and up 7% from 2Q21 on higher loan balances
Noninterest expense 6,053 (149) (1,292) • Noninterest expense down 18% YoY primarily due to lower operating losses
Pre-tax income 3,269 418 2,108 and lower personnel expense due to efficiency initiatives, as well as a decline in
Net income $2,451 $313 1,580 occupancy expense related to lower COVID-19-related expenses
Selected Metrics Average Balances and Selected Credit Metrics
3Q21 2Q21 3Q20 $ in billions 3Q21 2Q21 3Q20
1
Return on allocated capital 19.7 % 17.3 6.6 Balances
2
Efficiency ratio 69 71 80 Loans $325.6 331.9 379.8
Retail bank branches # 4,796 4,878 5,229 Deposits 848.4 835.8 756.5
3
Digital (online and mobile) active customers (mm) 32.7 32.6 32.0 Credit Performance
3
Mobile active customers (mm) 27.0 26.8 25.9 Net charge-offs as a % of average loans 0.37 % 0.43 0.39
1. Return on allocated capital is segment net income (loss) applicable to common stock divided by segment average allocated capital. Segment net income (loss) applicable to common stock is segment net income (loss) less allocated
preferred stock dividends.
2. Efficiency ratio is segment noninterest expense divided by segment total revenue.
3. Digital and mobile active customers is the number of consumer and small business customers who have logged on via a digital or mobile device, respectively, in the prior 90 days.
3Q21 Financial Results 9
Consumer Banking and Lending
1
Mortgage Loan Originations ($ in billions) Debit Card Point of Sale (POS) Volume and Transactions
61.6
28.8 53.9 51.8 53.2 51.9 122.0 118.6
21.6 16.3 105.3 108.5
18.2 16.7 102.9
2.3 2.3 2.5 2.5
2.3
52% 64% 55% 55%
51%
32.8 33.6 36.9 35.2
32.3
3Q20 4Q20 1Q21 2Q21 3Q21 3Q20 4Q20 1Q21 2Q21 3Q21
Retail Correspondent Refinances as a % of Originations POS Volume ($ in billions) POS Transactions (billions)
Auto Loan Originations ($ in billions) Credit Card POS Volume ($ in billions)
9.2 26.5
8.3 25.5
22.9
7.0 21.3 21.1
5.4 5.3
3Q20 4Q20 1Q21 2Q21 3Q21 3Q20 4Q20 1Q21 2Q21 3Q21
1. Debit card purchase volume and transactions reflect combined activity for both consumer and business debit card purchases.
3Q21 Financial Results 10
Commercial Banking
Summary Financials
• Total revenue down 7% YoY and down 2% from 2Q21
$ in millions 3Q21 vs. 2Q21 vs. 3Q20
– Middle Market Banking revenue down 3% YoY primarily due to lower loan
Revenue by line of business: balances on reduced client demand and line utilization, as well as the impact of
Middle Market Banking $1,165 $14 (31) lower interest rates, partially offset by higher deposit balances and deposit-
Asset-Based Lending and Leasing 911 (46) (119) related fees
Total revenue 2,076 (32) (150) – Asset-Based Lending and Leasing revenue down 12% YoY driven by lower loan
Provision for credit losses (335) 47 (674) balances as a result of lower line utilization reflecting reduced client financing
Noninterest expense 1,396 (47) (227) needs due to lower inventory levels, as well as lower lease income, partially offset
Pre-tax income 1,015 (32) 751 by improved loan spreads
Net income $759 ($25) 567 • Noninterest expense down 14% YoY primarily driven by lower salaries expense
and a decline in consulting expense due to efficiency initiatives, as well as lower
Selected Metrics
lease expense
3Q21 2Q21 3Q20
Return on allocated capital 14.5 % 15.2 2.9
Efficiency ratio 67 68 73
Average loans by line of business ($ in billions)
Middle Market Banking $101.5 102.1 110.3
Asset-Based Lending and Leasing 77.1 76.5 91.6
Total loans $178.6 178.6 201.9
Average deposits 199.2 192.6 179.0
3Q21 Financial Results 11
Corporate and Investment Banking
Summary Financials
• Total revenue up 2% YoY and up 1% from 2Q21
$ in millions 3Q21 vs. 2Q21 vs. 3Q20
Revenue by line of business: – Banking revenue up 12% YoY on higher advisory and equity origination fees,
and higher loan balances, partially offset by lower deposit balances
Banking:
predominantly due to actions taken to manage under the asset cap
Lending $502 $28 80
Treasury Management and Payments 372 19 (23) – Commercial Real Estate revenue up 10% YoY reflecting higher commercial
servicing income, loan balances, and capital markets results on stronger
Investment Banking 367 (40) 72
commercial mortgage gain on sale volumes and margins and higher
Total Banking 1,241 7 129 underwriting fees; down 7% from 2Q21 on lower capital markets volumes
Commercial Real Estate 942 (72) 87 and commercial mortgage servicing income
Markets: – Markets revenue down 15% YoY on lower trading activity across most asset
Fixed Income, Currencies and Commodities (FICC) 884 (4) (121) classes primarily due to market conditions
Equities 234 28 (78) • Noninterest expense down 10% YoY primarily driven by reduced operations
Credit Adjustment (CVA/DVA) and Other 58 74 (4) expense due to efficiency initiatives
Total Markets 1,176 98 (203)
Other 26 14 65 Average Balances ($ in billions)
Total revenue 3,385 47 78 Loans by line of business 3Q21 2Q21 3Q20
Provision for credit losses (460) 41 (339) Banking $95.9 90.8 88.9
Noninterest expense 1,797 (8) (194) Commercial Real Estate 110.7 108.9 109.5
Pre-tax income 2,048 14 611 Markets 50.7 52.7 51.4
Net income $1,530 $7 448
Total loans $257.3 252.4 249.8
Selected Metrics
Deposits 189.4 190.8 226.1
3Q21 2Q21 3Q20
Trading-related assets 194.1 191.5 192.7
Return on allocated capital 16.9 % 17.0 11.6
Efficiency ratio 53 54 60
3Q21 Financial Results 12
Wealth and Investment Management
Summary Financials
• Total revenue up 10% YoY
$ in millions 3Q21 vs. 2Q21 vs. 3Q20 – Net interest income down 11% YoY driven by the impact of lower interest
Net interest income $637 $27 (80) rates, partially offset by higher deposit and loan balances
Noninterest income 2,981 55 408 – Noninterest income up 16% YoY on higher asset-based fees primarily due to
Total revenue 3,618 82 328 higher market valuations, partially offset by lower retail brokerage
transactional activity
Provision for credit losses (73) (97) (63)
• Noninterest expense up 6% YoY and included higher revenue-related
Noninterest expense 2,917 26 175
compensation, partially offset by lower salaries and occupancy expense due
Pre-tax income 774 153 216 to efficiency initiatives; up 1% from 2Q21 as higher revenue-related
Net income $579 $114 160 compensation was largely offset by lower salaries and benefits expense
Selected Metrics ($ in billions, unless otherwise noted) • Total client assets increased 13% YoY to $2.1 trillion, primarily driven by
3Q21 2Q21 3Q20 higher market valuations
Return on allocated capital 25.7 % 20.7 18.4
Efficiency ratio 81 82 83
Average loans $82.8 81.8 79.0
Average deposits 176.6 175.0 169.4
Client assets
Advisory assets 920 931 779
Other brokerage assets and deposits 1,171 1,212 1,076
Total client assets $2,091 2,143 1,855
1
Annualized revenue per advisor ($ in thousands) 1,141 1,084 940
Total financial and wealth advisors 12,552 12,819 13,793
1. Represents annualized segment total revenue divided by average total financial and wealth advisors for the period.
3Q21 Financial Results 13
Corporate
Summary Financials
• Net interest income down YoY primarily due to lower loan balances due to
$ in millions 3Q21 vs. 2Q21 vs. 3Q20 the sale of our student loan portfolio
Net interest income ($427) ($123) (159)
• Noninterest income down YoY on lower gains on the sale of securities in our
Noninterest income 1,752 (1,575) (169) investment portfolio, partially offset by improved results in our affiliated
Total revenue 1,325 (1,698) (328) venture capital and private equity businesses; down from 2Q21 on lower
equity gains from our affiliated venture capital and private equity businesses,
Provision for credit losses (9) 25 70
and a $147 million gain on the sale of student loans in 2Q21
Noninterest expense 1,140 140 (388)
• Noninterest expense down YoY primarily due to lower restructuring charges,
Pre-tax income (loss) 194 (1,863) (10) partially offset by a $250 million operating loss associated with the
Income tax expense (benefit) 110 (113) 742 September 2021 OCC enforcement action
Less: Net income (loss) from noncontrolling interests 281 (423) 97
Net income (loss) ($197) ($1,327) (849)
Selected Metrics ($ in billions)
3Q21 2Q21 3Q20
Wells Fargo Asset Management assets under
management $588 603 607
3Q21 Financial Results 14
Appendix
Tangible Common Equity
Wells Fargo & Company and Subsidiaries
TANGIBLE COMMON EQUITY
We also evaluate our business based on certain ratios that utilize tangible common equity. Tangible common equity is a non-GAAP financial measure and
represents total equity less preferred equity, noncontrolling interests, goodwill, certain identifiable intangible assets (other than MSRs) and goodwill and other
intangibles on nonmarketable equity securities, net of applicable deferred taxes. One of these ratios is return on average tangible common equity (ROTCE), which
represents our annualized earnings as a percentage of tangible common equity. The methodology of determining tangible common equity may differ among
companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it
enables management, investors, and others to assess the Company’s use of equity.
The table below provides a reconciliation of this non-GAAP financial measure to GAAP financial measures.
Quarter ended
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(in millions, except ratios) 2021 2021 2021 2020 2020
Return on average tangible common equity:
Net income applicable to common stock (A) $ 4,787 5,743 4,256 2,741 2,901
Average total equity 194,041 190,968 189,074 185,444 181,377
Adjustments:
Preferred stock (21,403) (21,108) (21,840) (21,223) (21,098)
Additional paid-in capital on preferred stock 145 138 145 156 158
Unearned ESOP shares 875 875 875 875 875
Noncontrolling interests (1,845) (1,313) (1,115) (887) (761)
Average common stockholders’ equity (B) $ 171,813 169,560 167,139 164,365 160,551
Adjustments:
Goodwill (26,192) (26,213) (26,383) (26,390) (26,388)
Certain identifiable intangible assets (other than MSRs) (290) (310) (330) (354) (378)
Goodwill and other intangibles on nonmarketable equity securities (included in other assets) (2,169) (2,208) (2,217) (1,889) (2,045)
Applicable deferred taxes related to goodwill and other intangible assets (1) 882 873 863 852 838
Average tangible common equity (C) $ 144,044 141,702 139,072 136,584 132,578
Return on average common stockholders’ equity (ROE) (annualized) (A)/(B) 11.1 % 13.6 10.3 6.6 7.2
Return on average tangible common equity (ROTCE) (annualized) (A)/(C) 13.2 16.3 12.4 8.0 8.7
(1) Determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.
3Q21 Financial Results 16
Common Equity Tier 1 under Basel III
Wells Fargo & Company and Subsidiaries
RISK-BASED CAPITAL RATIOS UNDER BASEL III (1)
Estimated
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(in billions, except ratio) 2021 2021 2021 2020 2020
Total equity (2) $ 191.1 193.1 188.0 185.7 181.7
Effect of accounting policy changes (2) — — 0.3 0.2 0.3
Total equity (as reported) 191.1 193.1 188.3 185.9 182.0
Adjustments:
Preferred stock (20.3) (20.8) (21.2) (21.1) (21.1)
Additional paid-in capital on preferred stock 0.1 0.2 0.2 0.1 0.2
Unearned ESOP shares 0.9 0.9 0.9 0.9 0.9
Noncontrolling interests (2.0) (1.9) (1.1) (1.0) (0.9)
Total common stockholders' equity $ 169.8 171.5 167.1 164.8 161.1
Adjustments:
Goodwill (26.2) (26.2) (26.3) (26.4) (26.4)
Certain identifiable intangible assets (other than MSRs) (0.3) (0.3) (0.3) (0.3) (0.4)
Goodwill and other intangibles on nonmarketable equity securities (included in other assets) (2.1) (2.3) (2.3) (2.0) (2.0)
Applicable deferred taxes related to goodwill and other intangible assets (3) 0.9 0.9 0.9 0.9 0.8
Current expected credit loss (CECL) transition provision (4) 0.5 0.9 1.3 1.7 1.9
Other (1.0) (1.1) (0.7) (0.4) (0.1)
Common Equity Tier 1 (A) $ 141.6 143.4 139.7 138.3 134.9
Total risk-weighted assets (RWAs) under Standardized Approach (B) $ 1,219.1 1,188.7 1,179.0 1,193.7 1,185.6
Total RWAs under Advanced Approach (C) 1,138.3 1,126.5 1,109.4 1,158.4 1,172.0
Common Equity Tier 1 to total RWAs under Standardized Approach (A)/(B) 11.6 % 12.1 11.8 11.6 11.4
Common Equity Tier 1 to total RWAs under Advanced Approach (A)/(C) 12.4 12.7 12.6 11.9 11.5
(1) The Basel III capital rules for calculating CET1 and tier 1 capital, along with RWAs, are fully phased-in. However, the requirements for determining total capital are in accordance with transition requirements and are scheduled to be fully
phased-in beginning January 1, 2022. The Basel III capital rules provide for two capital frameworks: the Standardized Approach and the Advanced Approach applicable to certain institutions. Accordingly, in the assessment of our capital
adequacy, we must report the lower of our CET1, tier 1 and total capital ratios calculated under the Standardized Approach and under the Advanced Approach.
(2) In second quarter 2021, we elected to change our accounting method for low-income housing tax credit (LIHTC) investments. We also elected to change the presentation of investment tax credits related to solar energy investments.
Prior period total equity was revised to conform with the current period presentation. Prior period risk-based capital and certain other regulatory related metrics were not revised.
(3) Determined by applying the combined federal statutory rate and composite state income tax rates to the difference between book and tax basis of the respective goodwill and intangible assets at period end.
(4) In second quarter 2020, the Company elected to apply a modified transition provision issued by federal banking regulators related to the impact of CECL on regulatory capital. The rule permits certain banking organizations to exclude
from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the allowance for credit losses (ACL) under CECL for each period until December 31, 2021, followed by a three-year phase-out of the
benefits. The impact of the CECL transition provision on our regulatory capital at September 30, 2021, was an increase in capital of $463 million, reflecting a $991 million (post-tax) increase in capital recognized upon our initial adoption
of CECL, offset by 25% of the $5.8 billion increase in our ACL under CECL from January 1, 2020, through September 30, 2021.
3Q21 Financial Results 17
Disclaimer and forward-looking statements
Financial results reported in this document are preliminary. Final financial results and other disclosures will be reported in our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2021, and may differ materially from the results and disclosures in this document due to, among other things, the completion of final review procedures, the occurrence of
subsequent events, or the discovery of additional information.
This document contains forward-looking statements. In addition, we may make forward-looking statements in our other documents filed or furnished with the Securities and Exchange
Commission, and our management may make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can be identified
by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar
references to future periods. In particular, forward-looking statements include, but are not limited to, statements we make about: (i) the future operating or financial performance of the
Company, including our outlook for future growth; (ii) our noninterest expense and efficiency ratio; (iii) future credit quality and performance, including our expectations regarding future loan
losses, our allowance for credit losses, and the economic scenarios considered to develop the allowance; (iv) our expectations regarding net interest income and net interest margin; (v) loan
growth or the reduction or mitigation of risk in our loan portfolios; (vi) future capital or liquidity levels, ratios or targets; (vii) the performance of our mortgage business and any related
exposures; (viii) the expected outcome and impact of legal, regulatory and legislative developments, as well as our expectations regarding compliance therewith; (ix) future common stock
dividends, common share repurchases and other uses of capital; (x) our targeted range for return on assets, return on equity, and return on tangible common equity; (xi) expectations
regarding our effective income tax rate; (xii) the outcome of contingencies, such as legal proceedings; (xiii) environmental, social and governance related goals or commitments; and (xiv) the
Company’s plans, objectives and strategies. Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our
business, the economy and other future conditions. Investors are urged to not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-
looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. For more information about factors that
could cause actual results to differ materially from expectations, refer to the “Forward-Looking Statements” discussion in Wells Fargo’s press release announcing our third quarter 2021 results
and in our most recent Quarterly Report on Form 10-Q, as well as to Wells Fargo’s other reports filed with the Securities and Exchange Commission, including the discussion under “Risk Factors”
in our Annual Report on Form 10-K for the year ended December 31, 2020.
3Q21 Financial Results 18
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