Great. Good morning, everybody. My name is Ken Usdin. Recently joined Autonomous as the large-cap bank analyst. Very excited to help kick off the 41st annual strategic decisions conference. To start the day, I'm thrilled to introduce our first session with Wells Fargo. I have with me here on the podium, Charlie Scharf. He's the CEO and President, been the CEO and President since 2019. Really excited to get into the discussion to talk about Wells Fargo. Given that this is the first session today and my first SDC, I'll ask you to be easy on me, even though that's something that you should probably, usually ask the, yeah, the moderator. With that, Charlie, thanks, thanks so much for joining us.
It's great to be here.
Great. Reminder everyone, also you can submit questions through the Pigeonhole app as well. So Charlie, let's start with the macro backdrop. Big picture, there's clearly been a ton of news and noise since the beginning of the year. What's your assessment of where we are in the U.S. economy as far as, you know, what we know today? And then we'll talk about where we're going forward.
Sure. I mean, what we see is a continuation of what we've seen, which is, there's clearly concern amongst consumers and businesses of all sizes. It really hasn't impacted any kind of the behaviors that we've seen. We see a continuing strong consumer in terms of spend, in terms of credit. We see continuing strong performance from our corporate clients of all sizes. There are lots of discussions going on about, you know, how they need to react and change in this kind of environment. You know, what we're sitting here planning for is a period of volatility. That's just the reality of the world we live in today with the issues that have been put on the table by the administration. We're hopeful that there's resolution to these things. There's some clarity of exactly what gets resolved by when.
That will help business customers plan for their future. It's quite possible that there will be some kind of slowdown, but we hope it's not too meaningful. Both, you know, businesses and consumers go into that period relatively strong. It is a very, very odd time. You know, it's very hard to see any kind of trend either way.
Yeah. And to that point, right now we've got in D.C. the administration trying to put forth a lot of policies talking about relaxing regulations, introducing tax reform. So what are your thoughts on all of that and how that, and the effect that that's also having inside?
Yeah. Let's break it apart between regulation specifically, how it impacts banks versus the other things that are going. You know, one of the things that we have said, and I've said when we went through the earnings call is the issues that the administration is raising on trade and some of these other things, they're very reasonable issues to raise. What really will benefit us over a longer period of time are changes that make it more competitive for the U.S. and the rest of the world. When we go around and talk to our clients, and I'm on the road all the time, you really get a real feel when you talk to commercial banking clients, middle market clients.
Even though they see this period of uncertainty and they're trying to figure out what it means to have tariffs that they're gonna have to either deal with or pass on in one way, shape, or form, a huge number of them will tell you about how unfair trade is and how they look forward to the changes that are coming out of this. You know, on a longer-term basis, to the extent that we wind up as a country in a better place than when we started, that's ultimately gonna be very, very good for all of our customers and ultimately good for us. On the regulatory side, first do non-banks for a second.
We also hear that, you know, people often think about bank regulation when they hear regulation, but, for our customers to be able to expand, get permitting, and things like that, it's been incredibly difficult, under the prior administration and, and before that, quite frankly. So they're very excited to see the kind of, comments coming out of D.C. about the changes that they wanna make, to regulation more broadly. You do see the administration moving very quickly on certain projects, which make people feel very good about what's to come. Ultimately, it, you know, it's gonna require changes in the underlying processes and rules. Lastly, you have bank regulation. And, you know, we are very, very supportive of strong regulation and supervision. But that doesn't mean that, it should just be more and more and more.
There's a huge amount that has happened, which we believe limits banks broadly' ability to participate in helping the economy grow. The changes that the administration is talking about are very much directed towards those changes. None of the things that we see will result in any kind of safety and soundness harm. It'll be just the opposite. We'll actually all become stronger because we're able to be more helpful, whether it's lending, taking deposits, intermediating in the markets, doing the things that we all do, which ultimately helps the strength of the companies.
Yeah. When you put those two together, the macro uncertainty, the administration's movements forward, what do you think are gonna be the biggest swing factors that we're gonna look forward to in the next 6- 12 months?
First of all, again, specifically for banks, we're very much looking forward to the finalization of capital standards for banks. You know, we're very, very hopeful, based upon everything that we've heard, that the administration and the regulators understand that changes need to get made. You've seen that in terms of some of the things that the Fed has put out and the things that they're contemplating doing. You know, when you look at a company like us, our stress capital buffer went up 90 basis points last time, and we have no idea why. When we look at the company from everything that we see, we absolutely don't think we're any riskier than we were the year before.
That has a real meaningful impact on our ability to, not just, in terms of our returns, but what we can do in terms of the economy. The recognition that these things are just not helpful, there's gotta be more transparency so that we can run the place in a way that allows us to do as much as we can do is super helpful. We think that is an important linchpin combined with other changes like LCR and some of the other things that they're talking about again to allow us to do more. Ultimately, beyond that, when we look at the uncertainty out there in the economy, it is about the certainty of what happens with tariffs at this point and ultimately, where they are on the budget.
When we think about Wells Fargo and how it's gonna execute against that, we're closer and closer to emerging from what's been a very inward-focused period of time for the company, with the utmost attention paid to risk management controls, et cetera. When you think about just the starting point today of Wells Fargo versus five or 10 years ago, what do you think are the most different things and how is that gonna position the bank to, you know, incrementally intermediate and grow the company going forward?
Yeah. It's a great question. I mean, when we, I mean, when we sit and look at what the company was back in 2019, versus what we are today, we do feel like we're, in some ways a completely different company. In some ways, the strains that the company had still exist. Let me start with that first. First of all, through all the ups and downs that we've had through, you know, 2015, 2016, 2017, 2018, 2019, the quality of the business, the quality of the franchise, is still extraordinary. When you look at the positioning that we have, we really believe that there are just a very select few of us that have the ability to offer the depth and breadth of products to be able to compete really effectively, pass on those benefits to our customers.
We're differentiated as are the small banks who do things in a way that we can't do, and they serve communities that it's difficult for us to serve. We think competitively we are still in a great position as the company always was. When we look at how the company is run, when we look at the focus of the company, we've simplified it down to the businesses which we think strategically are important to be together to allow us to serve consumers and businesses in a way that, that I just said that differentiates us. When you look at the people that are at the company, our operating committee, I think, is 17 or so, of which I think 15 are new to the company since I got there. The other two are in different jobs. Something like 150 of the top 220 people are new.
These are people that have had experience in running companies at scale, with the proper risk mindset that the company did not execute on well before we were there, know how to do that, are able to put these issues behind us, and then take advantage of this great franchise that we have and grow it. You know, we have spent an awful lot of time, as you said, Ken, inwardly focused to get these issues behind us. We are not done, but we are a hell of a lot closer to the end than the beginning at this point. We could not be more excited about what the future holds given just the competitive position that we have.
In terms of one of those legacy strengths, one of those legacy strengths has been the retail deposit franchise. With the retail sales practices now largely behind, to your point, and you're facing a little bit more forward. What are the avenues you have specifically on the consumer deposit side to kind of reopen that back up and, in terms of either, you know, building relationships, improving customer behavior, relationship promotion scores, et cetera?
Sure. Your point is very true. When we think about the issues that we went through, sales practices was front and center in terms of what our issues were. The way we had to deal with that issue was we actually had to just literally scale back almost everything that we were doing to drive growth in the retail system and then rebuild it from the bottom up. There was a long period, multiple years, where we did not have branch P&Ls, we did not have sales reporting, we were not focused on expanding the product set, improving the digital capabilities because we were so focused on creating the right infrastructure to satisfy the regulators appropriately so that they and we could be comfortable when we turned these things back on that we could grow properly.
When you look at the closure of the sales practices consent order, that was a hugely important point because that was confirmation that our regulators were comfortable that we now had the right processes and procedures in place to be able to do the types of things that other banks have been doing successfully. That allows us to go back and to, again, recreate the kind of environment where we can really focus on customers and doing more for them. When we think about the things that we're doing now that we weren't able to do before, we are very focused on primary checking account growth. We worked really hard to try and preserve share before. Now the focus has gone to what do we have to do to increase share. It's a multi-pronged effort in terms of how we get there.
We've changed compensation plans. We've introduced reporting. We've simplified our product set. We've segmented our customer base so that we have specific products now available to those who are less affluent versus those that are more affluent. We're spending significantly more on marketing, and very, very focused on both the branch experience in terms of what it physically looks like, in terms of our customer satisfaction scores, as well as building the digital capabilities to be amongst the best out there. All those things come together in a way that should allow us to grow in a way that we really weren't capable of doing three, four years ago. Solvay and Burden, who run the business as a team, are doing a great job of putting all those things in place.
We're starting to see, you know, the very early impacts of these things when you look at those underlying stats that we report in terms of checking account growth, debit spend, active mobile users. And it's just, you know, it's a big battleship. When you get it turned in the right direction, given all that we have to offer, we think we're in a great competitive position.
In terms of just broader growth areas and opportunities, you've talked about several over the last couple of years where you've been investing, like credit card, investment banking, reinvigorating the wealth management franchise. Can you walk us through where you see the biggest opportunities among those and in terms of, like, both the growth opportunity and that incremental ROE opportunity that you're also driving the company toward?
Sure. I think one of the things, I really believe this, which is very often I think we think of our, like, our businesses as I've got a couple of kids. Some people have more kids. I don't love one more than the other. I had the opportunity with this management team when we came to the company to decide what we think fit and what we didn't and we thought didn't fit. We exited businesses that we thought were low-returning businesses over the cycles. We exited businesses that we didn't think had the right kind of growth rates that didn't make sense for us to invest in.
When you look at what we have left, we think across every one of our businesses, whether it's consumer and small business banking, our consumer lending businesses, our wealth management business, the commercial bank, and corporate investment bank, every one of them should be growing faster than they're growing today and have higher returns. We think we have the ability to do that. The two places that we're very, very cautious about are the home lending business, where you can chase short-term returns and chase growth, and it could turn out very, very badly for you in the future. We are focused on building it as a relationship product, not helping drive any of those things for the long term necessarily, and the auto business, where we're focused on returns, not growth.
Every other business we talked about, the consumer bank, and it's all the things I talked about, plus the ability to serve the affluent and the branches, plus the ability to serve small businesses. We have 4,000 branches. We have name recognition. We have this expansive product set across deposits, lending, investments, huge opportunities to grow there. You have seen from some of our competitors, when you put it together well, you are a more attractive proposition to consumers than many of the other folks we compete with. You turn to the consumer lending businesses. Our card business, we think, is showing that with our brand, with the right people, with the right product set, with the right level of investment, you can grow very consistently, outgrowing the market without stretching on credit, just having a great consumer value proposition.
Our wealth business, we have, you know, over 10,000 advisors in multiple channels, both in our branches, in Wells Fargo Advisor offices, and we have an independent channel. All three of those have opportunities to grow. Our commercial bank, same thing. We're adding salespeople. We're working on improving the way we deliver our payments products to commercial banking customers. Again, great opportunities to grow. The corporate investment bank, which had been underinvested in for years, the company actually, the business did remarkably well given the low level of investment. When we look at the relationships that we have, the amount of risk that we take with these folks, the ability to serve them more with fee-based businesses, is significant. All of them, we really feel really great about. Otherwise, they wouldn't be part of the company at this point.
When we think about just overall strategy in today's world, in addition to investing in the people and the product sets, we have to talk about just how tech and AI play into the strategy around also business growth and business efficiency. How are you thinking about the intersection of that today?
Sure. Can I expand the question a little bit and talk maybe also talk about just the way we think about investments in the business? One of the journeys that we've been on is to be very, very focused on becoming more efficient as a company. There's, you know, a huge amount of waste that exists in big companies, and we've found it firsthand. Even though we've been spending significantly more, $2 billion annually, on the risk and control agenda, we've been increasing the level of marketing. We're adding salespeople. We're spending more money on technology. We're doing all of that. At the same time, our headcount has gone from 275,000 or so since I got there down to 215,000 or so. We're a better-run company, and we're spending more on these investments.
We do think very hard about what we want to, what we should do to achieve higher shorter-term, higher returns in the short to medium term versus the level of investment spend that we should be undertaking as a company. We are trying to find the right balance of investing where it really is about building businesses for the long term and has the right economic payoff while making sure that we are showing all of our shareholders that the business is capable of earning at higher levels than it had been earning in the past, and there is a path to continued increased returns.
The card business is a great example where, when you look at the growth that we've had and the success that we've had in the card business today, it's not adding to the earnings growth of the company today or returns because it takes two to three years just to start building the profitability when you look at the upfront costs and the reserving and all that kind of stuff. When we look at the performance of our card business, when we look at spend, when we look at balance growth, when we look at credit profile, it's right on top of the models that we were using in our assumptions. We know the growth is built into it.
That's an example of a place where, you know, we could be earning more by not increasing the growth rate for the future, and we've made the decision to build the business because we think it's most important, and we're getting increased returns in other places. When we get to the technology agenda, I would say, first of all, our technology agenda is, it's very, very broad when we think about where we have to invest. It's cyber, obviously, huge spending. It's like the, you know, the conversation is, what else can we be doing, not how can we be doing less there just given just the level of risk that exists. One of the things that folks generally don't talk about is just the spend on the infrastructure.
You know, banks for a long period of time have made it very difficult to offer a seamless experience to their customers because of the way these businesses had developed. We are doing a lot and spending a lot on the infrastructure of the company, whether it's replacing core platforms, loan platforms, deposit platforms, things like that across both consumer and the wholesale businesses. At the same time, we are upgrading our technology to make it cloud-native, building new data centers and things like that. That takes actually a very significant amount of spend, which is not sexy but is key to build the right platforms to be able to move more quickly in the future and compete with all the people we compete with. Getting to your question, it is just the AI opportunity. You know, listen, there is no magic bullet here.
I'm not going to say anything that, you know, you probably don't already know, but it is transformative. We're at the very beginning of figuring out how to get all of the right benefits inside of companies like ours. The things that we're starting with are things that are much more efficiency-focused. Things like virtual assistance for our bankers when we look at call center opportunities and all the manual work that goes into taking a phone call, when we look at all of the call notes, categorization of those calls, trying to understand what our customers are telling us. That should not be done by individuals today with the level of risk and just how hard it is to get it right. We are building out a series of capabilities there.
When, you know, our operating committee had an offsite last week, we do, once a year, and we started talking business by business of all the opportunities. Whether it's credit memos, whether it's investment banking pitch books, whether it's, you know, filing patents, whether it is, you know, anything that, you know, humans do today, there is really an opportunity to do it a whole lot more efficiently, to offer a better product ultimately for our customers. The question we all need to figure out is how much of that gets passed on to the customer and how much gets passed on to our shareholders in terms of how much more we want to be able to do. The opportunities are hugely significant, and we're at the really early beginnings of seeing the benefits from it.
Yeah. I think the industry and the corporate world is in the same spot. Moving a little bit to the regulatory backdrop as it relates to Wells Fargo, there's been every eye pointed on the hopeful eventual removal of the Fed's balance sheet limiting asset cap and the related consent order. As we've seen, the company has put to bed nearly all of the 14 orders that have been outstanding since you joined as CEO, with only two remaining, including that big one. Can you walk through how you will think about the incremental opportunities?
We talked a little bit about deposits already, but when that date comes, you know, what's available to Wells Fargo to reopen the balance sheet and how you get to think about prioritizing how to, you know, generate the incremental balance sheet and add to the earnings base?
Sure. You did not ask it, but everyone always wonders just in terms of timing. I will just cover, I will just repeat some of the things that I have said more recently, which is, we have had this asset cap for a long time now. We have been working extremely diligently to fulfill all the requirements that exist in the consent order, both to lift the asset cap and ultimately lift the ultimate order. Those are two different decision points for the Federal Reserve. What I have said is, if you look at all of the work that we have had to do to lift the other orders, most of that other work is very foundational to the work that goes into this order.
As you've seen the regulators come in and affirm that that work has been done properly, those are just very good proof points for you all to say we're much closer to that order being lifted than something other than that. We feel very, very confident that it's going to get lifted. We feel very, very confident it's both the asset cap as is the rest of the order. I don't speak for the Fed in terms of timing. They've got a very, very diligent process that they go through. Our level of confidence in terms of where we are and how far we are down that road is extremely high. I've tried to provide that to, you know, whatever clarity I can, speaking for us without getting in front of our regulators.
what it means for, you know, it means multiple things for us. First of all, what it does mean is, it just it does lift a cloud that exists around Wells. As we go around and we talk to people and people talk about Wells, you know, we are limited in terms of what we can do. Maybe not in any specific day, but certainly over cycles and difficult environments, we've been limited on the way we can think about what we can do, both because of this cap but also the work that's been required. I mean, we have been so inwardly focused to get this work done that when the work gets, when the orders get lifted, including when the asset cap gets lifted, it does give us more bandwidth to build on the foundation that we have inside the company to focus on growth.
It's a combination of, you know, our mindset in terms of what we can focus on, as well as just this, you know, the scarlet letter goes away and we don't, you know, we're not differentiated from the other companies out there. When we think about what it means specifically to the businesses, as I just said, I think, you know, what we said is there's no light switch that the day the asset cap gets lifted, all of a sudden we start going, doing a bunch of stuff that's very, very different. We will expand the company in a very controlled way, in a way that is within the same kind of risk tolerances that we've had, which will grow linearly over time, not exponentially.
It does. We have been constrained in terms of our ability to take commercial deposits because when deposits come in, it comes with cash, and that's, you know, it's a deposit cap in addition to an asset cap. That limitation goes away. We have, our corporate investment bank has been limited in terms of what they can do because we've tried very hard not to limit our ability to take consumer deposits and wealth deposits because that hurts you strategically. That's really come out of the corporate investment bank in terms of our ability to finance trading positions and to be able to grow that business at a reasonable level. We will add balance sheet back there.
and the two other things which I think are incredibly important is during times of stress, historically going through COVID, we were in a very difficult position, which is, you know, when times get difficult, you want to be able to be there for your customers. That's where you build relationships over cycles. And when people start drawing on revolvers and the Fed starts flooding, you know, the, the environment with cash, it puts us in a very difficult position. Not having that as a limitation, knowing that we're going through cycles is extremely helpful and important for us to serve our customers properly, but it also allows us to think more aggressively about how to use the balance sheet.
Again, it's not tomorrow, but whether it's private credit, whether it's the things that we wanted, you know, to do to compete with the other non-banks that are out there, we're able to use the balance sheet differently. It does open our ability to grow in ways that we haven't been able to grow since we've had the asset cap.
Yeah. And to your point about the linearity, you're on this path to get the return on tangible common equity up towards 15%. Long-standing view that you're and you've made that progress. And there's a chance that some of these opportunities you just went might be initially sub 15%. So how do you balance that linearity, make that path continue to march towards 15% and hopefully beyond, and, and methodically, you know, continue to open the company up as you just walked through?
Yeah. I mean, it's a great question and a tough question because we are making those decisions all the time. I think we recognize, we recognize, that we need to continue to earn the right to invest in our business. The way you earn the right to invest in the business is to show that you get outcomes that increase returns and increase the level of growth that we've seen. We try and make the decisions as to, what does that look like? We're often asked, well, what are our expenses going to be next year? Like, we believe we will be able to, on a gross basis, reduce the expense base of the company next year versus this year. We also know that we want to continue to invest to build the franchise.
We've been very careful not to promise today what that'll look like when we get to the end of the year and make those trade-offs because we recognize that we want to show you that we're going to increase the returns of the company, that you are going to see more growth. It's, there's no formula to what that looks like, but I just, I just want to make sure that people understand that we recognize both things are important. It's true if it was your own company. I mean, you wouldn't just go spend, you know, in a, in a crazy way until you proved that the money you were spending was getting the right trade-offs.
You know, when you take the amount of money that we're investing in marketing in the consumer bank, we've increased what we're spending in marketing, in marketing fairly substantially. Should it increase from today? Absolutely. We want to see that we know how to do it. We're getting the right level of growth from the marketing investment that we're making, and then we'll go from there. What we're hopeful is that you'll continue to see an increase. You'll continue to see both an increase of the level of returns in the business and to see the things that will drive growth in the future through the different statistics that we show you at the end of each quarter.
Yep. Yep. When we think about then the last part of regulation, you touched on it a little bit earlier, but we're anticipating a lot of these formal changes down the road to whether it's Basel III or the capital regime, which is another thing that does govern bank growth and, and, and bank returns. What are you thinking about, like, what that ultimately looks like and that balancing act that you touched on earlier about, you know, good regulation versus too much regulation?
Yeah. I mean, I think, you know, the question is, how do we think about where we're running our capital levels today versus where it could be? So today what we've said is that we run our CET1 around 11%, which gives us a fairly significant buffer on top of the buffers that the government wants you to have, which is, you know, kind of belts and suspenders. I talked about before how when we look at the level of capital that we're required to hold, we don't understand it. We think it's too high relative to the risk that sits in the company. And when we look at that, we think about that both in terms of what it means overall, but we look at the individual pieces of whether it's RWA and things like that.
We're hopeful that when the Federal Reserve and the other regulators, along with the administration, look at what the appropriate levels of capital are, they're not just going to say, well, let's just lock it into today's level or what it was, that they're actually going to look at what makes the most sense relative to what's the appropriate level of capital to keep, to keep these institutions safe and sound, while allowing us to do what we should be doing out there. The reality is, as I've said, our capital levels have gone up.
I think if you look at the capital levels for, you know, the banks over the last four or five years, I think capital levels are up 20% or so, 15-20% just over the last four or five years and, you know, easily double, going from pre-crisis to what it was. The levels of capital are, you know, hugely increased from where they had been. The scenarios that we have to go through to justify the capital levels, do not always make a lot of sense, and they result in outcomes that when the government tells us what the outcomes are, are often very different than the outcomes that we have seen and we understand them to be. As I said before, there is really no transparency up to this point as to why that is the case. I think that is going to change going forward.
That is just a very long way of saying that we as an industry and we as Wells Fargo do not go to Washington and say, lower capital, lower capital, lower capital. The conversation that we have is get capital right. Everything that we know from our analysis suggests that the answers should be lower than they are today, certainly not higher, which is what we were hearing before. If that is true, then we will be able to live with lower amounts of capital and still be extremely strong and extremely resilient through any environment. We have to wait and see what they come up with.
Yeah. If we play that out and we get to the point where either the 9.8% that you have to currently live at or the 11% where you choose to live at can come down, can you remind us about your usage priorities when you think about the balance sheet growth we just talked about, dividends and buybacks?
Sure. Let's, you know, because we've had the asset cap, we haven't been able to reinvest in the business as we talked about earlier. When you look at what we have done, we've made these trade-offs in terms of what we can do inside within the asset cap that we've had. In addition to having to build capital for what I just talked about earlier, we've returned significant amounts through both dividends and buybacks. You know, since we reduced the dividend around the times of COVID, we've been continuously increasing the level of the dividend, which we would hope we would continue to do. We've been opportunistically repurchasing stock. When you look at our share count, I think it's down 22% over the last six years, because that's really the only way we could use it.
As we go forward, our first priority would be to be able to grow the company and to use it organically in a way that fits within the parameters that I described earlier, and build an increasing high returning earning base inside the company, which allows us to increase the dividend and whatever the remainder is, return that back to shareholders probably through buybacks.
Yeah. When we think about just the environment that we're in, I think one of the misnomers that you hit on a little bit earlier is that the asset cap has crowded out loan growth for Wells Fargo, right? With a 70% loan to deposit ratio, there's plenty of room to lend up inside the company. As we've all seen year to date, there's that uncertainty that lingers out there. When you think about the opportunities for loan growth over the course of time, and maybe mesh that in with just the environment that we're dealing with today, where are those opportunities? Where can you step in the most and what do you want to see from an environment to finally kick that up another notch?
Yeah. I mean, to your point, Ken, the asset cap is not a constraint on loan growth today because the demand isn't there. And that's been the case inside the banking system now for, you know, a bunch of years, which does raise a question when you look at all of the lending that's being done outside of the banking system, you know, why do, why do banks not see the demand, but there's this huge demand that exists outside? And that is an interesting question, which we also think, you know, the regulators need to look at in terms of what is, what is driving that. When we think about that, having said that, even though it's not a constraint today, we are very, very careful about how we want to use the, the, the balance sheet we have because we do have these revolvers out there.
Something does happen, again, COVID happened, we start to see significant drawdowns on revolvers, and there's no way for us, if we're over the asset cap, the way the calculation is determined, there's no remedy for it. Who knows what the Fed would have done in that scenario? We work very hard, not just to stay below the asset cap, on a daily basis the way we're required, but to make sure we have enough room within operating that balance sheet to handle anything that could come in terms of environment. On the one hand, loan growth has been the issue, and loan demand has been the issue. On the other hand, there is a constraint because we've got to be very careful about how we use it. As we go forward, you know, we have been able to grow our card receivables.
We've been in a scenario where our home lending loans have been heading downward as we've been shrinking that business. We would certainly hope to see opportunities as our middle market companies become more confident in the future to be more aggressive about using the existing facilities they have and new facilities. It is revolvers, it is asset back facilities, it is all the different types of things we do for them, as well as what we, you know, would see in the larger corporate space. A lot of it is, you know, the slowdown that we've seen in terms of the M&A environment, in terms of even large corporates' willingness to invest in these businesses away from, you know, some of the headlines that you hear for companies that are building things here to deal with the tariffs.
On a broad basis, that demand will return, and that's what we hope to use the balance sheet for, as well as thinking about what do we do to compete more broadly in the world we live in today, which we really haven't been focused on.
The other thing that's been really hard for all banks and investors to navigate is the seemingly daily changes of the Fed interest rate curve and just the bond markets in general. Obviously, making it hard for any, you know, company to kind of navigate, you know, outlooks and such. Can you help us understand in terms of how that loan growth dives into the deposit situation out there and the rate curves, the range of expectations you guys put forth in terms of full year NII plus 1-3%? How do we understand, like, what the range of outcomes are and the most important things to think about, whether we land on the low end, as you talked about in earnings or in a different place, given that this is a, you know, daily change that we're watching?
Yeah. Listen, I mean, it is, it's an incredibly difficult, I mean, it's always difficult to forecast NII because you don't always know what loan growth is going to be. You don't always know what deposits growth is going to be, and you don't know what rates are going to look like in the future. Very often you're in a trending type of environment, and you have a pretty good feel for, and a belief for the way you think the economic outlook will evolve over the next three, six, nine months. As we talked about earlier, there's a lot more uncertainty in all those things. What will ultimately determine the strength of our NII over the longer term is our ability to grow the business. Grow deposits, grow loans. We don't see, as I said before, a huge amount of loan demand. It's, it's stable.
It's growing slowly, but there's no significant increase in any kind of trend in demand that we've talked about over the last couple of quarters. There is a fair amount of competitiveness in the environment because all the banks are looking at their balance sheets and saying they'd love to have some more loan growth. You do see some people becoming much more competitive in terms of terms. We're trying to be very, very careful, not stretching at all on credit, in fact, being very careful on credit, competing on price where it's for a real customer that we think makes sense. That kind of environment is not the kind of environment where you necessarily feel great about NII for the future, but it all depends on what certainty consumers and businesses see and their willingness to change those trends.
That can change pretty quickly. Ultimately, yes, we've got the rate environment, which is a little complicated. It's uncertain, you know, depending on what economists you get in the room, you get very, very different takes. Ultimately it's going to be loan growth and deposit growth.
One of the things on the deposit side seems to be that the burden that banks had been dealing with the last couple of years of yield chasing behavior has calmed down a little bit. And we've seen the ability to reprice deposits down as an offset, in fact, you know, to the slower loan growth. How is that kind of, you know, cascading through the Wells Fargo deposit business?
Yeah, I think, listen, I think one of the benefits that, you know, that we have is, we have a, you know, a huge number of deposits both on the consumer side and the wholesale side that are much more relationship based. So, less price sensitive, they're there over a longer period of time. When you're in a significantly trending environment of rates moving up or downward, both consumers and businesses are looking for a change. Most of that behavior has already occurred. Now the question is, you know, where do we go from here? The marginal changes allow us to do different things, right? You know, changes in rates are often good for us, both upward and downward in the shorter term.
and, you know, your ability to extract some more net yield out of that is a positive, if you have a sense for the direction of trending.
Yeah. Yeah. All tricky as I introduce. On the cost side, you mentioned that Wells has been able to, well, you know, keep costs flattish over the last several years and even with all the incremental spend, right, funded by all the efficiencies that you've saved over the last several years. You talked a little bit about this with your investments point. How do you get the comfort that you're toeing the line in the right way in terms of, you know, trying to keep the line as tight as you can, and making the right amount of investments to both, you know, do what you need to do for growth and also coming back to that point of increasing growth and return over time?
Yeah. First of all, we run really two parallel exercises in the company that we do annually through the budget cycle, but then we update throughout the year as the world changes. They, and literally the conversation is, where should we be more efficient in the company totally separately from where do we want to increase the level of investment, what are those opportunities? We want people to think about trading off things within their businesses, but Mike and I spend a lot of time looking across the businesses at how we want to prioritize things. First of all, I said this before, but I just want to reiterate is with all of the efficiency that we've generated inside the company, which is over $12 billion on a gross basis today, our net expenses are down.
I talked about before, our headcount being down from 275 to 215. When we as an operating committee sit inside the company and we review our results, no one says we're efficient. No one says we're as good as we can be. It's not even close. It is like an onion when you peel the onion back and then you see the next thing, which is the next obvious thing to go look at. It's everything from continuing to move towards common platforms versus the way the company was operated before. It's having people focused on work, which isn't driving the highest return level of things. We need to reprioritize what they do. It's just getting rid of the corporate bureaucracy, the processes that exist inside the place.
As I said before, we've spent, you know, we've added on a net basis $2 billion plus or minus to deal with the risk and control work that we have to do. Some of that is project oriented, which as the work completes, will go away over a period of time. As you implement these things, and as they become more mature, we do have opportunities to do those more efficiently. Not a today issue, but certainly in the future, as we continue to make progress, that creates opportunity. When we look at where we want to invest, it just comes down to how strong do we think the returns are. Again, the card business, and it's both financial returns as well as strategically building something important for the company.
The card business we think is a great example of things that support both of those. Number one is very high returns over the cycle, running it the way that we're running it. At the same time, we think it's incredibly important to be in the payments flow for consumers and small businesses. Being in the payments flow allows us to think about all the different payments products, whether it's stable coins, tokenized deposits, other things which are going to continue to evolve out there, but you got to deal with the way consumers actually behave today. A huge amount of that is credit cards, debit cards, ACH. If you're strong there, it gives you the opportunity to stay inside of that customer relationship. Hugely important to grow strategically as well as getting the right returns.
We are sacrificing short-term profitability there because we know we're building something which will generate returns in a couple of years as well as allow us to be in a much better position to deal with what the future looks like.
Yeah. You touched on, I was going to ask you about that bucket of spend, the incremental $2.5 billion that you've been spending on risk and control. You know, I was wondering if you could just talk a little bit more about that over time, if that becomes a little bit more efficient, if some of that cost goes away, is that money that you find that you reinvest into the company, does some of it eventually fall to the bottom line? Is it a mix? How does that decision?
Yeah. I think, first of all, what's going to happen is, and just to be like, we're not going to do anything which is going to take us backwards in the things that we've built. As I kind of alluded to earlier, all of the work that we're doing, it comes with significant, you know, project costs. We have people that have been doing nothing but building these things. We've been paying third parties significant amounts of money to help us build these things. When those things are implemented to the satisfaction of regulators, those project types expenses are things that we can deal with more quickly than not.
Once these things are implemented, listen, we, you know, we wrote the response to consent orders four or five years ago, meaning we got a consent order, we give the regulators a plan that says we're going to build the following things. Five years later, you sit there and say, well, was it the smartest way to do it? Is it the most efficient way? You've learned a lot. We do have opportunities that'll help us become more efficient in that work, which will actually make us better controlled because we're looking at things holistically now than we had done before. Again, it's not a today issue in terms of being able to get synergies out of that work, but when the work is behind us, we're going to be very thoughtful about what we can reduce.
We're going to think about it the same way that we think about everything else is. Let's just run that work as most efficiently as we can. If there are reductions, there are reductions, and then separately say, where are the benefits of investments and how much of it should we do and in what businesses or what parts of the company should we be investing in?
Yeah. It wouldn't be a bank conversation without talking about credit and credit quality, which has been great, for the company, for the industry, albeit with the bumps in the road that have happened in, in Sierra over the course of the last couple of years. As we sit here today and think about everything we've discussed in terms of some of the uncertainty and tariffs, what are you watching out for? What are you looking out for amidst this uncertainty? Just talk about where you feel in terms of that, that underwriting, quality that's been inside the portfolio.
Sure. Yeah. So listen, what we look, I mean, we are, we look tirelessly at the earliest indicators that we possibly can find. And so we look on a weekly basis at spend levels within our debit card business, our credit card business, and just ACH, bill pay activity and things like that. That ultimately, you know, gives us an earlier indicator than very often what we've seen payment trends in our loan products, but we do the same there. We take it apart by geography. We take it apart by affluence level, by vintage, all that kind of stuff. What we see is just this level of consistency, not a lot of change in terms of consumer behavior. And it doesn't mean that you don't see changes within categories. So we do see less spend on travel, but you see more spend in other categories.
The overall level of debit and credit card spend has been roughly the same. I'm not sure that's true across all affluence levels. There's clearly more pressure on the less affluent customer than the more affluent level of customers. The more affluent customers are kind of bringing, you know, keeping those averages up at higher levels. We are going to continue to look at those patterns. Payment rates are strong on all of our credit products. That consistency in terms of what we see in terms of spend just says consumers haven't changed behavior dramatically at this point. On the edge, we are planning for a slight worsening of the consumer, even though we haven't seen it. That doesn't mean we are going to change a lot of behavior because we had tightened over a period of time.
We were going through conversations after the election of whether we should loosen credit standards back to where we had started from. We are not going to do that. That is what I mean in terms of just, you know, staying relatively tight in terms of credit until we see how this environment plays out. On the business side, ultimately it is going to be, what are the impact of these tariffs and their willingness to grow their business. You know, at this point, again, consistency in terms of credit performance across most all industries with just a couple of idiosyncratic differences in industries or retailers or things like that.
To wrap up, any final thoughts that you'd leave us in terms of what we should all be collectively thinking about, Wells Fargo?
I hope you, I mean, I hope what you get out of the conversation is, we're extremely proud of what we've accomplished, because it's been a long, hard road, given the hand that we were dealt. The hand that we were dealt had this amazing franchise in it. We think we've just got a great team of people. We think we're positioned extremely well. You know, whether it's the next three months or four months or five months as we get through this level of uncertainty, we are bullish on the country. That means our opportunity to serve customers more broadly is hugely significant. Our ability to look more outwardly and to focus on those opportunities is something that really excites us, not just putting our issues behind us.
Thanks so much, Charlie. Please join me in thanking Charlie Scharf from Wells Fargo.