Wells Fargo & Company (WFC)

Investor Day 2018

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May 10, 2018

Welcome to Wells Fargo's 2018 Investor Day. Thank you for spending the day with us here in Charlotte and via the webcast. As always, thank you very much for your interest in and investment in our company. Before we start, I will remind you that some of our presentations contain forward-looking statements. Please refer to the page entitled Forward-looking Statements and additional information in your materials and the forward-looking statements section of our SEC reports for information and factors that could cause actual results to differ materially from the forward-looking statements. Additionally, some of our presentations contain non-GAAP financial measures. Information about those non-GAAP financial measures, including a reconciliation to GAAP, can be found in your materials and in our SEC reports available on our website at wellsfargo.com. Ladies and gentlemen, welcome to Wells Fargo Investor Day. Please welcome Wells Fargo's CEO and President, Tim Sloan. Good morning, everyone. You know what? The highlight of this presentation is normally when I give presentations, I have to read what John just read, I don't have to do it today. So everything from here on in is downhill. Thank you very much for being here. Welcome to our Investor Day. We are really, really excited to give you an update on all of our hard work and effort since we last got together in San Francisco a year ago. We're very excited to describe the opportunities that we have in our businesses, and the opportunities that we have to continue to grow this company in the months and the years ahead. This is the first time that we've ever had an Investor Day in Charlotte. Charlotte's a city and a market where we have more Wells Fargo team members than anywhere else. We just finished a very successful Wells Fargo Championship last weekend due to the hard work and effort of all of our team members here in Charlotte. Even though it's our first Investor Day here in Charlotte, this is our third Investor Day in the last 3 years. It reinforces our commitment of transparency to you, all of our shareholders. We appreciate the commitment that you've shown by being here today. We want to thank all of you who are joining us via webcast to hear from our business leaders. They are very excited to talk to you about how they're transforming their businesses, including the drivers of improving risk management, efficiency, as I mentioned earlier, all of our opportunities for growth. For those of you that are in Charlotte, I really encourage you to take the opportunity during the breaks and at lunch to visit some of the exciting innovations that we have live for you outside. We have set up these demonstrations to reinforce how we are enhancing the customer experience at Wells Fargo. You are going to see how these innovations are going to drive new customer growth as well as improve efficiency. The team members that are out there that will be providing you with the demonstrations are actually those that were part of creating the innovation. Not only will they be able to talk to you in detail and answer your questions, but you are also going to see why we believe, because of the quality of that team, that team members are the most important and valuable resource that we have at Wells Fargo. I do want to take the opportunity to highlight that Betsy Duke, the Chair of our Board of Directors, is here today. Betsy, could you stand? Right there. I want to recognize Betsy's strong leadership and dedication. Her experience and active involvement has been very important and almost indispensable in terms of the work at Wells Fargo as we rebuild trust and build a better and stronger company. Let us get started. We always start our presentations with the slide that you are seeing here. The consistent vision of satisfying our customers' financial needs and helping them to succeed financially is about building lifelong relationships, one customer at a time. The core values of Wells Fargo, and this is a core value of this company, are as true today as they were 166 years ago. In addition to our vision, we have five primary values which articulate what is most important to us, and along with our vision, form the foundation of the culture at Wells Fargo. Doing what is right for our customers, which places our customers at the center of everything that we are doing. People as a competitive advantage, which emphasizes the importance of every member of our team. Ethics, which means doing things the right way and doing the right thing. Diversity and inclusion, which ensures that we are incorporating lots of different opinions, but also making sure that we have got the best team working with our customers. Lastly, leadership, which calls on every one of our team members to be a leader in service to our customers, in their communities, to each other, and to our shareholders. About a year ago, the operating committee and I got together and developed six overarching goals for Wells Fargo. We want to be the financial services leader in customer service and advice, in team member engagement, in innovation, in risk management, in corporate citizenship, and shareholder value. The goals reflect our challenges, but also our opportunities, and clearly state our aspirations for the future and certainly prioritize our focus. I want to give you a quick update on each one of these areas. First, customer service and advice. We want to know and understand our customers and their financial needs to provide them with the best-in-class service and make sure that we are providing them with the advice to succeed financially. One way we're doing this is in our Community Bank, and Mary Mack, who leads our Community Bank, is going to talk a little bit more about that later today. It's through the Change for the Better work in Community Bank, which includes new systems, new processes, and new tools to empower our team members to have meaningful conversations with their customers about their financial goals, and to solve and provide solutions on the spot. The first of these improvements was introduced in September of 2017, and the feedback that we've received, not only from our customers, but also our team members, has been very positive. We're also making changes to help our customers better manage their accounts by leveraging data and technology. We're really excited about these changes. A year ago, in the second quarter, we introduced automatic zero balance alerts. We now send 20 million low and zero balance alerts a month to our customers. Just think of that for a minute. 20 million additional times to establish and reestablish that relationship with our customers. in November last year, we introduced Overdraft Rewind, which has helped an estimated 800,000 customers avoid overdraft charges. In order to better help our Wealth & Investment Management affluent clients meet their goals, we've created or updated plans for over 70% of our wealth clients in the last 12 months. You're going to hear more about how we're meeting the needs of our Wealth & Investment Management clients from Jon Weiss later today. These are just a few examples, but let me give you a couple more, okay? In our contact centers, we're seeing satisfaction scores reaching an all-time high. In our branches and on the phones, we're seeing branch loyalty survey scores reach the highest level since August of 2016. Team member engagement is our second goal, and last year, under the leadership of our Chief Administrative Officer, Hope Hardison, we took a look at our team and we asked for their feedback. We also used market research to help to build a better experience for our team. In March, for example, we raised the minimum hourly wage for our team members to $15 per hour, which impacted 36,000 team members in the U.S. Last month, we increased the pay for approximately 50,000 team members whose compensation was at or near the new minimum hourly wage. We also granted an award of restricted stock rights to about 250,000 team members who are full and part-time, with a two-year vesting period, to recognize all the work that they're doing to rebuild trust with all of our stakeholders as we fulfill our commitment to the company's future success and tie their success to what's important to you, our shareholders. Because of the challenges that we've faced recently, I'm often asked about our ability to attract and retain team members. In 2017, approximately 97% of all the candidates that we made job offers to accepted and then came to work at Wells Fargo. That's been consistent over the last three years. What hasn't been consistent and what's been improving is team member turnover. Last year, our turnover, so in 2017, was at its lowest level since 2013. Our third goal is innovation. I want to encourage the folks that are here in Charlotte to visit some of the innovation during breaks and at lunch. We formed our Payments, Virtual Solutions, and Innovations group about a year and a half ago under Avid Modjtabai's leadership, and she and her team have accelerated our pace of innovation. You will hear a lot more about that, but let me just highlight a few things that are really important from my perspective. We rolled out card-free ATM access to all of our 13,000 ATMs last year, and over 8,000 of our ATMs have mobile wallet access. Our customers are using these capabilities over 1 million times a month now. This year, we were excited to be named one of only 12 companies in Apple's Business Chat beta, which is a new way to connect our customers and accelerates our customer service transformation towards messaging. We just launched our online mortgage application, which combines the power of Wells Fargo data with a digital interface. In our first quarter earnings call, John and I mentioned that in March, 10% of our online mortgage completed applications were done on this application. Last month, it was 20%, and it is moving very quickly forward. Our technology was also recently recognized by Dynatrace, which names Wells Fargo's mobile app number one in terms of overall performance, functionality, quality, and availability. Global Finance just named us as the best corporate and institutional digital bank. We have a lot more exciting technologies that will be rolling out this year, and Avid is going to talk about them, but they include things like Control Tower, which is designed to provide customers with a comprehensive view of the places that their Wells Fargo card and other account information are connected. Greenhouse, which is a very exciting new mobile banking experience with tools geared toward students or those who are new to banking. Our fourth goal is risk. We have had a very strong record of managing credit and market risk in this company, and under the leadership of Derek Flowers, who is in charge of credit and market risk within our corporate enterprise risk function, our focus on these areas continues to be very disciplined. However, we have not executed as well as we could have in compliance and operational risk. Candidly, this has created challenges in our retail banking, our mortgage, our auto, and our Wealth & Investment Management businesses. We have done a lot of work to strengthen our compliance and operational risk over the past 20 months, and we will continue to refine and build upon this work in connection with our consent orders. Earlier this year, we announced a new risk organizational design, which helps ensures that our lines of business have the appropriate structure to understand and manage their risk. Last year, we created a conduct management office to centralize the handling of internal investigations, ethics line, oversight of ethics complaints, and of course, sales practices. We strengthened our risk management function, and to do that, we identified specific talent needs and hired over 2,000 external team members over the past two years. This year, we hired Mike Roemer. He has joined us as our new Chief Compliance Officer. Mike previously held a very similar role at Barclays, and we have also brought onto the platform Sarah Dahlgren, who filled a new position as the Head of Regulatory Relations in March. She previously had a 25-year history and was a veteran at the Federal Reserve in New York, and they are both here today. We just announced this week that Amanda Norton is going to join Wells Fargo as our new Chief Risk Officer. She is a 29-year financial services veteran, and most recently served as the Chief Risk Officer for the Consumer and Community Bank at JPMorgan Chase. She has significant credit and operational experience and has spent time overseeing both wholesale as well as institutional risk, as well as having very extensive consumer experience. We are very excited to have her join us this summer. I do want to take a moment to thank Mike Loughlin, who is here in the audience today. Mike, could you stand, please? Thank you. Mike announced his retirement in January after 36 years of dedicated service to Wells Fargo, and he is going to continue in his role as Chief Risk Officer until Mandy joins the platform. Work is well underway to address risk management issues, particularly, as I mentioned, in operational and compliance risk management, which are part of the consent orders with the Federal Reserve, the OCC, and the CFPB. Let me give you an update on the work related to the Federal Reserve's consent order. We have had a very constructive dialogue with the Fed on our previously submitted plans, and we received some very detailed feedback. In order to have enough time to incorporate this feedback in our plans in a very thoughtful manner and to make sure that we get the work done right, we are making plans to operate under the asset cap through the first part of 2019. While I know that we may have further questions on this topic, I want to remind you that this process with the Fed is governed by confidential supervisory information. So unfortunately, we are not going to be able to comment much beyond that statement. You are going to hear more about managing under the asset cap from our Treasurer, Neal Blinde, in his presentation, including seeing that the financial impact of managing under the asset cap this year is at a little bit less than what we had previously reported. One of our additional goals is to make sure that every community in which we live and do business in is better. On this slide, you will see some of the positive contributions that we are making to communities, including our goal of increasing our donations to nonprofit and community organizations by 40% in 2018. In addition to our corporate giving, which is already industry-leading, our team members contributed $85 million to approximately 40,000 nonprofits during our annual community support campaign last year. We are proud of the fact that the United Way has recognized Wells Fargo as having the largest workplace giving campaign in the U.S. for the ninth consecutive year. What is even more important than the money is the fact that our team members volunteer their time, a record 2 million hours in 2017, to their communities and to causes that they care a lot about. Our goal to create long-term shareholder value is the last on the list because all the other five goals contribute to it. We recognize that you, our investors, have placed your trust in Wells Fargo, and we are focusing on managing the company to achieve long-term value. We faced a number of near-term challenges, but we continue to achieve strong returns. John's going to talk about and will highlight our 2-year annual target for ROE, and for the first time, we'll also be providing an ROTCE target range. You'll also hear, throughout all the presentations today, more details in terms of the progress that we're making of achieving our $4 billion in expense reductions by the end of 2019. John's going to provide a dollar target for expenses in 2019. We remain committed to returning more capital to our shareholders. Neal's going to provide some more information about our capital positioning during his presentation. We've made great progress on our six goals. You've heard me say in the past, and I'm going to repeat it today, that rebuilding trust is our top priority. We have significant work still to do, there's no question about that, but we've made good progress. In fact, significant progress in our effort to fix issues, to make things right for our customers, and to transform Wells Fargo into a better, stronger bank. We remain committed to looking across the company to identify areas or instances where customers may have experienced financial harm, and if we find it, we'll make things right by them. Among the fundamental changes that we made to fix some of the problems are eliminating product service sales goals for our retail bankers who serve in our branches as well as our contact centers, and create new compensations and performance plans for them. We strengthened the overall risk management framework by centralizing functions like HR and finance, and we've made fundamental changes to our organizational structure to make sure that we're more customer-focused, more efficient, and better positioned for the future. We're examining how we get things done, and as I mentioned, if we find anything, we're going to act swiftly to fix it. We know that this transparency is important, and we've increased the pace of our disclosure in 10-Q filings to provide updates on additional efforts as we rebuild trust. Because of this commitment, sometimes we've shared information with our stakeholders, even when the view of potential issues is a bit preliminary. We recognize that this creates challenges, but we believe it's the right thing to do for the long term. Our continued progress on our six goals, including our accelerated pace of innovation, will strengthen Wells Fargo and benefit all of our stakeholders. Let me now summarize why I'm so optimistic about the future by highlighting a few areas we have for our growth. We are a large, diversified financial services provider for both consumers and commercial customer. We process billions of debit and credit card transactions, trillions of dollars of wire transfers, originate billions of dollars in residential mortgage loan originations, and manage trillions of dollars of client assets. You can see on the screen just a few examples of those. In our wholesale business, in addition to what's on screen, we're industry leaders in areas such as commercial real estate, middle market lending. Perry Pelos is going to talk more about the wholesale business in his presentation. Operating at such a large scale provides us with millions of opportunities every day to interact with our customers and provide them with exceptional service and guidance. We serve over 70 million consumer and small business customers, which is a huge competitive advantage, and we are proud to serve one of three U.S. households. As you can see on this slide, many of our customers have relationships that intersect with our PVSI group, with WIM, with community banking, and our consumer lending groups. But from our customer's perspective, they're not a PVSI customer. They're not just a WIM customer. They're a Wells Fargo customer. Historically, we've had a number of different strategies to serve these customers. We had a branch strategy, we had a mortgage strategy, and we had an investment strategy. And these product-driven strategies worked really well for decades, but our customers expect more from us today. They want everyone at Wells Fargo, and every interaction with Wells Fargo, to reflect their complete relationship with us. So we've reorganized our consumer-facing businesses and changed leadership, which allows us to have a single strategy, a single consumer strategy, for the first time in our history. It provides us with the opportunity to grow within our existing customer base because as you can see on this slide, many of our customers have only one relationship with us. Having one strategy where we can serve our customers better as their trusted provider, reinforcing that we know them well, providing them with reliable guidance, allows us to serve the full range of their financial needs, and that's the foundation of our vision. Given our recent challenges, improving the customer experience is more important than ever, and I've asked our team to double down on our customer-centric approach through our new consumer strategy. Having a single strategy supports greater alignment as well as efficiency, while specifically addressing our customer needs and the competitive realities that we're facing today. Our strategy is guided by what our customers tell us they want. They want speed, they want ease, and they want simplicity. They want transparency, security, and control. They want reliable advice and relevant guidance. They want convenience and access wherever and however they choose, and they want differentiated value. We're going to execute on our strategy by evolving our customer-centric approach, which includes shifting from offering products through channels that work for us to striving to meet customers and their needs wherever they might be. One of the consumer strategy's two primary components is customer segmentation. This targeted approach enhances our focus on fast-growing segments like student, emerging affluent, and small business to ensure that we meet their unique needs while continuing to support mass, which is our largest segment, as well as high net worth, where we already are very well-positioned with the breadth and depth of our services. While individual segment strategies are being developed, they're not being developed in isolation, but in conjunction with each other, ensuring alignment and consistency across all the experiences, which will also drive long-term efficiency. The other primary component of the consumer strategy centers on elevating our baseline experiences for all of our customers. This focus will not only enable us to help our customers by meeting their financial needs, but it will also provide solutions in a more customer-friendly and cost-effective manner. We're already using customer insights and leveraging our strength and innovation to introduce new customer experiences that support core baseline initiatives. This is just the start of our efforts to enhance the customer experience by providing them with relevant and personalized financial advice, simple and intuitive digital cross-channel experiences, timely issue resolution, and optimizing offerings with transparent pricing. You're going to be hearing more about this work in Mary and Avid's presentation, and also from Jon Weiss. You may have noticed, or you're going to notice sooner rather than later, that Mary and Avid are actually presenting together today, which reflects their combined efforts to serve our consumers and small businesses customers together. I want to end my presentation with a few key takeaways that I hope you'll remember after spending the day with us. While we're making fundamental changes in our organization to make sure that we're more customer-focused, that we better manage our risks, that we're more efficient and better positioned for the future, it's really important to remember that we're building on a very strong foundation. We have a diversified business model which enables us to perform well through a variety of interest rate and economic cycles. We have industry-leading distribution, both physical and digital, and we serve more communities than any other bank in the U.S. We've been a long-time leader in providing innovation for our customers, and our pace of innovation under Avid's leadership has increased. We have a large customer base serving one of three U.S. households, and we have an outstanding team, and many of our outstanding leaders are here with you in Charlotte today. Our entire team is dedicated not only to serving our customers, but each other and the communities that they live in. We have a very valuable low-cost deposit franchise with $1.3 trillion in deposits, and we offer a broad set of products at scale, and we're very proud to be the largest lender in the United States. We have strong credit discipline, which has enabled us to perform well over numerous credit cycles, and we currently have historically low charge-offs. These strengths have enabled us to deliver consistent return and build a very strong capital position, and we remain very focused on returning more capital to you, our shareholders. These competitive advantages have driven our success for decades, and they will continue to drive our future success. Today, you're going to hear more about the transformational changes we've been making over the past 20 months, including becoming more efficient through centralization and optimization, how we're using technology to better serve our customers and transform our distribution, how we're using our new consumer strategy to meet the needs of all of our customers, and how we've invested in risk management to strengthen, in particular, strengthen operational and compliance risk management capabilities. These changes have made Wells Fargo a much better company today than we were a year ago, and I'm confident that we're going to even be better a year from now. Here's the three takeaways that I want to leave you with, and these are why I'm so optimistic about our future. First, while we have more work to do, we are making great progress, and I mean great progress in terms of resolving the issues that have caused near-term headwinds for us and making critical investments that we need to make in improving risk management. Second, we are evolving to meet the needs of our customers and our customers' preferences, including an accelerated pace of innovation, which will enable us not only to better serve our existing customers, but to grow our customer base. Third, our fundamental business model, which provides so many competitive advantages that I mentioned, is still intact, it is still working, and it will continue to be a driver of our success. Earlier this week, we launched a new marketing effort. You are going to see some of the ads today, which is the largest advertising campaign in our history. It sends a clear message to our stakeholders. We are ready to move forward as a better Wells Fargo. The campaign is built around reestablish and has four main goals: to acknowledge our past issues, to reestablish who we really are, to clearly show how Wells Fargo is moving forward, and to signal that change has happened and continues to happen at Wells Fargo. We will be showing some of the ads, as I mentioned, throughout the breaks today, and I hope you enjoy them. I do want to acknowledge the hard work and effort, as well as the creativity and the determination of Jamie Moldafsky and her team. Jamie is our Chief Marketing Officer, and they have done a terrific job in introducing this campaign. I want to thank you in advance for spending the day with us. I look forward to interacting with all of you. Now I want to turn it over to the best financial team in financial services, and that is our CFO, John Shrewsberry, and our Treasurer, Neal Blinde. Thank you. Morning, everyone. Morning. Thanks. Thanks for joining us today. I am going to start by highlighting our financial performance, as you would expect, and also provide some more detailed commentary on how we evaluate our different businesses. Then I am going to turn it over to Neal Blinde for a little bit to talk about other important topics such as net interest margin and capital. Then I will come back and conclude with a more in-depth discussion on our expense initiatives and updated performance targets. As you can see here, our diversified business model has consistently delivered solid results, but this period has also been a time when Wells Fargo has undergone tremendous change, including strengthening the foundations of the way we manage risk, developing new ways to more efficiently serve our customers and create a better customer experience, which includes investments in innovation, building a robust and more modern data and technology infrastructure, and streamlining and centralizing processes and organizational structures. While the growth in earnings has been modest over the past few years, these transformational changes are building the foundation for future growth. Already we are seeing encouraging signs of that taking hold, as you will hear from our business leaders throughout the day today. Despite the challenges we faced over the past couple of years, we have continued to generate industry-leading returns, which were also in line with the two-year annual targets we established at our 2016 Investor Day. These results are a testament to the strength of our franchise and its many revenue sources, our loyal customer base, our top market share positions in key financial products, industry-leading distribution, including best-in-class mobile and digital offerings, plus our disciplined credit risk management. In general, this ongoing risk discipline, together with the diversified business model, tends to drive less cyclicality in our results as we are willing to pull back in certain businesses when markets are particularly frothy and step up for our customers during the depths of a downturn. Over time, these competitive advantages have generated more consistent results than our peers in some of the highest ROEs in the industry with less volatility. In 2017, our ROE was 11.4% and our ROTCE was 13.6%, which were the best of our GSIB peers. I do not think that is well understood, and we take comfort in that outcome. Similarly, our ROA came in above these peers at 1.15%. Last year, we returned $14.5 billion to shareholders through common stock dividends and net share repurchases, representing a net payout ratio of 70%. Our strong financial results have generated a 35% increase in book value since 2012, representing a 6% compounded annual growth rate. As I have highlighted before, particularly in light of our recent divestitures, on an ongoing basis, we evaluate our business mix to make sure it not only strategically meets our customers' needs but also delivers an expectation of strong returns and earnings growth. To help us with this, we have a comprehensive financial performance management framework that includes a detailed analysis of our businesses to provide a basis for comparison. The primary components are focused on earnings, risk-adjusted returns, and efficiency ratios, but we also look at other performance metrics and their corresponding growth rates when evaluating each business. Importantly, our ultimate decisions are not just driven by the framework, but also consider several other factors that are relevant for growing the businesses, including their strategic importance to customers and the fit or interconnectedness with our other businesses and overall risk appetite. We also look at the business's future profitability, its growth prospects, and scalability, as well as what it will require in investments, capital, and liquidity to achieve scale. Throughout this analysis, we're mindful of the through-the-cycle considerations, such as credit losses and interest rate levels, and how that longer-term performance compares to current trends. Finally, we also look at the impact of these businesses and how they impact our operational complexity and resolvability. In the end, that's the starting point for discussions about the optimal business mix. While we tend to divest non-core businesses with low returns or those that lack scale, it's just as important to identify smaller businesses that have the prospects of great returns in the future that we need to be supporting and investing in. Along those lines, this bubble chart will help give you a sense of how we're thinking about the 30 major business lines or groupings, as well as the three that we recently divested. The left axis is the weighted average return on tangible common equity from 2015 to 2017, which we've mapped against the weighted average efficiency ratios over the past three years for these businesses, with the scale moving from high to low as you lead from the left to the right. The upper right quadrant is optimal. Up is higher ROE, right is more efficient. For ease of illustration, we've grouped the businesses with similar performance metrics into the seven individual clusters that you see here. Notably, the size of the bubbles gives you a sense of the relative contribution of the businesses based on their average net income applicable to common over this period. In the center, as you'd expect to see, there's a big blue cluster, which includes nine businesses that collectively contribute about 50% of our net income applicable to common stock. They deliver strong returns and average efficiency ratios in the 55%-59% range. In the upper right quadrant, you'll find our high-performing businesses that generate the best returns in efficiency. Our consumer credit card business would be an example of this. Over the past three years, it's delivered strong growth and relatively low loan losses. Given how we're still under-penetrated within our own customer base, it's a business in which we continue to invest. A couple of other clusters worth highlighting include the capital-efficient cluster in the upper left, which consists of four businesses with higher efficiency ratios, but they have lower capital requirements and deliver very attractive returns on equity. Also, the smallest cluster in red is a grouping of the three businesses that we've recently sold or agreed to sell over the past year. Wells Fargo Insurance Services, Shareowner Services, and Reliable Financial Services, our auto finance subsidiary in Puerto Rico. In general, these businesses were not considered to be core to our overall strategic focus. Their return characteristics were somewhat mixed, and their overall contribution to the bottom line was pretty modest, as you see by the size of that cluster. As a result of this kind of analysis and the other factors I mentioned earlier, we may come to the conclusion that it's best to divest a particular business, particularly in an environment like this, where it's often worth more to somebody else than it is to Wells Fargo. We've shared some of this information in our quarterly supplements in the past, though we've expanded it here to include all of the businesses that we've divested since the beginning of 2016, and we've also included the gains on these sales. For example, you see in the fourth quarter of last year, we sold Wells Fargo Insurance Services, which was essentially a break-even business for us. Yet we sold the business and recognized an $848 million gain since it had more strategic value to the buyer. The sales of our crop insurance and health benefit services businesses in the first half of 2016 had similar dynamics. Shareowner Services was a little different in that it was a profitable business for us, but we didn't have the scale to compete effectively, and changing that would have required significant investments and commitment to investments that we weren't willing to commit to over the long term. Turning to revenue and credit trends. Over the past two years, net interest income has been the primary driver of our revenue growth, and as a result, its contribution to our total revenue has increased from 53% in 2015 to 56% in 2017. Since 2015, we've grown net interest income despite our NIM declining eight basis points due to a combination of factors, which Neal will go into in some detail in a minute. This is consistent with our goal of generating net interest income growth and not managing to a particular NIM outcome. For 2018, we expect net interest income to be relatively stable as the benefit of higher interest rates is likely to be offset by the effects of a smaller balance sheet and increased deposit costs. Ultimately, however, our growth rate will be impacted by a number of factors, including the absolute level of rates, steepness of the yield curve, earning asset growth and mix, and the competitive environment for loan and deposit pricing. Part of our recent revenue trend reflects the fact that over the past few years, our non-interest income has been under pressure from a combination of market forces, business divestitures, and customer-friendly changes to our deposit accounts that Tim just mentioned. For example, in mortgage banking, not only have we seen the size of the overall market decline as interest rates have risen, but also we've seen tighter production margins in that business due to a shift in our origination mix from the retail channel to the correspondent channel and increased competitive pressures in both channels. As a result, mortgage banking contributed 11% to non-interest income last year, down from 16% in 2015. The mortgage market is expected to remain competitive this year, although higher mortgage servicing revenue could help to mitigate some of the impact of lower origination volumes. Meanwhile, deposit service charges have declined in recent periods due to the introduction of new customer-friendly features such as the automatic zero balance alerts and Overdraft Rewind, which Tim highlighted. While we believe using data and technology in this way will enable us to grow and build more long-term relationships, it had a negative impact on our fee income in the short run, and we believe that's the right thing to do. I would also point out that the sale of our insurance business in November had a small impact on 2017 results, and the full run rate of that will be in 2018. On the positive side, we saw growth last year in trust and investment fees, which is our largest fee income category, representing 37% of total non-interest income. Helped by both market conditions and customer growth, this business has seen steady increases in asset-based fees and retail brokerage transactional activity. Card fees, which include both debit and credit cards, have also increased and still represent one of our best growth prospects over the next couple of years, given the significant increase in digital channel acquisitions and usage among our customers. However, we expect this to be partially offset by reward costs associated with acquiring new credit card customers. Throughout the presentations today, you'll hear more about these trends as well as other opportunities we have to both attract new customers and deepen existing relationships to help drive future non-interest income growth. Our credit quality has continued to improve throughout the portfolio. Non-performing assets have declined for eight consecutive quarters, and now they're less than 1% of total loans. Net charge-offs were only 32 basis points of average loans in the first quarter of 2018, and for the second consecutive quarter, all of our commercial and consumer real estate loan portfolios are in a net recovery position, including our junior lien portfolio. You'll hear more about credit trends in our commercial and consumer businesses during the presentations today. But as the largest lender in the U.S., our strong performance not only reflects our well-diversified loan book, but also the ongoing improvements in our risk profile with the significant runoff of certain non-strategic or liquidating portfolios. To offset this, however, is that these loans were also higher yielding. We currently expect our through-the-cycle net charge-offs to be in the range of 60 to 70 basis points of average loans. To talk to you now more about balance sheet management, the net interest margin, and our capital position, I'm going to turn it over to Neal Blinde. Thank you. Thanks, John. Hello, everyone. As you can see, our balance sheet has experienced some pretty significant evolution over the last five years, not only tremendous growth at the asset level. It has grown from $1.4 trillion in 2012 to a peak level of nearly $2 trillion. As you look at the composition, that has evolved as well. The composition has evolved as we built our capital position, our liquidity position, and we built senior debt to comply with TLAC requirements. As we look forward, the balance sheet has stabilized over the most recent periods, and this will be more a story about optimization than changing composition in the major categories. That composition will include an optimization, will include not only optimization of those categories I mentioned, but also optimization of our investment portfolio and our lending portfolios. We will do that in a way that incorporates our outlook for the interest rate environment, our outlook for the U.S. economy in particular, and by extension of those, our outlook for credit in the U.S. Turning to deposits, we currently have the highest deposit funding amongst the GSIB peer group at 68%, and that is important for a couple of reasons. The first reason is that deposit funding is the most efficient form of funding for any financial institution. The second reason is that it has always proved to be quite stable over time. With regard to our rankings and our cost, we currently have the third largest deposit franchise in the U.S. market. Our retail deposit franchise is the largest in the U.S. And our cost as of the most recent quarter was 34 basis points. Now, probably the most important dynamic in deposit taking today is what we have observed on the ground is that customers are demonstrating a real preference for quality of service and for convenience, far more so than just looking for interest rate. For that reason, what you have heard from Tim and what you will continue to hear today and see in the demos is that we have made significant investment at this company in digital capabilities, mobile capabilities, and it is my belief that when you combine those with the largest branch footprint in the U.S. market, we have the best offering of service and convenience. That is important from a treasury standpoint in that it provides real durability in deposit trends over time and in deposit costs. So in terms of our liquidity position, as I mentioned, that has stabilized. You can see liquidity was about 30% of the balance sheet as of the most recent quarter. That has not changed a whole lot in recent quarters. To put that liquidity position in context, if the liquid assets, as we have defined them on this slide, were a bank, that bank would be the seventh largest bank in the U.S. market. So a very healthy liquidity buffer. In terms of our LCR ratio, as of most recent quarter, we are at 123%. It is my belief that we can optimize the LCR ratio over time. But it is also important to note that the LCR ratio is not our binding constraint from a liquidity perspective. The resolution metric, RLAP, is currently our binding constraint. That is also a metric that I believe we have an opportunity to optimize over time. Because it is a newer metric, it is natural for that to go through recalibrations and refinements. There is less certainty about the size of optimization and the timing of that optimization. In terms of our TLAC positioning, this is some new disclosure we began about two years ago to track that build. What you will see is as we stand today, we have about 2% buffer versus our target. When we initially started talking about this, the buffer we were illustrating was a 100-basis points buffer. So we are significantly above where we expected to be. That is really for a couple of reasons. Primarily it is because when we put together our forecast to build TLAC, we expected a growing RWA trajectory, and RWAs have come in at a lower trajectory than we expected. In fact, we have had a couple of sequential quarters of RWA decline. We found ourselves in a position of coming into compliance early and having some excess in the buffer. That provides some additional opportunity for optimization going forward. What will drive our issuance going forward is listed on the slide. I think most of it is pretty self-evident, so I will not walk through those details. What I would highlight is just a couple of things. The first is, as a result of that trend I described, we have not issued any new TLAC over the past couple of quarters. Our expectation for the balance of the year based on our outlook for RWA is that we will issue about $10 billion during the balance of 2018. As you look out into 2019 and beyond, you want to look at those factors and in particular, the trajectory for RWA over that period and the migration of our CET1 level, which also has a very significant excess and is a component of TLAC that we will be looking to bring down over the next two to three years. Before moving on to talk about the net interest margin and net interest income, I would like to provide a couple of updates on the asset cap. The first is as we sit today, we have a very healthy cushion versus the asset cap, and that provides us the ability to provide traditional core lending and deposit taking to our customers in a very normal way. The reason for that is a couple of factors. The first is seasonally, we typically see a large build in activity at the end of the year, and then we see that activity flow out early in the first quarter. We saw that same seasonal trend, and that gave us a nice bit of headroom as we began the year. The second point, as I already mentioned, deposit and loan growth has been a bit more modest than we expected. That also provides some additional headroom versus our expectation. The second update is related, and Tim mentioned this in his remarks. When we initially estimated what we thought the impact of the actions we would take to manage to the asset cap would be, we expected the range would be somewhere in the area of $300 million-$400 million reductions in net income after tax. As we sit today, our estimate is that the impact will likely be something less than $100 million. The reason for that is quite simply because of those lower trajectories I described, we don't believe we'll need to take as many actions as we expected we'd initially need to take. This is where we get technical, so stick with me. This chart describes the evolution of our net interest income and net interest margin between 2015 and 2017. The first thing that you'll note is that we've had very significant growth over this period. Our net interest income is up $4.3 billion over the period, and that's about a 9% increase. Meaningful improvement in a fairly difficult environment. The second point is, as was mentioned earlier, our expectation going forward is that net interest income and net interest margin are expected to be stable roughly for the balance of the year. The obvious question is, when we're in a rising rate environment, why would we expect a stable outcome in net interest income and net interest margin? The answer is, in addition to a slightly smaller balance sheet as John described, we have a couple of different factors that are moving in offsetting ways. We are benefiting from the interest rate environment, but there are some offsetting factors, some of which are enhancing from a credit perspective. First, as you look at the mix between 2015 and 2017, you see that our liquid assets or specifically our investment portfolio has grown about 2%. We've had a corresponding decrease in the loan portfolio. That's enhancing from a risk profile perspective, but it does put some downward pressure on net interest margin. Then also within the loan mix, we've had some of the higher yielding categories come down somewhat. Also risk enhancing, but somewhat reducing the net interest margin perspectively. Now I'd note again, in that shift between liquidity and loans, that trend is over and we believe that perspectively there's some optimization opportunity. In some of those loan mix categories which I'll talk about in just a minute, some of those trends we expect to continue for a little while. In terms of investment spreads and lending spreads, as is normal when you've had a long stable period of economic growth and good credit trends, spreads tend to come down. That puts some of that offsetting pressure on the margins that I described. In terms of the market funding dynamics in this period of 2015 to 2017, you see some of those costs going up. That's the TLAC build. Again, that's not going to continue and there's some optimization there. But the trend that's most important in all likelihood to our margins over the next couple of years falls within that category, and that's what's going to happen with deposit betas going forward. I'll dig into that in a little more detail and provide some new disclosure. Then the final element is the interest rate environment. In summary, in a rising rate environment, we do benefit, but we don't benefit as much when it happens in a flattening yield curve environment, which is what we've seen and what we continue to expect to see. Let's dig into loan mix a little bit more. I've highlighted three categories on the consumer side on this slide, all of which are some of the higher yielding consumer asset classes that we had. All of which have been in some period of decline, and we've shown a period from the third quarter of 2015 through the most recent quarter. While that's had an impact to somewhat reduce the margin as I described, it has also improved the overall credit quality of our loan portfolio as I also mentioned. Let's look at each one of these one by one. Within auto loans, this downward trend began in 2016 and the reason for it was we made a very purposeful decision from a credit perspective to start reducing originations in some of the lower credit quality spectrums because of our outlook. We feel that that was very appropriate. Moving forward, we've continued to have a modestly lower level of originations, and that's consistent with the process of restructuring some elements of that business. The sequential quarter declines have been about $2 billion per quarter, and it's our expectation that we'll continue to have some decline through the end of the year, but we will ultimately reach a point of equilibrium in the business. The second asset class I'd highlight is Pick-a-Pay loans. As you can see on the slide, that's one of our highest yielding loan categories. The reason for that is that's a portfolio, as you probably recall, we acquired in connection with the Wachovia acquisition. That came along with a very meaningful purchase accounting mark, and that low basis helps drive the yields that you see on the slide. Now, we all expected that that portfolio would continue to run off over time as it has, but the strength that we've seen in the housing market and the subsequent demand for housing product has enabled us to accelerate that a bit and be opportunistic and sell a couple of pools of Pick-a-Pay loans. The junior lien mortgage portfolio is also a longer-term story. In that sense, the story with this portfolio is that the risk structural profile of that product was really improved at our company and across the industry following the crisis. What we've seen is pre-crisis products continuing to run off. That's putting this downward pressure that you see on the outstanding slope on the slide. While we're continuing to originate, the level of originations hasn't reached a point where it's eclipsed that runoff. That's something that we also expect to continue. Again, it's a safer product, and we're in an environment where customers have other alternatives, and the rates on first mortgage loans are very attractive. You'd naturally expect a little bit less of that trajectory of growth. Ultimately, that will reach an equilibrium level, and it will be a safer overall portfolio. When you look at those declines from peak levels in the period that we described that began at the third quarter of 2015 through the most recent period, that's a total reduction of $47 billion of some of our highest yielding product. On average, those loans yielded 5.55%. In reality, what's run off probably yielded a little bit more than that because of that targeted reduction in lower credit quality and higher yielding auto product that I mentioned. That compares to 4.5% yield on the overall loan portfolio. So that creates some of that offsetting dynamic I described. The final thing that I'd mention that is similar to some degree to the dynamics that we're seeing here is not in the consumer portfolio. It's a dynamic on the commercial side. It's not an intentional runoff. It's a small decline in our commercial real estate outstandings. And what typically happens as has occurred with credit spreads is the commercial real estate market tends to provide better liquidity alternatives to borrowers as you have long periods of credit health and economic growth. And as you get into the second half of the cycle, you also see some competitors become a bit more aggressive in certain segments of the market. And it's our belief that in our credit philosophy at this company, not to chase credit in that way as you move through a credit cycle, but to maintain discipline. In certain cases, we'll find ourselves choosing to miss loan opportunities either because the duration profile of a loan or the credit profile of a loan falls outside of our box, and we choose not to change that box as the cycle changes in that fashion. So in total, all of those dynamics, plus the fact that we did have a couple of large acquisitions in this area that are now in a runoff phase, has resulted in about a $7 billion decline in that portfolio from its peak. And on average, our CRE product yields about 39 basis points more than our C&I product, which has been continuing to grow. In terms of what's going on with the yield curve, what you may recall is two years ago at our Investor Day, we talked about our view that rates would likely remain lower for longer than the market was expecting. And for that reason, we maintained a large portfolio of received fixed interest rate swaps to hedge against that kind of rate environment. That proved to be accurate. But as we move forward, and specifically in the third quarter of last year, we started to take the view that rates would likely have more upside risk versus market expectations. So at that time, we began to unwind that hedge position and position the balance sheet for rates that would rise more rapidly than the market was expecting. And that also proved to be accurate. And as we sit today, we think that the market generally has it right. We think that the precursors for additional rate hikes through the balance of the year are all there. So we think it's very non-controversial to expect that the Federal Reserve will continue to increase front-end rates. But we also think that it will continue to happen in a flattening way as the market expects, and that's for a variety of reasons. One of the reasons is that the international economic and interest rate environment has an impact from a technical perspective on the yield on long-end bonds in the U.S. So as we sit today, our roughly 3% 10-year bond compares to this morning about 55 basis point yield less than a point on a 10-year bond in Germany. So the technical pressure that comes along with that we think is somewhat durable, it's more slow-moving, and it will have that flattening effect in the near term. So what all that means, as I mentioned, for our portfolio is that we will benefit as the front end rises, and the amount by which we benefit will be most closely tied to deposit betas, and I'll talk a little bit more about that. Again, probably the single most impactful assumption that you'll want to consider. To provide a little bit more color on the receive fixed swap program that we use to hedge that lower for longer environment that we experience, we provided some new disclosure. I'll quickly walk you through that. The solid bars that you see represent the amount of outstanding in notional terms for that swap program. You can see that that peaked in 2016 at $86 billion. Then you can see it start to run down in 2017, as I described, and we unwind the entire position in the first quarter of 2018. The dash bars that you see represent the original maturity profile of those swaps. The reason that's important is that when we unwind those swaps, we don't experience the impact of that unwind cost, which was about $1 billion in a single period. We experienced that unwind cost amortized over that remaining contractual maturity. We provided that profile to you. The solid line that you see, and incidentally, that is approximately three years for those who are modeling this. The solid line represents the cumulative net revenue from the program. As you can see, the cumulative net revenue grow through the period we had the program and peaked at $3.1 billion in 2017. Then after we fully amortize that cost of the unwind, we'll have a cumulative net revenue of $2.1 billion. That's all locked in. Those contracts have all been unwound. Then finally, the dashed line is for illustrative purposes. The dashed line that we showed is to give you a sense of what it would have looked like from a cumulative net revenue perspective at April 30 rates. Would have been about $1 billion less. In conclusion, this was a very effective hedge program that did exactly what it was intended to do to protect us against a lower rate environment. It added $2.1 billion of net interest income that we otherwise would have foregone as a result of that environment. The timing was very fortuitous in the unwind because it resulted in about a billion-dollar better outcome. As I mentioned, it's very natural for credit spreads to come in as you get further into a cycle and you've had a long period of healthy credit. I think what's important when you're trying to evaluate what that means to bank margins is to put some scale behind the more recent tightening that you've seen because that's a good indicator of what you should expect. What we see across the categories that we've highlighted, all liquid markets across the credit spectrum, from triple A product to high yield product, we've seen a range of tightening between December of 2015 and April of this year between 33% and 55%. It's pretty striking. Very dramatic tightening over that period. Getting back to the credit discussion, there are really two choices you can make when you're in that type of environment. One is to maintain your credit box. That is our company's philosophy. We believe that provides more stability through the cycle, and perhaps more importantly, it allows us to participate fully at every point in the cycle and be there for our customers at every point in the cycle. But it does mean foregoing some revenue during that period. It comes at some cost. That is the approach that we have taken. As you think about what it means when you are evaluating our yield, the dynamic even though you cannot see it in the disclosure that is available because of the granularity of pools in the industry, is while you do not have that data, it is directionally moving in the same way that the liquid markets are moving. That is why you see our loan yields each quarter rising a little bit more slowly than treasury rates. The number one question that I get is about the direction of deposit betas through the balance of this cycle. We provided some new disclosure to help with that describes what we have experienced to date and what our through the cycle expectation is. Let me orient you to the slide. The light gray area that you see is the federal funds rate, and we go back to the beginning of the cycle in November of 2015. The dark gray area represents the interest-bearing yield on our deposit base. The red line describes the resulting beta on a cumulative basis through the cycle. That number for us is 28% beta. We have also included an additional line that describes the cumulative beta over the last year. That is the gray line that starts in the midpoint of 2017, and that beta is 33%. The reason I show that is to indicate that some of that catch-up that you expect as the cycle progresses has begun. There are a couple of additional dynamics that are worth discussing that you cannot see in this slide and quite frankly you cannot see in the industry disclosure in general. The first is that there has been a dynamic in the deposit market whereby many of the peers have generated very significant deposit growth through upfront offers on primary checking accounts. Incidentally, we think it is a very good program. It is not something that we have done in any significant way to date simply because we are already 68% deposit funded, as I described, and we have had modest loan growth as I have described. So we have not had that pressure to really drive a lot of incremental growth. It is certainly something we would consider in the future as we have a need to grow deposits. The way the program works is it is generally something like a $500 upfront offer to open a new checking account, set up bill pay, and deposit $25,000. As I mentioned, it has worked very effectively. What makes evaluation of deposit betas difficult is that $500 is a very meaningful deposit cost. That deposit cost does not come through an interest expense. It does not show up in betas. It comes through as a marketing expense line item in a P&L. So when you are comparing across institutions, that is one of the things that makes those relative comparisons more tricky. The second dynamic is a bit of a leading indicator, and it is something that we have seen in our wealth business. And that is over the past couple of quarters, we have started to see some parts of that customer base migrate some of their assets out of their traditional sweep deposits into cash alternatives. When I say that, I mean specifically brokered certificates of deposits, short-term treasury rates, and money market mutual funds, and also migrate some of those sweep deposits into other risk assets, specifically bonds and equities, which is also very natural when you have had strength in the stock market and a very good credit environment. The reason I highlight those is that is some of the early precursor that we see as you start to move through a rate cycle, and ultimately betas begin to rise. Finally, in terms of our through-the-cycle betas on the right-hand side of the slide, we have shown that for the overall portfolio, our expectation is that the beta for this company will fall in the range of 45%-55%. For the wholesale business, which tends to be more responsive to rate cycles, we expect it to be 60%-70%. In the retail business, which includes for us both community banking and the Wealth & Investment Management business, we expect that to be in the range of 35%-45%. Now, the final dynamic that I would like to talk about with deposits warrants a little more in-depth discussion, and that is the financial institutions deposits business. As you can see on this slide, it represents a fairly significant component of our wholesale deposits. It peaked at about $151 billion at the end of last year. Let me give you a couple characteristics of that business. The first is it is our highest cost deposit business by far, 129 basis point yield on interest bearing versus an average for the portfolio of 47 basis points. It is our highest beta category, with many of these deposits exhibiting a beta of one. It moves in lockstep with rates. It has the lowest liquidity value of any deposit category that we have on the balance sheet. Many of these deposits receive zero liquidity value under the LCR calculation. With those wonderful characteristics, you are probably wondering, why in the world are you $151 billion in this business right now? The reason is actually quite simple. Despite those characteristics, it is an extremely low-risk business. It is valuable to our financial institutions customers. From a shareholder perspective, it has a very attractive ROE. The reason for that is with low liquidity deposits, we will typically take the deposits in, store 100% of that in cash. So there is no risk associated with it in the way you would have some risk if you put it into a risk-bearing asset. It also draws no regulatory equity to the denominator in that ROE calculation. So now you are probably asking, why are not others as significantly involved in the business? The reason for that is that because of the low margin, low risk nature of this business, it consumes a lot of balance sheet to get to an appropriate scale. Because of the nature of our overall business, we have not been leverage ratio constrained over time. So we have got capacity to serve this part of the market in a fairly significant way. So if you are comparing our deposit betas, this is another reason across the peer group to an institution that may have leverage ratio constraints and therefore less capacity for this type of business, or to a bank that simply does not choose to participate in this business. It will not be an apples to apples comparison because those characteristics, while very accretive to ROE and very safe from a risk perspective, show up in the wholesale deposit category. So to conclude the net interest margin and NII discussion, we have refreshed our asset sensitivity disclosure. The punchline to this disclosure is that our target range is still a 5%-15% asset sensitive position for 100 basis point parallel shock over the course of the year. That is the target response rate. As a result of the swap unwinds and our view on interest rates, we have moved from being at the low end of the range because we had a lower for longer view previously to slightly above the midpoint of that range currently. As you are using this to develop your forward-looking views, I want to provide a couple of qualifiers. First, this is a single static simulation. As I mentioned, it is 100 basis point parallel shock and equally, and perhaps more importantly, it assumes no management actions. As we all know, rates do not move in 100 basis point shocks. They do not move in isolation. They move along with other things moving in the economy, and they certainly do not move without management actions. If I woke up tomorrow morning and rates were 100 basis points higher than they are today, we would be evaluating that and taking appropriate actions. So finally, in terms of our capital position, what you see on the right-hand side of this chart is the current capital stack of the company, and what you see on the left-hand side of the chart is our target capital stack. If you are a fixed income investor, you probably want to stand up and applaud right now at this position. If you are an equity investor, you probably feel very good about the stability of your investment, but you probably want to talk to us about optimization opportunities. The reality is those views are both accurate. It is our view that we have a significant optimization opportunity, and it is one of our objectives to, in particular, bring down that CET1 buffer over the next 2-3 years towards our target level. But what is important to consider is that it should occur over a period of 2-3 years and not be an instantaneous adjustment. The reason for that is there are some very significant changes that we see coming to the industry that will evolve over that time period that we need to evaluate and appropriately build into our target buffer levels. There is not time to go through all of that today. I will highlight one that is important as an example, and that is the stress capital buffer. We expect the stress capital buffer to become part of our capital requirements in the future. Because of the stress capital buffer's linkage to the CCAR process, we think that it could add volatility to capital requirements on a year-over-year basis perspectively, and we need to think about what that means for our internal buffers. The reason for that is CCAR assumptions change from year to year. We saw that in a big way this year with a very severe set of assumptions for the industry. CCAR models also change, both at companies and at the Federal Reserve. They should evolve, and they do evolve, and sometimes they evolve in directionally different ways. Each of those dynamics can create some incremental uncertainty on the level of buffer that you're going to have once you get the result and understand what the SCB's going to be. That's a process between the industry and the Federal Reserve currently. It will evolve. We'll have more information by the time it's adopted, and that's something we should take some time to evaluate appropriately. The benefit that we have, because of how high those bars are on the right-hand side of the chart, is we think we can achieve both of our objectives. We have enough excess today that we can pursue our objective of returning more capital to our shareholders. We also have enough excess that we can leave an appropriate cushion to evaluate what happens with the SCB, what happens with CECL. Of course, as is the centerpiece of any good capital management program, every year, we need to evaluate our current risk profile and our prospective risk profile, and that will be part of the ongoing evaluation. With that, I'll turn it back over to John to talk about expenses and targets. One down. Two down. Thank you, Neil. Next, we're going to highlight expenses, which I know is an important topic for all of you and a big focus at Wells Fargo, as you would hope. Last year at Investor Day, we grouped our expenses into these six main expense categories, and we've been using these categories to describe our expense drivers during our earnings calls each quarter. I'll use this same framework to talk about 2016 and 2017 expense trends. Total expenses increased to $6.1 billion, or 12%, in 2017. Over half of this increase was driven by higher operating losses due to litigation accruals. Higher salaries expense and third-party costs related to increased investment spending were the other drivers of the increase. We've always invested in our businesses to support ongoing business capabilities, and historically, we were able to operate at industry-leading efficiency levels while supporting those investments. In addition, beginning in 2017, we accelerated our investments in current high-priority enterprise projects to build new or enhanced existing capabilities to meet emerging needs. These investments, which are just a portion of our total investment-related spending, are related to specific projects and occur over specified time frames. In 2017, we spent $2.9 billion, primarily in the areas of technology and information security, meeting regulatory and compliance standards, and sales practices-related matters. These high-priority investments are expected to increase to $3.1 billion this year and decline to $2.6 billion next year. The next slide provides some more detail on these programs. Our high-priority enterprise investment spending includes both a mix of offensive spend, which helps us to better serve our customers and drive revenue in areas such as data management and business model transformation, and defensive spend in areas like regulatory compliance and operational risk that are necessary expenses given our focus on setting the global standard in managing all forms of risk, as Tim highlighted earlier. As you can see, these investments have an arc, and in some areas, our investment spend peaked last year and is now declining, and in other areas, we plan to spend more this year before expected declines in 2019. Again, it's important to note that what we're investing in high-priority enterprise projects is a relatively small percentage of our total spend. Technology, for example, is an important part of many of our high-priority investments, and in total, our technology-related expenses in 2017 were $8.2 billion, up $1.1 billion from 2016. The efficiencies we managed to achieve in equipment and telecom expense compared with 2016 were more than offset by a 9% increase in personnel expense driven by higher FTE, higher cyber and regulatory spending in technology, and recurring technology spending demands to support innovation and growth opportunities in our businesses. Now that I've highlighted some of the areas where we're spending, let me talk about the areas where we're reducing expense. These savings are part of the transformational changes that we're making throughout Wells Fargo. It includes centralization and optimization, an area where we've already made a lot of progress in our efforts to create a simpler and more collaborative company by aligning like work into centers of excellence, standardizing process and capabilities, and eliminating redundancy. We're also making changes to how we're running the business to more efficiently serve customers, leverage digital automation, implement workforce location strategies, and use our buying power to drive continuous improvement. The last category of expense saves is from governance and controls, where we're enhancing the enforcement of policies to drive down costs in areas like travel and entertainment, and consulting. We remain on track for $4 billion in expense reduction by the end of 2019. We've already achieved approximately $1 billion of these reductions last year, and we expect to achieve another $1 billion in 2018. As a reminder, these targeted savings do not include the runoff of the core deposit and tangible amortization expense at the end of this year, which will amount to $769 million in 2018. It also does not include the completion of the FDIC special assessment, which we expect should happen by the end of this year. Finally, it doesn't include expense savings due to business divestitures, which I highlighted earlier. This slide shows how each of our businesses and corporate support groups are contributing to the $4 billion of total targeted expense saving. As you can see in the bar on the left, through the end of 2017, most of the savings we achieved were from corporate support groups, and reflected the benefit of the consolidation and optimization we've done in functional groups like finance, human resources, and marketing. As we show in the bar on the right, the lines of business are expected to contribute approximately 70% of the remaining $3 billion of targeted expense saves. Let me highlight a few of the key initiatives behind these meaningful saves, which you will hear more about from the businesses in their presentations throughout the day. One of the key drivers within our consumer businesses is distribution optimization. This includes branch consolidations and divestitures within community banking as more customers use digital and self-service options, leveraging messaging in our contact centers in response to customers' preferences, which also improves productivity, and increasing co-locations of our mortgage sales team within our bank branches. In WIM, we are leveraging client segmentation work to reshape our product delivery and better optimize use of our distribution channels through innovations like Intuitive Investor. Within wholesale banking, an important contributor to the savings is our lending transformation initiative, which Perry Pelos will talk about, which should not only modernize and streamline our hundreds of related technology platforms, but should also reduce risk and improve the customer experience. Additional efficiencies should be realized through the realignment of corporate and investment banking. To bring this all together, I will walk you through our expectations for future expense levels. We first provided you with our targeted full-year 2018 total expense range of $53.5 billion to $54.5 billion when we announced fourth quarter earnings in January. This includes the increase in high-priority enterprise investment spend initiatives I spoke of earlier, as well as about $600 million of typical operating losses. It excludes additional litigation and remediation accruals and penalties. As we committed to you on our earnings call last month, today we are also providing the expected dollar range of $52 billion to $53 billion for expenses in 2019. Similarly, this includes approximately $600 million of typical operating losses and excludes additional litigation and remediation accruals and penalties. Now turning to our performance targets. Since our Investor Day in 2012, we have been providing updates on four annual target ranges: ROA, ROE, efficiency ratio, and net payout ratio. That said, last year's Investor Day was off cycle, so we did not provide updates on our target ranges. The ranges are meant to be guideposts for our annual results over the next two years. Our targets are based on our current view of the environment, though obviously there are many factors that could cause our results to be either higher or lower, including interest rates and the overall economic environment. For 2018 and 2019, we have chosen not to provide an updated target for the efficiency ratio since we have already given you the specific ranges we expect for our absolute dollar level of expenses. Again, those ranges are $53.5 billion to $54.5 billion in 2018 and $52 billion to $53 billion in 2019. However, we still believe that over the long term, an efficiency ratio between 55% and 59% is appropriate for our business model. Separately, we are not providing an ROA target. It is still an important metric to us, and we track it, but it is no longer as relevant given regulatory changes, including the amount of liquidity we hold and the increased funding through long-term debt that we need to meet TLAC requirements. Instead, as you can see here, this year we are introducing a target for our return on tangible common equity, which is more commonly used by our peers and the primary focus of many of you in the investment community. The two-year annual ROE target that we established in 2016 was 11%-14%, and last year, as expected, we came in at the lower end of that range, reflecting both a higher efficiency ratio and continued elevated levels of capital. For the next two years, our annual target range for ROE is 12%-15%, and our annual target range for ROTCE is 14%-17%, which is strong compared with our GSIB peers. Notably, these ranges assume that we receive a non-objection to our 2018 CCAR submission, and similar to our expense guidance, they exclude litigation and remediation accruals and penalties above the typical amount. Relative to our prior annual target range for ROE, tax reform added roughly 200 basis points, which was offset by approximately a 200 basis point drag from holding capital levels that are still well above our internal targets. We recognize that even in 2019, we are still going to be going through a lot of transformation, and the expense savings will not all be in the run rate until the year-end. Understandably, you want to know what returns we are capable of generating in 2020 and beyond. To that end, we have illustrated a simulation with assumptions on some of the key variables on this slide. Importantly, this simulation does not model significant revenue growth. In fact, it assumes revenue is flat with last year's level, which was roughly $88 billion. This is just a modeled assumption, and our goal is, of course, always to grow revenue. Ultimately, it will reflect how well we perform and execute on our business plan, as well as the strength of the economy, the absolute level of rates, and the slope of the curve, among other variables. The simulation also assumes, as we have said, that we reduce our CET1 ratio closer to our 10% internal target over the next two to three years by returning more capital to shareholders. Expenses are assumed to be in the range of $50 billion-$51 billion in 2020, particularly as we continue to execute on the ongoing initiatives, which I highlighted a moment ago. Finally, while it is obviously hard to predict future credit trends, for this simulation, we have assumed we continue to be in a favorable environment, in which case net charge-offs are assumed to remain at relatively low levels, consistent with recent results. That said, our loan loss provision is assumed to increase with the growth in the size of the loan portfolio. Notably, we have not made any assumptions for CECL, that new credit loss accounting standard which becomes effective in 2020. Taking all of this into account, we think this simulation shows that it is achievable for Wells Fargo to get to an ROTCE in excess of 17% in 2020. Just to be clear, this is a simulation. It is not a formal projection or expectation. But we do think that all of the assumptions are reasonable. Our focus on returning excess capital and our ongoing credit risk discipline, along with our expense-saving initiatives and our ability to realize benefits from our investments, should drive returns higher. Our final target is our net payout ratio. As Neil highlighted, our stable earnings profile has resulted in capital growth, which has supported strong payout ratios, including a dividend payout ratio above 30% since 2014, and a net payout ratio of 61% in 2016 and 70% in 2017, which is well within our previously stated target range of 55%-75%. Today, we're slightly widening this target range for our long-term annual net payout ratio to 55%-80%, reflecting the benefit of our strong capital generation, as well as our understanding that prospectively, the regulators are more focused on the capital levels rather than on payout ratios. However, for the next 2 years, we expect our net payout ratio to exceed this long-term target as we remain committed to returning more capital to our shareholders and actively looking to return the accumulated excess capital above our internal CET1 target level of 10%. This capital return will occur over time while we consider the environment, our risk profile and opportunities, and a number of other factors, including pending feedback on our 2018 CCAR submission, OCI risk in the rising rate environment, and finally, the current expected credit loss accounting standard, CECL, which becomes effective in 2020. In conclusion, Neil and I have covered a lot today, with a particular focus on expenses, the drivers of our net interest income, and how we evaluate our various businesses. You'll be hearing more from our business leaders throughout the day about specific initiatives to make their businesses more efficient, to help drive revenue growth, and contribute to the transformation of Wells Fargo. Despite some of the near-term headwinds, our returns remain strong and should continue to improve as we become more efficient. At the same time, the benefit of our diversified business model is that we have opportunities across all of our businesses to acquire new customers and build deeper, lifelong relationships with our existing customers. Meanwhile, our balance sheet is asset sensitive and should provide a benefit from further rate increases. We're on track to deliver against our targeted expense savings, and both our ongoing reinvestment in the company and our strong risk discipline positions us well for the future. Finally, we remain focused on returning more capital to our shareholders. With that, we're going to take a break for 30 minutes, which will give you time to stop by the technology demonstrations in the lobby, and we'll pick back up here at 10:30 with Mary and Avid. Thank you very much. We know the value of trust. We were built on it. Back when the country went west for gold, we were the ones who carried it back east, by steam, by horse, by iron horse. Over the years, we built on that trust. We always found a way, until we lost it. But that isn't where the story ends. It's where it starts again, with a complete recommitment to you, fixing what went wrong, making things right, and ending product sales goals for branch bankers so we can focus on your satisfaction. We're holding ourselves accountable to find and fix issues proactively because earning back your trust is our greatest priority. It's a new day at Wells Fargo, but it's a lot like our first day. Wells Fargo, established 1852, re-established 2018. Ladies and gentlemen, please welcome the Head of Community Banking and Consumer Lending, Mary Mack, and the Head of Payments, Virtual Solutions, and Innovation, Avid Modjtabai. Good morning. It's really a big pleasure to be with all of you today. For those of you who don't know me, I'm Avid Modjtabai, and I lead the Payments, Virtual Solutions, and Innovation team. Our group was formed about 18 months ago, primarily to accelerate our company's pace of innovation and digital transformation. I'm Mary Mack, and I lead our Community Bank and Consumer Lending teams. I joined the Community Bank about 20 months ago, and we brought Community Banking and Consumer Lending together right at the first of the year. Avid and I are going to start a conversation on our consumer strategy, which Jon Weiss is going to pick up on after lunch. We're going to talk about the progress that we've made innovating and transforming our company. Certainly, the last 20 months have been challenging, but we've been hard at work creating a new day at Wells Fargo. As we have been working through our challenges as well, we have been building for our future. We have been very focused on our customers and on moving our business forward. So as Mary mentioned, we are going to give you some updates about some of our key businesses. Then I will talk about our digital transformation, and Mary will talk about how we are optimizing distribution. Then we will also talk about how we are continuing to evolve the way that we are serving our customers and how we are also driving efficiencies in our businesses. Mary will get us started. Great. Thanks, Avid. Tim talked about the transformational changes that we are making at the company, and we are doing this with the customer at the center of every decision that we make. That is the foundation of our consumer strategy, and it is guiding every change that we are introducing. But it is important to remember, before we talk about change, that we have an incredible franchise that we are really proud of. We have leading market positions, we have talented and committed team members, we have cutting-edge technology, and we have distribution that is second to none. It is the combination of all of those things that differentiates Wells Fargo in the marketplace. So with the partnership of Avid's PVSI team and the recently combined Community Banking and Consumer Lending, along with Jon Weiss' Wealth and Investment Management team, we are providing accessibility and differentiating experiences to a broad range of customer segments. We have over 70 million customers. They interact with us 7.8 billion times a year across branches, ATMs, online, digital, and contact centers. That is 650 million times a month we interact with our customers. We serve more communities than any other bank, and we are deeply connected to the communities that we serve. We are proud to be number 1 across many areas. We have a leading digital platform. We have a retail branch network that continues to be number 1 with the most retail deposits in the most states. We are a number 1 debit card issuer, mortgage lender, small business lender, and we are number 1 in consumer mobile banking. While being number 1 is not our primary goal, these leading market positions are an outcome of great work by a team that is committed to serving our customers and delivering a great experience to help our customers reach their financial goals. We know our customers, and our customers are leading our transformation. Our transformation is based on what we are hearing, what our customers tell us that they value. We are seeing positive outcomes already from our consumer strategy. Customer loyalty and satisfaction are up year-over-year and have recovered to pre-settlement levels, and some scores are even at all-time highs. Our home lending customer loyalty is up 4.6 percentage points year-over-year, which is a big move in that score. But even more impressive is that mobile banking customer satisfaction scores are up 10 percentage points year-over-year. You're going to hear the themes on the right-hand side of this page a lot today because they come from our customers, and they're informing our consumer strategy. We're on the right path, and we're making meaningful changes across the business to help our customers achieve their financial goals. We're capitalizing on opportunities to build a better bank and achieve sustainable growth. We're going to start with four key business updates that we know you're interested in. First, let's talk about branches and deposits. We've implemented improvements and customer-centric innovations throughout our branches and our contact centers, and they're already having a real impact. As Tim mentioned, we launched the first phase of our Change for the Better improvements in September 2017, and our team is getting good at them. We started with the basics, introduced customer-centric activities that elevate the baseline experience for all customers. We are focused on reinforcing the engagement with customers, quality conversations to understand financial needs of our customers, and collaborating with partners across the enterprise to bring value. The customer-focused efforts that create goodwill are helping us retain our customers and bringing opportunities to attract new ones. But given all the changes, as you might imagine, our team has asked for clarity around what's important. What does success look like for me as a team member? We've introduced activity management to our teams to help our team members be successful in their roles. Those aren't new things. It's about talking to customers, understanding what's important to them, and meeting their financial needs. For our team members, we've introduced something that we call conversation starters. Conversation starters are for tellers who, by the way, as I mentioned last year, see 90% of the customers who come into our branches interact with a teller, but it's also for our bankers. Here's how to think about a conversation starter. When one of those customers comes into our branch, comes up to the teller line, our tellers almost all the time get an idea or a suggestion for that customer that recommends or suggests to them deeper value of products and services they already have. How to take advantage of things that they already have to reinforce the value of their relationship. It might be, "We see you've never checked your FICO score. Did you know you could do that on your mobile app?" Or, "We see you've never even downloaded a mobile app. Could I have somebody show you how to do it?" I get stories every day from across the franchise, and I got one yesterday from Scott Coble, who leads our Florida team, and it was about a customer who came into one of our branches. She came up to the teller line because her daughter needed her help. I have daughters. They need help from time to time. She had a loan payment to make, and she wanted to make her daughter's loan payment. The teller pulls up the customer's account and sees that the customer has rewards built up on her credit card that she's never used. It looks like she doesn't know how to access them. What the teller said was, "Here, can I show you how to get to your rewards? And maybe that will help." Takes her over to the ATM, shows her how to do it right on the spot. The customer uses a reward to make her daughter's loan payment. To which she says, "Wow, I need to tell my friends about this because this makes a difference." That is the kind of conversation we have the opportunity to engage in that rebuilds our customer's trust and introduces them to deeper value with things that they already have so that when the big things happen for them, we are the place they come. Another thing we have done for our team members is we have recently introduced a new CRM system. We have introduced it in our branches, and we will soon be rolling out in our contact centers. This allows our team to have a better view of the customer's journey at Wells Fargo, but also enables us to do something that is really exciting, which is outbound calling to our customers, setting appointments for customers to come in and have conversations that delve into deeper needs for the customers. We have also, as everybody so far has mentioned and will continue to mention, the deep investments that we have made in risk management to create a stronger platform with new processes, controls, and oversight. All of this together not only improves our customer experience, but results in healthy, sustainable growth. Another thing I get asked a lot about is team member turnover. I am delighted to report that across community banking and consumer lending, voluntary turnover is the lowest it has been in five years, down 9 percentage points since the first quarter of 2014. If I flip that upside down, we are retaining team members at the highest level that I have seen, which tells me that they are adapting and embracing the changes. They feel good. We have the most resilient team in America, and they are even more determined to serve the needs of their customers. They know what they do well and move the business forward. All leaders, including me, are engaged in doing all we can to hire, engage, and retain our team. Team member feedback has been critical to everything that we have done. Since taking over as head of community banking 20 or so months ago, I have done over 80 market visits, over 140 listening sessions with 10,000, 12,000 team members who tell us how we are doing, how we are moving through the changes, what additional changes we need to consider. I was in Atlanta last Friday with our teams from Home Lending and the Community Bank, and they looked just like those team members in the commercial. They are engaged. They are reestablished. They are meeting with customers and adding value. We also want to make sure that we are competitively compensating team members. So we introduced differentiated pay for bankers to better reward and motivate our top-performing bankers. Top-performing bankers are those who know how to meet with customers, understand customer needs, discover value that we can add to a customer's financial life. That is working because the retention of our top performers is also in a really positive place. Deposit trends. Let me start with primary consumer checking. 83% of our consumer checking customers are primary as of March. Remember, those are customers who use us in a way that tells us we are their primary bank. That's at an all-time high. You can see on the top of the slide that both consumer and small business primary checking customer growth rates have turned positive after the lows that we experienced in 2017. Primary customer attrition is at a five-year low for both consumer and small business customers. Attrition is at a five-year low. While retaining customers is critical, we know we can't sustain growth without acquiring new customers, especially those who engage with us and use us as their primary bank. Some of the early results of the changes that we're making are already resulting in growth in our acquisitions. Both consumer and small business new checking customer growth is up year-over-year, and that continues early into Q2. Two ways our deposit customers show us the value they see in the products are they use them more and they bring more deposit dollars to us, and they're doing both. Our consumers continue to use debit cards more frequently, with purchase volume up 8% year-over-year during the first quarter, and that growth is on top of the number one debit card issuer that I mentioned a little bit ago. Our community banking deposit balances are also up 4% year-over-year, which both those things tell me that our customers appreciate the value of the relationships that they have. The second business update that I want to talk about is home lending. Wells Fargo is the nation's leading home lender and servicer. We fund one in nine loans and service one in seven loans in the country. In 2017, our team of more than 30,000 home lending professionals helped 711,000 homeowners with refinance or purchase loans. We have an industry-leading business. We're number one in total originations, jumbo lending, correspondent, and servicing. We don't measure our success solely by our volume and scale. It's about the difference we make for customers and our communities. The chart on your left shows the composition of our 2017 mortgage originations in both correspondent and retail channels relative to the industry. Let me talk a minute about retail. Our retail share has declined. Some of that decline is based on intentional actions that we've taken. FHA Direct represents only 1% of our volume, yet it's 15% for the industry. Market-wide conditions also put downward pressure on retail share. John Shrewsberry mentioned that a minute ago. Felt this pressure amid increased competition from non-banks. Certainly conditions unique to Wells Fargo have contributed. The reputational challenges and the accompanying reduction in branch bank referrals to our mortgage team have certainly had an impact on our retail share. At the same time, we've grown correspondent market share for the last two years with a focus on conforming loans. We're really excited about our number one position in correspondent and the potential for growth there because we're focused on streamlining and simplifying our processes to make it easier for our customers to do business with us. Origination mix is an important part of our home lending story. Retail's percentage of originations has decreased from 56% in the first quarter of 2016 to 38% in the first quarter of 2018. The shift in our origination mix from retail to correspondent is reflected in the production margin, and the decrease in our production margin has been fueled primarily by that increase in correspondent. Remember, correspondent has a significantly lower margin, but it also has a lower cost structure. Our production margin was down 94 basis points. Was at 94 basis points in the first quarter of 2018, which is down 74 basis points since the first quarter of 2016. 52 basis points of that decline is directly attributable to our correspondent mix. But retail remains an important focus for us, not just because of the higher margins, because that is what our customers need us to focus on. It is also worth noting that about half of our retail originations were jumbo loans, which I will talk about in a minute, and they are not included in our production margin because we hold them on our balance sheet. How are we going to effectively compete in retail? First, the alignment of consumer lending with community banking will help us advance the consumer strategy. We can help our home lending team members and our business connect with and anticipate the needs of a large consumer base. We are innovating with digital and advice. We have expanded our digital capabilities paired with the nation's leading distributed sales team. It enables us to serve customers how, when, and where they want. And one of the strengths that I specifically want to talk about is jumbo. We have a competitive advantage in jumbo, and this is a reflection of the relationships we have across our organization and in the communities that we serve. Our total consumer real estate loan balances have been fairly stable since 2009. But our real estate concentration as a percent of the total Wells Fargo assets has declined in recent years. As Neil mentioned, we continue to replace the runoff from our higher-risk legacy portfolios with high-quality jumbo loans. If you take note of one thing on this page, look at that box, that blue box in the top right-hand corner. Only 987 or 0.25% of the over 395,000 jumbo loans that we have booked since 2009 have ever been 60 days or more past due. Another strength we have is the progress we are making on our online mortgage app. Hopefully, you had a chance to look at the demo outside. If you did not, you can do it at lunch. It is right outside of our online mortgage app if you are here in Charlotte. If you are doing this by webcast, you can go right now onto wellsfargo.com and start your mortgage application. We launched it in the first quarter of 2018, and we are seeing real success. It combines the power of Wells Fargo data with a digital interface to create a unique You Know Me experience that is really powerful for current Wells Fargo customers. Most online mortgage apps can aggregate external income and asset data, and ours can do that too. But only our online app has direct access to our large pool of customer data, and it is integrated with our sales team. A customer has the option to engage with an expert at any point in the process. We're still early in the launch, but as Tim mentioned, 10% of total completed retail applications, including pre-approvals, were done in the app in March of 2018, almost 20% in April, and for the first few weeks of May, that number's up to 26%. We've been investing in training our teams in the marketplace and in some marketing around it, and we're seeing the results. Not only are our customers using it, they love it. It's improving the cycle time, and our higher customer loyalty scores are evidence of the experience that they're having. You take the breadth of the customer relationships and information that we have, the ease and simplicity of the online mortgage application process, and the integration of the country's largest sales force, it's a powerful combination. Let me take that then and look at our current customer base. Certainly, Online Mortgage App has an opportunity to extend our reach into the broad marketplace. But if you look just at Wells Fargo customers, we have the opportunity to create a unique experience right here. Let me show you what that means. We have 36 million consumer households. That's a household view of those 70 million customers that we've been talking about, across consumer and small business. 22 million of those 36 million own a home. 8 million of those have a Wells Fargo mortgage, and we have the opportunity to capture a refinance or a second home purchase. 14 million have a mortgage, just not with us, which is a huge opportunity given the compelling experience that we've created for customers. In another 14 million of those who aren't homeowners, many of them will be. And we have a compelling yourFirst Mortgage product for them. This is the power of our scale and integrated consumer strategy, and even modest gains with Wells Fargo customers have a considerable impact on our market share in retail origination. The third business update that I want to talk about is another business that's been undergoing transformation, and that's our auto business. We brought in new leadership last spring, Laura Schupbach, whom you'll meet in just a little bit. And she's been focused on three things, de-risking, investing, and transforming. Perhaps most evident of that is we changed our name. Wells Fargo Auto is reflective of the fact that we serve not only dealers but consumer customers. We made several changes as part of that transformation. We've de-risked the business, including improved processes and controls. We've changed our structure and centralized key functions. And we are integrating that business to align with the enterprise in terms of systems, technology, processes, customer experience, and risk. And we've adjusted our credit policy in response to market conditions. Our goal is to deliver a faster, more consistent experience and create a saleable and nimble business. Over the past year, we've centralized collections and funding activities, but we've left our relationship teams in the market close to customers because that's important. We've closed all 57 of our regional business centers and consolidated those activities into three regional hubs. And we're finding better ways to serve our consumer customers, like a new customer assistance team, which helps borrowers stay in their vehicle. Really important, but also helps us minimize losses and manage risk better. We have revamped our dealer oversight program to monitor dealer activity, bring key insights to our dealers on their business, and also ways that we can improve the mutual consumer customer experience. As part of our funding centralization, we have streamlined and created faster loan funding, which is really important to our dealers. We continue to invest in retail automation or retail underwriting automation, both pricing and decision-making, which provides consistency and improved decision speed. Credit and underwriting has been a big part of our transformation. We made adjustments to our credit policy and underwriting practices in response to signs that we began to see of increased risk in the marketplace. We saw rising delinquencies, declining used car values, and it caused us to take a look and strengthen our loan-to-value, ability to repay, and proof of income requirements. Non-prime originations decreased over the past couple of years as we tightened our standards, and as expected, our origination growth slowed and our quality improved. But after the decrease in 2017, we are seeing signs of that origination stabilizing. We anticipate that they will start to grow in the second half of 2018, and we expect the overall portfolio to return to growth in the first half of 2019 as we complete the transformation and return to broad-spectrum lending and reduce risk. It is one element of our credit transformation. Avid is going to share the fourth of these business updates and then give you some cool stuff that is happening in digital innovation. Thank you, Mary. Great. Credit card. As you all know, credit card has been a really important growth opportunity for us, and as John mentioned earlier today, a business where we have strong returns. It is a business that we have been making investments over the last few years where we have been outpacing the growth in the industry, where we have gained market share, and we are continuing to make those investments as we move forward. Our investments fall into three key categories. First, it has been around new products and new value propositions. Our most recent products have been our American Express Propel as well as our Visa Cash Wise. These have been really great products for our customers. We now have over 1 million accounts in these two products. Customers in these products have high activation rates. They continue to redeem and be active redeemers. We have also continued to enhance our rewards platform. As more of our customers start redeeming, they also end up spending more on their Wells Fargo credit card and also have lower attrition. The second area of focus for us has been around digital. We have been expanding our digital capabilities. We have become present in third-party digital properties. It has become an increasingly important acquisition channel for us at Wells Fargo. In fact, when you look at our first quarter, more than 40% of our new account opens came through digital. The third has been a number of strategies around deepening engagement with our customers. It involves optimizing our credit lines, product graduation, activation programs, and we are increasingly seeing deeper engagement with our customers, more transaction volume, more balances per customer. Now, when you look at all of these new products, value proposition activation programs, they have been driving spend and balance growth in both the mass market and affluent customer segments. Cash Wise, which has primarily been a product for our mass market, has been very successful. We have seen 14% higher balances on our Cash Wise products than on cashback industry benchmarks. Affluent has been a segment where historically we had been under indexed, and our strategies in that segment have been working. Just year-over-year, we saw a 15% growth in our affluent segment around purchase volume and balances. Looking at our new account opens in the first quarter, we were up 12% year-over-year. Digital played a big role in that, and as I mentioned earlier, first quarter, 43% of our new accounts were originated through digital. That compares to about 30% a year ago. When you look at the cohort, the vintage of customers that we brought in the first quarter, we have a higher mix of customers with FICOs over 740, so a better credit profile. Also these customers are more engaged. They have spent 19% more than the customers that we onboarded a year ago. When you put it all together, you could see why we've had strong portfolio trends in the first quarter. Card usage, transaction volume was up 8%, and balances were up 6% in the first quarter. We are continuing to make progress in this business, and we have a very robust roadmap. I'm really excited about some of the new things that we are going to bring to the market. Stay tuned, because I think we have some really exciting work that we are doing in this space. Now that between Mary and I, we covered our four business updates, I'm going to talk about our digital transformation. As we all know, digital is becoming increasingly important in our customer's lives. It's really changed how our customers do their work, manage their finances, and really how they live their lives. That's created an enormous opportunity for us to rethink how we serve our customers and how we also support our consumer strategy. We are delivering digital capabilities to our customers that they want, and they use, and we're also being recognized for these capabilities. Earlier this year, as Tim mentioned, we were ranked again number 1 by Dynatrace for our consumer and small business mobile banking experience. Our Wells Fargo Gateway, which is our API portal, was also recognized by Barlow Research as the most innovative. Our corporate and institutional digital capabilities were ranked again as number 1 by Global Finance. That's because, again, of the capabilities we bring to our customers. Because of these capabilities, we have a large base of digital customers, 29 million active users. 22 million of those are on our mobile channel. These customers are deeply engaged. On average, they log in 19 times per month. That's one of the highest rates in the industry. They interact 11 times more than our non-digital customers with Wells Fargo through all of our channels. This base of digital customers continue to grow, and they are increasingly more engaged. In fact, if you just look at year-over-year, our mobile active customers grew 8%, and average session per user also increased 10%. Customers are doing more on mobile as we bring more functionality. They are sending money, depositing checks. They are turning their debit cards on and off. They are getting access to our ATMs. More of our customers are using Zelle. Our transaction volume through Zelle was up 64% year-over-year. More of our customers are taking advantage of our remote deposit capture. That increased 13% year-over-year. As you can see, we have a large base of engaged customer base. We have industry-recognized capabilities and leading capabilities, and we also have a very robust roadmap to transform how we continue to serve our customers in a different way. Last year at our Investor Day, I introduced that roadmap to you. The roadmap is really grounded in what our customers want. They want simple, easy, fast experiences. They want more transparency and control. They want relevant advice. They want guidance in the moment, and they want to interact with us when and how they want to interact. Based on that, we developed a roadmap, and we have five areas of focus. It is the same five areas of focus from a year ago. One is around accelerating digital account acquisition. The second is about being best-in-class in digital payments. The third is around delivering personalized advice to all of our customers and doing it at scale. The fourth is around distribution, expanding and integrating our distribution. Then very importantly, it is about building platforms for innovation. Again, at our Investor Day a year ago, I shared, and through our innovation panel, we shared with you a number of experiences that we have been building and bringing to the market. I am really happy to say that over the last year, we have been bringing all of the things that we talked to you about last year to the market. I know this chart looks really, really busy, but it is because our team has been very busy bringing these capabilities to market, and it really highlights the volume and pace at which we are bringing these capabilities to the market. In many cases, we are the first to create these experiences, and when we roll out these services, our customers are using them. Now I am going to go through a little bit more detail and give examples of how we are bringing this roadmap to life. As Tim mentioned, we also have demos. I have noticed that some of you were looking at the demos in the hallway in the lobby in Charlotte, and I really encourage you to visit some of these demo booths to both see the experience live and in person and interact with it, but very importantly, also to meet the great team who has been working on bringing these capabilities to the market. Let me first start with digital account acquisition. This is a really important and big opportunity for all of Wells Fargo. We are leveraging platforms that we have built across the enterprise, like our identity management platform, advanced data, e-signature, APIs, electronic documents, to create fast, easy, secure digital account experiences for all of our customers across all of our products. It is simple. It is end-to-end. It goes from application to fulfillment to usage. We have already launched some of these experiences. Mary Mack talked about the digital mortgage experience. I talked about credit cards. Deposits is one that has been in the market, and in a few days we are going to be launching the digital application and enrollment for small merchant processing customers. I am just going to spend a few minutes on our deposit account experience. A year ago at our Investor Day, I briefly talked about this. At the time, we were about to launch a limited pilot for our mobile customers, and today it is available across our entire geography for our most popular checking accounts. It is so fun and easy to use that internal within our team, we refer to it as the snappy app. It allows prospects to upload a photo ID, and from that photo ID, we pre-fill the application. Then we leverage our identity management platform that we use across the enterprise to make authentication fast and also secure. Very soon, we are going to be issuing a digital debit card into the customer's mobile wallet instantly, as soon as they open the account, so that they could start using the account right away. It has been very well received by our customers. In the first quarter, 11% of our new checking accounts were opened digital. When you look at how the application is going through the application funnel, submit to book rate was 64% in the first quarter. That is up from 39% in the prior quarter, fourth quarter of 2017. As I mentioned earlier, in just a few days, we are going to be launching our digital application and enrollment experience for merchant services. We are going to be starting with our existing business checking account customers who have less than $100,000 in processing volume. Customers can enroll in just minutes, and they could start accepting payments the next day. Again, for those of you who are in Charlotte, you could see the experience at one of our demo stations out in the lobby. The second priority is about being best in class in digital payments, because we really want to be the first choice for our customers whenever they want to make a payment. Our roadmap around digital payments starts with what our customers want. They want instant money movement, fast and convenient access to payment accounts and services. They want simple and easy experiences. Very importantly, they want transparency and they want control. Our goal is to be top of wallet for our customers by supporting a variety of mobile wallets that our customers use, and also by making payments really easy so that our customers would have no friction in using Wells Fargo as a way to make payments. We also want to make it easy for our customers to view all the connections that they have to their payments accounts and be able to manage those connections, which is why we built the Control Tower. I think most of our customers are like all of us here. We have cards on file in many e-commerce sites where we do e-commerce shopping. We have recurring payments like our gym membership that is tied to our credit cards. Some of us may give access to third parties like Intuit or other aggregators to access our accounts at the bank. We do not always remember all the places that we have stored this information. Wouldn't it be great to see all this information in one place and also have the ability to manage all these connections from one place? With Control Tower, our customers would be able to do just that. One feature of the Control Tower is allowing our customers to manage connections to their cards. Today, our customers can turn their debit cards on and off within the Wells Fargo app. That is available to all of our customers. So far, 90% of our requests to turn a debit card on and off is coming through digital. It is very well received by our customers. We are now in pilot with our team members for credit card on-off capability and international payments on-off capability. Other features that we have in our pilot include letting our customers control who and when they share their data with, as well as to be able to see recurring payments. As these payments become tokenized over time, they would also be able to control turning these payments on and off. Today, again, with some of these features, some are in production, some are in pilot with team members, and we are launching a multi-state pilot with our customers next month. I think this is an example of an experience that is unique, that we have brought to the market. It gives visibility and control to our customers, and it gives our customers a compelling reason for having their payments account at Wells Fargo and use those payments accounts in their daily lives. I am going to spend a few minutes to also talk about Zelle. I think you are all very familiar with Zelle. We launched Zelle last year with 30 other banks. Today, there are more than 100 participating banks in the Zelle network. It is really simple, it is easy, it is real-time, which is why customers are using it really quickly. For us, as I mentioned earlier, our P2P payments increased 64% year over year. Across the network, Zelle payments are expected to exceed $100 billion this year. That is three times Venmo, and that is within the first year of the launch of the product. You may have also noticed earlier today that we announced Pay with Wells Fargo. This is a new experience. It provides our customers, and we built this based on insights from our customers, and it gives them access to commonly used payments methods like Zelle, mobile wallet, bill pay, transfers, mobile deposit. They can even very easily, later this year, be able to donate to their charity of choice in a very simple interface. Next month, we are launching a team member pilot, and later this year, it is going to be available to all of our customers. I'm going to just show you a video of how we are seamlessly using this experience to make our customers' lives easy and make it really easy for them to make payments. Let's roll the video. Life moves fast, and your money needs to move with you. With simple, secure, in-the-moment payments, Wells Fargo will help people live their best lives. Say hello to Ashley. She's settled into her new job and life in the city. All around, everything is going great for Ashley, but something's missing. Not to worry, though. With Wells Fargo, Ashley can quickly check her balance and move money between accounts to cover a purchase. Even when she's out and about, she can pay her bills in one place. Imagine if Wells Fargo made it easy to request her roommate's share. At lunch, her new friend offers to pick up the check, but Ashley has something else in mind. She can send him her share in minutes. When she pays with Wells Fargo, she can use personalized offers from participating merchants. Plus, imagine a future where Ashley can give to charities when she feels inspired. With Control Tower, she can manage her subscription services, and with dog walks in her future, she can switch off recurring payments she no longer needs. Imagine if she could pay almost anyone nearby, even the pizza delivery guy. Imagine a future where paying with Wells Fargo means that Ashley's money keeps up with her. She can focus on the things that matter most, like spending time with friends, old ones and new ones, too. Well, you could see how this new digital experience would make it really easy for our customers to manage their money and make payments. Want to emphasize that some of this functionality is already available. A big chunk of it would be available very soon, and the vast majority before the end of the year. We do also have a demo of Control Tower and Pay with Wells Fargo at the demo stations here out in the lobby in Charlotte, so please test it out and check it out. Personalized advice at scale. For years, we have been talking about segments of one and mass customization. But when you look at today, the tools that we have with big data, with AI technologies and tools, we can make that vision happen, and we could make it happen at scale. We can deliver contextualized, personalized insights and advice to every single customer of Wells Fargo in the moment and when they need it. I would say that we are probably in the early days of using these technologies. The more our customers use these technologies, the more we learn, and we'll use that learning to inform the next generation of capabilities that we are going to be bringing to the market. Last year, I talked about a few of these tools. We offer FICO scores to all of our Wells Fargo customers. In the first quarter, 6 million of our customers viewed their scores through Wells Fargo. Intuitive Investor, which is built for the emerging affluent segment, has been rolled out, and Jon Weiss will be talking about it later today. Daily Change, it's a fun and interactive tool that would help our customers develop saving habits. Predictive banking, it's available to all of our mobile banking deposit customers. We look at cash flow patterns of the customers through an AI engine and make in-the-moment, useful pointers, insights, to help them track and manage their money. In March, more than 4.5 million of our deposit customers actually viewed the insights. I am really excited to talk about our new mobile-first experience Greenhouse. Greenhouse is really built for new-to-banking prospects and consumers, people like students. It's built for people with several income sources, freelancers, gig economy workers. It's a digital cash management experience, and it helps our customers be able to allocate their money between bills and day-to-day spending. We can leverage past spending behaviors to generate in-the-moment notifications and insights for our customers to help them stay on track. It's designed not to allow our customers to overdraft, so our customers cannot spend more than what they have. Customers can set their own limits on their debit card so that they could spend what they want to spend and make it easier for them to stay on track. Today, we are in pilot with our team members for Greenhouse, and we expect to make it available to our customers later this year. Now, I'm going to show you also a video of how Greenhouse works. This video looks different than Pay with Wells Fargo because it's primarily built to help explain the features of Greenhouse and how it works. Let's roll the video. Let's say you want to go to dinner with friends, but you're not sure you have enough money considering upcoming bills. That's when things start to feel fuzzy and a little off track. Introducing Greenhouse by Wells Fargo. Greenhouse is an easy-to-use app that takes the guesswork out of spending. A digital bank in the palm of your hand that puts you in control of your money. Greenhouse comes with two accounts, a set-aside account for bills and a spending account for everyday spending. Bill money is separate from spending money. You deposit money in your set-aside account. There, you set money aside to pay your bills, which you can manage all in one place. You get reminders when due dates are coming up, and pay your bills right in the app. You also decide how much money to put in your other account, your spending account. It's linked to a debit card that you can use for your day-to-day spending anywhere Visa debit cards are accepted. Greenhouse even makes it easy to set a weekly spending limit for yourself, if you like, so you can control exactly how much you spend. What's more, there are no overdraft fees. Since Greenhouse helps keep your money for your bills separate from your spending money, you can take charge of your debit card spending. Plus, with Greenhouse, you get the benefits you expect from your bank. So whether it's dinner with friends or something bigger, Greenhouse is with you every step of the way, helping you manage your money and stay on track. Get ready to meet your future financial self. As you saw from this video, this would be great for someone like my son who's in college, and who needs help managing his money every single day. We have a demo of Greenhouse in the lobby. Again, I really encourage you to check it out. The fourth area I'm going to talk about is about our distribution and what we are doing to expand our distribution and also integrate our distribution. Our customers are living in an increasingly digital world where their devices are always on, and they're also always on their devices. That's really changing the way we think about channels and distribution. As Tim mentioned earlier, our distribution, our 5,800 branches, 13,000 ATMs, our leading digital presence, they are a core strength of Wells Fargo. Our customers use all of our channels depending on what's most convenient for them. But as customers become more and more digital, as they're more on digital properties, the definition of convenience has been changing and expanding for them. Customers still want to access their accounts through our branches, our ATMs, online banking, our mobile app. But today, they also want us to go to where they are and give them choices on how and where they connect with us. One example of this is interacting with our customers in messaging platforms that they are already using. Earlier this year, Apple announced Apple Business Chat, and in March, we became one of the first companies to pilot messaging. We're in a few select markets right now with our customers, where our customers can engage with a Wells Fargo banker through the same messaging application and platform that they use to chat with their friends and with their family. For example, they could start a conversation with Wells Fargo around replacing a debit card. The experience that we have created lets our customers authenticate with Touch ID or Face ID, so they don't have to leave the messaging conversation. We have incorporated features like list picker, so customers don't have to type as much. What this experience does is allows our customers to interact with us in their own time and in their preferred communication channel. By the way, we also have a demo of this in the lobby in Charlotte, so please check it out. Later this quarter, we are introducing Wells Fargo Banking Assistant. It's a chatbot that's designed to respond to our customers' servicing requests as well as frequently asked questions. Like a customer can request to send money to a friend through the chatbot, and if the customer has a more complex need, the banking assistant provides a seamless handoff to the banker. When you look at these messaging capabilities, it is clearly what our customers want. They want us to make it really easy and convenient for them to interact with us. But it also helps us reduce costs. These are some of the key components of our strategy as we think about our contact centers in the future. Most of the digital experiences that I shared with you are intended to serve our customers directly. But we are working with Mary and her team very closely to leverage these digital assets in our physical distribution, like our ATMs and in our branches. Today, customers can use our mobile application to get access to our ATMs, and they are doing it more than 1 million times a month. They could also use their mobile wallet to authenticate in our branches. We are bringing self-service capabilities to our bankers, to our tellers, to our contact center platforms, so our bankers can see and use the same screen and experiences that our customers use. As we deploy these digital assets across all of our distribution, all of our properties, all of our bankers, we are creating consistent experiences for our customers, but we are also making it much easier for our team members, and we are also gaining efficiencies because we are building these capabilities once and we have fewer platforms that we are deploying across our distribution and platforms. As you think about all of these various experiences that I talked about, many of them are powered by platforms that we are building, our platforms for innovation. We are making investments in a number of next-generation technologies, and we are doing these in a way that could be used consistently across our entire enterprise, across all of our businesses, and be able to do them at scale. For the interest of time, I am not going to go through all of them, but let me give you a couple of examples. One is our identity management platform. We have been moving away from knowledge-based authentication over the past several years, and that is becoming increasingly important in today's environment. More and more of our customers are authenticating with us with voice, eye prints, facial recognition, fingerprints. In fact, today, more than 50% of our iPhone logins use Touch ID and Face ID. We are also leveraging technologies like device finding, geolocation, pin drop technology so that we could build multiple layers of verification. These make authentication simpler for our customers, but they are also more secure across our channels and our processes. Another important area of focus is data that John Shrewsberry referred to. Data is, amongst many other things, a key enabler of our digital experiences, and we have been making significant investments in building the next generation of our data capabilities. We have taken a horizontal approach across the company. We have one data environment, a data lake. We are implementing common data language and enterprise approach to data management and governance. A big area of focus for us is around safety and security and protecting our customers' information. When you look at big data and combine that with tools like artificial intelligence, that's really powerful, and it would help us make our data work harder and smarter on behalf of our customers. Another component of our innovation is the partnerships that we have been building with fintechs. We have a program we call the Wells Fargo Startup Accelerator, where we make small investments in early-stage companies where we think that their emerging technologies can be powerful, and we could leverage those technologies in creating experiences and capabilities that we are bringing to the market. We engage with these companies. We mentor them. We help them refine their potential breakthrough technologies. They also, in addition to giving us access to their technologies, they also help us to think differently and also think differently specifically around customer experience. Earlier this week, we actually announced the addition of two new companies to our portfolio. So we now have 19 of these emerging technology companies in our portfolio that we work with. Some of the experiences that I showed earlier are powered by these companies as well as other partners that we use. I know that I've covered a lot of information. Really proud of the work that our team has done, the progress that we have made. We remain committed to make investments in this space, in digital, and make sure that we do stay ahead of our customers' expectations. I would say that this is really an important priority, executing on our digital transformation. It is an important priority for our company, and it's also really important in how we are working to advance our consumer strategy. I think there are only a handful of companies that could make this level of investment, do it at the scale that we are making, and make it available to tens of millions, 17 million customers. I think our approach is really unique in terms of how we have brought all of these pieces together, integrated it with our payments capabilities. We have operations as part of my team, so we're looking at transformation from the customer experience all the way to the back end. I think this approach would make digital an even bigger differentiator for Wells Fargo. What we are also doing in digital is helping shape our physical distribution strategy, and Mary will now tell you more about that. Thank you. Not only is the stuff that Avid's talking about and introducing to our customers really cool and engaging, but it's helping to inform our distribution strategy. It influences the way we think about serving customers in our branches because you take digital transformation and powerful physical distribution, and it's a winning combination. We also know that when it comes to their financial lives, our customers want options. 80% of all consumers prefer opening a checking account in person, and 64% of consumers prefer opening checking card accounts digitally. So we need both. We also know that customers' preferences are changing. They want options to self-serve, and Avid showed you a number of those. We know too, though, that very few of our customers are digital only or branch only. They may use digital for the vast majority of their transactions, but they still like talking to people. They get value from visiting branches and engaging in different conversations with our team. Our job is to provide seamless experiences no matter how our customers prefer to engage with us, whether it is at a physical location or digitally, and most importantly, both. It is important to note that there is a shift happening. More customers are using digital, and that is a great thing for us because we know that customers who engage with us digitally have higher retention rates. In the first quarter alone, it is also important to note, though, that we had 132 million teller transactions, and when you add in ATM, that is nearly 350 million physical transactions in the first quarter alone. 350 million opportunities to engage with customers in our physical space. Both of them represent important features for us. One reason that our customers use our branches is because our branches are where our customers are. Across Community Bank, Wealth & Investment Management, and Home Lending, we already have a strong presence in all 50 of the fastest-growing large U.S. markets and all 50 high-income large markets. We do it from a position of strength. The Community Bank has a dominant presence with number one or two deposit share in over 80% of the fastest-growing markets. On top of that, we are in 2 times as many markets as our competitors. I also feel really good about our flexibility and optionality. We have the ability to adapt quickly to changes in the market and customer needs because over 80% of our real estate portfolio is flexible, with owned properties or leases that come up for renewal within 5 years. We are intensifying our co-location strategy. We already do that a lot, and we are piloting new ways to bring our teams together. Sure, there is an efficiency play there, but the most important thing is the synergy that it creates with our teams who are serving our customers. We talked last year about branch consolidation. We have identified the right branches to consolidate, and we are executing on it really well. We consolidated 214 branches in 2017, and we have identified another 300 branches to consolidate this year. The consolidations in 2017 and 2018 will reduce annual expense at a full run rate by $185 million, which is about $15 million more than the number I gave you last year. The closure of these 500 branches will reduce our branch network by 8%, but we expect the impact to total household retention by less than 1%. We continue to watch attrition and evolve our approach as needed, but what it really validates to me is the strength in digital engagement and the quality job our team is doing in consolidations. When I think about 2019 and beyond, we will shift from what is predominantly been a proximity-based strategy to focus on market segmentation for consolidations and divestitures in optimized markets. We will continue to focus on attractive star markets. In 2019 to 2020, we expect probably 500 additional consolidations or divestitures. By the end of 2020, that brings us to a branch network of approximately 5,000 branches with a greater focus on high-performing growth markets and a run rate savings from our 2017 to 2020 reductions expected to amount to over $500 million annually. The consumer strategy that we're talking about and executing on is leading us to rethink how we serve our customers, not only in terms of their unique needs and the value proposition for each segment, but also the way our customers move through their entire financial lives. We've talked before at Investor Day about affluent and small business. We do a good job there, but we also know that we can enhance our value proposition while at the same time enhancing the baseline experience for all of our segments. Our goal is to create lifelong relationships with customers because their journey isn't just within a segment. It's really as they move through segments. If I ask for a show of hands in the room of all of you all that still have either a checking account or a credit card that you opened, your very first one, probably as a student, my bet is there'd be a lot of hands that would go up in the room. But I also bet that it's not the place you've built your financial life. That's our opportunity, continuing to grow relationships with customers that we know well from their first account. We have over 70 million consumer and small business customers, and we have a lot of customer information. We have a lot of customer journey data, and we can predict how those relationships develop over the course of their life. We know that many of our students who open up a deposit account or maybe a Greenhouse account probably also have a campus card, and we may have financed a portion of their education. Particularly in financing their education, we know that they graduate in four or five years or whatever it takes. But we also know based on that information, within the first year or so, they're in the market for a used car. Predictably, 18 months after that, they're in the market for their first mortgage. They then begin saving for a child's education or saving for retirement, and we're along that journey. We will be there anticipating those needs and being one step ahead of our customers in solving those problems. Our consumer strategy enhances what we're doing in affluent. We have an amazing partnership with Jon Weiss's Wealth & Investment Management team, and we work closely together to serve affluent customers. We have over 9 million of them. 1.6 million of our affluent customers hold over $100,000 in deposits and investments with Wells Fargo. Another 7.5 million are what we consider affluent away. 85% of them are primary customers with Wells Fargo. They think of us as their primary institution, but their real money is someplace else. If we just penetrate that customer base at the same rate as the affluent customers that we already serve, not their whole wallet, but at the same rate of penetration, that opportunity is about $2.5 trillion in investments and deposits. In 2017, we invested in that. We grew our premier bankers by 8%. Those are our most experienced and skilled bankers in a branch. We continue to hire more in 2018 to work with customers and invest in a virtual service model, which reflects our customers' changing desires and how they want to be served. We are seeing positive results from this already. Since last Investor Day, over $10.5 billion in closed referred investment assets were referred from our bank branches to Wealth & Investment Management, which indicates to me that bankers and financial advisors are doing a great job serving complex needs of our customers. Similarly, we have a large opportunity with our small business customers. The way I look at it, we have about 1 million small business customers with annual sales between about $100,000 and $5 million. But we only have a partial relationship with those customers compared to those that we serve fully. Think back to the slide that Tim showed you with the bubbles on it of the customers that only have one relationship with us. That is these customers. If we deepen those relationships to the same level that we have with similar businesses that we already serve, that is a $3 billion-$4 billion annual revenue opportunity. It is things like the online merchant app that Avid just talked about. In the last year, we have also invested to grow to about 1,300 specialty bankers to address the financial needs of our small business owners. Today, more than 90% of our retail branches have a business advocate or a small business banker who is there to serve small business customers in their market. We are seeing positive results from this, too. In addition to growth and acquiring the small business primary customers that I talked about earlier, in the first quarter, our small business loan originations were over $585 million, which is a 4.8% increase over last year, and that momentum continues into Q2. April was our highest small business lending month post-settlement. We are really proud of the great work that we are doing to serve customers together. We are doing more for our customers, and we are doing it more efficiently. Thank you. Let us talk a little bit about efficiencies and how we are driving efficiencies between Mary's and my businesses. We are jointly working towards delivering half of the $4 billion company savings goals that John has been talking about. We have plans in place across our two businesses, and we are in the process of executing on those plans. Four big areas of opportunities for us. One is around our distribution and optimizing distribution. Another big one is around re-engineering our operations, our processes. We are also working towards changing our business models, which is around becoming more effective, but also they drive efficiencies. Then making sourcing as efficient as possible. Regarding distribution optimization, Mary has already talked about the work that she is doing with the branch network and in-home lending locations. In our contact centers, we are consolidating sites, especially as customers have increasingly been using our self-service capabilities that we have seen a drop in our call volumes. As we bring more self-service capabilities to the market, to our customers, and also roll out technologies like messaging, which would make our bankers a lot more effective, we expect further drops in our call volumes as well as our teller interactions. I am talking about these optimizations in the context of cost savings, but I also want to remind you that as we free up our bankers' time, they could actually focus on higher touch, higher impact, more complex customer interactions. The second area is about a number of pieces of work that we are doing to re-engineer our operations and our processes. This involves things like creating Centers of Excellence, bringing fragmented like work together. We are consolidating technology platforms. We are bringing more efficient ways of managing and staffing. We are bringing new tools to our team members, which would increase their productivity. We are automating processes. Really important, a big opportunity is around taking paper out of Wells Fargo. We have already done this with customers who have chosen to receive electronic statements instead of paper, and turn off paper. Just to give you a sense of the magnitude of this opportunity, in our 2017 run rate from our customers' adoption of electronic statements, we have $219 million of save already in our 2017 run rate. But we still have a lot of paper around Wells Fargo and in our processes. That is a big opportunity that we are all working on. Also by automating, by making things more structured, fewer handoffs. In addition to the efficiencies, it really would help us to also achieve operational excellence and also enhance our risk controls. New business models, auto is one example that Mary talked about. We have a number of those efforts across our businesses, and they drive savings through simplification, centralization, standardization. Lastly, optimal sourcing, and that is about where and how we get our work done. In some cases, we are bringing capabilities in-house, and in other cases, we are outsourcing, depending on what drives efficiencies and also what is best for our customers. Most recently, we announced outsourcing a significant portion of our print operations. By the way, that is not offshoring. We are outsourcing to a domestic provider. We are, again, very committed to enhance our business capabilities, but also to deliver efficiencies as we become more effective. I think the transformation that we have been talking about would clearly help us to do that. Thank you again for the opportunity for Mary and I to share some updates with you. In closing, we just want to leave you with a few thoughts. Clearly a very challenging year for Wells Fargo, but it has also been an exciting year as we have been focused on building for our future and transforming our company. The customers and what our customers want and need has been at the center of that transformation, and the digital capabilities that we have been bringing is to help us transform how we serve customers, and also how we deliver on our consumer strategies across all of our channels, all of our products, and all of our customer segments. The consumer strategy is focused on enhancing customer value, delivering best-in-class experiences, and tailoring our products and experiences to the needs of our customer segments. A powerful combination of distribution, digital, and data positions us as second to none. What we'd love to do now is invite two of our leaders up to join us that we'd like for you to meet and help answer questions. Michael DeVito is our new leader of home lending. Laura Schupbach, whom I mentioned, runs our auto business. And Bev Anderson, who's Head of Cards and Retail Services, and Ed Kadletz, who runs our Deposits Product Group. We will take questions from the audience for Avid, Mary, and their teams. As usual, we'll have members of Investor Relations walking around with microphones. They are the Catchbox that they'll throw over to you if you need them. But I'd like to open up the floor to questions for the team. Hi, Saul Martinez, UBS. You showed an interesting slide showing attrition rates coming down in recent years, churn rates coming down of your customers. It seems like that's sort of an industry trend, though, over the last few years. I think it dovetails with what was said earlier about the importance of convenience, technology, all those things to maintain and retain clients. But I guess the question is, do you agree with that? And what does it mean? Do you think that will continue? Also, if interest rates rise, will we see greater churn rates? And do you think it has implications for deposit pricing and deposit competitions? Does it mean that in this cycle, or does it suggest that in this cycle maybe deposit competition and deposit betas won't be as pronounced as in the past because these other factors are enhancing the stickiness of your customer base? Yeah. Let me make a couple of comments on that. One is, I think to your point, the digital capabilities that we are bringing, we are seeing a lot more engagement from our customers. I showed some of those data around how much they interact with us, how much they interact with us through all the various channels, how much they are doing. That is clearly one factor. I think another factor is a lot of the customer-friendly measures that we have taken. Tim talked about, for example, the Overdraft Rewind, the alerts that we are sending to our customers. A third is the change in the business model in terms of how we serve customers in the branches, in the contact centers. We have moved away from a lot of focus around efficiency metrics to customer service-oriented metrics. We see highest levels of customer satisfaction in our branches, in our contact centers, in our mobile. We are over 60% in our mobile of top scores. I think it is really a combination of all of those things. When you look at deposit pricing, clearly the competitive market is a really important and big factor. But it is also more than that. It is about all these capabilities, the convenience, the distribution, the product set, the relationships that customers have. Those play a role, and to your point, in this environment, one could hypothesize that these are going to be playing a bigger role because there are more points of differentiation today than maybe there were 10, 20, 40 years ago. Ed, anything you may want to add? Yeah. I think maybe just to tie it into a point that Neil made earlier, I think any time you are thinking about a total relationship, there is transactional activity as well as investing activity. A customer is considering that entire relationship. To the extent that you think about betas and that entire relationship, I think the customer is going to be looking more than just rates. They are going to be looking at that entire relationship, which includes convenience and capabilities and just overall service. I think what we would expect in terms of betas is that we are going to tend to be on the lower end of that scale because we have that full breadth of capability. I think to answer your question on attrition, I think we are really proud about what we have been seeing in the primary customer space around decreased attrition. I can't really comment about how it compares to the competition, but I feel really good about where we're at and the positive trends that we've been seeing in that space. Next question, we have one here in the front as well. We can go to Janine. Can I ask the questioners to stand up so the folks on the stage can see where you are? Thanks. Hi, it's Jimmy Hanna with North Reef Capital. My question's going to tie in part of John Shrewsberry's presentation, which showed the bubbles in terms of the highest performing businesses. Credit cards was highlighted. High return business, you guys have talked to us for a long time about being under-indexed relative to other banks. What that tells me is your deposit customers are getting a credit card from someone else. The question is, who are they getting the credit card from? Is it other banks or is it the monoline players? Then secondly, because this is a huge opportunity for you, how do you get those customers back to Wells Fargo? How do you get a credit card in their hands? What does it take? Is it promotional rates? Is it some upfront cash? I'd love to hear more about that. Thanks. Sure. First of all, imagine how excited I was to see the card business in that bubble. It's pretty good. Thank you for your question. You've heard us talk about card over the last few years, and I think it's always helpful to go back to the context, which is our business until just a few years ago, looked a little bit different than many of our competitors. We were primarily a retail banking card business. We focused on our own customers. We focused in the branch predominantly in terms of ways that we would acquire customers. Over the last few years, however, we've been making changes and growing the business, and quite frankly, we've outpaced the growth of the industry over the last few years, and we've gained share. The good news is there's still just a ton of opportunity in this business. I'd actually like to talk about five levers that we are pulling and will continue to pull to continue to grow the business. The first one is around customers and prospects. You saw John's and Tim's slide around many of our customers who have one relationship with us. The card business is similar to that. We've been primarily focused on our retail banking customers, but there are auto customers and mortgage customers, and we have a lot of work that we can do there to continue to expand our reach within our own base. The second is prospects. In 2016, we started for the first time, really reaching out and extending relationships to new prospects, and we've done that primarily through the digital channels. There's more to do there. We invite customers in through card and then work as we all do, all the time, to extend those relationships to other products and services. That's the first thing. The second thing is about value propositions and rewards. You heard Avid talk about new products that we've launched. They've done very well. There's more of that that we will do and more to come. The second is an award-winning rewards program. Quite frankly, it's one of the best programs in the market today, and the issue is nobody really knows about it. We've got some work to do to tell people about our rewards program. It's one of the best redemption programs in the market today, 100 basis points on redemption value across every category. Ask issuers if they can say that. The third thing is distribution. You heard Avid and Mary talk about all the work we're doing in digital. We are really excited about our digital acquisition capabilities both on us and off us. In 2015, we started digital acquisition with affiliates and media and paid search. That's going very well. 43% of our acquisition now is in the digital space in the first quarter. The fourth is all of this great innovation that you've seen Avid and Mary talk about, Control Tower, instant issuance. All of those things are going to drive real engagement from our existing customers. The fifth is the breadth of the wholesale and treasury relationships we have. Those lead to great strategic partnerships, including co-brands. That's a space that we also have opportunity in. I hope I've given you a little bit of a glimpse on all the things that we can still do to grow this business. We had a question up here in the front. Hi, I am David Knutson from Schroders. I am just curious, the efforts to reestablish trust with your clients and the marketing campaigns, are you seeing any benefits of increasing business with clients or retaining clients or attracting clients that might look at Wells Fargo differently today than they did a year or two ago? I think we certainly are seeing the first indicator was quite honestly the engagement of our team. Our team members love it. Our team members are very engaged about it, and they are a big reflection of who we are to customers. I think it is giving us more broadly the opportunity to engage with customers and tell our new story. That has really been important. I think it has been a platform for the way we are reaching out digitally and physically to our customers with new messages. That, if you think about something like home lending, that is one of the most important things we can do is invest in that overall story. Yeah. What I would say is in the deposits and in our credit card business, clearly when you look back over the last year and a half, our new customer acquisition has been softer than previously for a number of different reasons. But, as you saw from all the investments that we have been making, new capabilities that we are bringing to the table, the digital, we are going out digital, and we are actually growing new customer relationships through digital in cards, in deposits, soon in merchant. As Mary Mack and her team are also rebuilding confidence in our branches, we expect that that would also play a bigger role, as we move forward. I think if you think about our advertising campaign that Tim Sloan talked about, it has just been in the market for the last week. What it does, it tells a story of what we have been doing within Wells Fargo. It is not about assertions of something that we would come. It is about all the things, the proof points that we already have making available. To Deb's earlier point, historically, we have not really talked about those things a lot, in the context of marketing. Now by talking about them, hopefully we would get more prospects interested and non-customers interested to have their business with Wells Fargo as well. We have one on the far side, Dan. Thank you. Gerard Cassidy, RBC Capital Markets. Two questions. First one is quick. I think you said you opened up 19% of your deposit accounts online. Do you have a target of where you think that may get to in two or three years? First quarter was 11%, came through digital. As we are making the experience easier, we are already seeing from the fourth quarter to the first quarter to April, we are seeing that number becoming a bigger number. When you look at industry data and customer preferences, I think Mary showed that in one of her slides. Today, about 40% of consumers have a preference to open a deposit account digital. Sixty percent have a preference to open a credit card digital. So I think from where we are, we do have growth opportunity on the digital and especially on the mobile. Because you could create much easier, simpler, faster experiences in the mobile space. Ed, anything you may want to add? No. I think you hit the key point. Really the key is to be where our customers are at. What we are finding in that digital space is just being incredibly more and more important. What we want to do is continue to provide excellent experiences at the moment in time when a prospect is looking to be buying banking services, to provide them with the exact capability they need to get them on board and engaged very quickly. The follow-up question is, clearly it is a very impressive presentation with all the digitalization, and it would appear that you would have a real competitive advantage against smaller community banks. But when you compare yourselves to the other GSIBs, many of us have gone to their investor days, and it showed us very similar technology. How do you compare yourself to the large competitors? Do you have a competitive advantage over them with your digitalization, or is it really all about execution because everybody's digitalization is about the same? Yeah. I think you are making a really important point and something that I briefly referred to in my presentation. There again, handful, probably three or four large financial services who could make the levels of investments that we are making. In some cases, we have leadership position in new capabilities. A number of the things that I talked about today, we are first to market. In others, they may be bringing new capabilities to the market. But again, I think what is really unique about what we are doing is how we have organized ourselves and how we are executing around our digital capabilities. The team that we have within my organization, Payments, Virtual Solutions, and Innovation, it is not a think tank. It is not just a channel management. We have the P&Ls for our deposit businesses, deposits, credit card, merchant, treasury, from consumer to small business. The integration and overlap of those businesses is really important, and many of them are transforming by digital. Having digital and innovation as part of our team, having operations to be able to look at it end to end and look at not just the front-end interface with the customer, but the entirety of the process from the front end to the back end, be digitized. The platforms that we are building for innovation, if you think about data, artificial intelligence, robotics, identity management, all these various things that we are doing, we are doing them now at an enterprise level where we have COEs and the tools that we are bringing in are scalable. They are the same tools that we use across the enterprise. So whether you are going to come through deposits or card or any of the other businesses, it is going to be a consistent experience for the customer. I think our approach is going to be what enable us to really lead the pack and differentiate the Wells Fargo offering. And we have seen already the efficiency of doing that in the speed to market. Absolutely. When we are pulling it together. Yeah. That is a really great point. When you look at a number of these things or capabilities that I talked to you about, they were not even in the works a year ago when we had our Investor Day. Just think about the agile processes that we have brought into being in partnership with our technology teams. It has really helped us to also be more effective and faster at bringing these capabilities to the market. We have a question in the front. Hi, good morning. Erika Najarian from Bank of America. The question I most often field from your investor is one I can't answer, and it has to do with the culture and how it's evolved within consumer and small business banking. Could you give us a sense of where we are? On one hand, you're telling us that the rubbing opportunity is to continue to sell deeper into your current client base. But if you think about the root of the sales practices problem, clearly the practices were not sound, but that was the intent. If you could give us a sense of how that's changed or how that's evolved from a team member perspective. Second, of the $2 billion of savings that your department is responsible for, how much of it you would characterize as low-hanging fruit that a fresh set of eyes was able to identify versus costs that are naturally going to be optimized as consumer moves into a more digitized world, front-end and back-end? Let me start and back up just a minute in talking about culture. What I think about is environment in our branches and contact centers. The first thing we did, as you all know, is we eliminated product sales goals that were really focused on a product introduced to a customer and reoriented our team around customer experience. Their rewards have been based on the experience we create for a customer. We've gone to team-based, Tim mentioned that, team-based rewards in our branches largely, and the ability for some of our top-performing, most experienced bankers to also earn individual incentives based on their production. But everything is aligned around customer outcomes, not our numbers of things that we were doing, but are our customers doing three things? Expressing their delight in their interaction with us. That's the customer experience. Are we growing our primary households? Those are customers who use us in a way that tells us that we're their primary institution. They make that choice. They value the products and services that they have, and they use us in that way. The third one, which I think is the ultimate expression of a customer's confidence in the team or the institution that's serving them, is the growth in household relationship balances across loans, deposits, and investments. Also investments being important because we never want a banker or a teller not to introduce one of John's team when it's the best thing for the customer, even though that might be another part of the organization, but oriented around the customer outcome. The alignment of everything we're asking our bankers to do around customer outcomes has been a big shift as opposed to the number of things that we were doing. It's been a shift that I think you see in our team member turnover. They like it. It feels right. They're serving customer needs and being rewarded for creating the experiences that our customers tell us are great. We increased the number of customer surveys that we get by about 50% so that we could get more feedback from customers and are asking now what we call tell me why questions. If you gave us a really good score, tell me why, so that I can take that feedback back to the branch level. Or quite honestly, if you didn't have the kind of experience we would want you to have in one of our branches, tell me why, so that we can change that. That's been a really important part of our reorientation. We've overlaid our entire program, too, with risk metrics that measure the activity on an almost real-time basis among a number of things that continue to grow of things that we want to keep an eye on, and that's an overlay. It really wraps the whole plan around it. We've invested over 300,000 hours of training in our managers so that they reoriented around from counting things to coaching the team and helping our team get better at meeting with customers, understanding needs, and solving problems. Some of you all have heard me say this before. We evolved from being really nice. Right after the settlement, we became the nicest bank in America. You go into our branches, and we were delightful. But what our customers want is more. It gets into the deepening. Our customers come to see us because they want help solving their financial problems. That's not just an opportunity for us, it's an obligation when we think about serving customers. It was really reorienting our team members around what really truly adds value. It's understand what the customer needs and then help the customer solve their problem. That's been a big shift, and I think we've been, V mentioned it, we've been really working on building confidence across our team because they read the newspaper, and so they want to know that they're doing the right thing. That's why the activity management was really important. We gave clarity to our team that what you should be doing is meeting with customers, understanding needs, solving their problems. I'll start with the fresh set of eyes, Avid, and then hand it to you or anybody else. I would tell you that a couple of things we've done that really was walking into, all right, what opportunities might be sitting right in front of us? One was the early stages of our network optimization of the physical distribution. We had branches that were across the street from each other, and we absolutely could consolidate with very low risk. So those have been the first stages of our branch consolidation. The other is something that we're engaged in now, which is introducing our customers to all of the convenience that putting banking in the palm of their hand gives them. We want our tellers to be introducing customers to our mobile app because customers love it. And that was something that we hire more millennials into the Community Bank than any other part of the organization. Our team members know that they do everything on their phones, and so why wouldn't our customers want to? That's been a really an opportunity that's really right in front of us, allows us to reduce costs, but probably most importantly, engages our customer at a deeper level. Yeah. The other thing I would also say is, the mix of the initiatives that I talked about, some of them are low-hanging fruits, and some of them involve investments and other things. But I think the difference from maybe 2 years ago is that we've become very intentional in terms of how we think about it. And one example is when we look at the calls coming into our contact centers. Why are customers calling? What are the pain points? If we have something available, password reset, we would get a lot of calls around password reset, but it's available online. What about the online experience is not working the way that customers could just do it within seconds? Because they don't like to pick up the phone and call us and be on hold and authenticate and call to talk to someone as well. We've become very intentional to understand what are the customer pain points, how can we address it, how do we make it a priority in our digital roadmap? And we're seeing the outcome. We're seeing fewer calls and more satisfaction by our customers. And some of those things take a little bit more time, but we're looking at them more as programs. It's not a one-time initiative to get to the $4 billion, it's a way of running the business, a way of doing work. The other one I would add, I think our auto story has been a great example of a fresh set of eyes in the business that could not only look at the transformation from an efficiency standpoint, but de-risking that business. Anything you'd add, Laura? No, but I think that's a good point. I think that we were able to bring in some new leaders who had financial services experience, but not auto experience, and marry them with the people that knew the industry really well and really reinvent the entire model. We've reached our time. I appreciate everybody's questions. Mary, Avid, and team will be available at lunch. We're going to head to lunch right now. It is in the room right next door. As a reminder, your lunch table is on the back of your name badge. So if you want to find that table, you'll have some Wells Fargo executives to interact with. Thank you to Mary, Avid, and team. Okay. Okay. Ladies and gentlemen, your event is about to resume. Please take your seats. Just give in. It's okay. Pretty straightforward line. Watch the wind. Deposit checks anytime with the number one mobile banking app. Ladies and gentlemen, please welcome the Head of Wealth and Investment Management, Jon Weiss. Okay, good afternoon. Good afternoon. I hope everybody had a great lunch. I would like to add my welcome to all of you. I hope all the blood hasn't sort of settled in and around the stomach. You can get something going. This is my first opportunity to address all of you as the head of Wealth and Investment Management, and I am very excited to talk about a business that we think has tremendous growth potential for the company. Our team shares a commitment and an optimism for how these businesses are positioned for the future. This afternoon, I thought we would talk a little bit about the businesses we are in, how they are performing, how they are positioned for the future, and why they are important to you, our shareholders. The Wealth and Investment Management business is a leader in managing the savings, investments, and retirement assets of individuals and institutions. We are a scale business. Over $17 billion in revenue, $2.3 trillion in client assets, 7 million-plus clients, and more than 14,000 FAs. We divide into five client-facing businesses. Wells Fargo Advisors, which is the top three retail brokerage. Excuse me. Those are aspirations. Top three retail brokerage. Our Private Bank, which is a major wealth manager. Abbot Downing, which is more of a boutique model servicing family offices and ultra-high net worth families. The asset management business, Wells Fargo Asset Management, and the institutional retirement business. All of these businesses draw on the investment strategies and fund level research of Wells Fargo Investment Institute. As you look at this lineup, we are the only firm with this kind of scale and this completeness of businesses. The core attributes of the business are that we are client-driven in everything we do, first and foremost. Secondly, we are an open architecture firm. We are committed to bringing the best products from across the industry. We are disciplined both from an expense management standpoint and from a risk management standpoint. Lastly, we are a very collaborative culture, both within Wells Fargo's Wealth & Investment Management business, but also across the overall company. We think all of these attributes and all of these assets position us very well for future success. We work with clients across the wealth spectrum, from mass and emerging affluent clients to ultra-high net worth clients and into the institutional market. We do straddle the consumer and wholesale franchises of the company. We think there is just huge opportunity. To some degree, this business was managed a little bit in a silo historically, and we think there is a huge opportunity, as you heard a little bit from Mary and Avid earlier, to connect our business more closely with the consumer side. We also think there is some great connectivity to come on the wholesale side. You heard earlier from Avid and Mary how important that consumer strategy is to the company. You will see that we have segments that are consistent with the segments that Mary and Avid described. We have developed a comprehensive offering that is tailored to these individual segments. For mass or emerging affluent clients, we might interact with them through our digital offering, through Intuitive Investor or WellsTrade. Whereas for a high net worth or ultra-high net worth client, we are obviously going to work more closely with them on a sophisticated and tailored offering to meet their more complex needs. We also follow these clients on their financial journey. While some may come into us as a mass client or even a student earlier in life, or an affluent client, wherever they might come into us on this spectrum, we are looking to follow them over the course of their financial journey and serve them more and more as their wealth builds and as their needs become more complex. As we follow our clients and meet their needs, we also achieve important results for Wells Fargo. As I mentioned before, we have significant scale, and as a result, we make an important contribution to the company, which in 2017 was about 19% of revenue and 12% of earnings. The composition of our revenue is about three-quarters non-interest income, which is an important source of non-interest income to the company, and about a quarter net interest income. We are highly efficient from a return on capital standpoint at 21% ROE in 2017. Our results in 2017 reinforced our consistent track record of performance that has been delivered over a decade now. You will see that assets under management continue to climb. Significant growth on the advisory front. You will also see a balanced The growth rate on that recurring We have clearly benefited On direct expenses over the last couple of years. Let us transition now and shift to where we think the business is headed and where we think the industry is headed. As we step back, we see four almost tectonic shifts that are affecting the industry. They are not new, but certainly they are speeding up the transformation of our industry, and they are affecting client expectations, and we are accelerating our own strategies to address them. Let us take demographics. There is going to be, over the next 10 to 20 years, a huge transfer of wealth, estimated at about $30 trillion, as the baby boomer generation ages and passes its wealth on to the next generation. We want to be important to that transfer. We want to be involved in that transfer. At the same time, you have millennials entering their earning years, and they are likely to transact with us in a different way than their parents, or previous generations. You also have an advisor population that is aging across the industry, and we are not immune to that. There will be a transfer to a new generation of financial advisors. The way we are facing off on these demographic issues is we are tailoring our products to the individual segments that I described earlier, and we are investing in delivery channels and next-generation advisors to reach them. As far as technology is concerned, the client today and increasingly is looking to transact with us anywhere, anytime, in any way they want. We need to adapt to that and anticipate that. We are marrying new technology investments with the advice that we have developed over many years, to provide a new way to get that advice to the client. We are focused on simplifying the experience, which clearly echoes what you heard from Mary and Avid Modjtabai earlier, while improving automation across our platform. Competition in our business comes from traditional wire house firms, from monolines, from emerging fintechs. It is a crowded field. In business as in life, you focus on your competitive strengths. Our competitive strength is that we are an integrated full-service brokerage. We are one of very few firms with the kind of scale and reach that we have. 70 million customers across this company that are, in many cases, good prospects for us. A broad and diverse product set that a monoline simply cannot offer. Knowledge of the client at the same time that is very focused and driven by close interaction between wealth advisors and financial advisors and their clients. Then a deep investment acumen that we continue to invest in. Lastly, from a regulation standpoint, clients and regulators certainly expect and deserve greater transparency, security, and trust. We are deeply focused on enhancing our client service, on improving our processes, and on making sure that we are tight from a governance standpoint. A huge advantage to address the evolving landscape that we are dealing with is our complete integrated offering, as I said before. That starts with putting the client at the center of everything we do. Pretty much everything we do grows out of knowing the client. We take a goal-based planning approach and an outcomes orientation to our interaction with the client. We are trying to understand his or her financial needs, goals, values, attitudes, life events. Then we are entering into a continuous process with the client around discovery, around assessment, advice, documenting that advice, reviewing that advice regularly with the client, and it is a continuous process. As we understand the client better and understand the client's needs, we are looking to deliver our capabilities, whether those capabilities are within the Wealth & Investment Management group or more broadly across the wholesale and community banks. An important piece of this is having true depth and breadth in terms of brainpower. We deliver this through Wells Fargo Investment Institute, which allows us to ensure consistency of advice across the platform. This is in recognition that in addition to knowing the client, delivering outcomes requires expert advice. We call that investment intellectual capital, and that capital feeds the planning and advice process. It drives performance, and it elevates our brand, which we want to increasingly define us as an investment house of choice. Let's turn to some of the client-facing businesses. Let's start with the brokerage business. In WFA, planning remains core to the value proposition. It enables us to discover what it is the client needs. Our goal is for all clients to have an investment plan and then to align their portfolios with that plan. We have a strong conviction that better planning and better knowledge of the client leads to higher client loyalty, increased client confidence, better portfolio performance, and ultimately better client outcomes. Planning is backed by delivering where, when, and how the clients want advice and support. We are equally focused on attracting next-generation investors as clients and next-generation talent to our workforce. Capabilities like Intuitive Investor offer a compelling interactive experience for newer clients through technology. If you have not checked it out, Intuitive is right outside. I am a client. My kids are clients. It is a really interesting way to bring the next generation of investor into investing. Importantly, Intuitive is attracting the clients it is designed for. 70% are existing community bank clients, but they are new to Wells Fargo Advisors. Over two-thirds of them are next-generation clients, Gen Y, Gen Z, Gen X. We are also focused on programs to build a more diverse population of next-generation FAs who will better reflect the society in which we operate, but also, and really most importantly, they will better reflect the new next-generation client. We see tremendous opportunity with this brokerage business, which is the biggest piece of the wealth and investment management business. Part of it is in increasing the planning and outcomes. Part of it is most certainly attracting new clients. Part of it is deepening the product set, including the financing product, the lending product that we offer these clients. Turning to wealth management, we have two brands within the wealth and investment management group that focus on higher net worth clients and ultra-high net worth clients, The Private Bank and Abbot Downing. Both groups are executing a strategy to bring premium services, excuse me, that meet the complex needs of this client base. We continue to move The Private Bank upmarket, which is a trend you have heard about from us before. Both groups leverage a team-based model to deliver sophisticated planning and advice that is tailored to the client. In both of these groups, it is also important that they benefit from a deep partnership, not just across wealth and investment management, for example, with the brokerage business, but also more broadly with the company because this is a client group that demands and benefits from the deep capabilities of Wells Fargo across the consumer and the wholesale businesses. Whether that is lending against a real estate investment or offering investments out of the investment banking side of the house that are unique to a high net worth appetite. You've heard the asset management story at this forum for the last couple of years, and this business builds on a strong legacy. But at the same time, it's in the second year of what we think will be a multi-year repositioning effort. It's a business of scale, $500 billion in assets under management, that is. We hired Kristi Mitchem in the summer of 2016 to lead this business for us. Kristi is a terrific leader, and you're going to hear from her later. The business has had a solid performance and growth track record. It's a diversified client base, and it has a diversified offering. We've been investing heavily in the business, attracting great new talent and delivering strong performance. While it will take some time for all of that to translate and bear fruit in terms of higher asset levels, we're starting to see some improvement there with modest growth last year. Three keys to our growth strategy within the asset manager. First, client outcomes and performance. Ultimately, performance matters. You can see on this chart that we rank on a risk-adjusted basis, which is the way we think it's right to look at this, in the top 25% over a 10-year period and in the top third over a three and five-year period. Beyond performance, we're investing in capabilities to help clients better define their outcomes. That's involved significant hiring on the product development front, focusing on multi-asset solutions, focusing on systematic and factor-based investing, and focusing on alternatives to broaden our product offering and freshen up our product offering. Lastly, we're strengthening our client service and delivery, which has involved reorganizing our sales force and some significant hiring on this front as well. Like the asset management business, the retirement business serves important needs of institutional clients. Here too, we are a national leader. Here, the client is the plan sponsor, and the participants are nonetheless also very important constituents to us, which appropriately we want to translate over time as it makes sense into clients of the rest of the business. We use research and a data-driven approach here to drive plan health and participant outcomes. We're known for innovation in this business. For example, we'll soon be launching a new version of what we call Target My Retirement, excuse me, which offers a personalized investment option for 401(k) participants that competes with target date funds. This is also a business that draws very heavily on the partnerships across the broader Wells Fargo, because very often these plan sponsors are going to be clients of the bank elsewhere in wholesale. How does all of this fit into the broader Wells Fargo? Our business represents an important extension and deepening of the product capabilities and the client relationships that exist across the consumer and wholesale platforms. Put simply, the greater the offerings that the bank has, the more we can do for clients, and the greater the number of clients that the bank can bring to the wealth business, the more clients we can offer our capabilities to. We work through two-way partnerships with both the wholesale and the consumer sides of the bank. So for example, the $10.5 billion of referred investment assets that came over the last 12 months from the community bank relationships into the Wealth and Investment Management group. That's a huge source of opportunity for us. Or the mortgages and auto loans that originate with our clients, but that ultimately get served by Mary's consumer lending business. On the wholesale side, monetization proceeds from an investment banking transaction, which if we have the relationship or develop the relationship on the wealth management side, come this way. Or M&A opportunities or IPO opportunities out of the client base in Wealth and Investment Management that can be serviced and executed by the investment bank. These relationships, as often happens, these relationships are driven by people, right? So it's not incidental to this that Mary Mack came out of the Wealth and Investment Management business, knows our business well, is an advocate for our business within the community bank. Likewise, that I came out of wholesale, know that business well, and am a strong advocate of developing important relationships across the two businesses. As we look towards the future, certainly digital and the importance of digital only continues to grow. Striving to deliver experiences that meet client needs where they are, that's what we're trying to do. We're focused on simple and straightforward access, aligned with client preferences. If this sounds familiar, that's because it's completely in alignment with the technology investments you heard Mary and Avid talking about as part of the consumer strategy. Our focus is to enhance the foundation that we already have from a technology standpoint, to build new experiences, and to invest for the future with an eye to ease of use, reinforcing the segmentation strategy that we talked about earlier, and balancing costs while ensuring service quality. Our ability to execute on all of this that I've described so far really depends on discipline as much as it does on the creativity, talent, and experience of our team. Discipline does come down to execution. One of our most important commitments is to deliver on our efficiency initiatives. For the Wealth and Investment Management group, this means generating a run rate cost savings of $600 million by year-end 2020. Our focus is around client segmentation, around operational efficiencies and reducing redundancies, around centralizing utility functions. The work towards identifying that $600 million has been done. The work on implementing it and planning the implementation for it is well underway, and we are confident that we will deliver on our commitment here and, in fact, exceed our commitment. Here we've laid out the long-term targets to measure our progress. So what are those targets? To drive revenue growth through the cycle at a 4%-6% rate with, importantly, a continued emphasis on recurring revenue to reinforce the stability of the business. We aspire to a 30% pre-tax margin, which obviously will reflect the efficiencies that I talked about a minute ago. We want to remain the high ROE business that we are with a target of a north of 25% ROE. We made good progress towards these goals in 2017, and we believe they are very much within reach. So, in summary, before I invite up my team, or a portion of my team, we have conviction within Wealth and Investment Management that our strengths, our strategies, and our execution will continue to set us apart and will allow us to deliver value for our clients and results for our shareholders. Thank you. That's when you applaud. Thank you for that unprompted applause. Now, I want to invite three members of my team, David Kowach, who heads Wells Fargo Advisors, Kristi Mitchem, who's the head of Wells Fargo Asset Management business, and Jay Welker, the head of The Private Bank, to join me. Other members of my leadership team are also here. So if you ask a question that we can't answer, we'll punt it over to them. That is Darrell Cronk, who runs the institute, over there. John Papadopulos, I know is in the room somewhere, who runs retirement. Jim Steiner, who runs Abbot Downing. Where's Jim? Okay, great. Doug Steele, our COO, who are also all in the audience. So welcome, folks. Thanks. I guess we open it up to questions. John? Yes. We'll open up to questions, and we can start right here with John Pancari. If you could stand, John, that would be great. Yeah. Thanks. John Pancari, Evercore ISI. I just wanted to see if you could talk about FA attrition in the business. Yeah. We've been hearing a lot about hires made by other organizations amid all of the issues that you're dealing with at Wells. Can you talk about the attrition? Is it trending the way you've expected and how you're approaching it? Thanks. I'm going to pass that to David. John, the attrition in the first quarter is down about 24%, 25%. From my perspective, that's actually a good trend. I like that trend. The converse of that is recruiting is a little slower than it actually has been in the past. Good news part of the story for me when I look at the business is that the advisors who are leaving us, they do about 50% of the production of our core advisor population. In other words, the advisors who are staying are better than the ones that actually get up and leave, and that's a real positive. Other questions? I do have a question through the app, so I will ask you that. You highlighted the revitalization of the asset management business. How far along are you in that process, and what are your long-term aspirations? Kristi, why don't you talk a little bit about the asset management? Sure. Absolutely. Just by way of context, I joined Wells Fargo about 20 months ago. We are about 20 months in. I would say, generally, the way that we think about the repositioning of the business is that its trajectory should really sort of follow the natural cadence of asset management, which tends to be about three years, in terms of a track record, in order to get on a platform, in order to get picked up by consultants. I would say four years to begin to really rev, in our sales channels, and five years to sort of get to completion. The way that I would think about our revitalization is that we are 20 months into it. You should start to see what I call green sprouts, hopefully in about 12 months, and then we should be sort of cooking by year four or year five. In terms of our aspirations, and this is a question that I actually get a lot because I think sometimes there's this sense that when you sort of move into a repositioning or a revitalization, you should be really focused on growth in AUM. I think about growth in AUM as really more of an outcome of doing the right things. And the right things strategically, I think for us in asset management, are actually threefold. First, it's about getting performance right, and John highlighted that on the slide for you. And we've actually seen a substantial improvement in performance over the course of the last 12 to 18 months. The environment has been much more conducive to asset management in the active space, and you're seeing that sort of flow through into our particular strategies. So performance is key. The second thing that is key is relevancy. You want to make sure that you have the types of offerings that are actually relevant to your client base at large. And so for here, it's actually extending into lower cost, more quantitatively derived strategies in the office space, and also extending outside of pure public markets into the private arena, particularly in debt markets. And then the third thing that I would say is you need to kind of wrap all that up in a bow. Just like we look to deliver outcomes to our clients in the retail space, we need to look to deliver outcomes to our clients in the asset management space. One of the biggest places that we've placed emphasis over the last 20 months is bringing in, I think, probably the best team in the industry in terms of multi-asset class solutions. We hired Nico Marais from Schroders to build out that team. Behind him, we've made 20 very substantive hires. And we're already seeing a tremendous pipeline develop as a result of those expenditures, which again, I think will play out over time. For us, it really is about those three things, driving performance, making sure that we're relevant, and making sure that we deliver outcomes for our clients. And that will be the true measure of success. Thanks. I think we have a question over here. Yeah. Yeah. Brian Kleinhanzl with KBW. A quick question on the long-term targets, maybe starting with revenue growth at 5% results in 2017. Is there a way to break that down between what was market appreciation versus organic growth, and also on the long-term targets, how that plays out? Also on the pre-tax margins, can you give us a sense of what the pre-tax margins are by the individual businesses and who has the best opportunity to grow those margins going forward? Could you ask the second part of the question again? Sorry. Yeah. It was the pre-tax margins by business. It was 26% in 2017, long-term target of 36%. Yeah 30%. What are those by business? Yeah. I do not think we break them down by business. I will certainly answer the first part of the question. If you guys want to talk about your margins, you go right ahead. How much of it is asset appreciation versus organic growth? I think over the last 12 months, the answer is it is significantly impacted by asset appreciation. There is no question about it. You saw the balanced mix of the portfolio. The next question is, okay, if markets were up close to 20% in 2017, why were not you? The answer is we have balanced portfolios that have a fixed income component and a liquidity component and an equity component. We have benefited from solid growth, but certainly not double-digit growth. You guys should talk a little bit about sort of the accumulation of organic assets from out there. There is a fair degree of churn that occurs, because you saw the $10.5 billion of new assets that came into Wealth & Investment Management from the Community Bank. There is also a certain amount of liquidity that goes out as clients use their money for expenditures. I like talking about growth because I think that the brokerage business right now is a core growth business. If I look at the dynamics of where we are right now in terms of what we do for clients, the opportunity in the business I am running is a big opportunity. Just think, high-impact advice and service to clients are our number one priority. Nothing more important than that. I think about just by taking a planning-based approach, we have got a lot of room to run in terms of making sure that clients have well-allocated portfolios. John showed a slide on that earlier. Well-allocated portfolios do better for clients. Last year, 230 basis points outperformance, well-allocated versus non-well allocated, 252 basis points the year before. You get better allocation by increasing your percentage of client alignment in transactional accounts or increasing your advisory percentage. Today, brokerage is about 32%, 33% advisory AUM. There is opportunity for growth there. For me, if you look at the spread businesses, our opportunity to increase client loans, so loan growth from brokerage clients, we are way under-penetrated relative to our competitors, but more importantly, relative to client need. If you think about FAs, financial advisors' clients, outside of the bank footprint, only 18% or so of those clients actually have loans with Wells Fargo. Right. There's a real good opportunity for us to grow our spread revenues just by helping clients get what they need. I know they've got lending needs. They have like $300 billion in loans outstanding with other banks and brokerage firms. I don't want them to take on more debt. I just want my share of the debt that they've already got because we did a better job of doing plans around what they're doing. We have a lower share of the debt business of our clients than we do with the rest of America as a company. There's just a huge opportunity. It's the same opportunity that Mary talked about, or similar opportunity to the one that Mary talked about, which is that her clients have investments away from Wells Fargo Advisors. How do we get the right share into this bank? Other questions? Did we answer enough of your questions? Okay, great. Janine, go ahead. Hi, Nancy Bush from NAB Research. We hear a lot, read a lot about artificial intelligence, AI, and how it's going to change the investment business and displace many of the people sitting in this room. Can you just give us your thoughts about that? Hype, truth, real, not real, et cetera? Well, I'll take a stab at it, but then I think both Kristi and David should talk a little bit about this. Look, I think there's always going to be a human element to investing. All right? But it will vary with the individual, and some people, you may have kids where you've seen this, they'd really rather communicate through a phone or some other device than with a human being, and they actually trust what's coming out of the digital world more than they do out of the human world. One of the reasons that in Intuitive, we marry the technology and the resources of the Wells Fargo Institute with human contact, which is the difference with our robo solution, is that some people actually do want to talk to a human, and some people don't. I think there's always going to be some element of human involvement, but I also think that artificial intelligence allows you to take advantage of trends and data and mining data in a way that humans can't do anywhere near as efficiently. Maybe Kristi and David would like to talk about that. Yeah. I think for the asset manager, we really see the application in two spaces. The first is really what we call sort of more data-driven distribution. So actually using all the data that we have, particularly in the retail side of the house, to really understand which advisors are most likely to engage with us and ultimately buy and retain our products. I think there is a lot more that we can do in that space, and we're investing in that space, again, in order to use that data much more intelligently and be more targeted in terms of how we actually go out into the field and also just support that targeted messaging up with a much more digitized capability. That's one area for us. The other area where we see AI as being potentially very helpful is in the investment management space. Now, I think we're very, very cognizant that we're not a Man and we're not a Two Sigma. We are a long-term investor. If you think about it, the machine really can only think as fast as it can actually get the data to input. To the extent that our timing horizon is very long, well, then there's only so much the robot can do, if you will, to kind of speed that up. But I think what you rightly mentioned is where AI can really help is for us to just scale our thinking more, to take more data into account. What we're trying to do is take parts of our investment process, where again, that expansion and that breadth would actually help us look at more and embed that in. It's less about sort of replacing a PM with a machine and more about enabling a PM to actually look broader and more expansively because he has the machine or the robot at his or her side. My job is to figure out how to own the emotional connection between people's lives and their money. That is a fabulous opportunity with digital. What you looked at outside with Intuitive Investor, if you haven't seen it's really cool. It's a great way you can manage client accounts. That's just the beginning. I don't think the real opportunity with AI in the brokerage space is around managing client money. I think it's enabling clients to better picture what their life's going to be like. Those pictures show up in your houses every single day. If you think about your family, Pinterest, and how you can actually imagine the vacations you're going to go on in the future, or you can imagine the pool you're going to build sometime in the future. I think we are going to reimagine how planning works in clients' lives and have it paint a better picture for our clients about what they want to achieve in their life. Then behind the scenes, we're going to teach clients how to achieve those dreams. For me, I think in the past, we spent money building tools for brokers to use with clients. The future will be about building tools for clients that they end up sharing with their financial advisors. I totally think that technology will change the brokerage business for the good. I'm totally excited about it and how it will improve the client experience and how we, because we're Wells Fargo, how we're going to lead the way in the industry around that. We probably have time for one more question. Any other questions? We have one right here in the front. Hi, thank you. Peter Blasi in Blue Fort Capital. I'll follow up on your comment. How would you characterize your tech stack in providing technology to advisors? There's a big trend towards more productivity per advisor. Second, when I look at your advisory, as a percentage of total assets, it's sort of lagging. Are those linked together? How are you going about solving those problems together? They're not linked together. Average productivity is up about 7% year over year. It's actually pretty good growth. I feel good about that. The technology platform that we put on the desktop for advisors, I kind of feel like it's pretty fungible. I think ours is good. I think Merrill's probably good. UBS is probably good, too. I think everybody has about the same tech that's on the desktop today, but it's focused on the wrong thing. It's focused on brokerage of the past. It was built for advisor capabilities. We need to retool so that we're more focused on client capabilities, and I feel that's the big driver of the future. In terms of advisory adoption, our advisory growth has been strong. Our advisory growth going back five years has been strong. And we lag someone like Morgan Stanley in terms of advisory adoption, primarily because when we came out around the DOL, we came out and supported choice for clients, which I feel is right for clients, by the way. I totally see reasons that companies want to provide advisory-only options for clients under regulatory rules. But I think what we're going to find in the SEC rule is that choice for clients in terms of both brokerage and advisory accounts is good for clients, and we'll offer clients what's best for them first. I think your business model must focus on the client, and it can't just be good for us, or that fails long term. I think that's actually a good point to end on, right? Yep. Thank you very much. All right. Thank you for your questions. Thank you. Now it's my pleasure to introduce Perry Pelos, who runs the wholesale business, who's going to take us through wholesale. Thank you. Thanks, John. I'm glad I have the coveted after-lunch pre-cocktails spot. Glad that most of you are still hanging with us. I'm Perry Pelos. I run the wholesale bank at Wells Fargo. Wholesale banking picks up where Mary Mack's team leaves off in small business. So we handle customers from the business banking size of about a $5 million company up through multinationals, and many of the specialty businesses that are decked against that client base like asset-based lending, like securities, real estate, equipment finance are part of the wholesale bank. What I'm going to do today is give you a brief overview of the business. We'll talk about our risk focus in the business, which I think is very important to understand. I think if you understand that, you'll understand the value of the wholesale business at Wells Fargo. Then we'll talk a little bit about how we think about customers, where some of the future opportunities might be, and then we'll wrap with a look to the future. I was in New York a few weeks ago with Vivek, so I put some slides in there just for you, talking about what we're going to do in the future. So hopefully you'll enjoy them as much as I do. So quick overview of wholesale banking. We're about 10% of the team member base at Wells Fargo. We represent about a third of the revenues and about just under half of the income of the bank. We have team members in countries all over the world. We've got 586 domestic locations as well, and in many of those locations, we are the dominant player in the marketplace in the businesses that we do. We've had a pretty solid financial performance the past few years. If you deconstruct how we got to the bottom line, our revenues between 2016 and 2017 were affected by a couple of major things, which I think John and Neal have certainly gone over in the quarterly updates. Just to recap, the changes in the tax law really affected some of our businesses in wholesale to a great extent. Then we also had a couple of business dispositions which affected the comparisons there. The provision expense improved quite a bit, largely because of the improvement in our energy portfolio, which is part of our corporate banking group. Then our expenses are elevated for a couple of reasons. One is we have some expenses that are still associated with the businesses we acquired from GE that are going to begin to roll off, and I'll talk more about that later. The second thing is we have elevated compliance costs, which I'll talk about later as well, which we expect that as we get better at managing the risk apparatus, not only within wholesale banking, but within Wells Fargo, that those will moderate and become more business-as-usual type activities for us. We are targeting a 15%-17% ROE and an efficiency ratio below 50% as a through-the-cycle target for wholesale banking. Just to recap, the 2017 year-end numbers for these were around 13% ROE and just over 55% efficiency. So there's room to get better. The way we're going to get there, a few of the strategic drivers of improvement, one will be to leverage our scale more effectively than we ever have. We have largely run wholesale banking as a collection of businesses historically and done very well doing that. What we need to do is bring the things that are alike together and run them more effectively. So think of things like consolidating loan centers, where we process things more effectively that look and feel the same. This isn't talking about how we interface with the client. It's largely going to be things that are invisible to the client. It's using technology, and we'll talk about the wholesale lending transformation to improve the ability to interact with customers. It's to bring the customers closer to us. We think we've got great opportunities, and using scale to our advantage, we can improve the returns in the wholesale business very significantly over the next couple of years. We're going to reimagine our business with our customers. We have great strengths. We're going to build on those strengths, but the corporate and investment banking partnership, which we're going to give you an update on during this presentation, is an example of that. We've had separate corporate businesses, separate securities businesses, separate financial institutions businesses. For the first time, we're bringing those businesses closer together, and we think that's going to deliver a better customer experience at a lower cost. We're going to maintain our strong credit discipline. Again, it's largely been invisible through a very benign credit cycle, but as we all know, cycles have a way of repeating themselves, and we're going to be prepared for it. I will talk quite a bit about that to give you an idea of how we are preparing for that next opportunity. Then finally, we are going to complete many regulatory remediation projects. We have those in wholesale banking as well. We are going to do that with an eye to not only completing the remediation project, but to build an infrastructure so that we are better at doing it in the future. We have fewer problems in the future. This is not about completing a task. It is about rebuilding an infrastructure so that we can manage these things more effectively because we have never really thought about our business that way. Taking a project across wholesale banking and doing it well has traditionally been difficult for us because we have always done things within the lines of business, and that is not the best way to manage cross-business projects like the ones we have to do. Let us highlight our risk management disciplines. For many of you have seen this before, but maybe I will give you a couple of different data points to focus on. First off, our loan portfolio is very well diversified. It is about 25% commercial real estate and about 75% C&I. You can see it laid out by major business lines on the page here. On a year-over-year basis, we grew about 3%. We grew about 3% across C&I and 3% across real estate. Let me just point out a couple of things here that may not be as apparent to you. Middle market banking is, as you know, a very core business for us, but the growth rate does not seem, it seems to lag some of the others. You may ask why that is. Well, part of it is the customers in middle market banking are also customers of our Wells Fargo Capital Finance group. They are also customers of our Equipment Finance group. You can see those groups grew much faster, and part of it was because the clients migrate to what their needs are. It is the same customer. It may be a middle market client, but they are taking advantage of our equipment finance opportunities or our capital finance opportunities. If you think about it in terms of where we are in the cycle, those are better opportunities for us to finance as well from a risk-reward standpoint because they typically have collateral, and they have a managed process around how we lend that is different than a classic middle market environment. A couple of the other businesses I would point out, commercial distribution finance looks like it has an outsized percentage growth. That is largely because of a timing difference with where we onboarded the domestic business for CDF in one period, and we onboarded the international piece in another period. It is not quite as dramatic. I assure you it is positive, but it is not 48%. Then finally, the other I would point out is in corporate banking, the decrease is largely due to the fact that we have a big energy book, as most of you know. As many of those customers, where we help them, in many cases, access the public markets to replace debt with equity, they paid their loans back, and so we had a sizable decrease there. The next couple of slides, we are going to focus on our credit performance versus the Fed data on commercial banks. The first slide is C&I loans over a 10-year period of time. Wells Fargo is the brown line, and then the universe of other U.S. banks are the blue line. As you can see, those lines are very close together over the past few years because as credit quality has improved across the market, it is very hard to differentiate yourself. The differentiation is much more extreme when things are tough. On an average basis, though, over the past 10 years, our losses are 10% better than the market. Again, this is just compared to U.S. commercial banks. It does not include non-banks. If it did, I would suspect our performance would look even better. Think about a 10% differential in losses over a 10-year period of time on average in commercial lending. That is huge. That is a really big difference. Even more dramatic is our performance in the commercial real estate space, a much more volatile asset class. Again, Wells Fargo is the brown line, the universe of commercial banks are the blue line. Here, our performance over a 10-year period, the past 10 years, has been three times, almost three times as good as the market. That is a dramatic difference in a very volatile asset class. When you think about comparing portfolios, what you are looking at today is everybody looks the same. C&I basis, CRE basis. It is very hard to differentiate performance. You got to start thinking about what is in the portfolio. What are the quality of the relationships? What are the quality of the people? How long have they been doing this? How deep are these relationships? Another way to think about our portfolio and kind of sizing up the kind of risk embedded in the Wells Fargo wholesale book versus other competitors is to look at this kind of analysis. These are C&I loans, so not including the real estate business. The table on the left is what, again, under this analysis for Thomson Reuters, what they call leveraged book-runner loans. Leverage means lots of different things to lots of different people, so let me explain what is in their number. It is loans where the rate on the loan is LIBOR plus 175 or greater, and the customer does not have a public debt rating that is investment grade. What I call those are private company loans. Most of middle market loans are in there. They may or may not be leveraged, but if it is L plus 175 or greater and it does not have a public rating, which is most of our book, they are in that bucket, whether they are leveraged or not. The next two columns are subsets of the first column. Institutional book runner represents loans where institutions hold more than 50% of the outstanding debt. The LBO book runner is a subset of column 2. Again, that one is pretty self-explanatory. Most of these are middle market deals or large corporate deals with the primary owner being a sponsor, and it is an LBO. No one is going to get up in front of you and say, "We are number 19," but we are number 19 in that. You just think about it. Think about how this portfolio is constructed. On the one hand, why we are number 3 in the first column is because we have a huge middle market book, we have a huge asset base book. We are in the middle of the pack in the next one. We are probably going to try to grow that a little bit because quite frankly, many of those are with large corporates. A lot of those are in our ABF business, which I will talk about in a minute. We have collateral there as well. On the LBO side, we had to extend the column down to number 20 to even be in the mix. When you start comparing portfolios and people talk about middle market loans, and we have middle market loans, they are talking about something very different than what we talk about. The difference in the risk is huge, and you cannot tell today. You can only tell when you are in a downturn. The quality difference is great. The expected performance should be very different. Let us talk about asset-backed finance and what we do in this business. This business provides loans and provides market access to mostly non-depository financial institutions. What does that mean? Typically, these are containers for pools of assets, like first mortgage loans, auto loans, credit card loans. There are some that do commercial loans. We finance those pools with a haircut where we think it is prudent. We also, in many cases, have rights in those pools where we get to approve what assets get put in. We also get to remargin the loan if we think the risks have changed. Again, those are very important things to have in the process. We have been at this for a long time, and when markets are open, we help many of these customers access those markets. You probably saw on the prior page, we had a lot of increase in the loan book there, but we did not have a big increase in the commitment line on these, because in many cases, we have been helping customers access markets. Again, when the markets are open, we are a two-handed player. We have a balance sheet, but then we also help customers access the market. This is a very important business for us. The other piece I would say is that subprime, so the collateral in these pools that is subprime, is about 15% of the total loans, and it shrank on a year-over-year basis. Just remember, any loan we have against that is at a margin that we are very comfortable with and has terms and conditions against that that we are very comfortable with. So we are not financing subprime loans at 100 cents on the dollar. We have a very substantial haircut against those loans. Wish some reporters would call me for that kind of color before they write stories. Shifting from credit risk to how we think about market risk. What this slide attempts to do is just to give you a snapshot of a couple of things that we think about. One is the value at risk calculation, which many of you are very familiar with as a way to gauge market risk in one's portfolio. This is how we compare against other large players. As you can see, most of the industry has done a better job at managing this down over time. We started from a much smaller base and have done the same good job managing it down over time. We have a much smaller value at risk calculation versus our peer set there. Then the bottom chart on the right is the net trading asset book, which just gives you an overall, well, how much exposure do you have in your capital markets group, right? These two are pretty good proxies of the amount of risk that we're retaining in these businesses. As you can see, versus our peer group, it's much contained. We run our capital markets franchise to take care of our corporate clients. We don't run it for any other reason. We're decked against the needs of our corporate clients. The third bucket of risk is one we're getting better at, and we're very focused on getting much better at this one. It's operational risk and compliance. I wanted to give you a quick update on a couple of things you're probably aware of. One is we've been working for quite some time on our BSA/AML consent order. We're spending a lot of time, we're spending a lot of money on this. We're very focused on this. Most of the work has been documentation remediation work. It's not that we don't know who our customers are. It's that we're not very good at documenting it. We're not very good at aggregating things. We haven't been traditionally good at collecting the data that we need. We're good at knowing what the customer does and who they are, but we're not good at the documentation piece. We need to get much better at that. That's again, back to the things that we have opportunity with in terms of centralizing our business will help us get much better at this. In addition, the mountain that we've climbed so far relative to this project is now shifting into embedding it in the business, doing it every day, thinking about it. There's nothing inconsistent with us being really good at credit and being really good at operational risk and compliance. In fact, I think it's going to be a huge advantage for us. If we get as good at this as we are at credit, we're going to have huge opportunities to help customers understand their risks better, make better decisions. That's why we're focused on it. Again, we're focused on building the infrastructure and the knowledge base within our team members so that we can be excellent at credit and market risk and operational risk and compliance. The foreign exchange piece, again, that business was moved into our securities environment, which has a better control environment for a business type like that. We replaced the management team. We're working on new processes and procedures and incentive programs. We've got a little bit more work to do there. But again, we've disclosed things about that business which are not inconsistent with what other peers have faced from time to time. Let's focus on our customers. We've got industry leadership in many of our wholesale businesses. Let me point out a few examples. Top left, Wells Fargo Commercial Capital. We're the number one asset-based book runner in North America. On the right-hand side, commercial real estate. We're the number one CRE lender since 1999 in that space. We're the number one middle market bank based on primary relationships. We're the nation's leading SBA lender and on and on. We've got some really great businesses that are scale businesses that are also non-volatile. Let me talk about a few of those. The middle market business has been a very successful model at Wells Fargo for a long time. We're out in the regions, 123 offices close to the customers. In almost 90% of the cases, we're the only bank. We're starting to bring our specialty expertise into the middle market as well. Recall that we've organized ourselves in the corporate and investment bank by industry lines. We're starting to take those industry lines and access middle market, giving our customers access to the experts through our corporate and investment banking capabilities. That gives us an additional lever of growth, gives our customers additional opportunities to work with us through the middle market channel. You can see at the bottom, we've done a very good job in working with our customers to ensure they have access to credit, access to treasury solutions, and in many, many cases, our customers have been with us for a long time. In fact, the average middle market company has been with us for almost 20 years. That's a Wells Fargo client. Again, we're the primary bank for 11% of the middle market companies in America, and this has been steady over time. The long-term customer, you may have seen a variation of this slide at these presentations throughout the year. This is not a huge surprise, but the longer the tenure of the relationship, the more things your client typically does with you and the more success that they have, the more they do with you, and we're no different. Again, when you think about the tenure of the clients in this business and the stability of those clients, it's pretty remarkable. Many of you have asked me as we've gotten together in smaller groups, how are the customers feeling? Do you have customer attrition? You've had the news stories throughout the past years and again, they have asked questions, but by and large, they have hung with us because of the quality of the long-term relationship. Most private companies don't change banks very often. If you can maintain that quality of the relationship with them, you have the frontline people that they can interact with, they tend to do business with you for a long, long time. The value of this franchise is enormous. Our commercial real estate business is another powerful franchise. We're the number one share player in this business. We're a consistent through-the-cycle lender. Interesting chart on the bottom right. This is our market share in CRE. As you can see, coming out of the cycle, we gain share. Again, that's very classic Wells Fargo. We tend to be a little tight going into the cycle. By the way, people say that we're a little tight. We don't change our standards. It's just the market moves. Our standards remain relatively the same. When the market starts moving and people start loosening things, we appear tight. But we try to stay consistent, which means on the opposite side of the cycle, we look like we are a bargain because we are in the market doing stuff. Again, you can see it, see what is happening with the market share. We increased market share coming out of the downturn, and now it has been largely going down. The longer this recovery goes and there is not a recession, that trend is probably going to continue. We are going to try to do our best. We are going to try to find as many good deals as we can, but this is who we are. You should be very comfortable that this is who we are going to be in the future. We are protecting your investment because we know, think about the losses, that if you just hop in there and you change your standards, you are going to experience market losses, which are 3X what we have at Wells Fargo. You do not want to be there. We have a diverse set of products and services in the CRE business. So we are not only a balance sheet lender, which is kind of the upper right quadrant of what we do here. We are also a very large capital market shop. So in today's environment, we are helping our clients access the capital markets, and that is part of what we do, because we know that even if they go away and they pay off our loan, at some point when those markets get a little tougher, they are going to come back to us. Because we have been there with them for a long time. We have been a very important balance sheet lender. They have gone to the market. Maybe the next time the market is not as willing to accept them, they are going to come back to us as a balance sheet lender. So we view this as very much part of what we do each and every day, and we do not try to predict. We just go with what is best for the client. We also have equity investment opportunities available, and we are a huge servicer in the commercial real estate business, and that is a scale, steady business. That is actually one where if you think about it, back to where we are going to put like things together. We have got huge ability through the servicing business to help other parts of Wells Fargo at scale. We know more about commercial real estate than anybody in the United States. On the asset-based lending side, again, another scale business. We are number one in this business in terms of market position. You think about this business in terms of what it means to our middle-market client base. Again, to be a through-the-cycle lender, you have to be able to migrate clients to different environments. So when our middle-market companies have a strategic acquisition, maybe they have hit a bump in the road. The asset-based disciplines can help them get back to where they are more of a cash flow loan. We have got the opportunity to work within the system to give them those options. The asset-based lending group as well is also important to our corporate banking clients. You can think about different industries that are going through difficult times. You think about the retail business today. It is changing faster than ever. This is a way to participate in the retail business and not take a lot of undue risk because we're very good at understanding the value of inventory. We can lend against it. We can be helpful to clients in that business here and not put ourselves at undue risk. Huge opportunities, good integration, even better, we've got some niche businesses embedded within the asset-based lending business, like our technology financing business. Again, focused on receivables, focused on things that we know, things that have value and asset-based disciplines around them. Our corporate and investment banking alignment, I talked about last time we got together. I wanted to give you a quick update, but this is bringing these three businesses even closer together. It's giving people common goals. It's having the leaders think about being the head of corporate and investment banking. Many of our peers have a separate corporate and investment banking group and a commercial banking group. We don't have that at Wells Fargo, but this is what we're doing. We're trying to get people to think about it the same way. We're trying to say, "Who's the best person to lead this relationship?" Maybe it's somebody from securities. Maybe it's somebody from financial institutions. Let's think about it as if we're all running the business together, as if instead of we're running the business separately, and the leaders of these businesses have done a terrific job in starting to get the team to think about themselves as one business. There's obviously an efficiency pickup when you do that. You can do this more efficiently than you can do it separately. That's part of the opportunity, but the bigger part of the opportunity is taking care of clients better. You've probably seen us show up more and more with some name clients where Wells Fargo wasn't typically a player because we're doing this better. Phase one, which we've completed, again, along the right-hand side of the chart here, are the industries we've chosen to focus on, where we have deep knowledge of those industries from a lending standpoint. We've got people who have the ability to give advice to large companies in that space, and we've got the willingness to grow in these markets. We've largely completed identifying those industries. We've brought the teams together. We've started to have common goals. We've identified some expense efficiency opportunities, which we're going to execute on in the next year. Phase two, which is coming soon, is to really hold the team accountable on a customer-by-customer basis. The leaders are accountable now. Now we're going to get the teams to be accountable to say, "Okay, on this name, who's on the team? What's the responsibility? What are you doing? And then how many people do we need, and who's doing what?" Again, that sounds very simple. It's very difficult to do in the context of a large corporate and investment bank. But we've got the capability to do it, and when we deliver that, we can be more relevant to clients on a global basis than we've ever been before. This is a big opportunity for us, but we're going to be thoughtful about it. We're not going to take undue risk. We're going to do it within the disciplines of all the other businesses and all of our historical disciplines on the credit and market risk and compliance side. But it doesn't mean we don't have good growth opportunities here as well. A bit of a recap. These are some things we've been doing very well for a long time. We have a long-term commitment to our customers. We're in the relationship business. We've got a deep bench of talented team members who've been at this a long time. We have very disciplined credit management, and we're not changing that. We've got a broad distribution network, a broad set of products. All of those are things you've heard from Wells Fargo for years. We're not changing those. What we're adding to those is we're adding a centralized governance function to be able to identify opportunities for efficiency, to be able to manage large-scale projects most effectively, and to take the first step on our way to doing things more effectively, both internally and externally. We've streamlined the organization. We've started to identify businesses that are non-strategic to us. John gave some examples of that earlier today, and we're going to continue to do that. We're going to double down where we think we have opportunity, and we're going to step back where we think we don't. Operational risk and operational excellence, if I were going to call it, is an opportunity across the board at Wells Fargo, and it's no different within wholesale banking. We are not going to get there to be operationally excellent if we don't have a way of managing the business at scale, where we have things centrally done that need to be centrally done. Most customers don't care where their loan gets processed. Most don't care where their data byte happens to be. What they care about is what kind of advice are you giving me? Are you there when I need you? Are you able to deliver? You worry about the kitchen. We want to be able to invite the customers into the kitchen at some point. We can't do that yet, but the wholesale lending transformation is going to give us an opportunity to do that. We're also using innovation in this business. The wholesale lending transformation, let me just touch on that quickly, is that opportunity. This is the most important transformation in wholesale banking over the next 3 to 5 years is this. Because this goes end to end from how we onboard customers, how we collect data, how we group things together, what our process strategy is around doing that. This is an enormous opportunity for us if we get it right and if we commit to change. But this also involves fundamentally rethinking our businesses. We've always grouped businesses together based on the front end. We've never grouped businesses together based on the back end. We're going to change that up a little bit because we've got that opportunity. Because we already have such scale in these businesses that if we group some of them together on the back end, we have the opportunity to have that drop to the bottom line. It sounds easy. It's really hard to do. It's going to take a while. We're not blind to the fact that you don't just flip a switch and do this, but there's a huge opportunity. We're focused on growing things, but we don't need to add another customer to get a lot of expense and efficiency opportunity out of that change. One of the things we're doing externally looking from an innovation standpoint is the top left, the digital application for SBA customers. We want to have somebody who decides they want an SBA loan. We're the largest SBA lender in America, by the way, and that's an important consideration for us to continue to be helpful to small businesses and help them grow. Today, you need to access that opportunity at Wells Fargo through a phone call, through a visit to a branch, through accessing a business banking banker. You can't just go online and complete the process for an SBA loan. Seems kind of silly. This would be adding that capability, an end-to-end capability for small business customers to do that. We're committed to having this happen. When you think about it, that's a very small part of what we do. It opens the possibility for what comes next. It opens the possibility for other customers who want to access us the same way for business loans. These are not more complex than a mortgage. Anybody who's been through the mortgage process knows that, and we've created scale capability in the mortgage business to do it digitally. If we can do it there, we can certainly do it here. Huge opportunities to add efficiency and improve the customer experience. Again, we're targeting an efficiency ratio below 50%. As you can see, one of these slides is in every one of our presentations, so we're on the expense train with Shrewsberry. We get it. We've got good line of sight to doing this. Just a couple of the highlights, efficiency and effectiveness initiatives, which for us are going to total around $1 billion. We think we've got good opportunity to make most of these things happen. The corporate investment banking integration, we've talked about. The lending transformation, we think is a $200 million opportunity. We've got some reimagining projects going on. We've got things in place where we feel comfortable that these are achievable at the same time as growing our business opportunities. We're not doing these at the expense of our business opportunities. In addition, as we get better at managing through some of our remediation and regulatory work, there is a peace dividend there. We spent $400 million on external resources just on the BSA/AML project in 2017 alone. Imagine how much we spent internally as well in people's time, effort, and energy on this. We will spend whatever it takes because it's very important. Imagine if we were better at this, what the savings could be. That's the opportunity there as well. We're going to get better at this. Finally, my results aren't as impressive as my colleague, Mr. Weiss, but I think for a wholesale bank, they're pretty impressive. Our through-the-cycle targets, which we think if we do all the things I talked about, we'll be able to achieve a 15%-17% through-the-cycle return on equity in the wholesale business. That's through-the-cycle that includes expected losses and an efficiency ratio of under 50%. We think these are reasonable targets in the 2-3 year timeframe, and we're committed to delivering those targets. At this point, I'd like to invite four of my esteemed colleagues on the stage, and we'll take your questions. Lisa McGeough runs financial institutions, Ed Blakey runs commercial capital, Mark Myers is the head of our real estate practice, and John Adams runs our middle market banking group. Welcome to the stage. John, I'll turn it to you. Great. Thank you, Perry. We can take questions from the audience. I see one on the far side over there. Thank you. Gerard Cassidy, RBC Capital Markets. Perry, you mentioned that you guys know the commercial real estate markets probably better than anyone here in the U.S. Can you guys give us your outlook on what parts of the country might be showing some weakness? What type of property types are you seeing that might also be weak, and also the strengths. Where are you seeing some real strength Sure in the commercial real estate? Absolutely. Let me have Mark answer your question. Yeah, happy to take that, Perry. In terms of geography stress, we do see the energy markets, the energy-sensitive markets having stress, particularly the Houston market. In terms of the asset class that is most under stress today, it is retail. To put that into context, vis-a-vis Wells Fargo, roughly 15% of our portfolio is secured by retail collateral. Within that basket of collateral, 90% of it is secured with a loan to value somewhere between 50% and 55% with a debt yield in the 12% neighborhood. The 10% of our portfolio that is unsecured is exposure we have to the big publicly traded mall REITs. We feel comfortable with our exposure, though frankly, we are watching it very carefully. You have a question over here? Yeah. Chris Kotowski from Oppenheimer. Earlier this morning, Mary Mack kind of evidenced extraordinary caution on the auto sector and showed how you cut your originations in auto loans in half. I am wondering, is that paralleled by a concern on the wholesale side about the whole food chain, dealers, suppliers, producers, and so on? Yeah. Yes. We do business with a number of companies that are in the business of generating retail auto paper that we finance. Again, have we adjusted the margin? Have we looked at tightening up? Absolutely. We do that because it is the right thing to do as performance dictates in that client base. That is probably where I recall that in our ABF portfolios example, we had the subprime piece in particular become a smaller percentage over time. I would suspect that much of it came out of that sector. We will continue to be cautious there as we need to be. Again, the thing I would tell you is when Mary makes a loan, she has 100 cents on the dollar of the risk. When we make a loan, it is a lot lower on a risk percentage than that. So that, again, changes the nature of how you think about it and how you act in different environments. Perry, if I could, maybe I can add on to that because asset-backed finance rolls up to me. And to Perry's point, you made it earlier in your presentation, we've had a relatively modest percentage of our total ABF book in subprime in general, but an even smaller percentage in the auto space. But to the point that Perry was making, as an overall percentage of our portfolio, it's actually declined as we've grown other less risky aspects of the portfolio. And we've got significant haircut. I would say that in general, against our more subprime auto financing that we're doing on behalf of non-depository financial institutions, we might have an advance rate to the underlying receivable in the 55%. You also alluded to the fact that we've got a lot of structural protections embedded in those transactions that allow us to de-lever. But as an overall percentage of our portfolios, it's actually a very small percentage of the total. Yeah. Betsy? Hey. Betsy Graseck, Morgan Stanley. Thanks, Perry. A couple of questions. One, I heard you talk about how leverage loans and league tables there is really a function of your business for your clients as opposed to wanting to be up there. Could you just give us a sense as to how you're thinking about the other sectors in which you compete from a league table perspective, and if that bar that you showed us is fully running at what you would expect to support where you want to be? Or do you think that there's some bar that could come down from here? I just have a follow-up. Sure. Well, let me have Lisa talk about that, because I think her client base is the client base that we're going to interface with a little bit that might cause that to go up or down. Yeah, no, thank you, Perry. Thanks for the question. I've covered financial institutions for about 28 years, and I have the opportunity to bank non-banks as well as banks globally. What I am seeing is a tremendous amount of liquidity in the market, right? You saw it in our deposit numbers at the end of the year of $150 billion. We are seeing, obviously, spread compression. We are seeing covenant shifts away from what we would think is acceptable. Really, we're sticking to our strategy. We're seeing some strategic shifts from other financial institutions. We're seeing some disintermediation in the middle market lending. Competitive pressures are pretty strong. We're seeing growth in certain parts of the globe, like Asia Pacific, where we've been active with certain non-bank financial institutions like asset managers and insurers. But generally, sticking to the strong credit discipline that Wells Fargo has is our number one goal. On the LBO side, you saw the slide that Perry shared. We do bank sponsors, but we bank them in different ways. Doing a seven times lever end-of-cycle transaction is not necessarily Wells Fargo's forte. Standards remain the same, and that's where we're going to focus. In our markets business, which is going to be associated with lots of those customers, again, we're not changing our risk profile. We're not changing our risk parameters. We're not chasing business in that sector. Right. If anything, we're probably being a little more cautious. Then just, Perry, you mentioned the digital transformation that you're looking to do, and that it's tough. Could you just give us a sense as to why you say that? Because on the one hand, maybe it's just technology, so is it tough just because it's time, or is it more cultural and you have to share clients across teams? Sure. Am I totally off the mark, and it's some other reason why it's tough? Yeah, no. Great question. Two reasons. One is that if any of you have ever been promised anything by somebody in technology and they delivered it on time, come talk to me, because I would like to understand how that happened. That is one reason, all kidding aside. The second one is the more important one, which is the cultural piece, right? It is really getting people comfortable with a new dynamic, and that just takes time, right? It takes time. It takes repetition. It takes leadership to get people to understand that they are not at risk, but we are trying to help them serve the client better, and that is really what this is all about. People immediately go to, "Well, this is all about you guys just trying to get more efficient." They have heard the same things you guys have had, right? Part of the story is that, but really what we are trying to get at is to have the experience of the client just be better. All of us experience that in our day-to-day lives all the time, right? How many times have you not answered a phone call because you did not want to have the conversation, and you texted somebody? Probably none of you do that, right? Because it is just more efficient, it is easier. Our clients sometimes do not want to talk to us, right? Even though they love us, they just want to know what their balance is, or they just want to transact, right? They do not want to have a conversation about how the ball game was. Let us let them do that. It is their call. If they want to talk, let them initiate, that is fine, but also give them the option. I think part of it is just understanding that change is hard, especially when we go from an environment that involves digitization. People fear being out of the loop. We cannot have that happen because we always have to be available to our customers, but we have to make sure the customer is making the decision, not us. All right, time for one more question. Right in the front there. Hey, it's Jimmy Hanna, North Reef Capital. This question's regarding middle market commercial lending. The last few years, a lot of the demand has come from middle market customer buying another middle market customer. Not as much investment in plant and equipment or new facilities. I'd love to hear if that's changing at all, if we're starting to see more investment in plant and equipment. I think that could have implications for the broader economy. Sure. Yeah, John? Yeah. I think the first dynamic is continuing, and we're still seeing our customer base be an attractive target for acquisitions, not just middle markets and middle market, but from sponsors buying our customer base as well. So that continues. We are starting to see more investment, and that's why when you saw Perry's chart, where the middle market customers are starting to borrow a little bit more now is in equipment finance, which is part of Ed's world. So that leasing component is ticking up for us. We haven't seen that translate to usage under working capital lines yet, which is a little surprising given the activity and the general robust activity with our customers. But we haven't seen usage under those lines tick up yet. But we are starting to see that greater investment. I think the impact of the tax change hasn't been felt yet, but something that I think will be a factor in the future. All right. Okay. We're going to head into a break. We'll be back around 3:15 P.M. Thank you to Perry and team. Thank you. Thanks, guys. Nice job. Ladies and gentlemen, your event is about to resume. Please take your seats. Ladies and gentlemen, your event is about to resume. Please take your seats. Ladies and gentlemen, your event is about to resume. Please take your seats. Ladies and gentlemen, please welcome back the leadership team. Wow. Great. Am I on? We are good? Thank you for that tepid show of applause. At least you got one, Tim. Yeah, I know. Better. Thank you. That was awesome. All right, John. We've set aside a half hour here for a Q&A with the leadership team. Similar to the other sessions, we have the boxes for you to ask questions. We have one starting over here on the far side. Thanks. Marty Mosby, Vining Sparks. Why do you have to introduce yourself? Everybody knows who you are. Well, like- You're on CNBC every morning. Geez. Southern courtesy. Tim, I got one question. The bubble chart that John had where you showed all the businesses and where they were from efficiencies and profitability. Yeah. The ones that you have divested already were like a pin dot, right? They are very small. Pluto. Yeah. They just kind of went away and we never noticed them. There are four businesses that represent $1.8 billion worth of profit that are actually in the worst side of that chart than the four you have already divested of. I just wanted to get your opinion on how sustainable are they, why are they here, what purpose do they serve, and do you see any opportunity that you might have to divest of those businesses down the road? Let me start. John, you want to jump in. I think that if we answer every one of your questions, then you will know exactly those four businesses, which we are not going to do. Right. But I appreciate the attempt. I think the way that I would think about it is just because you are in that left lower area does not necessarily mean you cannot improve the business performance. It does not mean that by definition, because you are on the other side of Pluto, you are going to get divested. That is not necessarily the way it is going to work. But it is our way, right, of looking at the entire array of our businesses and being much more disciplined in terms of the expectations of performance, because that is what we assume you want us to do. I do not know, John, if you- Yeah. I guess what I would add is that for each one of those businesses, there needs to be a story. The business version of a performance improvement plan, where we talk about aspirationally where it might move, either in terms of efficiency and maybe also in terms of capital efficiency, expense and capital efficiency. For each one of them, there is that kind of a story. That's a three-year snapshot. Some of it's cycle-oriented. We're now out of zero interest rate policy, so some of them do better in a higher rate environment. That will have an impact. Some of it's the volume and where we are in the cycle. But each of them has to have that story that the management team and the board needs to all sort of transparently buy into. Some of them also provide important services to other businesses on that chart, and if you talked about doing away with it would change the prospects of other businesses, so that interconnectedness matters. One last thing I'd say that came up at my lunch table is we did call out in the upper right-hand corner that credit card was up there because we like that business so much. But if we really grow that business, it won't be in the upper right-hand corner anymore. It's there because we have a very seasoned book that's high yielding, low losses. We're not paying as much for that book in terms of rewards or other inducements to gather new customers. As we do that, and we are doing that, to grow the business, it's going to pull it down a little bit. It's like ROE discussions where you can have a very tiny company with a very high ROE, but that's not really what we're shooting for. It's a balance of aggregate net income, capital efficiency, and growth prospects. Mary, got two questions for you. One is, when you look at mortgage, you look at your slide, the slide that was up there that had the composition of originations. You can tell how that business has changed. Several of your peers, they are going to start not reporting anything on mortgage anymore. It is just going away. I do not want are we in the business, are we not in the business. What I am really at, how do you visualize that business. It is just different. It is going to be different as we go forward than what we used to have prior the residential downfall that we had. Secondly, as you have done the 50 to 60 brown bag kind of lunches, what was the wow, shaking my boots, I did not have any idea that came from those discussions. What just, when you heard it, you went, "Wow, that is completely different than what I imagined." Because I just think you got a lot of material from those meetings that will probably help as you transform the company, help set the stepping stones for that. Yeah, absolutely. Let me start with mortgage. The way I think about the mortgage opportunity for us, and we are in the mortgage business. To the question that you did not ask, we are, and we think there is a huge opportunity for us with our existing customers. There are lots of opportunities. You saw the online mortgage app. Hopefully, you started yours. There is a great opportunity for us to do more. There is also, you saw the chart of the Wells Fargo households. We actually serve very few of our Wells Fargo households on the whole. There is an opportunity for our own customers who need mortgages or have mortgages or will need mortgages who need us to do that for them. The way I think about it is there is a huge integration opportunity for us that we really have not, despite what you may think, really have not integrated in the past in the way that we can. That is a big focus. It is connected to online mortgage. John and I were talking about online mortgage a little bit ago and the online mortgage application. When I said that we were up to 26% in the first several weeks of May. If you just think about that in application volume, that is $250 million a week. I mean, a day. That is a big business for us. As we think, just in the online space. There is a lot of opportunity for us there. Now, anything else you guys would add on mortgage before I- No, that is good. So, and then when I go to all those visits that I've done, and I keep doing them, by the way, because I can see how the changes are burning in, how they're being received. I can sit there with a team and in 10 or 15 minutes, they'll tell me everything because they know it's their one chance. I tell them all the time, "Listen, if I'm not getting any body language from you, I'm going to do it. So if you don't like it, you better speak up." And they do that. We've actually gotten really good at getting that feedback from our team members. I would tell you the couple of ahas for me is one, it was really clear for me as I started traveling early on that one of the first things we need to do is address the environment. And that's where the environmental changes came from, and that's why we went really fast. If I look back on it, and the team is in here actually who helped design an incentive program over the weekend that we announced and implemented on a Monday. And we did that because that was one of the necessary first things we needed to do for our team and for our customers. And so those were pretty quick observations and pretty quick actions that yielded what we wanted, which was retention of customers during that period of time. Over time, what I've been, I don't know if it was an aha, but actually been delighted about was one, the feedback we would get from our team members, all the changes. I was telling somebody at lunch. I went to a branch in Washington, D.C., not too long ago, and I go to huddles in the morning. That's when they get together before the branch opens, just make sure we got the staff right, is there any training or learning that we could do. And they always do recognition because I'm there and they want to recognize everybody. And they recognized a teller who had just introduced a customer the day before to mobile house. And so I asked her, I said, "Listen, do you feel threatened by that?" Because I get that question a lot. "Well, don't your tellers feel threatened by mobile?" And she said, "No, it's what I would do. And by the way, if every time the customer comes in, I provide an idea that's valuable, this is the first place they come when something big happens." And so their adoption of that, it feels very natural to our team. And you can see that pretty clearly. Her other comment to me was, "I love all the new changes. It's almost like they were designed by team members." Said they were. We took 600 people from the market, not all at one time, but brought them in and had them tell us where the pain points were. So how quickly we could get our team to tell us exactly the things we need to focus on that we could then make sure they were designed the right way, I think was a really good outcome. Marty, I'd also add, when you think about the entire company, I think one of the aha moments for this management team is that we needed to communicate with our team members more frequently and in different ways. That includes getting out. All the visits that Mary did has been done by everybody on this stage, and everybody on the operating committee in terms of getting out and seeing our team and listening. That frequent interaction has been incredibly helpful in terms of making sure that they understand and appreciate our vision, our values, our six goals, but also that we're listening to them and they understand that we're going to run this company based upon the feedback that we're getting from them. The reason that's important is because they're the closest to their customers. It's not us, it's them, right? We're all on the same team. We have a question over here. Chris, go ahead. Yeah. Chris Kotowski from Oppenheimer Report. John, you talked about the CECL accounting standard, and everyone seems to be quite twitched about it. But I guess I'm wondering, theoretically, we're paying you folks to manage the economics of the situation, not to an accounting standard, right? The accounting treatment shouldn't change the economics. So if you have a pool of auto loans that, say, have a 5% coupon and a 50 basis point loss rate, and five-year life, at the end of the life, you should have earned 4.5%, and it shouldn't really matter how you account for it, whether it's up front or over the whole time. So why in your mind is CECL such a big deal? Publicly. Sure. Good question. CECL is still in flight. I think all big banks are in the process of doing their initial estimates or have done them. I think one has publicly announced what they think that the difference would be under CECL versus under today's expected loss approach. My observation is that for consumer loans, it has a meaningful increase in the calculated amount of allowance. But for commercial loans, the opposite is true. Mostly because it runs the calculation through the contractual end date of each loan rather than through the sort of expectation of a portfolio with renewals as in rollover, et cetera. The net impact depends on your blend bank by bank of consumer versus commercial loans. But the net impact is an increase, but not that big of an increase. That is sort of the backdrop for it. Incidentally, the regulatory community is processing that right now and measuring it against what they might have imagined in terms of what a lifetime loss estimate would lead to versus today's allowance levels, given that we are near the top of the credit cycle probably. The question about lifetime economics versus accounting. Practically speaking, if you are not growing really fast in any given category, then you are probably indifferent because loans are coming off and loans are coming on, and as you say, you are going to earn through it. It is like the credit card business where the expectation on a cohort of credit card loans is you have bad accounting outcomes in the early periods, and you have great accounting outcomes later in life, and it has got positive NPV, and you measure it in NPV terms. If you had too much of it, you would lose money, which nobody wants to do. So it depends how fast you are growing the categories of loans that have the most adverse from an accounting perspective outcomes. I would put things like first mortgages, the longer-term ones in particular, and student loans in that category in terms of areas we are going to have to really look at it and say, "Well, what happens if we grow too fast? What happens if we grow too fast in the fourth quarter of a given year where you add the loans and a lifetime loss appears, an outsized one in the fourth quarter, but there is no commensurate revenue with it at all, let alone a year's worth or half a year's worth?" Those are going to matter, or they are going to be explanation points each quarter as we talk to our investors about how our results were. They may say something like, "Gosh, if you keep growing at this rate, you are going to put yourself out of business. So be careful about the accounting consequences." It is a trade-off. Saul, go ahead. Hi. A question on the simulation, and I understand that it is a simulation, it is not guidance. But the 2020 expenses of $50 billion-$51 billion, which is obviously $2 billion lower than the guidance range for 2019. Is there an underlying message there that you have the ability to continue to right-size your cost structure and reduce nominal expenses, even if in an environment where revenues start to stabilize and grow again? Yep, it is a great question. So first of all, in that simulation, we are assuming the same type of revenue mix that we have today. To the extent that 2020 looks different than that, because we have grown a lot, we will be coming back to you and saying, "We had revenue-related expenses of blank, and they weren't accounted for in the initial simulation." So it is really meant to get at sort of an apples to apples kind of expense base. The message there is that in addition to the programs that we have been talking about for a while that are in place, some of the money that we are spending today to create the outcomes, these elevated investment levels. The doubling up of expense to create a technological solution to a brute force, status quo way of dealing with a part of the business or retooling a factory floor, et cetera. Those expenses have to come out over the same time frame that we are delivering the permanent benefit. So 2018, 2019 will be really busy times, not just executing on these programs to permanently take out expense, but to get the cost of transition out as well in order to get down to the level that we are estimating in that simulation. The message is that even in a flat revenue environment, you have positive operating leverage. If you grow revenues, maybe nominally it's a little bit higher than that, but you're still- Yeah. I think- a few hundred basis points of positive operating leverage from my rough calculation. Yeah. We're being vague, frankly, just to demonstrate that we're not relying on revenue growth to create the ROE outcome in that simulation. As you say, if we get our base expenses to that level, then positive operating leverage should be relatively easy to come by. Yeah, Scott. Hi, Scott Siefers, Piper Sandler. Just hoping you could, John, expand a little on the efficiency comments from earlier. Obviously, the efficiency ratio is not in the updated financial targets, which you suggested was based on us knowing the underlying cost level. I guess between the lack of a guide and maybe in the simulation that Saul alluded to, you sort of used flattish revenues in there. Can you just maybe expand upon your thoughts? Are we going to get into that efficiency ratio at some point in 2019? You said the existing ratio over the longer term is still what Yeah makes sense. I can sort of see the commentary gravitating toward what revenue number you guys are or are not capable of hitting to back into the numbers. You're looking for the revenue number. Yeah. I guess I know what revenue number it takes to get there, but just curious on your thoughts. Yeah. So it wouldn't surprise me if during 2019, we end up in the 59-ish range. Who knows in a given quarter, et cetera. But it depends on what happens with, I'll say, rates in particular. We've talked about the drivers of non-interest income, what's working for us, and what we're having to move through, like mortgage cyclically, where things are down. But card fees looking good. We'll be coming in 2019 back up into a growth trajectory on deposit service charges because we'll be coming off of a full year of these depositor-friendly actions, et cetera. So on the interest income side of things, we can all estimate where rates are going. We've got different scenarios for what happens to loan growth, and that accounts for most of earning asset growth. If we end up with more deposit flows, we could end up with more liquid assets on top of what we're able to generate in terms of loans. But the big driver, and Neil spoke about it earlier, is what happens to deposit pricing. Because as an industry and as a company, we've been outperforming our expectations since this cycle has begun, and that's great, and there's good reasons for it, and I hope that it continues. But to the extent that it normalizes and we end up catching up, and deposit costs end up catching up to normalized levels like the stabilized betas that Neil showed on his slide. At the margin, that'll probably be the driver for what happens to revenue in 2019. That's a pile of estimations, so it feels easier to tell you, here's what we think expense dollars are going to be. There's a range of outcomes for revenue based on the things that I mentioned. In our simulation, no matter what, if you believe that each of the key assumptions is reasonable. With revenue, we're hoping it's reasonable to assume that it doesn't require revenue growth to get to a 17% plus ROTCE, which we think is unambiguously attractive and something that people should feel good about. We have to get our expenses there. There's a lot of work to do that. You've heard talk about that today. CCAR has to go well because our capital plan would cause us to move our denominator down in the ROE calculation. Then you can estimate your range of what you think the likely outcomes are for revenue based on the things that I mentioned, and voilà, that ROTCE is as we described. And John. Hi, John McDonald from Bernstein. I know you can't give a complete answer on this, Tim, but we see a lot of headlines about fines and penalties for things that happened a while back, activities that were occurring in 2016, 2017 or earlier. Could you just speak to, throughout the business lines, how much scrubbing you've done and looking through your practices and putting in place things to make sure that you would notice these kinds of bad activities and your confidence that there are less likely to be finding new things happening from here going forward? John, it's a really fair question. First, I'd say I wouldn't believe the headline. Period. I think it's been very tiresome for us, to be honest with you, not only this team, but the entire team to have to live through some of the sensational headlines that in many cases just aren't true. That's not to say that we haven't made mistakes. We've acknowledged those mistakes. We've been very transparent about those. I think we're very well through, John, all of our historical review of issues. We've had a couple of quarters in a row where we have been transparent and there haven't been any new issues. We're going to continue to provide updates on those, but I think we're through most of the historical review. Having said that, and I know sometimes when I say that folks don't like this, but I'm going to say it again, and that is one of the lessons learned for us over the last few years is that regardless of how well we're performing in any one of our businesses, we've got to continue to raise the bar on ourselves. If we want to be the best risk managed firm in the industry, we've got to go beyond meeting the very reasonable expectations of our regulators. What they want and what we want, exactly the same thing. We've got to go beyond that. We've got to exceed the expectations of our customers. We've got to exceed the expectations of all of our stakeholders. But we're very far along in all of our review, and we've had a couple of quarters where there hasn't been anything new reported. Other questions? Then John. Thank you. John Pinckney, Evercore ISI. To come at the revenue and growth question another way, can you talk about how you think about loan growth? Clearly there is pressure this year, but we are seeing the pressure while some of your direct competitors, the money center players, are growing a lot faster. You can attribute some of it to the market, but not so much. Can you just give us an idea of where do you see the upside to loan growth? Clearly you said it is not really the asset cap. You have room in the balance sheet to allow loans to still grow. Right. What, amid your businesses, do you think can really drive that upside and closing the gap to some of your competitors? Well, let me start maybe just frame it. I think that it is really important to go back to actually one of Neil's slides to frame loan growth. Because when we report our total loan growth numbers, it is in the headwind of a reduction in the legacy home equity book. It was a few years ago where everybody was scared about that, and now we are all wishing it would stay forever, right? Which is somewhat perverse, but reflective of going through a cycle. That business will continue to decline. Not because we do not like home equity, but it is just we have got a lot of legacy on the book. Homeowners' homes are worth a little bit more. They do not need debt financing. They are paying it off. That is great because that is good for them. You're seeing a continued reduction in the legacy mortgage, first mortgage book, and that will continue, and it'll stabilize in the next few years. Those are the two big headwinds. The self-composed headwind that Mary talked about and Neal mentioned in his slide is auto, right? We made a decision a couple of years ago to step back in terms of our auto business. Part of it was related to credit, and part of it was that we had to retool that business. As Mary described and as Laura Schupbach is executing, we're going through a big change and transformation in that business. But we believe it's going to begin to grow in the second half of next year. Those are what I would say would be the headwinds. The tailwinds, I think it's maybe a little bit on commercial real estate, as you said, Perry. But you guys jump in. I think the tailwinds is really everything else, right? Yeah. Tim, I agree. I think from just a commercial standpoint, wholesale standpoint, we've got some businesses that look a little toppy. We're not trying to guess where we are in the cycle. All we're doing is looking at risk and return, and some of it's mispriced, and so we're probably not going to be as aggressive there as we would be historically. Then in other places, we see big opportunities. You saw the growth numbers in our capital finance business and equipment finance business and ABF business, all of which are secured lending businesses, which we have a pretty good track record of running through cycles. So there's scope to add there. Again, probably at the higher band of the credit quality target range. Maybe you take a little bit less of a margin, but you take a lot less risk for doing that, and that's where we're going to focus. How we match up against peers, quite frankly, I really don't care. That isn't something that I measure myself against. I could care less what their growth rates on loans are. As long as we're out in the market and we're getting all the good business we can, and how we compare is how we compare. In the consumer business credit card, clearly, as we talked about earlier, would also have positive tailwinds with some of the work we are doing with new products, new channels, new value propositions. We've already talked about the fact that we're very optimistic about retail mortgage opportunities. We'll be working on those over the intermediate term to capture our fair share there. None of that jumbos ends up on the books. The rest of retail mortgage- Right is for mortgage banking. Okay. Jim, a couple of questions, just to follow up on that question that you were just responding to. In January, you gave us this expectation of what you thought would happen with this asset freeze from the Fed, and you said loan and deposit growth has been less than expected. Obviously, some of the things you pointed out like auto, et cetera, you had already put that in place because you were already on that path to cut back your risk. So where has the shortfall come on the loan side? Can you talk about that? That is my first one, and then I have a follow-up for John. I misunderstand your question. Where does the shortfall- There is a slide which says that reduction in the balance sheet, you did not have to do much because things have been slower, softer than you had expected when you did the call post the asset freeze. I see. Where have you seen a shortfall, John? It hasn't been so much on the loan side. The shortfall has been on the natural deposit flow side. I think coming out of this year-end, the recent increases by the Fed and this tax season, there are more deposits that historically would have come back from, among other things, from tax refunds that don't seem to be coming back into deposit accounts in quite the same way. As Jon Weiss mentioned earlier, there is some WIM deposit activity that suggests that people are taking their money out of accounts and moving it into cash equivalents, hopefully with Wells Fargo products. But as a result, that side of the balance sheet is a little bit lower than where we would have modeled it previously, which would have otherwise been sitting in liquid assets on the asset side of the balance sheet. It's that headroom, that's incremental headroom compared to what we were estimating when the asset cap was put in place. It wasn't so much the loan categories. Yeah, I think the only impact really on the loan category is that, and you've seen it in the entire industry, Vivek, is that we all made an assumption that in the first quarter that we generally see a little bit stronger loan growth than we saw across the board. I don't think that's specific to Wells Fargo. Because we had a lower stepping-off point, it created a little bit more headroom there, too. Then John, we have simulation analysis. Looking from today out to 2020, where do you see the faster growth fees or NII? Can you say that one more time, Vivek? The simulation analysis where you gave us the expense number, what are you assuming in that in terms of revenue mix? Are you thinking- Yeah We see faster growth from today in NII or- We're assuming that the revenue mix in the future and the revenue-related expenses in 2020 are similar to where they are today. If there was big growth in investment banking or the wealth business or mortgage, businesses that have a more linear relationship between revenue and expense, that would be something we'd call out as an exception to the simulation. If you look at the last three or four years, our revenue-related expenses have been actually pretty constant. We just held them constant for the simulation, and the expense estimations are around the core base expense for everything else that we're doing. You must have some rate hikes based on your forecast, right? Even with the rate hikes you're expecting, you're keeping the revenue mix constant, not having any- Again, we're not predicting the revenues to be constant in 2020. We're showing you that if the revenues are constant with the capital actions that we are proposing and the expense activities that we have going on, that that with last year's revenue amounts to a 17% ROTCE. There's a range of revenue outcomes that could occur. As you described, if rates continue to move as we expect that they will, there's certainly a benefit from that in the out years in particular. Loan growth could be stronger. Other line items of non-interest income could be stronger. We're trying not to stretch the credibility of the analysis by defending a certain outcome two years out. Rather, making the point that if there's no change in revenue because of what's happening in expenses, because of what's happening in capital, that generates the outcome. Thanks. Betsy, you have a question? Oh, hey, thanks. Two questions. One, just on rates. Obviously, rates have risen a bit here over the last year and a half or so. Can you speak to any parts of your loan book where you see your customers maybe being impacted by that? Is there any sign at all anywhere that higher rates matter to borrower ability to repay their loans? Perry, you want to take that? Yeah, not yet. We think there will and there should be, as there always is, Betsy, but not yet. I think part of it is just the overall magnitude of going from zero to two hasn't really made that much of a Although it's a 200%, I guess it's an infinite increase versus zero. Yeah. But it hasn't been enough to really matter that much, but it's something we're watching very closely, and it's something we're building into all of our models and have been building into all of our models, as we think about projections and loan decisions, is to assume an increase in rates and what does that do to the ability to repay of that borrower. On the consumer side? In the consumer space, when you look at the credit card portfolio, for example, rates are a factor, but there are also a lot of other factors like employment levels, wage levels, and other things that have been positive from that perspective. In general, around credit card, we are expecting to trend to more normalized loss rates. When you look at our portfolio, the vast majority of our portfolio are pre 2011, 2012 vintages. For a couple of years, we have been getting a lot of the benefit of that vintage giving us better and better loss rates, because a lot of that loss content had come out during the financial crisis. As we are bringing new vintages, which are more normalized, the mix is changing and we are not getting the tailwind from the earlier vintages that were improving in the early 2010, 2011, 2012, 2013 timeframe. We do expect that our credit card portfolio losses will trend up, but we have not really seen any stress related to interest rates. Then just- We did account, Betsy, we did account for that in our preparation for when that big body of home equity loans began to go into repayment. And worked with borrowers who had been interest-only borrowers for a long time to think about a payment with both amortization and a higher rate in it. And helping to get those borrowers paid down or paid off, usually through a first mortgage refinancing, is an expectation of that credit exposure of having a higher rate second lien piece of paper on our books. Okay, and then just separately, Tim, question. We haven't talked much about the non-U.S. business that you have. Maybe you could give us some color as to whether or not you feel like you're leaning into that international business and through what products or channels, or is there more static or pullback? Just a little color there would be helpful. Well, I can start off and Tim or John hop in. I would tell you that our strategy internationally is to focus our efforts where we think we have the scale and opportunity to be successful there. Obviously taking into account the needs of our domestic customers. But it's an international strategy that's focused on taking care of the needs of domestic customers, not international customers. The only thing we're doing with international customers is making sure that we make available our great franchise domestically to them. We've had some growth there throughout the past 10 years, and now we're going to sharpen our focus and really kind of focus on markets where we think we can continue to be successful. And the ones we can't, we're probably going to scale back. And you've already seen us do that. And really the only exceptions to that would be in Canada where we've rolled out the entire wholesale platform, and it's actually performed quite well. And then we've got a commercial real estate and a corporate platform, in the U.K. Our capital markets business, again, tend to be focused, as Perry said, helping U.S. customers be successful outside the U.S. and then helping non-U.S. customers be successful here. And then in Lisa McGeough's business in terms of our financial institutions business, that's really wherever the financial institution might be. That really hasn't changed. I think what's changed is that Perry appropriately stepped back and said, "You know what? We should be organized differently. Let's not have a separate international operation to the extent we don't need one. Let's make sure that it's much more integrated into our corporate and our middle market business. That transformation has occurred, and it's actually performing pretty well. We probably have time for one more question. Nancy. I still can't get used to talking in the pillows. I'm sorry. This kind of goes back to the historical issue, and you may or may not want to answer this question, so I'll just put that out there. You gave us a choice? It's like a dare. Not really, but I thought I'd be nice now that I live in the South. Okay. Appreciate it. Yeah. When we go back to the old days and we were doing the cross-selling, customers have X products with us and I go back to the Eight is Great. You remember that one? We've all tried to forget. I always wondered, did you know if eight was more profitable than five or two or one? Because when you abandon these sales goals, had to abandon these sales goals, there was initially an assumption that you would not be as profitable because you had to sort of give up these cross-selling practices. Is that true, or are you as successful now in not emphasizing that or as profitable? You get what I'm trying to say? Yeah, I know exactly what you're trying to say. I'm kidding around by saying that I don't remember it. I think that, again, the cross-selling strategy is another way to describe good relationship management. It's about broadening relationships with customers. Where it went off the rails, to use the railroad analogy here, is that it became in the Community Bank more focused just on selling products and products as opposed to products that customers necessarily needed all the time or products that were necessarily profitable. Right? When you look at how we're running the business today, we absolutely believe in growing relationships with our customers. You've seen that throughout all of our presentations. But we've got to turn it around to make sure that it's absolutely what our customers and our clients need, one. And two, that we can provide in a risk appropriate way as we reinforce all of our businesses to make sure that we're focused on operational excellence, and we can do it profitably. Right. Again, relationship management, we are all in. Selling products just for product's sake, whether it's profitable or not, that's changed. Is that fair? Was that a good answer? Are you satisfied? Now that I know you were in the Navy, I want to be more respectful about that. Okay, that's fair. John, are we good? Thank you all for spending the day with us, those of you here in Charlotte and those of you who spent the day with us via webcast. We've provided a lot of information to you. Hopefully, it's helpful in terms of how you're thinking about Wells Fargo. Hopefully, you appreciate the transformation that's going on in the company and the hard work and effort that our team's put in over the last 20 months, as we've been very focused on making sure that we're grounded in our vision of satisfying our customers' financial needs, that we're following our five primary values that, again, form the culture of this company, and that we're very focused on the six areas, our six goals, which is customer service and advice, team member engagement, innovation, risk management, corporate citizenship, and then having all five of those hit on all cylinders so we're providing the best long-term shareholder value to all of you. You've heard a lot of great examples in these presentations of the progress that we're making in the business. John started out by talking about how we're very focused from an expense standpoint. Neil went through how we're managing our balance sheet as well as what our asset sensitivity looks like in excruciating detail that I'm sure you all loved. Right? Because that's what we heard from you. Mary talked about the transformation that's occurring, not only in community banking but also in consumer lending. There's so many exciting things that are happening as we put those two businesses together. Avid talked about innovation. You probably could have talked for days about innovation, going through that very busy slide of each one of the changes that we're making. What's exciting, I think a big change from the last couple of investor days, is that we had only been talking about things we're going to do. Now, we're talking about the innovation that's actually in production right now. For those of you who are in Charlotte, you saw it live. It's working. Our customers love it, which is great. Jon Weiss talked about the Wealth & Investment Management business, not only the breadth of that business in terms of how we can interact with our customers, but the focus on making sure that we're bringing that next generation of investors into our company and making sure that we've got that talent to be able to manage their needs. Perry talked about our leading market positions in wholesale banking, but also the fundamental transformation that's going on in wholesale banking. I think what was really important from my perspective, hopefully you appreciated, is that when we talked about our expenses, it wasn't just John talking about numbers that we want to hit. It was each one of the business leaders talking about how they're transforming their businesses to achieve the goals that we've promised you. The three takeaways, which I mentioned at the beginning of the day. First is, while we have more work to do, there's no question about that, we're making great progress in resolving our issues that have caused a lot of near-term headwinds. We're making critical investments in risk management, again, to make sure that we're known as the best-risk managed institution in the industry. Second, we're being very focused on listening to our customers and evolving with their preferences, including the first-ever consumer strategy for the entire company that everybody is all in on, again, reflecting that pace of innovation that's going to help us not only be able to better serve our existing customer base and grow those relationships, but also making sure that we're growing our customer base. Third is our fundamental business model. We've been through a lot in the last few years. I think if we turn the clock back a few years ago and you would've said, "Gosh, Wells Fargo, you're going to go through a challenging period. What would the performance be?" I don't think anybody would have thought we'd achieve what we have achieved, and it's because of this incredible business model as well as an incredible team that will continue to drive strong returns in the future. I'm very confident in our long-term vision. We've got a great diversified business model. We're making the transformational changes that we need. Wells Fargo is a better company today than we were a year ago. We're going to be a better company tomorrow, and we're going to be a better company a year from now. Again, thank you for spending your day with us. Time is a very precious resource. We understand that. Thank you for your commitment to our company, and we appreciate your trust and your ownership in Wells Fargo.

Data Source: Quartr Last updated: May 10, 2018

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