Wells Fargo & Company (WFC)

Investor Day 2016

← View all transcripts

May 24, 2016

Good morning, everyone. Welcome to Wells Fargo's 2016 Investor Day. Thank you for spending the day with us here in San Francisco and via the webcast. As always, thank you very much for your interest in and investment in Wells Fargo. Before we start, I will remind you that some of our presentation today contain forward-looking statements. Please refer to the page entitled Forward-Looking Statements and additional information in your materials, as well as 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 measures, including reconciliation to GAAP, can be found in your materials and in our SEC reports. With that, I'd like to start the day and introduce our Chairman and CEO, John Stumpf. Good morning. Wow, what a great group of folks. Thank you for joining us at our 2016 Investor Day. We do these every two years, and this is the fourth Investor Day since what I would call the latest version or the modern Wells Fargo, meaning since Wachovia. We did one in 2010, 2012, 2014, and this is of course our fourth one. I got a chance to see a number of you as you came in, a lot of familiar faces, some new folks. Who's with us for the first time at Investor Day? Can I show of hands? Okay, a few, but mostly old friends, so thank you for joining us. Today, you're going to hear from 23 Wells Fargo leaders talking about their business, their strategies, passion, the execution of how we go to market. Eight of those people will be new to you. They've never presented at Investor Day before, so it's a great opportunity to see some of the depth and strength of our leaders. Also, in the audience today, there are 60 or 70 of our team members, mostly behind you, all crammed together. As you go off to a lunch break or a break of any kind where we have a little time together, please seek them out, or our team members, please seek out our investors and our analysts. They're our guests today, and we want to make them feel welcome, and I want them to get to know you. This Investor Day, we also, like we do others, invite our directors to join us. Two years ago, Stephen Sanger, our lead director and former CEO and Chairman of General Mills, joined us, and I think he even had a question that day. Based on popular demand, Steve is back again with us, and he wanted some backup, so Suzanne Vautrinot, who is another one of our directors, is also here with us. We have two directors here today. Steve and Zan, would you please stand up so people can recognize you? Many of you know when we talk about the business, I talk about the core building blocks of long-term shareholder value creation. Being a real economy bank and company, those blocks are dominated by loans, deposits, and relationships. Since our last investor meeting, Investor Day two years ago, we grew average loans by $103 billion or 13%. We grew, in fact, point-in-time loans, we grew quite a bit stronger there because we had a lot of growth late in the year of last year. We grew average deposits by $142 billion in two years, 13%. We grew assets over $300 billion, 19%. If you took a bank that size with just the growth we had in the last two years, loans, deposits, and assets, you would be a top 10 bank in the U.S. In fact, you would probably be number nine. Part of the way we are growing so quickly is our net new growth in primary checking accounts. These are the accounts that people live out of. It is their primary account, and this is net. Over two years, we grew by 11%. On the business side and corporate side, about 10%. The mobile side of our business is booming. We added over 3 million new mobile customers since the last time we were in Chicago. This July 13th, we will celebrate our 164th year of business right here in San Francisco where we started. During that 164-year period, we have survived a number of administrations. In fact, the Whigs were in power in the White House when we started in business in 1852. We might want them back. We survived wars, expansions, contractions, lots of new regulatory activity, and a great recession. In fact, the recovery that we have experienced since 2009, that we are still experiencing today, is different than any other recovery I have seen in my 40 years in the industry, and probably unique among all recoveries. It is the recovery that people typically use the word but to help describe. We have had 73 months of job growth. We have created over 13 million new private sector jobs. The unemployment rate is down to 5%, but wages are not growing. It does not feel that good. The participation rate is low. The underemployment rate is high. Housing, the asset class that blew up in 2008, has recovered, in some places recovered fully back to what it was prior to the recession. It is not better for everyone everywhere. Actually, if you look at percentage of ownership of housing, it is coming down every month from the high 60s to the lower mid-60s. Autos had their best year last year in a decade or two, but not all manufacturing is doing as well. Price at the pump is down. That is good for America because we are still net importers, but that money has not all been spent. Consumers' balance sheets are the best shape they have ever been in, along with corporate balance sheets. But people are spending more on experiences, not as much on things. If someone would have said to any one of us seven years ago that we would be sitting in 2016 with 5% unemployment, with housing doing better, with autos doing better, with the infrastructure spend going on in the private side in our major cities, you would say, what do you think low and long rates would be? You never would have guessed. In fact, rates have come down since the last time we met, and the forwards had just the other view of it two years ago. Part of the reason is, even though the U.S. economy, the recovery, has averaged about 2% GDP growth, the rest of the world is much more challenged than that. So when you consider all of that, I am sure all of you are thinking, what is the new normal in this business? What are your views about how we should pencil in growth rates and our view on a whole host of things? We'll talk about that with you today. But I want to remind you, as I remind our team, about a number of enduring strengths that we have in this company that are really unique to this company. Number one, we're all in in the U.S. We are the only large bank in the group size that we are, where 97% of our revenues come from the U.S. We've been that way for a long time. We'll be that way as far out in the future as I can see. Do we love what we're doing internationally? Absolutely. But it's largely in support of our U.S.-based businesses. Number two, we have a diversified business model. You will see how the company is very balanced between net interest income and non-interest income, very balanced between what's going on on the retail side and the wholesale commercial side. And the strength of that is that when things get crazy or uneconomic, or the risk rate return ratio is out of balance, we don't need to do more of it or do riskier business to get paid. We'll do something in a different place. A third enduring strength of the company is all around relationships. If you had to pick one word to describe our culture, our people, our thinking, it's relationships. That goes with you. Many of you, I know you. You know me. We've been together. You've invested us for a long time. Analysts who follow us. Same thing is true with people. I've told you many times, my average tenure of my 10 direct reports is now getting close to 30 years with the company. Same thing is true for customers and communities. Long-term, mutually beneficial relationships. Those deep relationships gives us a more unique experience in understanding what customers want, especially in a time of lots of change going on, especially on the payment side of the business, and you'll hear about some of the innovation we're working on. You get better input. You get deeper relationships. You get a better understanding of what people really want. And when you put them first, it helps us. And while we love our business here, and while we love our diversified model, and we love these deep relationships, probably the fourth enduring advantage is the most important, and that's our people. The culture, the way we think. Keep your ears open today for how many times our presenters use the word us or we or ours or partner, and how infrequently you'll hear the word I, me, and mine. This is the ultimate team sport. And in that regard, we also had a big announcement since we last met at this event. Last November, our board of directors elected Tim Sloan, our President and Chief Operating Officer. And many of you know Tim or got to know him well as our CFO a few years ago. And I know him, and the rest of us know him, for decades, working with him and seeing his leadership, his passion for people, his passion for our business. In fact, he represents the best of our culture. I think I said that exactly how you wrote it, Tim, but I could be off just by a word or two. So why don't we get to work? Again, thank you for your ownership in our company. Thank you for your commitment to coming here and spending time with us today. I think we have a very exciting day. There will be lots of times for questions and answers. First on the agenda, we will have our CFO, John Shrewsberry, share our numbers with you. John. Thanks. Morning, everybody. Thank you again for coming all the way to California. If there was any doubt about which bank has the strongest IR department, Jim Rowe went out of his way to put the espresso machine right outside the door here to bring you all into his camp, and I am sure that you will agree. I am also aware that the numbers is the least exciting part of the day for you guys. You want to get to the meat of the order with people who actually deal with customers. So I have a half an hour worth of content for you. We are going to take questions, Tim, John, and I together at the end of the day. If there are questions that arise from this material, a lot of it will probably be addressed throughout the course of the day, give you more context, et cetera. But if there is some lingering things that you would like to cover, there will be an opportunity to do that at the end of the day. Or of course, we can talk at the breaks or at lunch as well. You will also hear specifically, and I am told at least from the analyst community, that you have gotten this material at 6:00 A.M. You poured through it, you have punched out notes, and you know exactly what is in here. But for those of you who have not flipped through it, Neal Blinde, our Treasurer, will get at the end of the day to some meaty specifics about capital liquidity and the balance sheet. So that may also answer some of your questions as we move along. This first slide gives a little bit of an update as to what has happened at Wells Fargo since our last Investor Day. During that two-year period of time, and this is measured 2013 full year, 2015 full year, you will see that we have managed to grow revenue. We have grown pre-tax, pre-provision profit, and we have grown earnings per share. Having done that has enabled us to actually return lots of capital to shareholders. We will get specific about that in a moment, and also to reduce our share counts. Things that we are very proud of. They are sort of the summary results of what happened economically in the last two years at Wells Fargo. As John mentioned, we also had strong balance sheet growth that contributed to the results during that time. We managed to grow our loans by 13%. This is now Q1 of 2014 through Q1 of 2016. That is among the highest of our peer group, and that includes strong organic loan growth. It includes some of the acquisitions that you've heard about, and we also did it while reducing our liquidating portfolio. You will hear about that liquidating portfolio at a few points today, but as you know, we have been running off Pick-a-Pay loans, running off home equity loans, running off government-guaranteed student loans, and some other things. Those were sort of a headwind, and in spite of that, we still grew loans by 13% over that time period. Deposits, John mentioned also, and coincidentally, we managed to grow deposits by 13% over that same period in time while keeping deposit costs very, very low. Our deposit costs in Q1 were 10 basis points. You will recall there were 8 basis points in the fourth quarter of 2015. The tick up came in the wake of that single 25 basis point move that happened on December 17. Frankly, most of it came from the wholesale side of the business. I think we also mentioned that at the end of the first quarter. The retail side of the deposit base really has not moved much at all from a pricing perspective in the wake of that first Fed move. We have also been able to generate relatively strong revenue growth over this two-year period, despite the challenging rate environment that we have been in since the last Investor Day. John mentioned rates are, and you know this, rates are lower now than they were then, and certainly lower now than they were expected to be then, or expected to be now, then. We have also continued to enjoy among the highest asset productivity of our peers, with revenue of 5% of assets. I mentioned that our strong performance has enabled us to return lots of capital to our shareholders. This is the gross number, $34 billion worth of dividends and common stock repurchases over the past 8 quarters, substantially ahead of anyone else in the peer group. This could be one of the most important slides of the day for our investors. As John mentioned, we have many distinctive capabilities at Wells Fargo, including diversified and balanced revenue sources, leading market share in key financial products, a comprehensive risk discipline, a deep culture, and what we believe is the right team. Our long-term advantages will be highlighted throughout the course of the presentations today. This slide should be familiar to most of you. It represents the diversification and balance of our revenue. As John mentioned on the left, it shows that we are about half and half, 53% net interest income, 47% non-interest income last year, or actually in the first quarter. We finished the last year the same way. On the right, it is a distribution of the different sources of non-interest income that we generate to show you the diversity of it, and also, that is where a good portion of the diversification benefit comes from. There is something for each part of the cycle, and frankly, many avenues for growing revenue over time. This is a comparison of our loan portfolio from the time of the merger between Wells Fargo and Wachovia and today. The loan portfolio today is 6% larger than it was at that point in time. Of course, it ran down somewhat after that time on purpose. And as you will also appreciate and Mike Loughlin will talk about later today, loan quality is much, much better than it was at that point in time, and in part, because our liquidating portfolio has run down $139 billion or 73% over that period of time. And of course, the quality of originations in the last seven years or so has been excellent by comparison to what happened before that. Our diversified business model, which is focused on serving customers in the real economy, and our size, provide us with advantages versus both our large cap peers and our regional bank peers. There are real distinctions in our relative advantages versus each of those peer segments. I believe, we believe that we operate in a sweet spot. There is no one else that has exactly our positioning. We have a lower risk profile and a more straightforward business model than our largest bank peers, and we have more geographic breadth, we have more product diversity, and a significantly larger customer base than our regional bank peers. I will highlight a few metrics that show you the distinct advantages against both of the peer groups, and you will see this is a different approach than we have taken in the past by separating the large peers versus regionals. We will start with advantages versus large peers. These are a few metrics that are commonly reported and easy to point to. We have managed to meet the most complex needs of our largest customers, international needs, capital markets needs, and lending needs, without making ourselves unnecessarily complex. There is a benefit to that. It shows up in our G-SIB buffer, which we are very happy about. We take our status as a G-SIB very seriously, in spite of the fact that we point to this as a differentiation between us and the other large banks. The bar is very high from a capital and liquidity point of view, from a risk management and compliance point of view, from a sophistication in how we operate, the strength of our technology. There are a variety of very high bars that we have to chin to be part of the G-SIB group, and it is a status that we will be living with forever, and we take it seriously. We do, however, have these benefits, and we are happy to point to them, because they do have the benefit of giving us a, as you will see in a moment. They have given us the benefit of having a higher mean and lower volatility of our return on assets, and I think Neal will show you later our return on equity as well. That is a real tangible benefit. It is why people value our shares the way that they have, and it is why people have stuck with us for a long time. You can see on the right a depiction of, this is profitability. This is GAAP reported earnings on a quarterly basis from 2012 through 2016. The red line, of course, is Wells Fargo, and the squiggly lines are everybody else in the G-SIB community. Wells Fargo has been one of only two companies in the U.S., and the only bank, to earn over $5 billion each quarter for the last 14 consecutive quarters. That is a reflection of the nature of our business model. A little technology thing going here. Great. As I mentioned, we also have real advantages versus our smaller bank peers. We have more stores than any other U.S. bank and almost double the amount of our smaller peers. There are 24 states where we have number one or number two deposit share, almost five times more than our smaller peers. In Barron's most recent wealth management survey, we finished fourth, more than 10 spots ahead of our smaller peers. You will hear more about that from David Carroll as he talks about growing his business a little bit later today. We service $1.6 trillion of residential mortgage loans, five and a half times larger than our smaller peers, and our servicing portfolio is comprised of 9 million households, giving us the opportunity to offer them other financial products. You will hear more about that from Franklin Codel and from Avid Modjtabai, as they talk about consumer lending a little bit later today. In terms of market presence, we could have picked from many portfolios. There are four on this slide, and I will highlight them. You will see C&I loans in the top left, commercial real estate loans in the top right, residential mortgage loans in the bottom left, and small business loans in the bottom right. These are our origination numbers versus smaller bank peers, and in each case, we are operating at multiples of their activity, which gives us more customers, more at bats, and more relationships that we manage. Our portfolio is diversified across geographies and industries. We are also industry leaders in a variety of segments, which benefits us through underwriting expertise that is hard to match if you are a smaller bank, when you are originating much lower volumes with much less industry or geographical diversity in loan portfolios. Also, our proximity to customers, being spread out all over the country, benefits our credit results and our ability to deepen relationships. We know our customers better because we are everywhere. This may be the second most important slide to some of you. When we look at our performance against all of our peers, our model has provided leading shareholder returns. We are looking at three, five, and 10-year returns here. Our focus is always on creating long-term shareholder value. As you can see, we have outperformed our peers across all three time periods. We have included the bank index, which we managed to beat over those time periods as well, something that we are very proud of. Something that we have done at the last three Investor Days is to ask you, by polling beforehand, what topics you are most interested in hearing us discuss today, and we have highlighted a few of those topics on this slide. I will touch on each of these in my presentation, except for innovation, which will get picked up shortly after by Steve Ellis, who will be leading a group that covers several innovation topics. Innovation is built into the business presentations throughout the course of the day as well. So with respect to the operating environment, which was something that many of you asked about, and as I mentioned, it looks very different, frankly, than we would have imagined a couple of years ago as we stood up here and talked about our forecast. We've had declining rates. We've had very steady but slow economic growth. This is not what we thought we'd have, and we've all had to adjust our plans to operate strongly given the hands that we've been dealt. The 10-year Treasury yield over the last two years reached its high shortly after the last Investor Day. And of course, it reached its low in February of this year, with a variety of related market volatility. We continue to expect GDP growth, in the ±2% range. As John mentioned, that's white hot among developed economies, and we're happy to be doing most of our business in the U.S. But we might have imagined a stronger growth rate as we sat here two years ago. You asked about the regulatory environment, and there's a lot to cover here. I'll talk about a few things, and we can talk about more separately or later. These are things that we cover on a pretty regular basis with most of you. At our last Investor Day, or since our last Investor Day, final G-SIB buffer or G-SIB surcharge rules were released. And our buffer increased to 2% of risk-weighted assets, which impacts the amount of capital that we hold. There probably won't be a lot of movement in that over time because the nature of our business is not moving that much. As you know or you may know, the calculation there is a relative calculation, so each time it gets done, each bank is weighed versus the aggregate of all banks. So not only moves that a G-SIB makes, but also the aggregated moves of what the peer group are doing will have an influence on the outcome. And of course, it's also indexed in euro, which creates a little bit of volatility in terms of what the outcome could be. But for things that we can control and things that we can measure, we're not making changes in our business that we would anticipate to put upward pressure on that. TLAC wasn't even in draft form on the last Investor Day, and we still don't have final rules, but we think we know what it's going to look like. For those of you who have skipped ahead, Neal's got a new and exciting disclosure on what we think TLAC means for Wells Fargo. It's exciting for some of us. It's not exciting for everybody. But TLAC will be a NIM headwind over time. We'll be issuing long-term debt. We'll have that excess cash that'll have to get deployed in one form or another. I think most of you are aware of that. And we expect the final rule to be coming out, frankly, before the end of the summer. I think LCR had pretty much phased in, or at least was well understood by the time at the last Investor Day. And certainly, you'll see now and probably forever forward, we hold much higher levels of cash than Wells Fargo would have in the past. It's a structural change in our balance sheet. It has an impact on NIM. It provides great liquidity for the very unlikely stress scenario that we might face. I think it is what it is, and we'll be holding levels of cash or HQLA. It doesn't have to be in cash, but it has to be high-quality liquid assets in the orders of magnitude that we are today, as long as we've got the balance sheet size and composition of assets and liabilities and contingent claims that we have today. Neal Blinde will discuss a little bit more about that in the treasury update at the end of the day also. This slide just gives you a little bit of a rundown. There's always a lot of investor focus on businesses we acquire. You'll hear more about the GE acquisitions today. We've also been active, a little bit below the radar on reducing non-core businesses, simplifying our organization, and improving our risk profile. There are a handful of things here that are examples of that. You'll recall that we sold our government-guaranteed student loan portfolio, I think in the fourth quarter of 2014. We recently sold our crop insurance business. We were an industry leader in that, but we decided that it made more sense for Wells Fargo to not be in that business. You'll recall that we got out of, or we discontinued the interest-only home equity loan unilaterally a couple of years ago. That made a positive change in our risk profile. There are other examples on this slide, but the takeaway here should be that we're always going to be doing this. There are more ways to simplify ourselves, more ways to streamline ourselves in the way that we operate, and we'll take advantage of that as opportunities arise. You also asked about a little bit of an update on GE. There's substantially more information that will be coming in the wholesale presentation by Ed Blakey and Henry Jordan, who are the receiving business leaders who now own those GE businesses as part of Wells Fargo. I have a couple of highlights for you here. The weighted average yield on the loans, which is a question that many people have asked, is 5.7%. Hopefully, that's helpful in some of your modeling. Quarterly net interest income will benefit by approximately $300 million starting in the second quarter. It's more complicated than that, of course, because there's so many leased assets that came over on the books as well, and leased assets have not only carry costs, but they have depreciation associated with them. This is the easy part of the story. We'll talk a little bit more later about the whole picture. The increase in non-interest lease income is largely offset by operating lease expense, which I just mentioned, depreciation on the assets that are leased. Importantly, we anticipate the full merger transition will take 2 years to complete. It'll be substantially completed sooner than that, but there'll be a tail on it because there are things that just take time to settle in. Like all of our acquisitions, we're going to take time to get it right. Excluding merger-related expenses, the efficiency ratio of the businesses that we acquired, we expect to be in the range where we operate, 55%-59%, and probably at the higher end of that. These are very operationally intensive lending businesses as you may know or as you'll learn, but they do fit nicely in the Wells Fargo portfolio. We've had some questions about credit quality of the GE loans, and we consider this to be a high-quality portfolio. It's performing within our acquisition underwriting assumptions. The boarding of these loans did increase NPAs a little bit in the first quarter and were one of the drivers of the increase in criticized loans last quarter as we conservatively board loans in the onboarding process into our internal credit grading system, and then at the second pass-through, the third pass-through, they'll migrate, my guess is, into a more representative distribution of credit grades. So setting aside GE now, we've grown net interest income in the past two years despite a 45 basis point decrease in the net interest margin. We expect to grow net interest income in 2016 even without additional rate increases, frankly, even without the GE loans that we added. You'll hear more about our net interest income, our net interest margin, and our asset sensitivity from Neal, as I mentioned, toward the end of the day. You can pin him down with Q&A for a little bit as well, and he'll respond very well. While non-interest income has been relatively stable since 2013, we've had growth in trust and investment fees and other customer-driven fee businesses such as card fees and deposit service charges as well. Mortgage fees have declined, reflecting lower refi activity as you'd expect, but we currently expect mortgage banking fee income to grow modestly based on an improved housing market. Non-interest expenses are up modestly since 2013, and our efficiency ratio has been stable and remains among the best when compared to our peers. Expenses have increased from operating losses as well as commission and incentive compensation, which is generally tied to revenue growth. Salaries and employee benefits have been stable, and we've decreased all other expenses. We've generated positive operating leverage every year since 2013, and our goal is to continue to generate positive operating leverage this year. While total expenses have been relatively flat, there's a lot going on behind the scenes. We're achieving efficiencies across our businesses, and you'll hear today more about these. We've also been reinvesting those saves into the business to ensure we're well-positioned for the long term. Our expense story is slightly different from our peers. We're already operating at among best-in-class levels, and we're actively becoming more efficient so we can invest for growth while still operating within our efficiency ratio target range. In particular, we've been investing significantly in improving the customer experience, risk, compliance, and innovation. Moving on to credit quality. Credit quality has remained strong with our net charge-off rate near historic lows, even with the increase in the first quarter of 2016, which as you know, was primarily due to oil and gas losses. Mike will be talking at length about that later today. After several years of credit reserve releases, we built the reserve in the first quarter as stress in the oil and gas portfolio outpaced continued improvement in consumer, and particularly in residential mortgages. We expect continued strong credit results outside of oil and gas. We provided a lot of detail on our oil and gas portfolio during Q1 earnings, so I'm not going to spend a lot of time on it here. This is very similar disclosure to what you saw at the first quarter. One area where I do have an update because of the time of year that it is an update on the spring borrowing base redetermination process. In fact, I have slightly more updated information than what's in the slide because we updated it through yesterday. We're now more than halfway done, and of those completed, 68% of borrowing bases had a line decrease, 19% were unchanged, and 13% actually had increases in their availability as a result of the redetermination process. We expect continued stress in the oil and gas portfolio this year, and more credit losses will undoubtedly be realized, and there's still the potential for additional reserve builds. Quick snapshot on capital. Neal will be providing a lot more information on capital, but let me just highlight that our capital position remains strong, even as we've grown the balance sheet with assets up 17% from year-end 2013 to 2015, and of course, the distributions in both share repurchase and dividends that I mentioned earlier. On a net basis, we've returned $25 billion of capital in 2014 and 2015, and we recently, as you know, increased our common stock quarterly dividend to $0.38 per share. Turning to our target ranges, we've been providing you with updates on four ranges, return on assets, return on equity, the efficiency ratio, and net payout ratio, starting with our Investor Day in 2012. As a reminder, these ranges are meant to be guideposts for our annual results over the next two years based on a current view of the environment. Since many of you think in terms of long-term targets, these are not intended to be normalized over the cycle or aspirational ranges. If that were the case, they would likely be higher. Rather, they're intended to be useful to you as you consider the environment in which we expect to be operating between now and our next Investor Day in two years. Obviously, Jim would be disappointed if I didn't tell you that there are many factors that could cause our results to be either higher or lower than these ranges, including interest rates and the economic environment. So for those of you who've been watching carefully, we've been operating below our 2014 ROA range recently, reflecting continued low rates, higher levels of liquidity, that's that structural change in the balance sheet. As we discussed earlier, in regard to LCR, we've had tighter lending spreads and higher provision expense. Our new full year ROA range is 1.1%-1.4%, which is consistent with recent performance and of course, is still above the range where most of our peers are operating today. As you're looking at the slide, the dashed box is the prior range and the gray box is the newer range. The same factors that impacted our targeted range for ROA have also affected our annual ROE target, which is now 11%-14%. This new range is consistent with our recent performance and is higher than the range of most of our peers are achieving, and we believe it's the appropriate range for this part of the cycle. I'll point out to you that this is a GAAP ROE, unmodified, unadjusted, unadulterated. These are real accounting results, which makes it hard to compare with most other firms' disclosure. I know that many of you use return on tangible common equity, and we've created that calibration, and we'll begin reporting it that way also so that it's easier to make an apples to apples comparison. You'll see that with the treasury update later today from Neal Blinde. We've not adjusted our efficiency ratio target, which remains 55%-59%. As I mentioned earlier, we're consistently focused on operating more efficiently while reinvesting back into our business. I still believe we'll operate at the higher end of this range if interest rates remain low, and it would take rates moving up to move us meaningfully down in this range. Our net payout ratio range of 55%-75% also remains unchanged. Our strong organic capital generation and stable ROE support strong capital returns, and returning capital to our shareholders remains a priority for Wells Fargo undoubtedly. This compares us with the peer group, with the ranges superimposed. Even with the adjustments to some of our performance targets, our targeted ranges are still at best in class levels. Let's take a look at our first quarter results as well as those of our peers. That's what's here. Then see how they measure up. You can see, our performance is among the best and something that we're very proud of. Again, we think this is realistic, we think this is the right context for the next two years, given what we know about and believe about the environment that we'll be operating in. In summary, in a challenging operating environment for most banks, we've had solid performance since our last Investor Day. Our balance sheet strength, reinvestment in our businesses, and strong risk discipline position us well for the future. You'll be hearing from the presenters throughout the day how our diversified business model continues to provide us with unique opportunity by focusing on the building blocks of long-term growth, as John Shrewsberry mentioned. Increasing our customer base, deepening our relationships, and growing loans and deposits. It's something that we're committed to and very proud to have done well at. Now I'd like to welcome to the stage President and COO, Tim Sloan. Thanks, buddy. Appreciate it. Good morning, everyone. I want to acknowledge that you can see that we've upgraded our CFO over the last few years. It's a big change since the last Investor Day. That alone should be a reason why you want to buy a little bit more stock later today. I want to echo John and John's comments, and thank you all for attending our Investor Day. We realize your time is very valuable, so to carve out a day for us is much appreciated by the entire team. For those of you who are shareholders, we appreciate your investment in Wells Fargo. We take it very seriously. For those of you who are analysts that write either externally or internally about Wells Fargo, we appreciate your hard work and effort and how you follow the company. We follow what you write very carefully. We don't necessarily always agree with it, but we learn, and I pore through all your reports because the perspectives that you can provide about the company are very helpful in terms of how we think about our growth. A lot's changed in the last six years. I've had the privilege of being a part of this company for 29 years. I've also had the privilege to present to you all, in the last four Investor Days, including this one, in four different roles. I guess I can't keep a job. A lot, again, has changed, but some things haven't. That's this consistency of our performance, as John just described. But it's also the consistency of how we focus on our customers and on our vision to satisfy our customers' financial needs and help them to succeed financially. It's easy to say. It's incredibly difficult to do. I would suggest to you that there are a few common principles that guide us, some of which John referred to already, and I want to reinforce a few of them. The first is all about our team. You're going to see 23 presenters today. You're going to have the opportunity to interact with those presenters, plus almost 80 of our senior leaders at Wells Fargo. I would really encourage you to get to know this team to the extent you don't already, on breaks, at lunch, and at our cocktail hour afterward. These are the folks that are running this company every day, that are there for our customers, that are making decisions that guide how we operate. I think this is the best team in the financial services industry. The second is about how we balance the short versus the long term. We certainly take seriously and appreciate that we have to produce fine operating results every 90 days, and when we do that, you look at them and say good things and sometimes not so good things about them, and that's fine. Again, we take that responsibility seriously. However, we will never make a short-term decision that negatively affects the long term of this company. This company's been in business, as John mentioned, for almost 164 years here, founded here in San Francisco. That one of the reasons that we've been able to be in business for 164 years is because of how we balance the short versus the long term. Great short-term results, but focused on building over the long term. The third is this diversified business model. We're going to talk about this a lot today. You're probably getting tired of it. We'll never get tired of it, because it allows us to be able to deliver both short-term and long-term results in different economic cycles, different interest rate environments, periods of economic volatility and market volatility. We've sure seen a lot of that over the last few years. Right? It's also about how we manage risk. I frequently say internally with our team that the reason that Wells Fargo is here today and many of our former competitors are not is because of how we manage risk. It's about that risk return so that we can deliver the right products and services to our customers, priced appropriately, deliver for our shareholders, and very importantly, meet and exceed the regulatory expectations that are put in front of us every day. We want to be known as the best risk-managed financial institution bank in the world. Finally, it's about delivering for our shareholders. John just described to you our returns over one, five, or three, five, and 10 years. Maybe we should just stop and just look at that slide again and again and again. But the fact of the matter is that we know that we cannot continue to perform and meet the needs of our customers unless we provide appropriate returns for you. So as you listen to the presentations today of the four various business lines, think about those principles. Think about how those business lines are continuing to grow revenue, because we've been growing revenue at this company. We are a growth company. We've been growing revenue in a difficult environment, but it's because of the team that's leading the business lines. Okay. Also, as you listen to some of the business presentations, you're going to hear about how we continue to innovate Wells Fargo. Before I say a couple words about innovation, you're also going to see today some videos between the breaks. The videos are going to describe our brand, which is the most valuable in the world in our industry. It's also going to describe our commitment to our communities, not only on behalf of how we make a difference in those communities as a company, but more importantly, how our team members make a difference in those communities. There's a view today, in financial services that big banks, maybe even big successful banks, are not innovative. I'll remind you that we started our business 164 years ago, delivering people and packages by horse. That was the business. We've been innovating for 164 years. I think some of the best ideas that are occurring in financial services today are certainly occurring in Northern California. It's just a little bit north of Silicon Valley. It's right here at Wells Fargo. You're going to hear about those today, again, in our business lines and also from our innovation panel. Having said that, we're not a technology company. We're a financial services company that delivers technology in an appropriate way, at an appropriate time, at an appropriate cost, so that we can satisfy the financial needs of our customers, and we can also make the lives of our team members even better so they can perform for our customers, and we can continue to operate in the efficiency ratio that John just described. With that introduction, I'd like to bring up to the stage Steve Ellis. Steve and I have worked together now for a few decades. I know you wouldn't know that by our appearance. I can assure you, by the way, having worked with Steve for 20 years, he's dressed up for today. Thank you. Yeah, actually, I was trying to remember when we first met, Tim. I think it was 26 years ago when Wells Fargo was just primarily a California bank, and we were kind of big in commercial real estate, and things were a little upside down with commercial real estate, and we worked a lot of things out, and I learned a lot of things from Tim. He learned a couple of things from me. Dress code he did not learn from me. We'll leave it at that. I'm Steve Ellis. Recently, I run the Wells Fargo Innovation Group. I think when we talk about innovation, it's about all of us at Wells. Just like risk management's about everybody here. We look at innovation as really a part and parcel of what makes us different and differentiates us from our competitors. At its essence, at Wells, it's about making things easier for our customers and team members. Sometimes it's going to be about flashy technology, like mobile wallets. In fact, we announced our Wells Fargo Wallet this morning. Tim will talk about that a little bit later. Sometimes it's about redesigning processes that lead to efficiency and a better customer and team member experience, like taking paper out of the stores. Sometimes it's about flashy technology and process redesign that engender new forms of trust, like biometric authentication, which we'll also talk about a little bit later. Our focus here is about building capabilities that add tangible, long-term value to our customers. It's not about being disruptive. It's about making it easier for our team members to work together to deliver those customer solutions, and we're focused on evolutionary, enduring, and sustainable things. It's been part of the DNA of Wells for 164 years, and I bet if you look forward to 2152, it'll still be part of our DNA. If you go back, and Tim was doing this just a little while ago, if you go back, there's three truths about Wells I always think about. One is we always go where our customers are. We want to do things fast, simple, and easy for our customers, and we want to be secure. Back in 1852, there was this gold rush going on, and you can think of it as a VC investment in the American West and the gold rush when Wells Fargo moved out here in 1852. A few years later, we operated the first national stagecoach service, which was delivering mail twice a week, which was markedly faster than steamships delivering mail twice a month. A few years later, we developed and implemented the proprietary double encryption on telegram transmissions, some of the first cybersecurity you will see in the U.S. If you fast-forward to the digital age, here's some things about Wells I want you all to know. We were the first internet bank website in 1995. in 2000, we launched the first single sign-on portal for commercial businesses, which we now move over $11 trillion a year through. We personalized ATM experiences, and the architect of that will be on stage next. We jump-started mobile banking before smartphones were smart in 2007. The thing to remember here is we're talking about billions of customer interactions and tens of trillions of dollars we move. Our stuff's got to work when we roll it out. Just talk about our innovation ecosystem at the bank. It's very deeply rooted throughout the company. Good ideas come from everywhere. Everywhere inside the company, everywhere outside the company, all around the globe, and we look all over for those. By the way, not all ideas are good. Sometimes you got to sift through them and find the good ones. Inside, we have a number of tools any team member can use to produce an idea. One of those tools is called Idea Builder, which you see up on the screen. We get over 700 ideas a month from Idea Builder, and then roughly one out of five of those ideas, we then take further on to test and look and investigate in one of our 11 R&D labs that are sprinkled throughout our enterprise. Next month in June, we'll have our annual iWeek, where we bring people across the enterprise together for a week of festivities to think different and act and come up with events and contests that are focused on new ways of doing things. We do hackathons and proto-thons, where we get lots of good ideas, and it helps us generate very good IP. There's also a lot of avenues for us to get outside perspectives, right? Because we know there's a lot of brilliant people at Wells Fargo, like Tim Sloan, my former boss, right? There's a lot of really brilliant people outside the company, and they've got ideas, and how can we partner and nurture and foster ideas with them is really important to us. Right? We have lots of relationships with VCs. We are hooked in with incubators all over the world and labs all over the world. We've also got a technology banking group in the wholesale bank that has thousands of relationships with small startups to the biggest companies in the world that we also work with. We also have a startup accelerator, which we received close to 1,000 applications over the last two years and has led to 11 funded companies. One of those companies is a company called EyeVerify that I'll talk about a little later, where they authenticate you from the veins in your eyeballs. Really cool technology. It's not just small firms we partner with. We also co-develop with large firms. An example is the development of our self-service ATM technology with NCR, which is one of the leading ATM manufacturers in the world. Some of their folks are in our labs right now working with us, creating cool new cutting-edge technology for the future. We take a long-term point of view here. If you look on the right-hand side, some of the medium and long-term things. We percolate ideas with lots of these new technologies and ideas for years. You got to remember, we are moving trillions of dollars through billions of transactions. Stuff has got to work. These ideas, we have been, years, investigating, testing, and evaluating. I would tell you, I think the future does indeed look bright for financial service and our customers, with some of these new kinds of tools are going to add more value for our customers. Just a couple of those. One thing we have been doing, is that we are looking at new ways of doing banking. If you look at speech recognition. What about the idea of just talking into your phone or into your car or into your home entertainment system and your transactions happen? We authenticate you, we know what you want to do, and we test that, and then we make it happen. We are testing that with a number of different firms and labs inside the company today. Blockchain. I hear a lot about blockchain, also known as distributed ledger technology, as Tim Sloan was telling me just the other day. He is a blockchain expert now. We look at that. We are involved in R3. We have been doing a lot of development inside our company, looking at ways to leverage blockchain. Looks like it has some promise, particularly in what I would think of as back office things like reconciliation and settlement, trade finance, some of those kinds of services. Then look at behavior analytics. In behavior analytics, we have been using behavior analytics in our fraud detection ecosystem for years. It is one reason why we are best in class at fraud. Now we are starting to use some of that behavior analytics to test predictive banking by analyzing customer accounts and transactions so we can proactively deliver personalized interactions. All those things on the right, some of those we have been working at for years, and some of them we are just starting to because they are new things that have cropped up, like virtual reality, which may become very useful a few years from now. In the short term, some of the things we are going to talk about today, all these things we have been hard at work at for years. When we start thinking about biometric authentication, we started looking at that in 2008, whether it was for fingerprints or eyes or your voice. The paperless store we have been looking at for a while, and have payments, obviously, payments is the backbone of a lot of what we do, and we have been very focused there at how that world will evolve over time. Those are the areas that we are going to focus on today, authentication, the paperless store, and mobile wallets. When you think of innovation at Wells Fargo, look, it has been in our blood since 1852. It is going to be in our blood to 2152 and beyond. What leads us is the voice of the customer. It is not about being disruptive. Customers do not want disruption. They want new kinds of value that make life easier for them, that give them new things, that make them want to continue to bank with you. Many of our services are built around common platforms that can be used by all our businesses, which I will talk about in a second. Then the built for scale and the scale is in durability. Billions of interactions with customers every year. Tens of trillions of dollars moved. Industrial strength is a hallmark for us. It has always been since the day we got. It is why we are so good at this. We make sure it works, and it works whether one customer wants to use it or 1 million customers want to use it. Now we are going to go to one of my favorite topics, which is authentication. I spent a lot of time here. This is a big deal, and there are four things I want you to remember about authentication. The first one is that every single financial transaction starts with authentication. Every single one. If you are not good at it, you are not going to be very good at being a bank. The second thing that is important is there is no silver bullet. There is no one tool that creates a great customer experience and the right level of security. You should think of authentication with fraud as a layered approach with multiple lines of defense. One is how you authenticate yourself, but there are all kinds of things we also do. Mobile device recognition. Behavior analytics. IP addresses. Other kinds of controls that are invisible to the customer so we can confirm their identity. It is not one thing makes it work. It is an ecosystem. That is really what makes a company safe and secure. We are best in class, and we continue to get better. We are best in class because from the day we started doing stuff online 21 years ago to just this moment right now, we are constantly looking at new ways at how to make ourselves better. How do we continue to learn and stay ahead of the game? This is probably one of the most innovative areas we have in our company. It is why we are so good at it. Fourth, this is a hot area for innovation right now, which is why I get really excited talking about it. Because authentication is evolving from something you know, your username, your password, maybe some transactional stuff, to something you have. This is a very powerful device. We give our commercial customers tokens, but this is somewhat like a token, something you have, and everyone knows where their mobile phone is. Then it is moving to something you are. Maybe it is your fingerprint, maybe it is your voice, maybe it is your eye print, maybe it is the way your face looks. Maybe it is how you do what you do. These behavior things are becoming very important. These tools are really cool for a number of reasons. One, they create a better customer experience. Two, when you layer them into our secure ecosystem, they make things safer. Three, they are going to allow us to simplify how we do authentication, which is going to drive cost out of the company. It is a win-win-win. That is how it works. Here is how we are thinking about this. One of our overall customer strategy. Customers want choice. We have our user IDs and passwords. We've been doing one-time passcodes for a while, which many of you know, you get a one-time code that shows up on your phone, and maybe you enter it into your online banking app. Now we're going to do a new service with that. We've been very focused on biometrics. We want that to work across all our channels consistently. Wherever you come into us, you can use the way you want to authenticate yourself, and then across all our businesses. We like the idea of persistent, which is something we're going to build into our process. So when I come in and maybe I'm in the community bank, I'm working something with my consumer products, and I need to go over to brokerage. Once I'm authenticated, I'm authenticated. Once we know you, we know you. Very important. Okay? The smartphone is going to be one thing that's very important to us. But again, it's all the things we do that really make security work. So here's where we're at. What we're launching this year. So when you think of biometric authentication, we've done the fingerprint on iPhones for consumers, which we rolled out a little while ago. Next week, we are rolling out eye print verification, which does from the veins in your eyeballs for our commercial customers. I'd do the demo right now, but if you saw my eyes up on that big screen, you really don't want to. But if you want to see the demo, I will show you the demo during any break. We've been testing and piloting voice authentication internally at the bank and on our wire platform and a couple other places. We'll be starting to roll out voice authentication across the enterprise over the next several years, starting in the second half of this year. We've also been doing some work on what you have, which can be using the phone to get that one-time passcode. Here we're bringing things together. So starting in June, customers who don't have their ATM cards with them will be able to obtain a one-time passcode on their smartphone and enter that code in the ATM machine and authorize their transaction. So that's pretty cool. Also starting in June, in a pilot, we're going to be connecting the smartphone through NFC to the ATM. If you have your debit card set up as your default card in your mobile wallet, they'll merely need to unlock the phone and tap it at the ATM, and then transact as they normally would, enter in your PIN and select your transactions. This NFC capability is going to be offered initially at select ATMs and then rolled out over time. All cool things, again, layering things on top, years of experience and work focused on these things to get us where we're at today. So we're very excited about the ease of use and nature of these services. Again, if you want to see stuff at any break, I'll be able to show you a demo, or Jim or Jonathan will be able to talk to you about it. Now what I'd like to do is to introduce one of my cohorts, Jonathan Velline, the guy who made ATM sexy. Thanks, Steve. All right. Well, now it's my job to make paper sexy. That was really cool stuff, Steve. Really neat innovation that's going on. Some innovation's harder to see, especially from the outside. It's behind the scenes. It's how we reinvent ourselves. It's how we work differently with our customers, how we work differently amongst ourselves, how we work differently with the industry. It's how we make our business better. We think this is interesting to you because, one, it's hard to replicate. There are a lot of moving parts throughout the organization, things you have to get right, collaboration. But if it's done right, there can be some tremendous savings. We have internal innovation, but even if it's inward-focused, our goals are the same. It's customer first. We start by creating a better customer experience. Customers don't like filling in forms. They expect the same ease and speed of digital service. We build trust. Eliminating paper gives us more opportunities to protect customer information. Faster posting reduces risk. And we think about efficiency. It's labor and transportation and time. We have a number of examples where we've reduced or eliminated paper in the enterprise, things like remote deposit, online wires, onboarding new customers to Wells Fargo. Today, I want to talk about the service experience in our stores, what we call our paperless store. Now, go back in time and just think about banking in general. There's a lot of paper processing that drives our business. Think about that customer who wants to make a deposit. She's going to fill in a little deposit slip, write her name and account number, spell out the amount in cursive, hand that to the teller. The teller types that into the system, puts it into the right bin, depending on what transaction it is. At around 4:00 P.M., they take all those transactions and they bundle them up. They put them into a bag. A courier comes and drives that or flies that to the nearest processing center. They rush to scan and process all that work before the 10:00 P.M. cutoff window. It's this big, elaborate process. It's confusing for our customers because if they come in after 4:00 P.M. when all the work's already left to the back shop, we have to explain to them that it's tomorrow. I'm sorry, sir, but your deposit will count to tomorrow's business day. It feels like today, but we're saying that it's tomorrow. Our team members have to get this transaction right. There's codes they have to type in the system. They have to get the transaction into the right bin and bundled with the right work, or it might not post correctly. The bank has to support the logistics of all of this paper movement, which has a lot of opportunities for failure. You think about weather or other transportation delays, that can delay posting. So there was this big opportunity. Also remember that we're talking about workflow that's deeply rooted between our customers, our team members, our industry. We took a very deliberate and iterative approach to improve this. You see a lot of examples on the right-hand side, things our customers see like assisted service ATMs and team member tablets. I'm going to take you through that in some detail in a moment, but as you're going through that, remember that the customer experience is only the tip of the iceberg. It's the end result, but it's the work behind the scenes, that transformation of people and process and technology, changing the end-to-end workflow, how we work together between retail and wholesale, technology and operations. We had to move work around. We had to do things differently to create a better customer experience, and also drive the efficiency to fund that better customer experience. Some institutions look at that complexity, they look at that expense of a teller transaction, and they decide they're just going to eliminate that altogether. We don't think that's the right answer. We think you actually have to meet that demand with better customer experience, like the things that you see on the slide here. It's that transformational work. It's the working with the people and the process and the technology. That workflow creates the efficiency. The efficiency creates the experience. Workflow, efficiency, experience. By the way, when you digitize the end-to-end workflow in the stores, that sets us up for the faster payments network that you're going to hear about later from Jim Smith and Ed Kadletz. We actually have a long history of digital experiences through our ATM network dating back to the 1970s. Think of that as our first step in terms of digitizing the Wells Fargo stores. Our ATMs represent about 60% of our customers' transactions in the physical channels. Almost 900 billion transactions at 13,000 ATMs across the country. We've developed our own software, and that gives us the flexibility to deliver a differentiating you-know-me experience. We remember our customer's language and receipt preference. We look at what they do the most, and we paint the experience for each customer individually based on their transactions. Those big green buttons, that's what this customer does the most. One click and they're done. That's great for the customers. They like the speed of that. They don't have to play that game of 20 questions. What's your language? Do you want a receipt? Do you want a balance inquiry? One click, they're done. We like one click because it's faster. One click is as much as 25% faster than if they went the long way. Faster transactions are great because it builds capacity for us to see more customers at that ATM. Almost 40% of our transactions follow the fast way. We know that it's working because customers are choosing it. Customers also choose to use our teller. We have 600 million transactions a year. There's huge demand. But it's not demand for the paper slips. It's demand to talk to that teller. We've replaced the paper slips with those touchscreen PIN pads. The experience is a lot like the ATM. It is faster for the customer. It is faster for the teller. It is a great example of how we blend our channel experiences. This is like a little ATM. The only difference is you have a teller standing behind it, smiling teller who can do more things. They can do more complex transactions. They can answer your questions. They can build a relationship with you. It is that concept that helped us develop Assisted Service. Assisted Service just takes the best of our ATM experience and our teller experience, and it puts it together. Our customers can do more. They can withdraw larger amounts. They can access all of their accounts. They get multiple denominations, ones and fives and hundreds. If they need help, if they need assistance, a team member is alerted on a wireless tablet, and they come over to help. They have all the information from our teller system and our banker system. The only difference is they are untethered. They can help the customer right there at the ATM. You heard about Assisted Service at the last Investor Day as part of our neighborhood bank new format. The thing about the paperless store is it allows us to design in a smaller footprint. Paper takes up a lot of space. We are also rolling out Assisted Service to our traditional stores, and we have recently been installing them directly in our teller lines adjacent to our existing tellers. A customer can choose Assisted Service, or they can continue to choose to use the teller. What we are finding is about 15% of our transactions are choosing Assisted Service, and that is great for the customers who choose it. It is also good for the customers who are using the teller because it actually moves the line faster. The assisted service ATMs are building capacity. We are also exploring a lot of use cases with team member mobility. What are those experiences that would make sense for a team member to do untethered in the store, helping customers? Assisted service is obviously one of them. We are also piloting the ability for a stage director to welcome customers, check them in for appointments, give them some basic account information, queue up teller transactions. A couple things I want you to take away from this. First is assisted service can be more efficient than a teller. They can, at their peak, do about twice the transactions at a lower operating cost. Remember, this is fixed cost, so you have to run a lot of transactions through it to get the lower cost per transaction. An ATM that does half the transactions is twice as expensive on a per transaction basis. So you have to be very careful about overinvesting in fixed cost hardware to save cost. If the transactions drop, you cannot just cut the hours like you would with a teller. So we are very careful. We are trying to optimize the cost per transaction between assisted service and full service by looking at the transaction throughput for our tellers and our ATMs on an individual basis, and maximize that investment in fixed cost hardware and variable cost staffing. Second thing is tablets are great if they are adding meaningful value to your customers or your team members. So our tablets have our teller system, they have our banker system. We're connecting them to our ATMs. We have our stage 2 specialized applications. We're looking for those use cases that truly are adding value, adding efficiency, improving experience. You don't want to just roll out tablets for tablets' sake. When we focus on our end-to-end workflow, when we improve our back-end workflow, we have the ability to really improve customer experience and efficiency. Full image capture is an example of that for us, where we now capture 100% of check volume in the store. Before we had this initiative, we captured about 70%, and the larger transactions, mostly wholesale customers' deposits, we would put in the bag, and the back shop would process those. Now it's 100% scanned in the store. Now, for us to be able to accomplish that, to deal with that increased scanning volume, we created a new teller system. It's easier for the tellers to use. It scans checks at about twice the speed of our old system. Our tellers can scan all that work without increasing staffing. Our customers love it because it's faster for them. The transaction's faster. Everything posts on the same day, so we don't have to do that as tomorrow business day, which benefits about 35 million transactions a year. It's great for our shareholders. We have less processing centers, less transportation, less paper. This is another example of fundamentally changing workflow that drives efficiency, that drives better experience. That's what the paperless store is about. It's a story of continuous improvement. We'll continue to push the boundaries on what we can deliver. Team member mobility, continuing to look for those use cases that make sense for a team to be untethered in the store, helping customers. We'll continue to invest in teller automation, finding that right balance between the fixed cost technology and our variable cost tellers. Authentication, as Steve talked about, is a really exciting area for us. He mentioned the cardless ATM, where we'll have the ability next month for NFC readers to tap the ATM, and we're piloting the one-time passcodes. We're also going to roll that out to our tellers, both in the lobby and in our drive-up. The paperless store is really about just connecting the best of digital with personal service. It's important to our customers and the 1.5 billion transactions that they do every year in our physical channels. That internal innovation and collaboration throughout our company delivers efficiency, and it helps us continue to improve the experience. Now I'm going to hand it over to my friend Jim Smith. He's head of virtual channels, leads a lot of innovation in this company, and today he's going to talk to you about the payments business. Great. Thank you, Jonathan. Thank you. Well, thank you. Good morning, and as you just heard, the digital revolution is impacting and improving the experience and efficiency in the store, just as it is across all of Wells Fargo. I am going to talk a little bit about how technology is impacting another cornerstone of Wells Fargo, payments. Payments are a critically important component of our business. At Wells Fargo, we are investing in activities that leverage our scale and will lead to the next generation of payment products. Payments are a critical driver of relationships for consumers, small businesses, and our wholesale customers. I am going to take a moment to describe our payments business. For consumers, the ability to use their accounts to make purchases at stores or pay their bills, buy goods online, that is a key part of their daily financial life. Offering a diverse and integrated set of payment solutions is a key reason that customers choose Wells Fargo for their checking accounts and their credit cards. Our consumer businesses include checking accounts, related services like bill pay, person-to-person transactions, remittance services, and many more. In addition, we have a large and growing credit card business, which is playing an ever-increasing role in our customers' daily payment activity. On the business side, the ability for a business to manage their cash balance, accept payments from customers, enable trade domestically and internationally is paramount. We offer checking, debit, credit, and more payment services, all built for the needs of a small business customer. In addition, we offer value-added products such as the ability to accept card-based payments, manage their payroll, make international wires, and more. Even larger businesses benefit from dedicated treasury management solutions to help manage treasury operations, process payables and receivables, and a lot more. Payments are a key part of our ecosystem that links the consumer and businesses together. We have got a strong share in our customers' primary accounts, which enables us to earn their day-to-day payments business. Both the treasury management business and debit card are great examples where we are over 85% penetrated by account. It is not just the wide array of products that we offer to our customers. We also benefit from tremendous scale. Scale provides many benefits, such as it allows us to do more for our customers at a much lower price. It also allows us to leverage our expertise across businesses and customer segments and offer new solutions. It also allows us to use information in new ways, such as improving security and fraud. We believe the scale and the breadth that we offer provides a huge competitive advantage over our startup or monoline competitors. Because we offer this breadth of service at scale, we can integrate these experiences together, which is incredibly important since most customers are using multiple payment types. You can see the size of the scale, which Steve mentioned earlier. We processed in 2015 over $140 trillion in electronic payments. We are number one in a great many businesses, including retail deposit market share, debit card transaction volume, ACH payments. We have got the number one online money movement experience, and we are rated number one in customer satisfaction for our treasury management products. We are focused on extending that leadership, increasing our scale, accelerating businesses such as credit card and merchant services, following where our customers go by becoming the default card for customers, developing open APIs and extending our solutions to meet our customers' needs, empowering customers to manage data and access their own payments information. We are investing in the next generation of enabling capabilities, such as creating faster payment systems. Our goal is to be a significant provider of core payment services, differentiated by convenience and trust, and a leading force in shaping the future of payments. Let me talk for a moment about how innovation is transforming our payments ecosystem. As you have heard this morning, technology is shaping customer expectations, their experiences, and the capabilities for many industries, including our payments offerings. The rise of mobile banking, the use of data, and the ability to process transactions in real time will transform the payments ecosystem and unlock new sources of value for us. At Wells Fargo, we are leading efforts to leverage digital technology to transform payments. We are focused on the customer experience and finding new ways for customers to make and accept payments or link their Wells Fargo accounts to new offerings. Mobile is enabling a whole suite of new capabilities and experiences for our customers at home, on the road, or as you heard from Jonathan Velline, in our stores. We are extending products in new ways, including mobile wallets, person-to-person payments, cardless ATMs, and other services. We are also really focused on leveraging this technology to enable trust and security in our payments products. Technologies such as tokenization are allowing us to make those payments even more secure as we make payments faster, simpler, and more accessible. Tokenization allows us to hide the actual account number with an encrypted single-use number that greatly enhances the security of the transaction and can be applied in both consumer and business contexts. Finally, digital is enabling us to realize new efficiencies. You are going to hear a little bit later from Ed Kadletz about our partnership with Early Warning Services to enable a new real-time, person-to-person payment system, and we are focused on other solutions that apply the benefits of real-time transaction processing in products such as faster bill pay, which will help us reduce our costs. These are just a few examples of innovation that is happening in the payments ecosystem across Wells Fargo. But I want to spend a little bit more time on one solution in particular, mobile wallets. As I mentioned, one of the primary motivators for a customer having a checking account or a credit card with us is the ability to make a payment at the point of sale, online, and other locations. Over the years, payments have been moving from cash and check to debit and credit cards. Now, with the rise of mobile banking and the adoption of new capabilities like EMV technology, we can extend those products into an even more convenient form factor, moving from plastic to a convenient digital wallet that resides directly on the phone in the customer's pocket. We have partnered with some of the leading mobile providers to offer solutions such as Apple Pay, Android Pay, and Samsung Pay. There's genuine interest in these products, as exhibited by the fact that we've had over 2.8 million customers adopt and load a Wells Fargo card into one of these wallets. As merchants have added NFC capabilities, we've seen an 88% growth in the number of monthly purchases from our active users. Among merchant categories, grocery stores seem to be a key driver of this adoption. As we've expanded the number of digital wallets that we offer, and we've encouraged adoption, we've seen a 203% growth in active cards year-over-year. In just the last quarter, over the prior quarter, we've seen a 25% increase in the total purchase volume from our customers. We expect to continue to see that adoption grow as the use of NFC rolls out across the point of sale at merchants. These wallets allow us to integrate our products directly into the tools that customers use already. We're focused on enabling wallets that customers use, earning top of wallet placement, and driving engagement in customer relationships. Today, as you heard earlier, we launched the Wells Fargo Wallet. This is going to benefit from scale instantly as it will be available to over 5 million customers using their Android phones. It offers features like the instant provisioning of cards, real time balance checks, and many other card management features. We've been testing it with Wells Fargo team members for several months, and as I mentioned earlier, it'll be available to over 5 million Android customers coming this summer. Because it's integrated into our mobile banking application, there's no separate app to download. All your eligible Wells Fargo Visa cards can be added with just a click of a button. We've integrated things like your checking account balance and your credit balance right into the wallet experience. That's incredibly important since 62% of mobile banking customers actually check their balance before making a transaction at the point of sale for large purchases. It is so easy to use. As you go up to the merchant, all you have to do is hover your phone over the terminal. If the phone is unlocked, the payment happens automatically. We're really excited to bring the speed and convenience of wallets to millions of new customers. We're excited to offer this and allow them to use their wallet at more than 2.5 million contactless locations globally. We believe that customers will love it because it offers the integration of the full customer experience and the convenience of a wallet. In fact, Javelin Strategy & Research recently announced that more than 50% of mobile customers that they surveyed actually prefer a wallet solution from their primary financial institution. That's the Wells Fargo Wallet coming this summer. As you heard, we're finding new ways to leverage this technology. We'll soon be able to use the Wells Fargo Wallet and our other partner wallets at Wells Fargo ATMs to get cash, make deposits, and more. It'll be as simple as unlocking the phone at a Wells Fargo ATM, holding it near the NFC reader, and entering your pin. No need to carry a card any longer. Because it's integrated into mobile banking, this will allow us to continue to enhance the customer experience, increase trust, and gain efficiency. Just a few examples of other experiences that'll be coming. You'll be able to use your mobile wallet to verify your identity and initiate a transaction in a store. We're going to integrate the ability to turn a card on or off inside the mobile wallet in cases where you've lost or stolen your card. We're planning to integrate our Wells Fargo rewards and other loyalty programs directly into that experience. No matter what wallet customers choose, we're focused on enabling customers with the latest tools to manage their finances easily, quickly, and safely. Throughout the day, you're going to hear more about how our businesses are leveraging technology to build new experiences, enhance trust, and drive efficiency. Wells Fargo has a long track record of innovation and is a proven leader in financial services. Rooted in our customer needs and benefiting from scale, we will continue to evolve our businesses and technologies to help our customers succeed financially. I hope you'll see while there's a lot of focus on the so-called fintech companies, we think that the most tangible and valuable innovation is happening right here at Wells Fargo. Now I'd like to introduce the speaker for our next session, Carrie Tolstedt, Head of Community Banking. Thank you, Jim. Good morning. I'm so pleased to be here to share a little bit about our business. Our presentation is organized in five sections, beginning with a brief business overview, followed by how we're committed and guided by our customers, our economics of retail distribution, our deposits business, and our omnichannel distribution strategy. As you all know, our vision is to satisfy our customers' financial needs and help them succeed financially. Our vision drives our strategic priorities, our customer-centered activities, and produces results. We are in more communities than any other bank, proudly serving one in five consumers and one in 10 small businesses in the U.S. We are America's Community Bank. There's a digital transformation occurring. We understand it, we're excited about it, and we're going to lead it. At the same time, we know the local store is important to our success. We are a business of people serving people, providing the best of both, a local place for guidance and the convenience of a great virtual experience. Among our competitive advantages for our success include, one, our scale and geographic reach. Two, our distinctive omnichannel capabilities. Three, our focus on innovation. Four, our strength in payments, particularly with our strong deposit and debit card franchise. Five, our amazing people and their superior execution. Finally, the customer's experience that we provide and the way we deepen customer relationships. These competitive advantages reinforce each other to deliver outstanding results. Just to highlight a few, we're number one in customer satisfaction. We're number one in overall mobile. We're number one in retail branch network, and we are the most valuable bank brand. When we focus on our customers, providing them the best products and services to meet their financial needs, our customers succeed and so do we. Our omni-channel distribution is a competitive advantage and serves 21 million retail checking households and 3 million small business owners. Our distribution strategy evolves with our customers and our new capabilities enabled through technology. To be successful, our distribution strategy must be integrated with our end-to-end workflows, our product design, and our customer experience. Our omni-channel distribution is unparalleled in the industry, and we are making it even better. Our retail store network continues to be the nation's largest with the most retail deposits in the most states. Our market share of deposits is 1.5 times our share of bank branches. In other words, our deposit share over index our bank share. We have state-of-the-art ATMs that provide you a You Know Me experience, personalized for what customers want to do most. We know that cash remains important in the U.S. Our ATMs provide a convenient option. Our mobile experience, as I mentioned earlier, is recognized as number one overall. Customers want a convenient option for transacting and purchasing products, and increasingly, that means mobile. Our convenient contact centers provide our customers personalized service when they need it. Customers expect our channels to work together. They want to be able to start, continue, and complete our banking activities at any channel or any combination of channels however they choose. They want friendly, they want frictionless, and they want convenience on their terms. We are leaders in innovating for our customers and in payments, including small business. With our growth in primary checking customers and our focus on our customer experience, we are number one in debit card transactions in the U.S., and our small business credit card accounts have grown over 20% since 2013. In terms of our focus on innovation, we are number one in digital for small business, including functionality, ease of use, and transact categories. We also innovate on product design and delivery. In fact, as you might have recently seen, we just launched a new online product, FastFlex Small Business Loan. It provides fast credit decisions, next-day funding, and a streamlined digital application. We developed this product using nimble, agile approach, and we piloted the product to monitor the customer experience and our credit risk, and now it is available to our customers. FastFlex demonstrates some really important competitive advantages we have in our innovation efforts. Advantages like our scale, our trust with millions of customers, our lower cost of customer acquisition, our stable, low funding costs, our history of risk management, just to name a few. Of course, we hold these loans on our balance sheet. Credit access is also important to small businesses, and for 13 consecutive years, we have been the nation's number one small business lender according to CRA data. Small businesses are critical to our communities and to America for the products, services, and jobs that they provide. We remain committed to serving the real economy in our markets, and small business is at the heart of that. Wells Fargo is uniquely, and we are structured to outperform because we are uniquely equipped to out execute. Our team is experienced, they are smart, and they are aligned with our vision and values, with a proven track record of leading in our industry and bringing new ideas to market. My direct report team averages 27 years with Wells Fargo. These leaders are deeply ingrained in our culture. They know how to adapt quickly, and they know how to partner across our business lines with a high degree of collaboration and trust. Our team knows how to get things done on behalf of our customers and on behalf of our shareholders. The graph on the right illustrates the engagement of community banks, over 94,000 team members. They are nearly seven times more engaged than the average U.S. working population. Our engaged team members know how to drive exceptional customer experiences, as you see on this slide. We are number one in customer satisfaction by ACSI, and we are also ranked number one for our customer loyalty by Brand Keys. Our customer satisfaction and our loyalty scores are at or near all-time highs across our channels. We are very proud of this, and it is important to our long-term success. We are energized by the mission of helping our customers achieve their financial hopes and dreams, and building exceptional customer experiences are at the center of this. Over the last few minutes, I have talked about some of our competitive advantages and how they lead to positive outcomes. This slide highlights some of the results since we met two years ago. Primary checking customers have grown 11%. Our deposit balances were up 13%. That is $65 billion of increased deposits since 2013. Business direct new commitments were up 12%. Product sales occurring in our digital channels, a really important strategy for us, grew 17%, and in the last year, we have more than doubled the number of sales applications from mobile. Our total revenue was up 9%. We have realized this growth while at the same time improving our efficiency. Team member turnover improved 2.8 percentage points, which leads to better customer experience and productivity. Our retail checking household attrition improved 1.6 percentage points, and importantly, our efficiency ratio improved 2.8 percentage points. By focusing on both our revenue opportunity and our improved efficiency, we generated positive operating leverage. In everything we do, we are guided by our customers. We need to be flexible and smart in our approach to meet our ever-changing customers' expectations and to create engaging experiences for them. More and more, our customers seem to be constantly connected. We believe that what our customers want is control. They want it simple. They want the best in digital offerings, and they want personalized service and channel choice. What do we mean by guided by our customers? It simply means we go where our customers go. At Wells Fargo, we deliver a continuum of service, building the best possible experiences within each channel while making it easy for customers to move between them, from self-service to personal service, from virtual to physical. Many transactions start with mobile, and mobile is a growing enabler to connecting our customers across channels. As our customers' expectations continue to change, we are organized to be highly responsive so we can make the right decisions with the right information at the right time. No question, our customers are more active and more connected than ever. In fact, just last year, we supported 7.4 billion customer interactions in our channels, up 28% since 2013. You can see that the volumes with our tellers, our ATMs, and our contact centers have remained relatively flat over the last couple of years while we continue to grow the number of customers we serve. At the same time, our digital interactions are growing over 40%. Our customers use a mix of channels. Over half of our deposit customers use a mix of three or more channels in a six-month period, while around 75% come into a store. About 90% of our interactions are self-service. That's an increase from the last Investor Day at 85%. Approximately 85% of our community banking sales are sourced from a store interaction. This while we continue to innovate on sales and service experience in digital. We're happy with this mix. Customers choosing low-cost self-service options for their basic banking transactions and coming in to seek personal financial guidance. You hear study after study speculating how customers want to interact with their bank. We know how customers interact with us. Let me share that with you. Here you see an additional level of detail on customer interactions, showing how Millennials, Gen Xers, and over 50 use a mix of our channels over the course of a quarter. While our customers enjoy all channels, which supports our omni-channel distribution strategy, not all customers engage with us in the same way. Let's use an example. We'll compare the use of mobile. 72% of our millennial customers use mobile, and they use it frequently. At the same time, half of our customers ages 35 to 50, and just 19% of our customers over 50 also use mobile. While millennials certainly use mobile more, you might find it interesting that they also use stores at fairly similar rates as the other age groups. We watch these trends very carefully. They help guide our investment choices, our channel decisions, how we think about efficiency, as well as revenue opportunities. We continue to look to our store network to acquire households, to grow deposits, and to meet the full financial needs of our customers over time. We are focused on having an efficient store network by being in growth markets with convenient, high-quality locations while continually integrating technology in our stores to provide better, faster, and more intuitive experiences. We have stores in 39 states plus D.C., more than any other bank in the country. We have retail banking stores in 22 of the 25 largest U.S. markets, and we bank 20% of the households in 19 of them. We also have presence in 15 of the projected fastest-growing U.S. markets. In fact, Wells Fargo is the only bank with retail stores in every one of those markets, and we have 20% or more household share in 14 of them. New customer growth is stronger in markets where we have store network density. While digital adoption continues, our store coverage remains important to our growth. Quality sites and network health is a consistent focus for us at Wells Fargo. For example, we open de novos mainly in high-quality A site locations. This generates over 1.6 times as many households and over two times as many deposits than C sites. We actively relocate and consolidate our stores to enhance the health of our network. This improves our customer experience and accommodates for additional growth. Recall two years ago, we talked about the neighborhood bank format. We are now introducing elements that we learned from that pilot, like assisted service ATMs, into our overall network. Other learnings, such as branch layout and platform capacity, are being integrated into our store relocation strategies. We introduced last year, or 2 years ago, a new lever for growth, customer intensity. This measure tells us how customers engage with our channels and transact with us, and what combination of both create higher customer engagement and better business outcomes. As our channels offer more convenience and services, our customers use them more intensively. The more channels and transaction types our customers use, the better our model performs and the more frequently our brand is in front of our customers. The left-hand side of this slide shows the value and importance of high-intensity customer. It includes better retention and higher profitability than low-intensity customers. We define high intensity as the combination of three or more channels used and nine or more transaction types used, which includes deposits, withdrawals, transfers, and payments. Our customer intensity has increased since the last time we met. The bottom line is this: customers are interacting with us more, benefiting from the variety, convenience, and value of the services while we, in turn, benefit from higher engagement. We get a lot of questions, as you can imagine, how we think about the future of our channels. We view conventional trade-offs, such as digital instead of physical, or self-service instead of personal service, as a false choice. We believe in customer choice, and we strive to create seamless, integrated experiences. We also believe in leading the change that our customers have come to expect. Rather than debating digital or physical, we consider the best answer to be digital and physical. Customers use and value all of our channels, as we've talked about this morning. We can better serve the needs and meet and exceed our customers' expectations by embracing the convergence that is happening across our channels. We also believe in the integration of self-service and personal service, providing whichever makes most sense for our customers at that point in time. We do not force channel migration. We let our customers choose when to be self-directed and when to seek personal assistance or any combination of both. By preserving options, we're able to innovate, be flexible, and nimble to the response to market changes. Our goal is to not only lead today. We are forward-looking, building for today and tomorrow, leading the change as banking transforms and as guided by our customers. Next, you'll hear from Michelle Lee, our regional banking executive from the Eastern region. Michelle? Wow. Great job. Thanks, Carrie. Good morning. Good morning. Thank you. It's a pleasure to be with all of you today. Our economics of retail distribution begin with the revenue model, which includes three fundamental objectives, growing customers, deepening relationships, and delivering value. We continue to grow customers. In fact, we've consistently grown households almost three times faster than the household growth in the markets we serve. Once we acquire a household, our goal is to provide the products and services our customers need, want, and will value over a lifetime. Delivering value drives a mutual value exchange between the customer and Wells Fargo. As we continue to enhance customer value propositions like convenience, ease of use, reliability, and personalized experiences, Wells Fargo receives greater value from higher balances and utilization, which benefits spread and non-interest income. The math of the revenue model is revenue equals households times products per household times revenue per product. We focus on all components of that equation. Since our last Investor Day, retail checking households have grown 5.3%. This is different than the primary checking customers, which, as Carrie mentioned, have grown 11%. We've also increased the total products held by our customers, up over 5 million products or 4.2%. While both households and total products held have increased, the ratio results in a slight reduction in cross-sell to 6.29. Why the decline? First, it starts with our strength in household and customer growth, as new customers have 2.5 fewer products on average than longer tenured relationships. Sustained low interest rates have been a factor, driving lower demand for traditionally higher yielding deposit products. Exiting certain businesses and product design changes have also contributed to lower volumes. Growing sales of some advanced products, which I'm going to highlight in a moment. These products tend to have a longer sales cycle but also have higher product value. Based on these factors, we expect flat or slight downward trends in average products per household in the near term. We believe opportunity remains for increased cross-sell in the long run. The revenue drivers that complement cross-sell have grown faster than both households and products. The volume of products our customers use monthly was up 7.8%, and total deposit and investment balance were up nearly 11%. That's over twice the rate of growth in households and products during the same time period. You may have noticed we've made some changes to how we calculate households and cross-sell, but the trends remain the same. To sum up the revenue equation results, we've had strong retail checking household growth, adding more households than any two-year period in recent history. Despite average products per household being down slightly, the value drivers of our households have increased. When we consider how to best satisfy our customers' financial needs, we think of it in two ways, everyday needs and advanced needs. Everyday products are used to buy a cup of coffee or save towards a vacation or pay for gas. These are the products that usually bring new customers to Wells Fargo. That remains an important opportunity for us and one we'll continue to focus on. Advanced products are those that may be triggered by a life event or an evolving customer need. For example, buying a car or saving for retirement or purchasing a home. Satisfying advanced needs helps us deepen customer relationships and generates more value, with 6 times more revenue than everyday products on average. When customers have consumer and business accounts with us, these combined relationships hold 6 products more with Wells Fargo on average than retail-only households. I want to call your attention to the chart in the middle because it represents the opportunity we have to deepen relationships by meeting more of our customers' advanced and business needs. 38% of our retail checking households already have at least one advanced or business product with Wells Fargo. That leaves 62% of our households that only have an everyday product with us. We believe these households either already have advanced or business products somewhere else, or they'll have a need for it in the future. The demand is there. Our opportunity is to satisfy it. As you can see on the right, we're making progress on meeting these needs. We've grown the number of specialized bankers in our stores, and we also partner with other lines of business. Avid Modjtabai and Mary Mack will talk more about our partnering efforts in a little bit. Carrie talked about customer intensity. Let me show you how this works when you add in product mix. The top chart shows average products per household, and the bar on the left represents households with everyday products and low customer intensity. On average, they have about 2.7 households per product. You see what happens when customers have higher intensity. Those with everyday products and high customer intensity have an average of about 6.6 products. That increases to 10.3 for those with everyday and advanced products and high intensity. When we combine it all with everyday and advanced and business products and high customer intensity, the average is 16.6 products per household. The same is true for revenue on the bottom chart, which generates 17 times more revenue when the household has everyday, advanced, and business products with high intensity. When customers engage with us more, they use their products more, they use our channels more, we earn more of their business. Our economics of retail distribution also includes a strong focus on operating efficiently and making smart investments in our future. Let me describe how we think about our efficiency focus. We want to find or strike the right balance between self-service and personal service and fixed and variable cost structures. These costs need to be optimized at each point of service. So earlier you heard Jonathan describe the need to maximize throughput of transactions with tellers and ATMs. Our teller deposit transactions run 18% faster now, and that increases capacity. As a result, our tellers now process 5% more of all transactions per month. These savings allow us to reinvest in higher value activities. For example, we are able to grow our specialty bankers over 15% without increasing store personnel expense. We have made thoughtful investments in fixed cost technology that build capacity while avoiding overinvestment in fixed costs ahead of customer demand. Our investments in mobile assisted services capabilities and other digital efforts are showing terrific customer adoption, which drives further cost savings. Finally, our continued focus on the basics of expense management, like travel and entertainment, is also delivering meaningful savings for us. Now, network changes can incur significant capital costs in the short term, and if you get it wrong, mistakes can impact household growth for many, many years. This is why we make deliberate choices with each location. We manage our locations to find the highest impact sites and maintain sufficient network density. We have taken several actions since 2011, which you can see on the slide, resulting in a net decrease of 113 stores while adding almost 600 ATM sites. As we continue to optimize our network, we expect a net decrease of 60 to 70 stores this year. Now, our stores are also a great way to advance our brand and improve the customer experience. We add new signage to 500 stores and refresh the interiors of 400 stores each year. By the end of 2017, we will have replaced all of our store signage across our network since the merger. I would invite all of you, by the way, to visit one of our downtown stores and see for yourself. We have taken all of these steps while maintaining flat occupancy expenses. As Carrie mentioned, our efficiency ratio improved 2.8 percentage points since 2013, even better than the 1.6 percentage point improvement we reported at our last Investor Day. We are very focused on operating efficiently, and we save to grow. We have been able to reinvest nearly $700 million since 2013, and we ensure our investments align with our strategies and with our customer preferences. You have heard about some of the areas of our investment this morning, and you will hear more about our digital and omnichannel investments from Brett shortly. Our successful execution of our vision has resulted in positive economic outcomes, such as growing revenue, increasing efficiency, and delivering positive operating leverage while continuing to invest to further enhance the customer experience. Now Ed Kadletz, Head of our Deposit Products group, will speak with you about our deposits and payments business. Ed. Thank you, sir. Thanks, Michelle. Good morning. Our deposits business is a great example of how our retail distribution drives customer and balance growth and delivers value to shareholders. This is an exciting time in our industry, with technology transforming our customers' expectations and reshaping traditional business models. There's one thing that hasn't changed. Our success is fundamentally tied to serving customers and small business customers and helping them succeed financially. I'll start by sharing our group's three areas of focus. First, we are highly focused on growing the business by acquiring and retaining primary checking customers, which have grown 11% since 2013. This is a critical function for the franchise, as two-thirds of our new consumer households in 2015 started their relationship with Wells Fargo by opening a checking or savings account. Second, we want our customers to be highly engaged with us, and this begins from the moment they open their new account, how we onboard them, and extends to their everyday purchases and payments, however they choose to make them. Third, as we grow highly engaged primary customers, the net result is a stable, low-cost funding source for the franchise. Primary relationships provide us with a favorable mix of deposits in the form of low and non-interest bearing checking and savings accounts, which makes up 95% of our consumer and small business balances. Historically, we've been able to maintain a lower cost of deposits than our peers, and we'd expect that to continue into the next rising rate cycle. This is a testament not only to our pricing discipline but also to our focus on building lifelong relationships. Our customers choose to bank with us not solely based on interest rates, but more importantly on the value they derive from the products, the convenience of our channels, and the excellent service we provide. This is why we've been able to maintain our number one ranking in retail deposit market share. In the last two Investor Days, we've discussed the concept of primary checking customers and why they're important. These are customers who have their primary banking relationship with Wells Fargo, which means they have a checking account that they use regularly for deposits, purchases, and payments, often with their debit card. As I mentioned, we've grown by 11% in the last two years. While most of this growth came from new customer acquisition, there's also been a migration of existing non-primary customers to primary. Over time, we would expect less migration opportunity, and primary customer growth will converge with household growth. Our acquisition efforts will continue to focus on meeting all the checking household needs. For example, not only do we have a primary relationship with the parents, we're also the primary bank of their 18-year-old son or daughter who's heading off to college. To that end, we're driving a significant portion of our growth from younger customers. In 2015, millennials made up 54% of our new primary customers. We believe the strength of our brand, our industry-leading mobile capabilities, and our unparalleled distribution are important to all customers, but especially millennials, which is why they choose Wells Fargo. As Carrie pointed out earlier, millennials utilize all our channels, including the stores. Our omni-channel focus will continue to resonate with them and allow us to generate primary growth going forward. This is important since primary customers purchase 30% more products than non-primary, and as a result, they are 2.4 times more profitable. Primary customers now make up 80% of our total customer base. This is due to our focus on primary acquisition along with our products, which are intentionally designed to reward customers for maintaining a primary relationship with us. The combination of strong growth and a high concentration of primary customers is delivering greater value to our shareholders. Not only are we growing, we are also seeing improvements in performance versus two years ago. We have reduced attrition to 7.5% in 2015. We are keeping more relationships by continuing to innovate around the customer experience, such as providing more real-time information to help customers better manage their accounts. One example is our new debit and credit card fraud alerts. We have also seen a 6% increase in the total deposit balances held by the average primary customer, with a vast majority of those balances held in low-cost deposit accounts. And finally, we have reduced the variable cost to serve by 7%. Our primary customers are leveraging more of our self-service channels, and our strategic investments have made transaction processing more efficient. Meanwhile, primary customer loyalty improved by four percentage points and is at an all-time high. That is just another example of how we are simultaneously improving the customer experience and efficiency. As I mentioned, debit card usage is an important characteristic of primary checking customers. It is also a great success story for Wells Fargo. More and more of our customers are utilizing their debit card for everyday spending. As you can see in the first chart, for the average primary customer, 72% of their monthly checking withdrawals are debit card purchases or payments, and that number jumps up to 85% when looking at our millennial customers. We see significantly different debit card performance with primary versus non-primary. Primary customers are three times as likely to use their debit card at the point of sale in a given month and have nine times as many monthly transactions, which generates 24 times more interchange revenue. The propensity to use debit card, coupled with our strong primary customer growth, propelled us to the number one debit card issuer ranking by transaction volume for the first time in 2015. With a transaction growth rate over 8%, we anticipate we will extend this advantage over our peers moving forward. While debit card has proven to be a popular payment alternative to cash and checks for our customers, we believe that person-to-person payments will continue to grow in popularity, especially among millennials. P2P payments are not new to Wells Fargo, as our customers conducted over $10 billion in P2P volume via our SurePay service in 2015 by simply using their mobile number or email address. We believe that real-time P2P is strategically important not only for Wells Fargo, but for the industry as a whole in order to maintain primacy with our customers. Some non-banks have been targeting the P2P space, but none can offer the speed, security, ubiquity, scale, and efficiency that a bank-supported system can provide. Wells Fargo and six other owner banks are collaborating on real-time payment interoperability through Early Warning Services that delivers powerful benefits to the U.S. consumer. The Early Warning owner banks bring connectivity to 65% of the digital banking customers in the U.S., and we have plans to extend our reach well beyond that. Building off of the security and fraud control foundation of Early Warning, along with the P2P capabilities of the clearXchange Network, it will become a one-of-a-kind, bank-supported, real-time P2P payment network. Our customers can already receive real-time payments from other Early Warning banks that are live on the real-time network, and in July, they'll be able to send real-time payments. We're well on our way to offering customers these exciting new payment capabilities. Providing customers with convenient payment options like debit card and P2P is a critical component of customer engagement. But the path to primary begins as soon as the checking account is opened. In fact, we believe onboarding is an important moment of truth. Our omni-channel approach begins with instant issue debit cards, which allow customers to start transacting immediately. It also includes a digital quick start guide, how-to videos, and a customized welcome email with details on their new account and how to avoid service fees. These are just a few examples of how we get our customers started with Wells Fargo. To share more about our omni-channel approach, it's my pleasure to introduce Brett Pitts, our Head of Digital. Brett? Thank you, Ed. Good morning, everybody. You've heard us talk about our distribution channels, both individually and collectively. We know that significant customer and business value lies in being the best, both within each channel and in how we build experiences across channels. I'm going to take a few minutes to talk a little bit more about what that looks like and how we're using an omni-channel approach to extend our advantages in retail distribution. Meeting our customers' preferences by blending self-service and personal service is important to us because it's really important to them. Wells Fargo's customers already use a variety of channels, and in supporting those interactions, we all get more from the relationship. This isn't something specific to our current customers. When U.S. consumers by and large are asked how they want to bank, they still say that they strongly prefer having access to a mix of servicing options. When customer preferences are met, the result is really high engagement. By contrast, if customers feel like their preferences aren't being met, or worse, if they feel like they're somehow being steered into an option that's more convenient for a company than it is for them, then their engagement plummets and the relationship predictably suffers. In retail distribution historically, teams have been focused on creating great in-channel experiences. That's going to continue to be really important, but as I'll talk about in a moment, we now have to think more broadly across channels. First, continuing to be the best within channels. If I use digital as an example, we've got the majority of our customers interacting with Wells Fargo through online or mobile, many of them every day. That experience has to be easy and engaging. It has to continue to feel like the best-in-class experiences that they're having with other companies in other industries. As Carrie mentioned, we've got the top-rated mobile banking offering overall, and we just launched a completely redesigned mobile experience back in January. It's got a totally new look and feel with a lot of new features like touch ID and the ability to be able to pay a bill by taking a picture of it with your smartphone. There's exciting stuff happening in digital as well as within the other channels. If that's all we were focused on, optimizing purely within channels, it wouldn't be enough to meet customers' needs anymore. Even the most digital-centric customers have questions and new needs that come up, and they want to talk with us when they do. Many times that conversation is started by something that started in self-service, but at the moment they decide they want some help, the transition to get more personal service needs to be really easy. By making it easy for customers to navigate across channels, in addition to providing great service, we're surfacing other opportunities to meet new needs, and that's how we build the best relationships over time. Give you a quick example of what that looks like. In this case study, Noah's out on social media and learns about tools we offer to help him better manage his money. Using a smartphone, he opens an account and is immediately able to reach out to a banker on the phone to receive personalized guidance on saving more money. He's then able to take the customized plan that we help him develop and use new tools like our savings app and proactive messaging to help him manage his spending and savings habits toward meeting his goal. This experience wouldn't even have been possible two or three years ago, and this is just one of hundreds of these kinds of interactions that are either already available or are currently in development. I went through that quickly, but there's a lot implied in creating an experience like that. It means we're moving beyond account-centric, purely transactional experiences toward enabling the next generation of banking and financial health. Encouraging conversations between customers and our team is really important, and it will remain a very valuable part of the approach. That's what continues to help us build customer intensity and all of the associated positive business outcomes that Michelle was just talking about. All the innovation work we've talked about this morning ties directly to our omnichannel strategy. In maintaining our channel leadership, we've launched a steady stream of new features and experiences this year, and there's definitely more to come in the second half of the year. Both Jim and Ed talked about mobile payments as a key area of focus for us. The mobile payments world is incredibly dynamic these days, as I'm sure you know, and capitalizing on our leadership in debit card and digital experiences will continue to be critical. Our work to build the next generation of P2P payments and our support for customers' various wallet options are just a couple of examples of our focus. At the same time, we're leveraging collaboration technology to bring the channels together. Whether you're talking about chat, video, messaging, doing that enables us to effectively use our broad distribution in new ways. As I said, we're seeing some especially promising results in using an omnichannel approach to support customer purchasing journeys, and there's still so much more opportunity ahead. A question that comes up when we talk about innovation and quickly adapting to change is, does our size somehow hinder our ability to innovate in the retail channels? The answer is an emphatic no. In fact, there are many aspects of our size and diverse business model that supports our ability to innovate. Our scale is what gives us the resources to constantly invest in new technologies and experiences. Then, getting those in front of thousands of team members and customers for their feedback enables us to iterate the design and develop interactions that we know are going to exceed the expectations of the broader customer base. With that confidence, we then deploy these innovative capabilities to millions of customers across channels and businesses literally overnight, and we do that on a regular basis. Steve talked about the really good example of omni-authentication and how we've extended those capabilities to multiple products, channels, and customer populations to simultaneously enhance security and further reduce customer friction across experiences. As we do these things, we also realize the associated business benefits on a significant scale. Many of the same innovations that make experiences easier for customers also reduce costs through automation and real-time processing. Really good example of that, which Jonathan talked about earlier, is the paperless store and how those results have benefited both customers and our cost structure. Being able to capitalize on these opportunities at scale demonstrates that we're good at a number of things. It seems like the technology is what you most frequently hear about in relation to innovation and omnichannel. Technology is important, there's no question, but it's only one piece. In our experience, success requires a cohesive strategy across the entire operating model. Certainly, making the right technology investments is critical. We have to have a modern architecture that can scale capabilities across multiple channels and customer journeys. Earlier, I mentioned our mobile and online in terms of the redesigns that we're doing right now. We've built those new experiences and apps on top of a brand-new architecture that supports all of our digital experiences. Whether it's desktop, tablet, or smartphone, we now have an infrastructure that supports responsive design. What that means is when we change a product or launch a new experience, we're able to build it once on a single code base and then use it across all of the devices. You can contrast that with many companies who are still managing device-specific platforms and often have to undertake multiple expensive projects, even to make small changes across online and mobile separately. This investment is already making us faster and more efficient, and it's reducing many forms of risk. Second, our people and our organization are key. Since community banking has responsibility for many of the channels our retail customers use every day, in close partnership with others across Wells Fargo, Carrie and her team are able to continuously align strategies to drive end-to-end customer and team member experiences. Third, we also know that our teams have to use effective modern processes to drive the right outcomes. As an example, in terms of how we deliver products and software, we're in the midst of a very important transition toward a more agile approach to product and software development to match the accelerating pace of change that we see in the environment. This more holistic approach, integrating technology, people, and process, is what's making us successful in our omni-channel strategy. This strategy, particularly at our scale and reach, is what's building a sustainable competitive advantage. Our customers benefit from our intentional approach to frictionless self-service and personal service within and across channels. We're accomplishing that quickly and cost-effectively on an infrastructure that's flexible enough to leverage innovations across devices and channels. Our job is to be the best within each of our channels, as well as to continue to compose our channels and capabilities as part of a whole. That's what customers expect, even in a very digital world. By delivering on that, we'll continue to be rewarded with their relationship, their business, and their advocacy. Thank you very much. Back to you, Carrie. Thanks. You've heard about our distinctive competitive advantages, our scale and reach, our omni-channel distribution, our innovation and payment leadership, our expert team, and our commitment to our customer experience. We have everything it takes to compete. Our six strategic priorities demonstrated on this slide, aligned with our vision and values, have stood the test of time. In summary, we believe that the combination of our competitive advantages in connection with our strategic priorities positions us very well for the future. Now I'm pleased to welcome back Michelle, Ed, and Brett, and I'm also inviting Jim and John, part of the community banking team that talked during the innovation panel. We'll be happy to take your questions. Jim, I think Just before we start. This will now kick in for the remainder of the day with Q&A. We'll go straight through each session, as in the agenda, we'll have a dedicated Q&A segment. For those of you on the webcast, there's a dialogue box. You can send questions throughout the day. Here inside the room in San Francisco, we also have the opportunity, in addition to raising your hand as some are, we have a placard with an internal email address if you'd like to use that as well. We have runners using these foam box microphones, which look unusual, but are actually very handy for us. They will get to you as quickly as possible as we take questions. And then as a reminder, after the Q&A session, we will have a break and then come back for Avid and the consumer lending group presentation, after which we will break for lunch. A lot of good progress, and let us open it up to questions. Joe Morford. Good catch. Thanks. You mentioned that customer transactions were up 42% on digital, while the interactions were relatively flat in the other ATM teller customer centers. Would you not have expected it to be down in those other channels? The other question is just if you could just talk more broadly about how digital has developed as a sales channel. You mentioned product sales were up 17%. Where are you finding successes, and how do you get that number to increase more? Great. Thank you for your question. I will answer the first question in terms of would we have expected that our interactions in some of our physical channels to go down while our digital channels went up. When you think about it at a customer level, our customers are using our physical channels, particularly the teller line, fewer times during the year. However, we are growing customers. Because we have the customer growth engine, that keeps our transactions steady. That is really why you do not see a large, or any kind of a decrease in our customer interactions, particularly in our teller line. Relative to digital sales, we are very interested, or we are very excited about it. I will let Brett or Jim. Jim, you want to take it? Sure. I can talk a little bit about digital sales. We are really excited about the offering that we have today and the ability for our customers to apply for just about any product. Not only through an online PC, but also through a mobile device. As Carrie mentioned earlier, we saw the sales through mobile, the applications through mobile, double over the last year. For us, we're really focused on enabling a great experience, enabling those customers who want to buy any product through our mobile or online platform to do it. But we're also focused on integrating some omni-channel capabilities into that. So the ability to, if a customer's applying for a checking account, and they've got more questions, they can actually chat with us. That might lead into other things. We're now piloting the use of video and other tools. We're excited about the future of sales through our digital channels, and we expect to see those numbers grow quite a bit going forward. Yeah. One quick thing I'd add, if I could. We've spent the past couple of years in particular really streamlining and mobilizing all of our digital sales experiences. There was a fair amount of work to do to kind of transition from a desktop world and realizing that customers absolutely want to be able to form and extend relationships on mobile devices. To do that with product applications that historically maybe had been a little bit more complicated, to really streamline those, it's not just about the digital experience, it's streamlining and digitizing all of the underlying business processes to make that really, really easy and more real time for customers. So we've made that investment. We've done that work, and what we're seeing right now, particularly within the digital applications, is we're seeing best in class pull-through in terms of people who start applications making it quickly all the way through the other end. So we feel very, very optimistic about that portion of it in particular. It's important strategy for us going forward. What inning are you in for the paperless store? Any metrics that we can use to gauge progress? In other words, what does the paperless store mean for each one of you? I guess what I'd say is the game has completed for the customer. We're onto the double header now, where we're focused on internal processes for our own team. If the customer walks into a Wells Fargo store, they can conduct all of that without paper. Even during the onboarding process, we can give them all those disclosures electronically on their mobile phone. So we have a process from consumer-facing that's digital. On the team member side, admittedly, there's still some forms and transmittals and audit logs that we're filling out. We think the team member mobility's going to be an enabler to digitizing some of that and just make some of our internal processes a little bit more efficient. We've done a lot there. A lot of our processing shops have now closed, which has given us some savings. In addition, we've cut our transportation. So there was a time that in our very busy stores, we had transportation come twice a day to pick up checks and other paper, and we've cut our transportation by 2 days. So we continue to look for ways to get that paper out so that we can take some of the associated costs out as well, and then reinvest in our business. Hey, Carrie. Betsy Graseck. Hi, Betsy. So just a couple of questions. On the investment spend that you are doing, clearly a lot to create the mobility here. The question is, how does it impact your ROA and your ROE? To what extent is this an expense reducer? Is there any revenue opportunity? Does it help with capital? For some of the things that are interactive with your competitors, like clearXchange, is there an opportunity to charge them for it? Right. Thank you, Betsy, for the questions. When we think about all that we are doing with our investments, one of the guiding principles that we try to consider in how we build our plan during the year is really to achieve positive operating leverage. So we are looking at both the revenue growth side. So what investments can we make on behalf of our customers to engage them more and to provide them more value so they give us more of their products. So clearly, some of our investments are well-focused in terms of engaging our customers more and earning more in their business, so we get the loans, the deposits, and we build the relationships, as John talked about earlier. At the same time, we also have an eye to efficiency. I think I said that we had an efficiency ratio improvement of 2.8 percentage points, and 2 years ago when we were together, it was 1.6 percentage points. We have a proven record in a pretty low-rate environment to be able to grow revenue by 9%, as well as continue to achieve positive operating leverage, and we do that through our very careful investment processes. In terms of Early Warning, we are really excited about this new capability that is a bank-supported capability. As Ed mentioned, we are going to be rolling that out to our customers in the next month in terms of receive. These are really in the beginning stages for the small-dollar payments for consumers and will, in my opinion, take out some expense in terms of people who are writing checks or cash. I think there is some cost savings play here. Time will tell. Yes. Is this working? Hi. Nancy Bush from NAB Research. On the decline in products per household, could you just discuss, is that an inevitable saturation? Does it reflect a need for new products? If you could just go into that a little bit, because it is a bit of a change for you. Sure. As we think about products per household or cross-sell, the first thing we anchor ourselves on is our vision of satisfying our customers' needs and helping them succeed financially. Everything that we do is really about that. It starts with that, and then the result is products per household. There has been certainly some headwinds for us. Some of it, I believe, is a result of our very strong checking growth, our primary checking growth. The numerator and the denominator caused that to go down. In addition, the interest rate environment has some products not being particularly appealing to our customers right now, so that should change over time. Having said that, even with the headwinds that we have experienced, we have grown revenue 9% in the last 2 years. We continue to have positive operating leverage. It is really, if you think about it is our entire revenue equation that we focus on, all focused on helping our customers succeed financially, not just one part of it, and over time, we still expect our product for households to go up. Hi. A question on millennials. You have some interesting slides on how they're growing your business. I'm curious how your market share or your deposit share among millennials indexes relative to your non-millennial market share. In other words, if your market share is 20% in a given market with non-millennials, is it 30% with millennials? I'm just curious how much of a tailwind you might have from this. Well, in terms of new customer acquisition, 54% of our new business coming in is millennials, and we do think we're getting our fair share of millennial business in the marketplace. With that really comes the customer intensity that we talked about. I referenced the debit card usage of the millennials, 85% of their withdrawal activity coming through. I think from a new customer acquisition, we're doing extremely well, and I think we're getting our fair share of the millennials. Carrie, let me put you on the spot here a little bit in terms of metrics. You said you improved efficiency ratio 2.8 points. How should we think about it looking forward, next two years, next five years? Similar, another three points more? Without any rate help. Can you give us some sense of where are we going with all this Right migration to digital and omni-channel? Right. Well, first of all, we do not really disclose or project what our efficiency ratio is going to be relative to any single business. But let me stop you right there. Wealth management just put a target on their operating margins. Right. So let's have it come from the other groups too then. Right. Great question. Community banking is part of an entire segment which also includes Avid Modjtabai's business. So we look at the businesses in a combined way when we report externally. Having said that, as I indicated, our goal every planning cycle is to achieve positive operating leverage and to stay within the targets that our company has set out, and John talked about this morning. So think about that we are going to concentrate on revenue growth and developing relationships with our customers and do that in an efficient way so we continue to have positive operating leverage. Okay, one more on branch network. You said you're going to shrink by 60 to 70 branches. Can you talk a little bit about anything else in terms of the branch distribution? What else you're doing to rationalize? Are you shrinking the sizes? Do you think the 60 to 70 is something that will happen annually? Give a little more color. Yeah. When we think about the branch network, first of all, we focus on our branches to grow revenue. That's the key for our branches. We don't think of it as an expense to be managed, although we want an efficient store network. So we focus on making sure that our stores are able to grow deposits, acquire households, and meet the full financial needs of our customers. We look at network density and look at it on a relative basis with what our competitors are doing. We'll see ebbs and flows over time as long as we are right on the store share to the population share so that we can achieve the revenue growth out of our store network. We have time for one more question. Hi, it's Jimmy Hanna with North Reef Capital. I'm impressed to see all the innovation. I'm impressed to see the efficiency ratio improve despite what's been a challenging macro environment, both from rates and then for community banking, also with the regulatory changes. If you had to assess where you are on the level of investment from zero being watching every last dollar spent to 100 being able to do as many wishlist projects as you'd want, where have you been the last 2 years? If you have any specifics on projects that you'd like to do if the macro environment were better. The beauty of Wells Fargo is we have a diversified business model. That gives the ability to make the kind of investments we need to make for the long term. As Tim talked about this morning, we manage the business for a long term while we certainly appreciate and respect our short-term focus areas. I would say if there is an important investment that we need to make on behalf of our customers or risk management or making our team members more efficient, and we have a good business case in which shows that it's the right return for our shareholders, we can get the money to accomplish it. I'm sorry, what was your other question? Just in terms of as you look out the next 2 years, if the macro environment improves and rates rise a bit and the revenues are a lot stronger, where you might be putting incremental investment dollars. Yeah. We'll continue, of course, to build out our digital capabilities. We're very excited about mobile, so we'll continue to innovate there. What you might think is a little bit unusual is we believe in organic growth. Because of our deposit size, there's not a lot of opportunities for us to do acquisitions from a deposit perspective. If, for example, the interest rate environment got very good, one of the things that I would consider and build business case for is looking to de novo in markets where we have low density and see what we could do through growing market share in a market where we have low density, but we increase the number of branches that we have in a more deliberate and almost at scale for an entire market. That'd be one area that I would consider. Terrific. So a great kickoff to the Q&A. Thank you, Carrie and team. We are now going to take our first break of the day, so we will come back at 10:30. Feel free to find Carrie and her team to continue or enjoy the rest of the team. We will see you at 10:30. Thank you. 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. Our brand is more than a logo and TV commercials. It is our promise to customers and communities. It is our reputation with key stakeholders, including investors. It is the sum total of everything we do to build lifelong relationships. With 165 years of dedication and passion, we have built a uniquely powerful brand. Please welcome the Head of the Consumer Lending Group, Avid Modjtabai. Good morning. I am delighted to be with all of you this morning and to share our consumer lending story. I am going to be speaking about how we have delivered against the priorities that I had outlined with you at our last Investor Day, the significant opportunities that we see ahead of us, and why we believe that we are so well-positioned to execute against those opportunities. First, start with a quick overview of consumer lending. Wells Fargo is amongst the largest consumer lenders in the country. We serve 27 million households. The loans in our portfolio represent about 50% of Wells Fargo's loan portfolios. We serve the broad range of consumer lending needs of our customers, from financing a home, to financing their day-to-day transactions, to buying a car. We have maintained our number one or number two position in the majority of our businesses through every cycle. We are organized into three groups, which are led by very seasoned management team who are with me today. Shelley Freeman, who runs our Consumer Credit Solutions, which includes our credit card business, has been with Wells Fargo 20 years with leadership roles in many of our businesses, in wealth, in digital channels, in community banking. She was the regional president for some of our largest markets in community banking. Dawn Martin Harp, who leads our Dealer Services business. She has had over three decades of experience in auto finance. 20 years of those have been with Wells Fargo. Most recently, she was the head of our indirect auto lending business. Franklin Codel, who runs our home lending business. She has been with the mortgage business with Wells Fargo for over 23 years, and most recently as head of production. Each one of them would be providing more details about the strategies and opportunities within their businesses. At our last Investor Day, I outlined several priorities for consumer lending, and I am happy to say that we have delivered against all of them. We have achieved very broad-based and disciplined growth. We simplified our businesses, and we reduced risk, and we have made strategic investments so that we would be transforming the customer experience. Specifically, in our card business, we introduced a number of new products. We launched an award-winning rewards platform. We doubled the percent of affluent cards within our own portfolio, and our outstandings grew three times the industry average. In auto, we executed on our proven business model. We maintained our consistent credit policy, and we deepened dealer relationships, winning more contracts and growing the business. In home lending, we leverage our scale, our local distribution, our balance sheet strength to maintain our number one position in originations, in servicing, and in jumbo lending. You can see the impact of these strategies on this slide. Auto origination, since consumer lending was formed in 2011, has increased by one and a half times. New credit card account opens has nearly doubled, and jumbo lending, driven primarily by our non-conforming loans, has more than doubled over the past four years. This has resulted in a double-digit compounded annual growth rate in our core loans over the last four years. John Shrewsberry talked about this. When you look at our loan portfolio in 2011, core loans were only 56% of our portfolio. Today, they are 78%. What does this mean? Instead of new loans replacing their runoff from our liquidating portfolio, they are now driving growth in our total loan portfolios. We did not compromise our credit quality and the quality of our portfolio to achieve this growth. As you all know, FICO is only one of the measures we look at to assess the quality of our portfolio. Across all of our portfolios, when you look at our customers, the percent of customers with FICOs over 720 has increased, and the percent of customers with FICOs less than 620 has decreased. This is even further evident in our net charge-offs that are at historical lows across all of our portfolios. We have also made significant progress in simplifying, de-risking, and making our businesses more efficient. John Shrewsberry referred to a number of these actions that we have taken over the last two years. We have sold legacy portfolios, like our government student loans. We have exited segments, like the joint ventures and the wholesale channels within home lending. We have closed several litigation and regulatory matters, and we have right-sized our businesses to respond quickly to the changing market dynamics. In fact, we now have 13,000 fewer full-time equivalent employees, FTEs, since our Investor Day in 2012. That is a 20% reduction in our team member base. One of the topics that is really important to all of us, you heard a lot about it this morning, is customer experience. We are driving within consumer lending as well as in partnership across our company, we are driving innovation to meet the changing needs of our customers. How they want to engage with us, how they want to purchase, how they want to transact, how they want to behave, and very importantly, how they want to feel. Within consumer lending, for example, our customers can use our e-lending platform, so that they could give us paperless applications. They could get real-time status alerts. They can upload their documents without having to send us paper. They can access value-added tools to understand and improve their financial condition, and they could do much more of their business with us through their mobile devices, which Jim Smith and Brett also talked about. We will continue to raise the bar, make the right investments, and make sure that we are retaining our leadership position and create experiences that will win for the customers in the long term. Carrie talked about providing choice to our customers, and that is what we are doing in consumer lending, to make sure that our customers can engage with us when, where, and how they want to do so. That is a big priority for us as we move forward as well. As we are looking ahead, we are really, really excited about opportunities for Wells Fargo in consumer lending. We think that consumer demand will remain strong. We think that we are very well positioned to execute against those opportunities, and that we have the right strategy and the right capabilities to earn more of our customers' business. John talked about the buts in today's world, so there are clearly global uncertainties, but we do believe that the macroeconomic trends for the consumer is positive in the U.S. Unemployment's continuing to drop, wages are beginning to rise, and household net worth is growing, partly fueled by the increases in values in their homes. We are seeing that in our own portfolio. When you look at our residential mortgage portfolio, the average LTV for our residential mortgages in the fourth quarter of 2015 was 65%. That's a huge improvement from three years ago when it was 82%. We are seeing consumers returning to the market. They are buying more cars, they are buying more homes, they are buying more consumer goods, and we're expecting that demand to continue and remain strong. I believe that Wells Fargo is exceptionally well-positioned to capture that demand in consumer lending. We have powerful relationships with one out of every three U.S. households. We know these customers. They do trust us. We have proven business models that has delivered through many cycles. We have advantages from our scale, our team, our balance sheet that really helps us in serving those customers, and we have unmatched distribution with very broad reach and local presence. That's through our own sales force as well as through many of our partners. These unique capabilities will help us realize three important growth opportunities for consumer lending. Bringing more new customers to Wells Fargo, meeting more of the lending needs of the existing Wells Fargo consumer households, and increasing our engagement with our lending customers so that we are top of mind and top of wallet. First, let's look at winning new customers to Wells Fargo. Consumer lending is already the second-largest source of new households for Wells Fargo. Just a factoid, over the last three years, we brought 9 million relationships to Wells Fargo through a lending product, and we think that we can attract more new customers to Wells Fargo through our lending relationships. We're increasing and enhancing our capabilities in the digital channel. We're earning new and deepening our relationships with our partners, the dealers, correspondent banks, merchants. We're further leveraging our physical distribution, our home mortgage consultants, regional stores in Carrie Tolstedt's organization, financial advisors in Mary Mack's organization. Once we start a lending relationship with Wells Fargo with a customer, we partner across our company so that we would turn that lending relationship into a broad-based Wells Fargo relationship. Just one example, in the last two years, our home mortgage consultants referred $1.9 billion of booked wealth balances to our partners in David Carroll's organization, in the wealth organization. We will continue to do that. For the existing Wells Fargo households, we are working to meet more of our lending needs, and we've had significant progress in this space. When you look at the consumer lendings penetration of the consumer households at Wells Fargo, over the last two years, we increased that penetration by four percentage points. We went from 62% to 66%. That has been a focus and great progress, and there is still significant opportunity. One out of every three Wells Fargo consumer households still does not have a lending product. Of the ones that do, 79% have only one. These are existing relationships. We have tremendous advantages with these customers. We have analytical insights that allows us to offer the right product at the right time. We have existing customer data that allows us to pre-qualify customers for other products and streamline the application process. We are designing offers that rewards the entire relationship that these customers have with Wells Fargo and gives them reasons to bring more business to Wells Fargo. We are changing the paradigm of lending. Instead of just underwriting and approving a customer for a product that they have applied for, we are looking at underwriting that customer for their entire credit capacity and give them the choice of using that credit capacity across multiple products as they choose to do so. When I look at this customer base, I see $2.7 trillion of credit opportunity that these customers have at other places, at other financial institutions, and we can, and we should be their first choice. For every customer that already has a lending relationship with Wells Fargo, we are working towards deepening that relationship so that we are top of mind and top of wallet. For credit cards, what this means is that we are going to be increasing our share of our customers' spending and their balances. In home lending, we are going to be capturing more of their refinance business, of their new home business, of their home equity business, and that's from our existing servicing book of customers. In auto, it would mean that we are winning more contracts across the entire credit tier from our existing dealer relationships. Increasing the engagement of our existing customers and relationships by just 1% would add another $5 billion of balances for Wells Fargo. So how will we realize this growth? We see three critical drivers. One, making Wells Fargo the gold standard in customer experience and delivering hard-to-replicate value propositions. Two is by leveraging our robust data and analytics so that we can anticipate our customers' needs and deliver on those needs better than anyone else. The third is by building our digital distribution to match the power of our physical distribution. Now we're going to be talking more about how we are going to be executing on these three strategies within each one of the businesses in consumer lending. With that, I would like to invite my partner, Shelley Freeman, to talk about credit cards. Nice and warm up here, everybody. Oh, you want me to do that? Sure. Okay. I won't be able to wildly gesticulate, but it'll be all right, I guess. So good morning, everybody. As I mentioned, I'm going to take a deeper dive into our credit groups, as you can see from this slide. The largest of these is our general purpose credit card business. This business is $25 billion in assets, serving over 11 million customers, historically and primarily those in the retail bank. Our retail services business provides private label credit card programs to merchants, not quite 18,000 of them, who provide financing at the point of sale to their customers. Our newest business is the co-brand credit card business, and this business is a business where we see opportunity to grow over the long term. Now, two years ago at Investor Day, we talked about the key initiatives that we were going to be doing and investments we were going to be making to accelerate growth in our card business, and we've done just that. As you can see, we've nearly doubled our POS active credit card accounts. More of our customers are putting our card at the top of their wallet and swiping that card more. You can see that's true by looking at the strong growth in purchase volume and in credit card outstandings that you see on the right-hand side of that slide. At the same time, two years ago, we said we could be more successful in the affluent segment, and we've made significant investments there as well, and we've experienced double-digit growth in our active accounts, spend, and balances. As Avid pointed out, we've doubled our share within our own customer base of affluent customers. Nothing's working today. Okay, there we go. When I look ahead, I see two key areas for growth for our credit card business and two ways that we'll achieve that growth. First, we'll win new cards and new customers inside and outside Wells Fargo's customer base with a revitalized credit card offering program. Second, we'll deepen engagement with the customers we have through our award-winning rewards platform and our new companion card strategy. The way that we'll achieve this is by maximizing distribution in our stores, but also expanding significantly in the digital space going forward. Finally, we'll also enhance our capabilities, mostly in the digital space, delivering best-in-class end-to-end customer experiences. Now, let's talk about each of these in a little bit more detail. The question I get asked the most often about our credit card business is: Is there still room to grow in the existing customer base of Wells Fargo? The answer is a resounding yes, and it's a very sizable opportunity. As you can see in this slide, on the left-hand side, these are our retail checking households, and these are the penetration figures we talk about all the time. Over the last four years, we've grown penetration from 33.5% to just over 43%. We know that there's significantly greater opportunity here still because we have many of our markets that are well above that penetration rate. But there's an even bigger opportunity among our consumer households that don't have a checking relationship with us today. We only have 10% penetration of these households today with our consumer credit card products. More importantly, nearly two-thirds of those customers who do not have a card with us, they do not have a Wells Fargo credit card, they do have another Wells Fargo credit product with us. We know a lot about them, as Avid pointed out, and we will be putting that data to work to deliver credit cards, better, richer offers, and better cards to them in the future. We have also made significant improvements to the family of cards that we offer, giving customers more compelling reasons to carry them, and I am going to talk about that next. When you look at our offering here, you will not find a single card that our team has left untouched in the last four years. We now have a full array of products that serve our customers throughout their lives, whatever their needs may be, and across the credit spectrum, whether that is secured or a student card for people who are building or rebuilding their credit, all the way up to our high-net-worth customers. Our cards have new branding, new value propositions, and new security features. Just last month, Corporate Insight recognized us and gave us the highest rating among all issuers for the built-in benefits that now exist in this family of cards. We also have some new cards that we have introduced, a couple you have heard about in the past, but just in December, we introduced our third American Express card, another Propel card, this one with no annual fee. This month, we are introducing our new Visa Cash Wise card, a terrific cashback card with a highly competitive 1.5% cashback on all purchases. Our customers love these new products. Over the last two years, the four new products we have introduced drove 25% of our new accounts for mass market, affluent, and high-net-worth customers. New products is part of the story, but we also, in addition to refreshing this, we wanted to reimagine our rewards program. When we set out to do this, we did not just want to catch up. We wanted to offer cards, rewards, and experiences that would help us leap ahead. Our program offers all of the benefits you would expect from any issuer, no question. But we have unique Wells Fargo experiences because of the relationships that we enjoy with our customers. First of all, our rewards are tied to the customer, not the card. So no matter what card you swipe or use your digital wallet for, you are earning rewards in your account that is attached to you. If you are a Propel customer, any one of our three American Express cards, and you have a checking relationship with us, we reward that relationship with an annual bonus. So what do our customers do with all these rewards? Well, they do the things that you would expect and that most issuers provide. They can redeem them for travel, dining, and shopping. But they can also redeem their cards, their rewards, for up to nine Wells Fargo products. They can deposit in a savings account. They can pay down their mortgage. They can redeem cash at any one of the 13,000 Wells Fargo ATMs that you heard about this morning. They can share their points with a spouse. They can give them to charity. They can share them with another Wells Fargo customer. It's no surprise, as you can see in this slide, that we've seen a tremendous lift in customers with open rewards accounts, and those who actively redeem spend 4.3 times as much as those who don't redeem. This Go Far rewards platform is a key enabler for a significant opportunity we see to deepen engagement with our existing customers, and that's our new companion card strategy. Consider this, fewer than 2% of our Wells Fargo credit cardholders have more than one card with us today. But 65% of them are carrying another issuer's card in addition to ours. We believe we can capture more of those cards, more of that spend, and more of those balances with our companion card strategy. The experience that we're creating goes well beyond simply carrying two cards from a single issuer. We're creating something really special that we think only Wells Fargo can deliver. You can have your Wells Fargo American Express card and your Wells Fargo Visa card, so you enjoy universal acceptance anywhere you might go in the world. Because our rewards are attached to the customer and not the card, you can put those rewards you earn on American Express and Visa cards into the same account. You can go online to wellsfargo.com and use our new digital line management tool that enables you to dynamically move your credit line from one card to another to facilitate a major purchase. You can also go online and manage the timing of your payments, and you can track your spending across all of your Wells Fargo payments tools, including your Wells Fargo debit card. We're really excited about this, and we're piloting this strategy right now, and customers are giving us great feedback. They're swiping our cards more often, and they're giving us more of their overall spend. Why not? Our companion card strategy offers Wells Fargo customers unmatched choice, control, flexibility, and value. How will we get these cards into the hands of more customers? Our retail stores, you've heard a lot about them this morning. They provide us with a great competitive advantage. They're a powerful, cost-effective household acquisition engine for us. But as Carrie said earlier, it's about the and. It's about stores and digital. We're embracing the digital channel. We're building experiences that make it easy to find, apply for, and use our cards. We're also making some significant investments in capabilities. You can see there's a lot of work underway here, and you've heard a lot about Wallets this morning. I'm going to talk about one of my favorites, which is our new Cash Track tool, which is also rolling out this month with our Cash Wise card. This is the digital companion to our Cash Wise card. Customers can use this card to track their current earnings as well as their lifetime earnings, and they can redeem cash into their accounts with just a few clicks. It's a very cool tool, and our customers in our pilot are responding to it very well. Now, let me wrap up a little bit by reminding everybody that our card business has outpaced the industry in balance growth over the last two years. That is because of the investments that we have been making and will continue to make. These balances have grown at three times the average rate of the industry. We are going to continue to grow by transforming our customer experience and winning more of the 30 million checking and non-checking Wells Fargo households who do not yet have a card, and by delivering a second card to those who do. We will leverage data and analytics in more ways to engage more customers, as Avid just described, and we will optimize our distribution across all of our channels. Not just Wells Fargo's digital channels, but the digital world outside of Wells Fargo also. We will grow because of the strength of the relationships we have with our customers and because we have the right strategies and the team to reach customers wherever they are across all of our businesses. Thank you very much. Now I will turn it over to Dawn, who is going to discuss our auto lending business. Thank you, Shelley. For over 65 years, Wells Fargo has been helping customers across the credit spectrum purchase affordable transportation to support their daily lives. While we make a small number of direct auto loans through our retail stores, this morning I am going to spend some time talking about dealer services. Dealer services includes indirect auto. We service 3.7 million customers that come to us through our distribution channel of 14,000 dealer relationships. In the commercial dealer space, we offer traditional real estate financing and floor plan financing for our auto dealers. In addition, they are the relationship management connection to all of the products and services Wells Fargo has to offer our dealer customers. I am very fortunate to be joined by a seasoned management team with hundreds of years of cumulative experience in the auto lending industry, and many of us have worked together for decades. We are a growth business, but we grow in a disciplined way. Since 2011, we have added $18 billion of assets to our balance sheet. We have maintained our leading market share in used auto finance and the number two market share in auto lending overall. Our focus is on transportation vehicles and used vehicles. We have a great opportunity here because there are three times as many used vehicles financed as new vehicles. We have a time-tested business model. It is the same model that has been in place since I joined dealer services in 1997, which makes me feel very old. Our local market strategy is critical to our success. We are close to our dealer customers through 57 regional business centers. In each of those centers, we have highly tenured teams that have worked with our dealer customers, in many cases, through generations. Being in the local market provides us insights to the market and economic conditions. Equally important is our consistent approach to underwriting credit. Our model has performed across numerous economic cycles. We don't chase competitor trends. As I mentioned, we have a focus on pre-owned vehicles. About 65% of what we financed is used. We have a very disciplined approach to our loan structure. When we look at the loan to the value of the vehicle, we start by looking at the wholesale price, and we minus any manufacturer incentives. In addition, when we look at terms, we have a tenth of a percent of 84-month terms that we originate. We do not lease, so we do not carry any residual risk. I talked about our regional business centers, and I'm passionate about this, so I'll give you that clue. We have 57 regional business centers, and they're all very unique. I would love it if you could come visit one of our offices, but I know we don't have that luxury. So I wanted to introduce you to two very different offices to compare and contrast. I'll start with Santa Rosa. It is one of our oldest regional business centers, and it's our smallest. We have 19 team members, and we serve 99 dealers. Our management tenure is 16 plus years. We've maintained the top market share for 3 years. We're still growing, and our portfolio exceeded $500 million in balances for the first time in 2015. In contrast, Philadelphia is one of our largest centers. We have 54 team members serving 320 dealers. Last June, we had a record origination month of over $100 million. Because of the concentration and volume in that region, we've spun Philadelphia off to 3 different offices. Our most recent in 2015 was Cherry Hill, New Jersey. We view markets like consumers. No two are alike. John Stumpf mentioned relationships this morning, and auto lending is all about relationships. I'd like to share with you how we measure our relationship success in dealer services. We measure it in a number of ways. One is the number of contracts we purchase each month from a dealer, and we measure it by 5, 10, and 20 contracts per month. To give you an example how powerful that is, 10% of our dealers have given us 20 plus contracts per month, and in 2015, that accounted for 29% of our volume. Avid mentioned earlier full-spectrum dealers. We like that. We're a portfolio lender. We like to have loans in the dealer's portfolio across the credit spectrum. It's a balanced book of business, and we're helping customers across the credit spectrum get access to affordable vehicle financing. When we do that with our dealer customers, we see a 22% lift in return on assets. For us, it's a win for the customer, for the dealer, and for Wells Fargo. Our integration with our commercial dealer unit is a substantial advantage over many of our competitors. While captive finance companies can provide real estate financing and floor plan financing, they can't provide all of the products and services available to our dealers that Wells Fargo has to offer, from treasury management to wealth management, retirement management, and succession planning. Many of our dealer customers are family-owned businesses that are transitioning to the next generation. Over the last few years, we've increased our cross-sell from 9.6 products to 11.7. Of our competitors who do have commercial offerings, few have as seamless of a team as we do. Avid mentioned I used to lead indirect auto. Since our last Investor Day, I lead both indirect auto and the commercial dealer team, and we show up as one Wells Fargo to our dealer customers. We share information, we make sure each of the product offerings are very clear to our dealer customers, and that has provided success for both our dealers and ourselves. When we look at our top 150 commercial relationships, we have an 18% higher application conversion than an indirect-only dealer. I'd like to switch gears and talk about our consumer customer. What you see on the slide is information about our 2015 indirect auto originations, as described by our own internal proprietary scorecards. We've tested and refined these scorecards over many years based on our data, billions of dollars of loans originated based on our credit underwriting standards and how they've performed through numerous cycles. We also look in these tranches at expected loss, along with many other attributes in our proprietary scorecard. FICO has been communicated a lot in articles recently. FICO is one indicator of a loan's performance. In and of itself, a customer could have a subprime FICO and not be a subprime customer. We look at many characteristics, such as the borrower's characteristics, as well as the collateral characteristics and the loan structure to determine whether to underwrite that loan or to purchase that loan. We look at the customer's ability to repay. The loan must make sense for the customer, for the dealer, and for us. We look at the outcome of our underwriting. I'm showing you TransUnion industry portfolio statistics on 60-day delinquencies, which we believe is a better indicator of loss. Amongst our competitors, we are the lowest in the industry over numerous years. We do see that used vehicle values have been coming off all-time highs, and they will be trending lower, and we are prepared for that change. We've managed through many cycles like this before, and we're well positioned to continue to provide strong returns. In closing, I'm passionate about the auto business, our dealers, our customers. No team understands how to manage through economic cycles and support auto lending like the team at Wells Fargo. We have the right strategies to capture opportunities. We'll continue to invest in systems to improve both the dealer and the consumer experience. We're continuing to work on developing new insights and behavioral analytics to refine both our origination and our servicing models and look at our operating environment end to end. We'll continue to focus on deepening our dealer relationships. I'm very proud to lead this business, and I'm looking forward to the future. It's my great pleasure to introduce Franklin Codel, the head of Home Lending. Thanks, Sharon. A couple of years ago, I had a chance to do a town hall style recognition event with John Stumpf. During the course of our Q&A, a team member asked, after reciting a series of issues that comes with being in the mortgage and home equity businesses, "John Stumpf, do you like being in the home equity business?" He said, "No, I don't like being in the mortgage and home equity business. We love it at Wells Fargo." Somebody actually snapped a picture at that exact moment, which is hanging in my office. We love the mortgage and home equity businesses at Wells Fargo for three main reasons. First of all, we serve a fundamental customer need. We help customers buy homes, and we help customers improve their financial situation by refinancing. For many of our customers, the purchase of a home or the refinance will be among the biggest financial transactions they make in their lives. We take our role very seriously in working with consumers. The second reason we love the mortgage business is we are a source of new households, new homeowning households for the enterprise. Homeowning households, by their nature, tend to have more of a need for other financial products and services, and we look forward to serving them by working closely with the community bank, with other parts of consumer lending, and with the wealth brokers and retirement group to meet all of their financial needs. The third reason we love the business is because we understand it, and we deliver attractive returns to the enterprise, and we are a big part of Wells Fargo's diversified business model. Inside the home lending business, we are also a diversified business in and of ourselves. We have the origination business, the portfolio business, and the servicing business. Our origination business consists of our retail channel, where we work directly with consumers through about 8,000 home mortgage consultants in 500 standalone locations. It also is our correspondent business, where we purchased loans. I honestly didn't do that. We purchased loans from about 900 correspondent clients all around the country. We also, in our retail business, frequently co-locate in community bank stores, and we work very closely with our Wells Fargo Advisor and wealth channels, with both our distributed and our centralized teams. We have a portfolio of high-quality assets, which I'll talk about momentarily. Of course, we service $1.65 trillion of loans for investors and for ourselves, which represent over 9 million households. I talk about our long-term commitment to the mortgage business. To be successful in the mortgage business over the long term, you have to be excellent in these attributes that are listed on this page. I just want to raise that it takes a long-term commitment to the business, especially to be strong across local communities and to invest in a distributed sales team. It takes strong management in operational risk, credit risk, interest rate risk management. The mortgage business and home equity businesses are cyclical businesses. It's no coincidence because of our long-term commitment that we have been a top five lender and servicer for over 20 years, a claim no other lender can make, and we've been profitable every year since 1990. Let me talk about the origination business just for a moment here. This chart represents the top 10 originators in the U.S. in the mortgage business, mortgage and home equity business. You can see there's a mixture of business models here, a mixture of banks and non-banks. I want to point out a couple of items. One, look at the circled area on the red bar. That represents retail purchase business. We are very committed to what it takes to be successful in serving purchase customers, and our purchase business is bigger than the next three or four lenders' purchase business combined. This is very important because we're not always going to be in a period of elevated refinances like we have seen for the last few years. You'll also notice we have a good balance between retail and correspondent business, and you'll see different competitors have chosen different paths. There's no doubt that the environment has shifted. We have new competitors coming into the marketplace, especially non-banks who are selling directly to Fannie Mae and Freddie Mac through their cash window and selling servicing away to other non-bank servicers. Talking about the mortgage industry, it's important to look at the investor community as well. The mortgage market is not homogenous. There are multiple types of investors. On the left-hand bar, you'll see how the industry is indexed between government lending through FHA, VA, Rural Development, Fannie, Freddie, portfolio lending, and a very, very small emerging subprime and alt A private label business, which Wells Fargo does not participate and does not plan to participate in. Couple things I want to highlight on these. If you look at the middle bar, that's our retail originations, and the right-hand bar is our correspondent. How we mix. We are under-indexed in retail in the FHA business. That is a conscious strategic choice we have made, and we expect to remain under-indexed and continue to be so going forward. The second thing you'll notice is our emphasis on jumbo and home equity lending in our retail business. We are over-indexed there. That is because we have the ability to and desire to put these high-quality assets on our balance sheet. We do purchase a very small amount of jumbo lending through our correspondent business, and those also go on our balance sheet. I do not see the emergence of a scalable, robust private label market for jumbo or home equity anytime in the near future, and we expect to continue to portfolio these loans on our balance sheet going forward. Let's take a look at our portfolio part of the business. You can see here that the pre-2009 books have declined steadily over the last seven years, replaced by the post-2009 book in the red part of the bar. While our overall portfolio has remained relatively constant, the mix of this residential real estate as an asset class in Wells Fargo has declined over the years. The pre-2009 book attributes are on the lower part of the page there. The post-2009 are in the upper part. Just want to call out this is a very high-quality book of business. Only 367 loans out of over almost 270,000 originated jumbo loans funded in the last seven years have ever gone 60 or more days past due. Additionally, we look at the jumbo portfolio in particular as a key source of opportunity to work closely with our wealth brokerage and retirement group, and as a source of customers for them. We bring new customers with assets under management to the wealth brokerage retirement group to work with and provide future services for them. Let me touch briefly on the servicing business. We have the largest servicing portfolio in the mortgage industry. We understand the mortgage servicing right asset, and we know how to manage the risk associated with it and see it as an attractive asset for our balance sheet. It also represents 9 million households. Households where we want to be in the best position we can be to earn their future business, whether it be a purchase or a refinance. The servicing business has also seen a lot of changes, especially since the delinquency and foreclosure rates have steadily declined since the peak of the financial crisis in 2009, 2010. Our levels today are lower than they were prior to 2007. Initially, about 80% of our servicing team members work on the 5% of the portfolio that is in delinquency or foreclosure right now. As these numbers come down, that represents an opportunity for efficiency and cost takeout going forward. A lot has transpired since the last Investor Day. Avid touched on a few of those in her remarks about how we've de-risked the business and we've put significant financial crisis era matters in the rearview mirror, as well as implemented significant regulatory items such as the TILA RESPA disclosures and the CFPB servicing rules. What that means is that the industry and Wells Fargo is absolutely at an inflection point. We have some trends that are emerging that are very, very important to be positioned for growth in the business going forward. First, demographically. When we look at the data for the U.S. citizens who are in the ages that become peak home buying years, in their mid-20s to mid-30s, it is the largest cohort population ever in the history of our country. Even bigger than the baby boomers were in the 1970s. We all, who can remember, understand the impact the baby boomers had on the housing market in the '70s. This bucket of or this cohort of people is very diverse and very interested in homeownership. The way they approach the market is a little bit different than in the past. They do a lot of self-research. They look at properties on sites like Zillow and Trulia, and they research lenders usually through internet and digital spaces. Their expectations are different than in the past, and it's very important that lenders be in a position to meet these customers where they want to be met. We see it critical to be relevant for these customers by being present in their communities, understand their specific credit needs, and provide access to them through our digital tools and through our locally based team so they can have the best of both worlds, the online world and the world of trusted advice through our home mortgage consultants. We also are increasingly using data and analytics to provide early-stage pre-approvals to these consumers. Industry data shows that the first lender to provide a pre-approval to a customer will end up with that final loan about 90% of the time. The game has changed with when to interact with these customers to win their business. Additionally, digitization of the home lending business has provided a number of opportunities for what Steve Ellis referred to as the trifecta, a better customer experience, better risk management, and lower cost process. Things like getting source data on income and assets directly from the source and not having to have the consumer provide the documents to us is one example of the ways our industry is evolving to become more integrated and more seamless from a customer experience. We are absolutely moving from an era defined by the aftermath of the financial crisis to the age of the consumer. We have a lot of customers in our care, 9 million in our servicing book, and many millions more across the enterprise, some of whom are homeowners and some of whom are homeowners in waiting. Tremendous first-time homebuyer opportunity with 15 million non-homeowners across the enterprise. Each 1% increase in our penetration of these customers equates to about $7 billion a year in origination volume. We see winning our existing customers' business as a significant source of growth for us going forward. Go forward, please. Digital is transforming our business. I want to point a couple things out here. I've talked about the importance of seamlessly integrating the digital with our trusted team members. Wells Fargo has a wonderful platform and digital footprint already. We have, just on our mortgage site alone, over 1.5 unique monthly visitors. These are customers who are doing research, looking at rate quotes, doing payment calculators, or just trying to get information about the home buying or refinance process. Last year, we launched yourLoanTracker, which is an integrated digital interface for our consumers. We host over 2 million consumer sessions a month. We provide disclosures. We have customers' ability to e-sign documents. Customers can take pictures of, for example, their W-2 and just send it in if that's a requirement of their loan, and we can receive that. We are regularly taking process steps out, removing paper from the process, and improving the customer experience. It's simpler for consumers. It increases clarity and transparency. It reduces cycle times, increases productivity of our team, lowers costs, and customers are giving us wonderful feedback on what we've built. There's plenty more to come in the future. In short, I'm very excited about the growth prospects for the mortgage and home equity businesses. Both demographic and housing trends point to very favorable growth in housing in our country for the coming years. We see leveraging digitization, data, and analytics as a key way to work with customers going forward, and we look forward to increasing our reach and our interaction with those customers through things like pre-approval, digital sourcing, as well as leveraging the distribution channels that we have both in the home lending business and across the community bank and wealth groups. With that, I'm going to turn it back over to Avid Modjtabai. Thank you. Thank you, Franklin. Thank you, Franklin. I hope it's as evident to all of you as it is to us at Wells Fargo and in consumer lending that we have substantial opportunities in consumer lending for Wells Fargo. We have long-term relationships with 41 million households. That's 70 million customers. We have capabilities and structural advantages that are very hard to replicate, and we have expertise and insights that only comes from a seasoned team that you just heard from, and they have delivered through many, many cycles. I have tremendous confidence in our ability to continue to meet the needs of our customers today and also the customers of the future. All of us at Wells Fargo look forward to doing just that. With that, I would like to invite the team back up here and take some time to answer any questions you may have. Hi. I have a question for Shelley and a question for Dawn. Yeah. Oh. Oh, there you are. Sorry. I'm hard to see. Shelley, one of the dynamics in the credit card space currently is that you're seeing tremendous loan growth across the industry. But actually net income is not growing. In fact, in many cases, for many institutions it's shrinking, and that's in the absence of any significant credit pressure, right? The key dynamic there is one that's similar to what you've articulated, which is this growing richness of rewards and the functionality and all the technology investment that goes into that. I guess my question is, based on your new product alignment and all these investments you made, is your incremental customer coming on, whether it's a new customer or shares taken? Is that going to be accretive to your core ROA in this product or dilutive? I think that we're seeing good net income growth for these customers, and because we have a lower cost of acquisition, I think you're going to see the continued performance that we've had. We enjoy a very strong ROA in this business. There's no question about that. Because we have these relationships with these customers and the opportunities that we have to reach out to these other customers that are Wells Fargo customers that have another credit product with us, our ability to reach them at a very low cost gives us a distinct competitive advantage when it comes to continuing to grow net income. Yeah, the other thing I would also say is some of the dynamics that you are seeing in the card business and the pressure on the margins is in the co-brand space. The pressure in the co-brand on margins as some of these transaction or portfolios are becoming available has been significant, and that's a very small portion of our portfolio. Our portfolio is our core card business, where we are building relationships and growing those relationships. So some of that dynamics really doesn't apply to our portfolio. Dawn, you alluded to this at the end, but obviously one of the sort of battleground issues in auto lending currently is the forecasted loss experience, right? Manheim indicates, if nothing else, that the loss given default is going up a little bit. Yes. I guess my question is underwriting a loan. There's been some deterioration in underwriting at the lower end of the credit spectrum. Is that alone enough to cause some sort of significant change in the loss experience, or is it still going to be driven primarily by some kind of frequency event? Good question. I think it's a combination. I think underwriting plays a critical role, and that's why I hit on that so hard. Really, are we pricing for the risk we're taking? That's absolutely critical, and then there's other dynamics. There are operational changes that might take place in the support of the collection and recovery processes as well that might have an impact on overall net losses. Janine in the back. There's a question here? Yep. I'm sorry. Yeah. Hi, Franklin. How are you doing? Ed Wozak, Von Tobel. Franklin, a four-part follow-up, if I may, on your jumbo comments. Number one, what are you seeing in the competitive environment today regarding LTVs for competitors? Has it gotten more liberal? Is it affecting your growth prospects in terms of what you do? Secondly, do you offer interest-only jumbos? Thirdly, do you intend to retain all of your jumbos, or do you ever securitize? Fourthly, and lastly, what percent of jumbos, let's say, are exposed to the greater San Francisco area, which may be dependent on what's happening in tech? Okay, I'm going to try to remember all those. Different lenders have different credit philosophies. We tend to be very disciplined with our credit philosophy. I have seen in the last couple of years some lenders have gone up the loan-to-value scale in some markets. We have no plans to follow them. We have robust programs in place, and I think we can serve the jumbo market very effectively with what we have. We do offer interest-only jumbo loans. We have some risk appetite limits on those. We constrain the loan-to-values on interest-only, obviously because you don't have the same pay-down of equity over time there. You asked a question about securitization. We have no plans to securitize any of our portfolio at this point in time. The securities market that exists today for jumbo is highly due diligence, and actually we originate more loans in 2 months than the entire market does in a year in the private label market. We don't see that as scalable under its current construct. As far as San Francisco, we have a very robust market classification process. We look at states, at different markets like San Francisco, and we continuously are challenging ourselves to make sure that we're comfortable with the lending we're doing. We're anticipating what might be happening with property values or the economies of different markets, and we have and will continue to take action in anticipation of market dynamics for us. Obviously, California, as a state, is a big part of our jumbo portfolio. I don't have the exact concentration here, but as you would suspect, it's a big jumbo market. Both coasts have a lot of the jumbo activity. Hi, good morning. Good morning. Up until maybe four weeks ago, there was a lot of momentum behind the thought process that financial technology companies would be major disruptors for banks in terms of consumer and small business originations. Since we started the day with innovation, and you mentioned it several times during the presentation, could you give us your thoughts on what you've learned from these financial technology companies in terms of how your own origination platform will develop over the next few years? Also, given that Carrie had mentioned FastFlex during her presentation, I'm wondering if the tendency is to build your own technology in-house rather than maybe partner like some of your other competitors have done. Sure, absolutely. When we have been purely looking at a lot of the marketplace lenders and the fintechs, and when you look at their business model, we look three key components to that business model. One is their funding. The other one is how they think about risk and their underwriting, and the third is around the customer experience. From a funding perspective, I think they would die for our capabilities in terms of funding. In terms of underwriting, we actually do believe that we haven't We've looked at the outcome of their model. Clearly, we don't have views into their proprietary, but the outcome of their models, and we actually think that our credit engines are significantly richer in terms of how they perform over the cycle, the kinds of information that we use. We clearly have relationship data from many of our customers around their financial lives. We think that there's clearly some things that we could leverage from how marketplace lenders are leveraging outside data that we may not have used in the past, and we are absolutely looking at that and enriching our own capabilities. The third piece of it is around the customer experience, what they're looking around simplifying, making it more transparent, making it very quick, instant decisioning. We've been on that roadmap. There's a lot that we are looking at what they are doing and integrating into our own customer experience. You heard a lot this morning around the innovation on making Wells Fargo the gold standard from customer experience, and that's a space that we are absolutely looking at all industries, including the fintechs, marketplace lenders, but other retailers, other consumer providers. We don't foresee insourcing wholesale their platforms, but absolutely, there are components of the technology that we partner with our technology team, with Steve's organization, to integrate into our own platforms. Janine? Yeah. Good morning. I'm just curious, the peer-to-peer lenders have been having issues in the last couple of weeks. That said, even though they're small in relation to the total amount of bank consumer lending, they've captured a significant amount of the growth in the last couple of years. I'm curious, is there a risk in your business that kind of like the people who go to Barnes & Noble and thumb through the books and then order it online at Amazon, that people use your auto lending and card services and so on, do the transaction, and then a couple of months later, refinance out and take advantage of the bigger chunkier loans in the peer-to-peer market? How do you address that risk? Yeah. What I would say is in the financial services industry, it's a very fragmented industry. We've been dealing with competition with banks, with non-banks, with large banks, with small banks, with money center banks through our entire history, and we absolutely look at marketplace lenders as an important competitor set to look at. But we are very focused on what we all talked about, which is deepening our relationships. These are customers that have a lot of point of contact with us. We have a ton of data to pre-qualify these customers before they even are perhaps thinking. Like when you look at the 9 million customers we have in our servicing book, in terms of management of that servicing book on a quarterly basis, we are looking at the credit profile of each and every one of those customers, where we could pre-qualify those customers and be even ahead of the curve versus the marketplace lenders where the customers are reaching them. We absolutely look at them as important competitors, but we think that we have a lot of capabilities that we are continuing to develop that will position us extremely well as we move forward. One over here. Thanks. Kevin Barker of Piper Jaffray. Franklin, I am noticing you mentioned that you love the mortgage business. I think bread and butter for Wells Fargo. You have seen mortgage originations come down from over $500 billion down to roughly $200 billion. Market share has come down from over 25% to less than 15%. Seems like there is a major cross-sell opportunity within mortgage. Can you explain some of the dynamics of why you are seeing that market share go away, if there is any opportunity to potentially grow within mortgage given where Wells Fargo stands right now? Sure. Yeah. Probably about four to five years ago, our market share peaked in that 25%-30% range, depending upon which source you look at. Since then, we have dropped our market share by at least 10 percentage points, let's call it 10-13 percentage points. About half of that market share was ceded because of the business line de-risking that we undertook. We exited the broker business. We exited the reverse mortgage business. We exited the joint venture business. We have put overlays on the FHA business to manage our exposures there. There's been a number of actions we've taken to better position the business longer term for the risk profile that we want. The other big shift was when Fannie and Freddie opened up their counterparties to the broader industry, which they did a few years ago. Some of the firms that used to sell to us through our correspondent business were able to find outlets for their servicing and sell the loans directly to the GSEs. As a result, the correspondent business was impacted, especially in that conventional conforming space. That was worth several percentage points of share loss. As we stand here today, those cycles have largely played out, and we're now in a position to grow going forward by primarily earning our existing customers' business, I pointed out, from our existing servicing and enterprise customers. In the middle. Yes, John. Hi, it's John Pancari, Evercore ISI. Franklin, just regarding that as well, how are you thinking about retention on the balance sheet of mortgages? What types of mortgages, and is this influenced at all by the rate environment? Are you thinking about retaining additionally balances here? Also, given the amount of liquidity you have on the balance sheet, could you step up retention and fund it with cash? Thanks. Yeah. As you recall, our total residential real estate balances have been pretty level over the last few years while we've swapped out higher risk assets with lower risk assets. We are portfolioing all of our jumbo and home equity today, and a portion of our high balance conforming, as market opportunities dictate. So we anticipate that to be the case going forward. We have a very disciplined pricing process along with our credit process to make sure that we are comfortable with the returns that come from just purely the net interest margin and the credit, and the funding and so forth, as well as the customers we're attracting from not only a credit profile, but an ability to cross-sell. So, I see that the demand remains strong. As I said earlier, we're not expecting there to be a secondary market to develop for those asset classes to any scalable degree in the near future. So I'm anticipating that our posture will continue going forward. We have time for two more. Janine, is there one on your side? No. John? Yeah, please. Marty? Well, Franklin, you put the bait out there. You said there was an inflection point coming up in the mortgage business, profitability-wise, volume-wise. You cited that there was this pipeline of new households that were coming through. One of the things that since the financial crisis, not that you haven't been profitable, but under-earning what you used to be able to produce for the overall company. Could you give us a little bit of a magnitude of what kind of inflection points you see, and what's the way that you can start to see mortgage banking be a part of the growth part of Wells Fargo again? Well, I see our returns have been pretty attractive the last few years from what I can see. By the inflection point, what I was intending to put forth is a lot of the financial crisis eras have been or are being resolved, which will create a different feel in the marketplace for not only the lenders and servicers, but also our customers. We regularly survey American households and Americans who don't have homes to see what their sentiments are, and we see a growing sentiment that homeownership remains a real part of the American dream, even for people that aren't homeowners today. But we see some myths. There are a lot of people who are younger. Imagine if you're somebody who's 27 or 28 years old. Seven, eight years ago, the financial crisis was in full bloom. This is the world you know. There's a lot of myths out there that you have to have a 20% down payment or perfect credit to buy a home and so forth. We see one of our roles as the nation's number one lender is to educate and inform the marketplace, both at a national level and at a local level, so people understand their options and what it takes to become a responsible and sustainable homeowner. The demographics favor homeownership. There has been a delay in household formation among younger people. That ties pretty closely with their comfort level with their income and job situation, and student loan debt, and a variety of factors. But demographics ultimately will want out, and many of these folks will start families and want to become homeowners. Yeah, Marty, the other thing I would also comment on is when, and Franklin touched upon this in his presentation, when you look at a number of new regulations that has been impacting the mortgage industry, the QM, RESPA, TILA, a lot of those implementing on those regulations has taken a lot of our technology capacity and our business capacity. With many of those regulations now having been operationalized, we could also leverage that capacity to bring more capabilities to the markets from our customer perspective. Some of the e-lending capabilities, some of the things that the marketplace lenders are doing, we are now able to shift more of our investment capacity to those initiatives as well. Yeah. We've really built our business to be successful in a purchase market, as you could see from the other slide. We don't rely fully on earning refinances from the general marketplace through national advertising and so forth. We like to earn our current customers' refinances and grow in the purchase market. We're really excited about those prospects. Time for one more. Was there one in the middle? Betsy? Yeah. Yeah. Franklin, a question for you, but then for everybody up there as well. You had an interesting comment about if you're the first preapproval, 19% of the time you're more- 90. 90% right, to get that. Could you speak a little bit to three things? One is how that factors relative to prior, but then also how far along you think you are in optimizing what you need to do in order to maximize your preapproval scores. Lastly, what is the implication for just the business overall? In other words, the wallet share of the customer, I would think you'd want to have as much as possible to get the best information to have the right preapproval. Maybe you could speak to how it fits into the rewards component of the focus that you have on the business. Sure. I'll give a comment, and then others can add. I'll start with the customers that we already service their mortgages, and I think about what we know about them. We know their credit. We worked on their loan originally, so we have good visibility into their profile. We understand their collateral, and we see their payment history. If they have multiple Wells Fargo accounts, we can oftentimes see other things that they have. Perhaps their asset accounts or their direct deposits and so forth. We're in a very strong position to provide pre-approvals earlier than somebody who has to actually learn about that consumer. That's a big advantage and a journey that we're on across all of our product sets, to make sure that we're leveraging the data we have about consumers and providing them valid offers there. I think it's going to be an ongoing journey that's going to continue to get better and better and better as time goes on. Talk about how you think about it. Yes. Shelley, do you want to talk about the rewards and how you- No, I would jump in and say that I think, Betsy, we're in the early innings for the card business in terms of how we leverage this data and analytics. We're developing new capabilities all the time. We've got the 20 million non-consumer checking households that we talked about earlier, where we've got, as we've mentioned, Franklin's got an amazing cache of information about those customers that is going to enable us to pre-approve many, many more customers. I think we're just accelerating that now. We also have opportunity with our credit line assignments as we take all of this information that we have about our customers, and we see their deposit relationship. We can see that they pay their bills, they pay their rent bill, or they pay their cell phone bill or their cable bill. We have the information that our customers who have another consumer credit product with us have. We can pull all that together, and it's going to enable us to pre-approve a lot more people than we've done in the past. Yeah. Betsy, I think the augmentation over what we have been doing, because we've been leveraging relationship data for a very long time, but our focus historically, and when you look at many of our scorecards, had been focused around relationship data and transaction data within the checking account, the DDA, and looking at the inflows and outflows there. But now what we are extending that is across all of our lending products. Now we know, as Franklin talked about, a lot about our mortgage customers. We know a lot about our auto customers. We've already extended credit to them. So we are basically augmenting that to leverage the entirety of enterprise data, not just the checking account data. Okay. Terrific. Thank you, Avid and team. Great. Thank you. Okay, so halftime. It was a great morning. Thanks for your engagement. For lunch, for our guests, if you go out the door and to the right, in the lunchroom, the Gold Ballroom, there are tables with numbers on them. We've assigned Wells Fargo hosts to each of those tables. You're free to sit at whichever table you like, and we'll come get you when lunch is done in just over an hour. Enjoy the conversation. 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. Our brand is seen and experienced in many ways, including our locations, ATMs, sponsorships, and marketing. From broadcast messages to local one-on-one interactions, and in every engagement in between, our 260,000 team members bring our brand to life every day. We carefully craft and optimize our efforts to deliver maximum brand impact. Please welcome the Head of Wealth and Investment Management, David Carroll. Good afternoon. I am David Carroll, and I am very excited to be able to spend a little bit of time with you telling you about our wealth and investment management business. I want to add my thanks to all of you for investing a day to come here and be with us and hear the Wells Fargo story. The strategic framework that we apply to these businesses in wealth and investment management is the same one that we adopted in 2009 coming out of the financial crisis, and we think it's as relevant today as it was then. It's built around helping our clients achieve financial peace of mind. Peace of mind because financial markets are volatile, and to many, they are confusing and complex. Our customers' goals are life goals. It's housing, it's education, it's healthcare, it's philanthropy, it's estate planning and preservation. We help them meet those goals with a focus on customized investment plans to help them grow, preserve, and transition their wealth over a lifetime. In addition to myself today, you'll hear from two of my 10 colleagues, direct reports in wealth investment management, Mary Mack, who's the head of Wells Fargo Advisors, and Darrell Cronk, who's the head of the Wells Fargo Investment Institute. By now, you know there's a recurring theme in the room today around tenure at Wells Fargo. While I may look like I joined the company in 1852, I've only been here 35 years. My direct reports, the 10 of them, average 23 years with our company. For all 36,000 team members in wealth and investment management, we average 12 years with the company. In a business where long-term relationships are incredibly valuable to our clients and equally valuable to our shareholders, think about what that tenure means as a financial advisor whose relationship could go on for decades with their clients. Our leadership team not only has long tenure with our company, they have very diverse experience and backgrounds in corporate banking, treasury services, risk management, technology, retail banking. I tend to think of the combination of tenure with our company and diverse backgrounds as leading to an organizational commitment and teamwork that's just rare in our industry today. We hear that from our clients. Our division consists of five business groups in the Wells Fargo Investment Institute. Because of our scale and our scope and the integration that we have, particularly with the community bank, we are one of a very few players in the industry that is able to compete effectively at scale with the mass affluent, high net worth, and ultra-high net worth segments across the spectrum of wealth accumulation. The Wells Fargo Investment Institute is now about a year-and-a-half-old entity that was conceived to aggregate a host of key common portfolio construction inputs in one place to do a much better job of producing consistent and high-quality investment research and advice for clients and for our client-facing investment professionals. I talked a little bit about scale and scope. This gives you a view of the scale and scope across these various businesses that allow us to play across that wide spectrum. Combined, we serve over 7 million households, over $1.6 trillion in direct relationship client assets through Wells Fargo Advisors, through the private bank, and Abbot Downing, and over $800 billion in client assets through institutional intermediary relationships in Wells Fargo Asset Management and Wells Fargo Institutional Retirement. Our multi-channel, multi-business model is unique in a couple of important ways. Beyond the breadth of our client segment coverage and because of our partnership with Community Bank, we have a unique ability to have a cradle-to-grave approach to clients as they accumulate wealth over a lifetime. I remind our team frequently that other than the very small percentage of clients that inherit wealth, everyone else accumulates it, builds it, and nurtures it over a lifetime. Wells Fargo is unique in the ability to be there every step along the way. If I reinforce anything today, it is the importance of the connectivity we have with the community bank, with Wells Fargo Securities, with Wells Fargo Home Mortgage, with Auto Finance. You have heard other people make references to the handoffs and the referrals. It is not just mom and apple pie, it is a definitive business strategy for growth for us. Another somewhat unique aspect, more succinctly put, is the interconnectedness of the businesses in wealth and investment management, where brokerage, the private bank, Abbot Downing, Retirement, and now Wells Fargo Asset Management share common operations, technology, product, risk management, and compliance infrastructure in the company. More than that, we share a DNA-deep commitment to getting the customer to the right place. It is called teamwork. You are all professional investors, and you are astute observers of our competition. From where I sit, there is a huge sea of sameness out there in the competitive landscape. John talked about competitive advantages that we have at Wells Fargo, and we think we have some inherent strengths in our part of the company that differentiate us from that sea of sameness. The first is the power of the Wells Fargo brand that gives us access and consideration enjoyed by very few. Our fundamental approach to focusing on client outcomes, not selling securities, life goals, housing, education, healthcare, philanthropy, estate preservation, and planning. The strength of our multi-channel model and our willingness to evolve, to challenge the status quo, to transform the business, to adopt best practices, and to embrace technology. The fourth is the Wells Fargo culture. It is all about internal partnerships that drive referrals and ultimately sales. Lastly, the ability, I would say now the history, of taking the long view in our business and having the discipline to create and fund investments in the business. We think that those long-term advantages that I just talked about are borne out by our track record. Here you can see, this is my favorite slide. All of us have our favorite slides. I have two. There is this one and one in Mary Mack's presentation later. A 30% seven-year CAGR for earnings, net income after tax, and 300 basis points of positive operating leverage, both over seven years. Here you can see our relative contribution to Wells Fargo overall revenue and earnings and our revenue mix. We have made very good progress in recent years in deliberately reshaping our revenue mix as we have grown net interest income, as we have emphasized balance sheet opportunities with our clients, and in growing recurring revenue in our investment businesses. Another view of our results, very nice, consistent growth in loans and deposits, advisory assets, net interest income, and ultimately our margins. I apologize for the eight people I had lunch with today. I told you everything I was going to tell you now, so this is redundant. With our margins now consistently in the low to mid 20% range, we can easily see 30% in any kind of normalized or whatever normal rate environment is, any higher rate environment. So we are confident about that. Over the last three years, loans have grown at a very healthy 14% CAGR, driven by both non-conforming jumbo portfolio mortgages in concert with Wells Fargo Home Mortgage, our partner, for our private bank and brokerage clients, and very strong securities-based lending within Wells Fargo Advisors and within the private bank. On the deposit side, we continue to attract net new deposit balances and higher balances from our existing clients, providing the company with a growing, stable source of very low-cost funding. Our deposits in WIM have a weighted average cost of a little less than four basis points. As I mentioned earlier, we have made really nice progress over the years in shifting key components of recurring revenue. Our now decade-old emphasis on plan-based relationships with customized investment plans with advisory asset allocations has, in addition to driving much better investment results for our clients, it has driven 7% growth in asset-based fees and 12% growth in net interest income over the last three years. On the expense side, we have been both disciplined and very deliberate. Over the past three years, non-commission-based expenses have been held to a 1.5% CAGR. From an earlier slide, recall that total non-interest expenses have grown at only a 2% CAGR over seven years. It has been quite intentional. We have identified and realized efficiencies, non-interest expense efficiencies, that have allowed us to invest over $600 million in our businesses in key platform and infrastructure improvements. John mentioned this earlier, we have operationally intensive businesses. Ours is one of them. We are a high ROE business and a bit higher OER business. But we've improved our OER between 2009 and 2015 from 89% to 76%. The strategic priorities that have driven our growth and success over the last several years have changed very little. We've upgraded technology and key infrastructure and tools. We've driven consistency of the client experience and institutionalized advisor best practices. We've elevated the quality of our investment advice. We are extending our wealth management platform into the customer base of other Wells Fargo businesses. And in all things, we've elevated risk management in client portfolios and in our operating environment. A couple of examples of some of the major investments that we're making in platform enhancements funded by those efficiencies that I mentioned are referenced here. In the block labeled number 1, there are three such investments. The first is a single new division-wide portfolio management system supporting four brokerage channels, the Private Bank, Abbot Downing, and Retirement. Today, portfolios in our environment are largely manually implemented. The new system will allow quicker, more efficient, more accurate portfolio administration, and access from all businesses, and much better risk oversight and improved functionality. The second is a front-to-back, end-to-end reengineering of our brokerage trading, clearing, and settlement platform. Third is another front-to-back reengineering of our core wealth trust and investment accounting platform and surrounds. Lastly, we are totally reengineering our client contact center infrastructure, bringing in state-of-the-art telephony. Getting the contact center right is key to linking service between our physical, digital, and mobile and online client channels. Over the past year, we've rolled out a host of new tools and capabilities for both clients and advisors. For clients, we've rolled out new, easier-to-access planning and guidance tools, a complete rebuild end-to-end of both the desktop, online, and mobile applications, including a recently relaunched WellsTrade, our self-directed platform. For advisors, a mobile tablet-based application that basically takes the advisor's comprehensive desktop anywhere. A tablet-based manager tool, a supervisory and coaching resource that's untethered from their desktop or office, as well as major enhancements to our client information data dashboard, and a major overhaul of Envision, our proprietary planning tool. Now, the subject of robo-advisors or automated investing is much the buzz in the industry today, and we are working hard, fast, and furious to adopt that capability at Wells Fargo. It plays very prominently into our approach to capturing and serving clients early in their investing career and augmenting it with more robust resources and options to include a human, as their needs grow more complex over a lifetime. We are in advanced stages of planning right now, and we'll have more details for you likely by the end of the second quarter. Expect an announcement about a key investment and strategic partnership that will assist us in rounding out our robust product offering for both the self-directed and inclined investor and new tools that are automated to allow our advisors to be more relevant to smaller client investors as well. Expect us to have a robust embrace of what you now think of as automated low-cost robo investing. Late last fall, we organizationally moved Wells Fargo Asset Management from the wholesale division to the Wealth and Investment Management division, bringing all of our retail and institutional asset management activities together in one division, and I'm hugely excited about it. This is a business we like a lot, and we intend to raise the profile of this business both internally and externally. You can see this is already an established scale business with a well-developed retail and institutional product and distribution capability. We announced new leadership several weeks ago with the retirement of longtime head Mike Niedermeyer, who'd run this business so well for over 20 years. on June the 1st, Kristi Mitchem, a name that some of you may know, will join us from State Street to run and grow this business. I'll be excited to introduce you to her well before our next Investor Day. This business is already very well positioned, but we do think there's some things that we can do to round out our product menu and some things that we can do to bring this business closer to other client relationships in all of our retail and institutional businesses. So look to hear more from Wells Fargo in the asset management space. I'm going to turn this over now to a colleague, Darrell Cronk. Darrell, who, as I said, led the creation and launch of the Wells Fargo Investment Institute. About 2 and a half years ago, across our multi-channel, multi-business model, it occurred to us that we had work to do to significantly improve the quality and the consistency of the investment advice that we make available to those 7 million households. So we undertook an effort to aggregate key common components to portfolio construction, investment strategy, asset allocation, capital markets assumptions, thematic research, global manager research, publications, things that are needed in all of our businesses, in all client segments, and we endeavor to do that one time, one way, and do it better than we've ever done. Darrell's going to tell you about the contribution that they're already making to our business. Darrell. Thank you, David. Good afternoon, everyone. It's great to be here. The dangers of presenting after lunch, as I was sitting at the desk, my server did the privilege of dumping my fork and knife down the front of me. A thing that I'm quite capable of doing myself, right, to ruin many ties over the years and everything else. But it's great to be here with you. Let's talk about investments for a minute, okay? It's an exciting area of our business. I only have 3 slides for you, so this is not going to be death by PowerPoint. But I do want to spend some time talking about one of the strategic initiatives, one of the 7 that David talked about, which is improving the quality and consistency of our advice. It is imperative to us, and we think a huge opportunity for us going forward. It is the genesis of why we created the Wells Fargo Investment Institute, which we think can be the ecosystem and frankly, an engine, a behind-the-scenes engine for our wealth and investment management businesses going forward around some of those key areas that David just alluded to. I would tell you, though, don't think about this as narrowly as just the institute. Think about this as the opportunity set for our organization, our enterprise, to grow our presence in the investment landscape today, an area that we have substantial opportunity in. As you see, there's a number of businesses over here to the left, the institute in the middle as kind of that center of excellence, that ecosystem, that engine, if you will. What I want to do is just spend a minute on the benefits. Those three slides, the first one is around, what are the benefits of doing this? The second one is, what exactly are we doing every day that's accretive to our businesses? And maybe most importantly, this third slide, we'll talk a little bit about what impact is it having on our clients and our teams today. I could make a big, long list of benefits for you. We could spend all afternoon, which you would not want to do, of the work that we've been doing of late around this and have been laser-focused on. But let me just highlight four that I think are critical. One is better and higher conviction around our best ideas and advice. In the past, we often had many different voices, many different ideas and thoughts that were streamed into our actual businesses themselves. We're able now to take those and roll those up into the institute, so that we can get to the front page very clearly, in a transparent way, without ambiguity, around what are those highest conviction ideas and best advice for our clients. It's imperative, and it's really going to help us get our best foot forward in the investment space. Number two is what I would call a more consistent client experience for something we call like clients. What is a like client? We have a lot of people who walk into our doors of our organization who have similar financial goals, similar time horizons, similar age dynamics, similar risk tolerances. And yet, if we're honest with ourselves, the experience they get sometimes is often dependent upon who they get introduced to or how they walk into those doors. We think the Investment Institute can actually be a lever for us to help improve the consistency of that advice for those clients. We still have a need to be able to customize for them, but again, we can help make sure that we're getting our best foot forward in that space. Number three, better investment performance. We are, at its core, an investment firm. David alluded to, in his division alone, 80% of our revenues are tied to assets we manage for our clients. And frankly, our results have been exceedingly good. But just simply by taking some of those best minds, those smartest people, putting them in a common place and around a common table, we believe you're going to end up with better outcomes of investment results. That is, in our business, a proverbial journey and never a destination. You never arrive and say, "Investment results are good enough." The last one, and the one, frankly, that I'm probably most passionate about, is we have an opportunity to create a stronger, more prominent investment voice and brand in the industry. All of my colleagues this morning, you heard talk about our extraordinary community banking franchise, the premier mortgage business that we run. This afternoon, you'll hear the team talk about the wonderful commercial and wholesale businesses that we operate. Yet we don't always enjoy the same moniker for our investment businesses as we do for those other businesses. We think that's an opportunity for us to expand in that landscape and really grow and prosper for the benefit of our clients. Frankly, we have size, scale, and scope there and huge amounts of expertise today that are benefiting our clients. We think there can be a halo effect of the brand that will be exceedingly good. Let me see if I can get. There we go. What is it that we're asking the institute to do every day? I would say there's four pillars. Number one, strategic asset allocation. In our business, strategic asset allocation and recommendations are mission-critical to what clients have to do. If you look at all the academic research in this space, it would suggest that 80% of the variability of returns in a client portfolio are determined by getting that right. If you don't get that right, the rest becomes nonsensical. We have teams that are dedicated to figuring out how to optimize those portfolios from a long-term allocation standpoint and the work that gets done there. The second one, tactical investment strategy and manager research. Tactical talks about we know that there are times in the marketplace where price and value diverge, right? What are you overweighting, what are you underweighting, and why? How can you take advantage of that for clients? The investment strategy team has over 21 years of experience in the industry that are running those asset groups. They are exceedingly good at what they're doing, and they're providing extreme value every single day. On the manager research side, we have one of the most rigorous institutional research processes in the business. Frankly, it's a 13 factor, 82 sub-factor, quantitative and qualitative model that improves the probability of better results for our clients. It is what drives what comes onto and off of the platform for the teams to be able to customize for their businesses. Number three, thematic research. There is a lot of, what I like to say, noise in our industry that masquerades as investment advice, and it is most assuredly not often investment advice. The industry gets very fixated on the short term and what's happening day to day in the landscape. Yet we think that our clients also need to be concerned about the intermediate and long term in their plans. What is it about the investment landscape that's shifting, the sand that's shifting under their feet each and every day, and how do they take advantage of that long term? Just to give you an example, we wrote a piece, probably about a month ago, called "Living Longer and Living Better" on the topic of longevity. It was the most downloaded report we have ever had by 50%. I think most people must have thought the Ponce de León secret to the fountain of youth was inside of it. But it is exceedingly important that clients have to think about as healthcare improves, as life expectancies extend, as diet and better living styles increase the life expectancy, how do you think about that in relation to your portfolios, and what are you doing with it every day? The last one's around market advice and guidance. This goes back to that element that, remember I said I was extremely passionate about, which is helping us raise our investment brand. Just for example, in the last 12 months, team members from the institute had over 1,000 print, online, and media appearances. Think about that. That's probably two to three times a day somebody from the institute is out in the marketplace, in the landscape, not only providing advice and guidance but also increasing the brand awareness in the business for our industry and helping our clients. We think that's an important element and something that we have to do every single day. I promised you three slides. This is the third of the three. All of that work is good work, and the team's doing a great job, but if it's not getting used and consumed, then frankly, it's all for naught. We might as well be an academic institution writing white papers in research and content. We spend a lot of time looking at how are the teams using it, what's most effective, and how are they using it to serve their existing clients and grow the businesses and win market share every single day. I have probably 10 or 12 slides that I could create a whole deck on showing you how they're using it, but I thought this was a telling and compelling way to think about it. The black line, this chart goes back about a year, and the black line simply looks at the VIX index, all of you know as the volatility index. The red line is the number of downloads of the publications and the content from the institute itself. Two takeaways from this. Number one is just an upward-sloping red line over a period of time. In fact, today, every day, just over 5,000 reports and pieces of content are downloaded from our website that our teams are actively using to serve their clients, and that increases every single day around that consistency of advice and guidance. But maybe more telling, I think, and why I overlaid this to the VIX, is we know in the last year, we've had extreme periods of market volatility. Right? Think back to August of last year, August 24th, to be exact. The Dow goes down 1,000 points on geopolitical concerns and global growth concerns. You see a huge spike in the amount of usage around that period of time. Then concurrently, in January and February, the U.S. stock market has the worst start to a calendar year in modern history. In that period of time, you see a threefold increase of that content. Why does that matter? Because during moments of turbulence and strife, people go to where they trust they can get good solidity of counsel, advice, and information. That is exactly what we have created in this environment, is an ability to go there and understand what is happening in the markets, how should I think about it, and what, if anything, should I do about it. It comes back to that improving the consistency, quality, sophistication, and comprehensiveness of that advice. We think it is exceedingly important, and it is going to be a big driver for our business going forward. You saw some of the CAGR returns of this division. You saw what the margins can do in this division. If we can continue to grow this space, we think it can be a huge tailwind for our company and our enterprise as a whole. Let me bring Mary Mack to the stage. I have had the good fortune of working with Mary for years. She is a wonderful colleague. Frankly, she is actually the smartest person I know from multiple decades in the brokerage business, and I am very serious about that. I think what you will hear from Mary is a commonality or a common theme between my comments and hers, which is we believe and live the power of advice with and for our clients. It is what is essential to their success, and it is essential to our success long term as well. Mary, I will turn this over to you, let you talk about all the good work that your team is doing- Great. Thank you. in Wells Fargo. Thanks. Thanks. Daryl may be prone to exaggerated introductions, but he's not prone to exaggerate the impact of the Institute. It has never been more valuable than now as we think about market volatility and the need for clarity of message. The landscape is shifting for our clients. When we think about they're really wrestling with what's within my control, what can I not control, and what can I plan for. If you think about what's going on in the marketplace, market volatility, economic pressures are driving the need for greater and greater levels of advice amongst our clients. And the type of advice they need and want is changing. The retirement landscape is changing. The need for full balance sheet advice is present amongst most of our clients. David talked about the changing way that clients want to get advice. It sort of mirrors the way we want to do everything else in our lives with access to digital directly or maybe digital with support. We'll respond to those. Or increased regulatory oversight. Our banking and securities regulators have initiated exams on culture, and the Department of Labor has gotten into the regulation in our business. Let me talk about that a minute because I know based on my lunch conversations, you all want to hear something about it. As I remind David often, the Department of Labor rule is 1,023 pages, and so we are working through the analysis and interpretation of the rule. But what I can tell you is this. We've had a team in place for over a year that's been working on the policies, procedures, technology support to ensure that we are within the compliance of the rule by next April. And then the following January is the further compliance. I can also tell you that we have been in support of a best interest standard going back to 2010, when the Department of Labor first introduced the rule that was defeated or was withdrawn and then re-proposed. And we run on a fiduciary platform in all of our businesses across Wealth and Investment Management. We have that knowledge resident in our businesses. In fact, we've anticipated all of these trends, and I think that our focus specifically on planning and advisor best practices gives us a head start in most of these areas. Let me start with our financial advisors and wealth professionals. They are part of their communities. We understand our clients, their needs, their hopes, their fears, their dreams, their objectives in life. And we work with specialists to analyze those desires and hopes and dreams and risks and fears for our clients and create customized, actionable, specific advice that then evolves over a client's life cycle. And what we used to think about as just aspirational is now an expectation of every advisor and client-facing professional, that every client should have a plan, that every plan should be aligned, that every client should get a documented annual review. In fact, that's a big part of our response to the Department of Labor when you think about our duty under the rule. And when that happens, clients get better advice, they get full balance sheet advice, and they have a lower risk profile. And when we talk to clients about their lives, good things happen. We learn about and can fulfill against other needs and more financial needs of a client. And the best practice advisors who have fully adopted have doubled their productivity, even through market volatility, and grow faster than any of our advisors. But advice starts with goals-based planning. For those of you all who haven't been, who raised your hand this morning and haven't been with us in a prior Investor Day, let me just hit on our planning process really quickly. We started, as Steve Ellis talked about and David mentioned, we started in the goals-based planning business 12 years ago. But it's not our tools and our processes that give us a unique advantage here. It's a significant head start, which has led to tremendous adoption. In fact, 80% of our affluent clients have a current, written, specific plan in place with a financial professional. We continue to invest in it. We continue to invest in our platform. It's integrated. Our clients can get that plan online. They get it on their statements. It's regularly updated. It's dynamic, and evolves both with the market and the changes for the client relationship. But we continue to invest in it still. We believe it's not enough for our clients just to get an investment plan and a goal and an asset allocation. They need to stay aligned through market volatility, through changes in the client life and lifestyle, and we give our advisors the tools to make that happen. If planning is our foundation, then why does that matter? I will just tell you all, this is David's second favorite slide. When you think about the financial crisis in the last eight years, a lot of investors still act on emotion. Their behavioral response to market volatility is to jump in at the high when it feels good and to sell out at the bottom when they're scared or to go to cash and feel like they're safe. But we don't see that with clients who have a plan. Clients who have a plan avoid emotional investing. They're aligned to their investment goals. They have better performance, more consistent performance. They consolidate their assets and carry less cash. Probably the punchline here is they are much more confident. 93% know where they stand, and 92% feel like they're getting the guidance they need to fulfill against their financial goals. What's good for clients is good for shareholders. Clients with a plan generate 41% more revenue. They have longer relationships with the firm. They're not about emotional investing, they're about strategic investing. And a big component of that is our advisory business. FAs who leverage planning also rely much more heavily on advisory to fulfill against that. In fact, 60% more in like-sized portfolios. Because advisory assets or managed assets eliminate the emotional impact of investments. Portfolios stay aligned to their goals. A plan, by its very nature, recommends diversification. But advisory products give both the client and the financial advisor an efficient, effective way to achieve that and keep that aligned. What's really important here is that affluent clients who have a plan and utilize advisory assets significantly outperform clients who have no plan but invest in transactional business. The other good news about planning is you talk to a client about their lives, and you uncover all kinds of needs that are fulfilled across Wells Fargo. As I'm going to talk about a few of our key partnerships. Before I do, let me give you some context for this. Just last year, 77% of client-facing professionals in Wealth and Investment Management were actively involved in referring to other parts of Wells Fargo, 77%. That's over 24,000 folks who are in the affluent and high-net-worth business who are looking for opportunities for the community bank, for the Consumer Lending Group, for the wholesale bank, for Wells Fargo Securities every single day. Let me start with a partnership that I've had the opportunity to talk about for the last couple of investor days that only continues to get better and better. It's our partnership with Cary's Community Bank. This partnership shows that not only do clients have multiple needs, but when they are with an institution like Wells Fargo that has both the relationships and the capabilities to serve them, they want to bring the rest of those assets home to Wells Fargo. In fact, virtually everybody is involved in serving affluent clients. 96% of our store-based financial advisors and 99% of the store-based private bankers are actively involved in the affluent space. We are now at over $1.1 billion a month in closed referred investment assets from this partnership. The cool thing about that is 60% of those referrals that close are for clients that have never invested with us before. It's still a huge opportunity, though. We still estimate that opportunity at $2.5 trillion. You all as analysts hear folks talk about opportunity. Let me tell you how we've defined that. This opportunity is not every asset in a market that we serve or even every asset that our customers have in a certain market. It's only our market share with those clients who don't invest with us today. If we just got that same market share, that's over $2.5 trillion. Those are a lot of numbers. Let me tell you how that happens. Just last month, a client walked into our Westport, Connecticut branch, one of Cary's branches, actually one of Michelle's branches in Westport, Connecticut. Client walked in and met with a banker and said to the banker, "I need to get money out of my 529. Can you help me do that?" Banker said, "Sure." Goes back, looks up the client on the system, and saw the client had not one, but three 529 plans. Each of them had $75,000. It's simple math for a banker to know that that's a trigger to bring a financial advisor in, who's sitting right in that store, a financial advisor who might be able to help the client. Banker walks the client over to the financial advisor. She asked a couple of questions, learns that the client's actually retiring in a couple of weeks and was coming in to try to consolidate assets. 30 days later, we have a $7 million trust, a $1.1 million private bank loan, and we have another $5 million in brokerage assets on the way. That's happening right now in stores across our franchise because folks sit together and partner and work on behalf of clients. It's our true organic growth story that continues to build in those stores. Another organic growth story that is very similar, actually, in terms of partnership, is the one that we have with the private bank. This is fundamentally about leveraging the resources of the private bank that are already in markets all across our country. Jay Welker has teams in all of our major markets, and we have financial advisors who are in those markets. If you all follow the industry, you know that historically, financial advisors and bankers compete, not partner. We started a few years ago working specifically on developing the trust in the relationship to allow those partnerships to build and develop for the benefit of clients. Now a financial advisor in our private client group can bring a banker from the private bank into his or her relationship to serve the client better. That, in a short period of time, has led to almost $8.5 billion in additional business, $2.8 billion in high-quality loans, $2.1 billion in trust assets. The thing that really makes this sing for financial advisors, it is another $3.4 billion in brokerage assets that a private banker did more deeper analysis on and found assets that the financial advisors weren't managing and brought it to them to manage. How do you get more people doing it? You see results like that. What's really important here, though, is we've only introduced 5% of the clients who have an opportunity in the private client group for the private bank. 5% of the clients have 2% of the overall opportunity. A really good example of this are the financial advisors that we've been onboarding from Credit Suisse. They come in the high net worth space, they join our company, and very quickly realize that they had resources here that they never had available before. I had dinner with one about a month ago on the East Coast, and he brought over his $50 million client from Credit Suisse, moved those assets. Two weeks later, moved another $750 million to our short-term asset management in Jay's area because he just couldn't serve that client at Credit Suisse that way. We're seeing that kind of momentum quickly for advisors who join us for just that reason. The last partnership I want to talk about is our partnership with Wells Fargo Securities. Jon Weiss is going to get up here in just a little bit and talk about his business, which continues to grow and benefit not only the institutional clients, but also our retail clients. As Wells Fargo Securities gains in market position, we benefit as well. We get great C-suite introductions from Jon's team as they monetize wealth for the executive of the firms that they work with. In fact, Abbot Downing got a wire just last week for $150 million from a consumer products executive who was monetized through the efforts of Jon's team. Or their strength in underwriting new issues, particularly income-oriented, which are really important to our clients. Or strong syndicate production, also important to our clients. The support in secondary trading and in Diane Schumaker-Krieg in research team, in equity and fixed income research, has been a great partner to us as well as to the Wells Fargo Investment Institute. That partnership together for us generates about $500 million in annual revenue across our businesses. It is also not only important for our clients to have access to product, it is important for John's clients to know that they have got 15,000 financial advisors across 50 states for retail distribution. I am going to bring David back up here, and I want you all to remember two words from these last slides, planning and partnerships. We had a significant head start. We have a significant advantage. It is a significant strength for us going forward. Thank you. Good job, Mary. I am remiss in also not giving a shout-out to our partners in Wells Fargo Securities, particularly Diane Schumaker-Krieg, economics and research group. They have been fundamental to the early traction and success we have gotten with the Wells Fargo Investment Institute in upping our game on the quality, consistency, and sophistication of investment advice. Diane, thank you. I want to talk a little bit about some financial targets that we first shared with you in our 2010 Investor Day. Over the cycle, we still believe that we should be able to average annual revenue growth of 4%-6%. Recall that over the last seven years, we averaged 5% top-line revenue growth. We are already effectively at our long-term recurring revenue target of around 80%. We do not see that changing. We like where we are there. Lastly, as I noted earlier, we do think 30% pre-tax margins is achievable, that we have work to do. We are not happy with where we are, but we are consistently in the low to mid-20s today, and we think not just on the back of higher interest rates, but through better continued execution and these partnerships, we can get to that level. In closing, I am as excited about this business as I ever have been. I do love Mary's slide. I go back to where I started around our mission of helping our clients achieve financial peace of mind. One of the things I worry the most about is how are we doing in helping our customers achieve their financial goals? When 93% of our clients tell us they know what they need to do to achieve their goals, and 92%, in essence, say they have confidence they are going to get there, I feel good about it. We have still got 7% and 8% to get Mary, and Jay, and John, and Jim, but I feel good about it. I think we have got the right strategies. We are focused on client outcomes, things like AUM, and margin. They are all consequences, but at the end of the day, we are here to serve clients and help them achieve their goals. We are doing everything we can, and I think we can do more to leverage strengths in other Wells Fargo businesses and access other customers of Wells Fargo that already see themselves as Wells Fargo clients. We are big believers in continuing to invest in the business. We've got to stay current, and we have to fund those investments from within our businesses, and we've a track record of doing that. Continued strong emphasis on execution, on financial discipline, and on risk management. With that, I'll ask Mary and Darrell to join me, and we'd be happy to answer any questions you've got. Any questions for David and team? Nancy? It's coming. Thank you. Could you guys just address the major change that's going on in the business right now from actively managed assets to all the various passive strategies, et cetera? How is it impacting you right now? What is your view of how this progresses? Is this something specific to our particular market conditions right now or is this a lasting trend, and what you're doing? I'll start off, and then I would ask both Darrell and Mary to comment on this. Retail tends to follow institutional in many things, and long ago now, institutional investors have clearly separated where they get alpha and where they get beta from, and we see that moving into our business. The fastest-growing wrapped managed strategies that we have in brokerage and in our wealth management business are wrapped ETF solutions that are low cost, transparent, very efficient. I do think some of what we're seeing is a consequence of the cycle. We've been in a seven-year up market and rising tide lifts all boats, and you know better than I, we're now in a phase where security selection and active management is supposed to prove its mettle, and I have no doubt that it yet will. But I do think, at your own peril, if you ignore the rise and prevalence of passives, it's a mistake. We are embracing that. It's not going to be either/or. It's a mixture of the two. Mary? We have one of the largest wrapped ETF portfolios in the industry in allocation advisors. That's been a strength for us. We also introduced an active-passive portfolio over this last year, so it's given us a chance for some product innovation that has been good for clients and for solutions. I would just add, to David's point, we don't think it's an or, we think it's both. But you have to understand where active management has an opportunity to pay off and where it doesn't. In highly efficient sections of the market, we think that passive structures make a lot of sense, and then you spend, if you will, your active alpha budget on places where active management can really drive results and drive alpha over time. I think it's the combination of both and the growth of both. People do get caught a little bit into, I would say, two points. They get caught a little bit into this idea that the past five, six, seven years will extend forever. If you go back and look in history, when you have parabolic markets that go straight up like we had from 2009 to 2014, with exceedingly low volatility, record low volatility and recoveries, people tend to get on that ship and ride it higher, and of course, active management underperforms in that. Of late, what I was referencing earlier, some of our work around the 13 factor, 82 subfactor has been able to produce exceedingly better active management results as well. We think it is both, and you need both to be the size, scope, and scale player that we are today in this business. One over here. David. Okay. That is a trick. It does not seem like it is working. Here is David. Thanks. For the benefit of those of us who weren't at lunch with you talking about the DOL rule, maybe you can offer just a few more comments. I'll direct it specifically to where in your business do you think the most change may be required? You just finished with a slide on your, among other things, a margin call. Does the DOL rule represent a material hurdle to that margin call? A couple of thoughts, then I'll ask Mary to chime in because she's led well over a year's worth of work on this. It is 1,023 pages. We are still getting our head around it, so to speak. The way I think about this, the underlying premise or issue or driver for the DOL unquestionably was around cost. On one end of the spectrum, at the peak of its hostility in 2014 and 2015, as this played out in the press, you had the Elizabeth Warrens of the world and others chiming in about how big banks and financial institutions are screwing individual investors. There's this presumption that the lowest cost investment vehicle is always going to be the best, and that sentiment does permeate it. I reminded our group at lunch, with this now in a fiduciary realm, a violation here is a violation of law. It's like ERISA. It's not violating a Fed statute or a FINRA rule. It's a violation of law. For those of you that have investments in firms that seem to be taking this lightly or cavalierly, they shouldn't be. We are very much on edge around doing this the right way for our clients and being compliant early on. To your question, I think about it sort of in two big swaths. They're small investors. That's where the industry has worried that small investors will be shunned, not given much attention. Frankly, the industry hasn't done a great job with small investors to begin with anyway. So we're looking at a lot of different things, but we probably will end up with something that draws a line and says small investors, and we haven't defined that yet. There'll be a discrete fixed menu of probably wrapped ETF strategies that are very low cost, very efficient, very transparent, and that's how we'll serve those clients. Everything above that will be subject to the best interest contract, the BIC, and move more into advisory assets, which accelerates a trend that we've been advocating for a dozen years anyway. We're working through the economics on that. I think the market will have to work through what reasonable pricing looks like. The DOL was not very forthcoming on a view there. I don't want to be cavalier about this, but there are going to be winners and losers, and our team, for a year, have been working on how do we figure out for Wells Fargo to be a winner here, and we're going to do that. In the short run, it will absorb some expense and investment dollars in systems and technology to be compliant by April of next year. That's not necessarily incremental dollars in Jay and Mary Mack's business and John Papadopoulos' business. We've got a baseline spend of between $70 million and $90 million a year on this year's technology spend. That was well planned ahead. Mary? The only thing I would do is maybe to mention what you were asking about specifically on small accounts. We serve, because of our partnerships across Wells Fargo and the cradle-to-grave approach that David talked about, we do serve clients across the wealth spectrum. But if you think about our smaller households, we've got probably about 30% of our households are with clients who have $100,000 or less with us and have an IRA. On the other hand, though, that's well under 5% of our revenue. It's totally manageable. We've got a team in place that is on top of it, and we'll assure that we're in full compliance by next year with little financial impact. Taking the longer view, other than the people that are born into wealth, big investors started small. I love the idea of being able to efficiently and economically capture clients when they're small investors, and they're only 4% or 5% of our revenue, because taking the long view, there's a percentage of them that are going to be affluent and ultra-high net worth. We think we've dealt with other things this big in the past, and we're going to win at this. Our digital offering gives us that kind of capabilities. It's well-timed to roll out. Our clearing business is a beneficiary because we have the scale to clear for other firms because of the cost investment. The natural diversified business model impacts are positive for us. To David's good point, the one thing I would add there is take no illusions that the best interest contract or the best interest standard, as it was before, is exactly what we do every day for our clients. We've done it for decades. In some ways, through the regulatory lens, the industry's coming towards where we've already been and where Mary's business has been for years. So the amount of change, frankly, for us, is probably less than most in the industry. Okay, one in the middle. Mike? Can you talk about the competition for financial advisors? There's been three decades of brokerage consolidation. Sometimes firms pay up, sometimes they don't. Where are we in that cycle? We have been a net positive recruiter in the industry, and one of the highest levels of recruiting across the industry with, quite frankly, the lowest deal. So we sell very hard the other benefits across Wells Fargo, the brand, the breadth, the access to product that you have here that you don't get at other firms. The partnership. The partnership, exactly, through the referrals and the ability to bring folks in. We continue to recruit. The movement's down, as you know, but we're not seeing a considerable increase in the deals that are out there at this point, and we certainly haven't. We have an increase, but we're not really even seeing a more competitive environment other than maybe some little spikes around some enthusiasm on Credit Suisse, but beyond that, it's a pretty normal environment. Mike, to your question, our regretted attrition, advisors with $250,000 and above in revenue, and we probably should re- It's probably never been lower. It's been below 3%, well below 3% now for more than eight years. That hasn't changed. Credit Suisse was a very positive, small endeavor for us. They had about 330 advisors when we first started talking to them. We hired 112. We could have hired all 330, but somewhere along the way, it became apparent that it probably wasn't a good idea to try to pay a couple of those guys more than John makes, which was the expectation. Seriously, there were some checks of that magnitude written, which we think are kind of dopey, frankly. There's still people swinging for the fences out there. You do have the 2008 and 2009 retention deals burning off later this year. When we talk to our peers, we don't hear anyone anxious to re-up for a couple billion dollars in retention. We're going to stick with our game plan. We have a lot of rigor and discipline around modeling and required IRRs. We stuck with that with Credit Suisse, and so we'll see where the cards fall. Janine, do we have one near you? Thought I saw a hand. No? Any more questions for David and team? Yes. In the front. Right. David, could you spend just a quick moment or two just discussing in more detail the decision to bump up the pre-tax margin number? I guess just, one, how did you arrive at that? It's a more substantial bump up than last time, at a time when, if anything, pricing pressures, the rate environment get presumably a little more challenging. Just any additional background. Yeah. It's not a big mystery. We've been there before. I know what it looks like. When I think about how under-penetrated we are with credit, when I think about the $2.5 trillion of investment opportunity, with clients in the community bank, in our CLG, in mortgage, people that are already card-carrying Wells Fargo clients that have never invested with us, huge opportunity. It almost doesn't matter what broad financial markets do if we can continue the trend of capturing wallet share for existing Wells Fargo clients. I think, at some point, we will have higher interest rates. We've got $182 billion, I mentioned, roughly, of FDIC balances that will one day generate a lot more spread than they do today. Just really, the evolution of time and continuing to execute on the game plan. We've had 28%, 29%, 30% pre-tax margins before. We're not that far away from it today. There's a lot of operating leverage in our business. All right. Terrific. Thank you, David. Thank you very much. Thank you, Darrell. Thank you. Now I want to ask Tim Sloan, our President and Chief Operating Officer to come up. Thanks, David. That was a great introduction. I feel welcome and warm, and I'm frequently forgotten, apparently. We're going to talk about wholesale banking. First thing I do, Nancy, are we warmer now? Are we okay? Yes. Because Nancy said, "Tim, if you don't get this room warmer, I'm going to throw a shoe at you when you present." Was it that polite? No, I said it was deceptive. Okay. Yeah. We've got to take care of you. You guys are important to us. I'm going to put my wholesale banking hat on for the next 45 minutes to an hour, and I'm going to be joined by my colleagues, Perry Pelos, Ed Blakey, Henry Jordan, and Jon Weiss, who are going to give you an update on wholesale banking. Then we'll take a break, and based upon all the questions we have had during the breaks about Wells Fargo Securities, we'll probably need a break after that presentation. What I want to do first is talk about what we do in wholesale banking. When you think about Perry's presentation and Ed and Henry, and Ed and Henry are going to talk a bit about the GE acquisition and how it fits into their businesses as well as Jon's. Think about these five things. The first is that we cultivate long-term relationships. That's the basis for the business model in wholesale banking. Your natural reaction is, "Well, of course, everybody says that." Let me give you a statistic. About 40% of our relationships in wholesale banking have been banking with Wells Fargo for 15 years. We not only talk about it, we mean it, and our customers stick with us. To be able to stick with those customers and manage those relationships over the long term, you've got to make sure that you've got a diversified business model that can be there for them over the long term. A business model that is successful in a variety of different economic environments and interest rate environments, just like the business model of Wells Fargo. You've got to make sure that you manage in a very disciplined way so that you don't find yourself taking risks in very good times that you're going to regret in bad times. We've done that across Wells Fargo. We've done that in wholesale banking, so you can be there for your customers when things are a little bit more difficult. You also need to make sure that when you look at opportunities that are out there, it's beyond just organic growth, that you've got that disciplined growth strategy so that you can capture a wider share of the relationship, the wallet organically, but also take advantage of acquisition opportunities. I mentioned we're going to talk about GE in a minute. Fourth, you've got to make sure that you continue to invest and innovate. You've heard that from all the businesses already today. We're doing that in wholesale banking, and Perry's going to give you some specific examples of how we're doing that, in our industry-leading treasury management business. Then lastly, you've got to make sure that you balance that risk-reward. How do we do that with that foundation? We do that by having over 50 different business lines that cover business banking customers, commercial banking customers, or middle-market customers, and corporate customers that have revenues of over $5 million. We do that by also covering financial institutions in the U.S. and around the world, as well as investment funds. Likewise, serve the international needs of U.S. customers and the U.S. needs of multinational customers. This broad set of businesses does a few things. One, it allows us to meet a variety of different needs that our medium-sized and larger and complicated customers have in terms of different areas that they need to be served by. But it also allows us to have a very diversified set of revenues. I know you've heard that as we've talked about Wells Fargo, and here's how we break down the various businesses on the prior slide and talk about them in terms of how we group them, and you can see that none of them are disproportionate in terms of driving the majority of the revenue within wholesale banking. In addition to a very broad set of businesses, we also have a very extensive product set. We use this wheel to depict our products. There's hundreds of different products behind this wheel. We break them down into eight product families. The two most penetrated are treasury management and credit, which as John talked about, it's all about that deposit and that lending relationship in terms of building relationships with customers. Then we need to serve, just like Carrie talked about in community banking, we've got to serve our customers when, where, and how they want to be served. We have 625 offices in wholesale banking across the country, and then 55 offices around the world. How do we fit into the overall revenue and profit for Wells Fargo? Well, if you look at 2015, wholesale banking generated about 30% of our revenue. Because of that diversification that I mentioned, not only do we have diversified as it relates to businesses, but we're also diversified by category. About half of our revenue comes from net interest income. I'm sure that sounds a little bit familiar when you think about Wells Fargo. The other half comes from non-interest income, and you can see the sources of that non-interest income are very diversified. Then we generated about 36% of the net income in Wells Fargo in 2015. Notwithstanding the headwinds that we've had in wholesale over the last few years because of the decline in loan yields, that diversified model has allowed us to grow revenue. Not as much as we'd certainly like, but we've been able to grow revenue, particularly in the last year, in a pretty challenging environment. We've continued to invest in the business, and you can see the expense growth there. About half of that expense growth over those three years has come from our reinvestments in people, including bringing new people onto the platform. Additionally, it's investing in our products and services, and it's continuing to invest in everything risk, as you'll hear more about from Mike in a few minutes. We want to be known as the best risk management bank in total, but certainly the expectations are high within wholesale banking. Then that's generated relatively flat net interest income over the last two years in particular. The primary driver for that being flat has been the fact that we've transitioned from a loan loss reserve release environment to a more normalized credit environment, and then had some of the challenges that we've had in the energy business, which I'm sure you'll have a question about. You don't have to have a question about, but I'm sure you'll have one, but just one. Credit quality has been a hallmark of wholesale banking for decades. To really demonstrate that you're good at lending money, and making good credit decisions, lending and investing money, you've got to look at it over cycles. You can see over this 10-year period in the 2008 and the 2012 period, which was a relatively difficult environment, not only did we perform well on an absolute basis, but when you look at our C&I losses, they were about 47 basis points lower than the industry average. Our CRE, or commercial real estate, losses were about 71 basis points better than the industry average. Then in this more benign credit environment, until relatively recently, we continue to outperform the industry. I mentioned loans and deposits. Again, the bedrock to most of the relationships that we have within wholesale banking. We've been very pleased with our loan growth. Over the last year, we've grown loans by an average of about 13%. Most of that growth was actually organic growth because the largest portion of the GE acquisition closed toward the end of this period, and these are average numbers. It's also relatively similar to what we've done over the last few years and all the years since the Great Recession, and that is we've been able to grow our loan balances by a high single digit or a low double digit rate, regardless of the quarter, again, because we have that broad set of products and services. On the deposit side, it's been relatively flat over the last year. We had a little bit of growth in 2015, but then we decided, or we continued our pricing discipline when the Fed increased rates, and we had a little bit of seasonality in the first quarter. Deposits continue to be a very important part of the overall relationship. We will continue to be very disciplined from a pricing standpoint. What are some of the competitive advantages of the business model within wholesale banking? The first is that we're part of Wells Fargo. We have the most valuable brand in financial services. We have an incredible balance sheet. We've got a great team, not only within wholesale banking, but across the platform. We partner quite well. We also serve those customers when, where, and how they want to be served, as I mentioned, and our business model continues to allow us to invest in the platform while many of our competitors are struggling in this business. The second is it's all about the team. You've heard that throughout the day for the entire company. My four colleagues who will be up here in just a minute have an incredible amount of experience. I won't repeat all their experience at Wells Fargo. It's not just about this team, it's about the other senior leaders in wholesale banking. It's about their teams. Candidly, one of the things that I'm most proud of is that of the 37,000, or almost 37,000 team members in wholesale banking, they have 11 years on average of experience here. It allows us to work together differently than many of our competitors do. If you've got a long-term focus of cultivating those relationships, and you put the right team on the field day in and day out, it creates a long-term opportunity to grow relationships. You can see the penetration here of our eight product families. Treasury Management, which again, Perry's going to talk a little bit more later, is very penetrated at 86%. There's still a tremendous amount of opportunity there because that could just mean one product. That doesn't mean the full suite of products. There's opportunity there. Likewise, on credit, even though we've already penetrated 72% of those relationships, we haven't necessarily provided the broad set of credit products to our customers. As you go down, the other areas are just about opportunity. International is a great example. You look at that and say, "Gosh, why is that only 34% penetrated?" Gosh, I ask the same question every day. It should be more. You know why it should be more? Because when we talk to our customers, about two-thirds of those customers use and need advice in terms of their international banking needs and need international banking products. With loyalty, we drive revenue, right? Just very similar to the discussion that, or the presentation that Michelle made this morning about the retail and community banking business. When you have longer tenured relationships, and again, recall I mentioned that 39% of our customers are in that 15 or greater year, they have more products per relationship. The relationship is broader. That not only increases revenue, it also reduces risk. As you can see, the more products, the more revenue. It's pretty simple. The final slide that I have here is about industry leadership. This is relatively new for Wells Fargo. Not necessarily new for the last couple of investor days. When I joined this bank almost 29 years ago, I would have never imagined that someday I would be standing up here and talking to you about how Wells Fargo is the number one middle-market lender, that we're the number one CRE lender, and so on. I won't repeat everything that's on this slide, and by the way, this slide does not reflect all of our industry leadership. What's exciting about this is first, industry leadership creates more opportunities because you tend to get the first call more often from your customers. You're more important to those customers. The other thing that's exciting is that just given the level of competition and the fact that even with being number one doesn't mean you have a very high market share. There's still opportunities to grow even when we're number one in, or two, or three in every one of those businesses. With that overview, I'd like to invite my colleague, Perry Pelos, up to the podium. He's going to talk to you and make a presentation about commercial banking services. Perry. Thanks, Tim. Thanks, Tim. I was kind of hoping that Tim would keep it frigid in the room so you would stay awake during this, but Nancy, you got to him first. Let's talk about commercial banking services. A great business that makes up about 50% of the loans of wholesale banking and just under two-thirds of the deposits. It is made up of four relationship banking businesses, business banking, middle market banking, corporate banking, and government institutional banking. The deposits and loans for each as of the end of the first quarter are displayed on the chart in front of you. The commercial banking services business also has two product groups, treasury management and the insurance business. They all have one thing in common. We put customers at the center of what we do. We think about the customers in terms of not the next quarter, but the next generation, and what can we do to help the customer get from one generation to the next and become more successful over a long period of time. Each relationship in commercial banking services has a dedicated relationship manager whose job it is to bring the full suite of products and services of Wells Fargo to bear and find solutions for that customer's financial needs and help them succeed financially. If you think about it, business banking, which takes in many $5 million companies, is a great incubator for relationships over a long period of time, and we could help those companies become more successful and grow. I can't tell you how many times I've walked into a $500 million company, and they've said, "You gave us our first loan. You gave our parent, you gave my grandparent their first loan." That has incredible meaning in a relationship business. That's what we coach our team to think each and every time they look at a $3 million company or a $5 million company, is that could be a very large company 20 years down the road, and we want to make sure we treat them as such today. How do we organize ourselves? First off, the business banking team, which are the red dots on the chart here. According to Barlow Research, which is a survey of business banking customers with sales of $5 million to $20 million, they've identified Wells Fargo as the lead financial services provider to that segment of the market in the U.S. We've also had other independent research that indicates that we do business with approximately 20% of the customers in that segment. In terms of wallet share, we think our wallet share is much less than that. We think there's huge scope for growth in this segment. We serve our business banking customers in 462 offices with 2,000 bankers. The average loan size is half a million dollars. The median is about half of that. Our go-to-market strategy is very local. It's very personal. When you think of a business banking customer, it's a company with sales size of $5 million to $20 million. It's a regional company. It's usually a first-generation owner that needs a lot of advice and a lot of counsel. That's a very important hands-on segment that we put all the relationship focus on to help that customer succeed. As those companies grow, they graduate into our middle market segment. The middle market customer base takes care of companies with sales of $5 million to around $750 million. The blue dots on the map are the middle market teams. We have 121 middle market offices, just over 1,000 bankers in U.S. and Canada, and the average loan size in the middle market is $16 million. Again, the median is about half of that. And again, according to Barlow Research surveys, we are the number one provider of lead financial services to this middle market segment. Think of these companies as private companies, again, much like the business banking customers, but more regional and some national in scope, and their needs are starting to become more complex at this point. On the top end of our market, we introduce our security solutions, probably our foreign exchange and derivative solutions. On the lower end of that market that are just the smaller middle market companies, it's a little bit more straightforward in terms of traditional banking services. But that's how we go to market. In addition to this distribution network, we have all of our stores. We have over 6,000 stores, and many of these customers go to our stores each and every day. You saw Carrie's presentation. These customers, many of them think of themselves not only as a corporation, but they think of themselves as an individual. And they expect when they go to a store, not only can we service their business needs, but their personal needs as well. It's a huge advantage for Wells Fargo to have that incredible store network to be able to serve these companies as their needs change and grow. And maybe they have a relative who has a need, and they can bring them in. Many of these customers make introductions to our store and vice versa. They come into the store, and then we get an introduction to a business banking opportunity through our store network. So it's a very symbiotic relationship that's important to our overall growth. Our corporate banking business serves large multinational companies. So we do business with nearly three out of four Fortune 500 companies already through 50 offices in the U.S. and Canada, 425 bankers. The average loan size here is around $100 million. These are large, multinational, complex businesses, and we serve them through an industry vertical strategy. Traditionally, we've had these industry verticals in the energy and power sector, financial institutions, restaurant finance, gaming, and healthcare. And recently, we've added industrials, consumer retail, and TMT segments. We used to target those customers with a geographic focus, much the way we did in our middle market and business banking segments, but we recently changed to target this business in an industry vertical focus. Why did we do that? Well, first off, we got feedback from customers that that's what they wanted. As they became larger and more complex, they wanted their relationship team to really understand their industry, to be able to bring them advice, to be able to bring them examples of things that others were doing in that industry. We also found, as we looked at the segments where we had traditionally focused from an industry standpoint, that we were more successful in those businesses, in the financial institutions segment, in the energy and power segment. We decided to organize this way, we have done that going forward, and we think this is going to give us an opportunity to not only become the main operating bank for many of these customers, but also to help serve them in all the other things that we can bring to the table that Wells Fargo does very, very well. The government and institutional banking segment is our fourth relationship banking business within the commercial banking services group. You will see from the pie chart here that half the business is in the government banking segment, governments, large municipalities. The healthcare segment is made up almost exclusively of large, not-for-profit hospitals. The education and not-for-profit segment is primarily large colleges and universities, places that many of you went to school, and we are serving them through this business segment. What I will say about this segment is that, and in all of our segments, we take a very balanced approach to risk and reward. We try to stay consistent through all the business cycles. What happens when you take that approach is when the market gets more competitive, you are naturally going to grow a little bit slower. When the market becomes less competitive, you are going to grow faster if you maintain the same discipline and focus from a risk standpoint in all of your segments. You can see from this chart on the bottom right, this is what we did since the last investor conference. The government and institutional banking segment, because certain parts of it, the risk award has become a little bit more challenging. This segment, out of the four segments in commercial banking services, actually shrank somewhat in the past two years, but that is okay. We are okay with that because we feel that in the long run, this is going to be a very successful business. It is one we want to continue to invest in, and that market has a way of correcting itself over a long period of time. Our two major segments, our middle market banking segment and our corporate banking segment, have grown faster than GDP growth in the past couple of years, and we think there is still scope for additional opportunity. As I mentioned, in the middle market segment and in the business banking segment, even though we are number one, we still have huge opportunity for growth there because we feel that our share of the wallet is still very low. One thing I would point out in all these businesses is even as they have grown very well, our treasury management share has grown even faster. In the middle market segment, we have grown 4.6%. Treasury management in all these segments has grown 8.7%. We are growing the businesses faster than GDP, and treasury is becoming a larger component of our revenue stream in all these segments. Treasury management represents about just under 25% of the revenues of our corporate banking business and slightly above that in all three other businesses. We think there's huge opportunity to continue to grow that business as payments become more important to our customers. We think about our relationships as long-term relationships, I know you've heard that from everybody up here at Wells Fargo, and you're going to hear it again and again because that's really in the DNA of what we do. Because of that, even though the market's been tough, you can see from the chart on the right, we've been able to grow our lending book in the commercial banking services arena, even in a very difficult market. We've done that primarily with existing customers. Now, we add new customers as well, but many of our existing customers, as they grow and become more successful, reward us with more and more of their business. That is key when you think about what does Wells Fargo do that others don't do on a very consistent basis. Now, you may have heard we've had some bumps in the energy space. That's a part of what we do inside the corporate banking group. Let me just take a minute to talk about how we think about relationships in the context of an industry that's having a very difficult time. I won't go over the numbers because you saw them from John, and you heard the update, as of the most recent borrowing base redetermination and how we feel about that. But how we think about the relationships is as follows. These are people we've banked for a long time, so we do severe customer selection. These are business models that we understand. These are people we know. This is a market that we want to be in for a long time. Now, we're going to be commercially reasonable, and sometimes things don't work out. But we're going to do everything we can to give our customers good advice, to be there when they really need us, because at some point, cycles end, and people have long memories, and they remember when you were there for them when they really needed it. In fact, great example of that is we've got a customer in Central California who's an incredibly successful person in the agribusiness world. This person was in our workout group over 15 years ago, but it was the right person, they had the right business model, the right strategy, and we stuck with them. Now that person's net worth starts with a B. I think that we'll have a good opportunity to talk to that person about what they want to do when they set up their foundation, and we'll probably be able to make an introduction to David Carroll's business. That's a 20-year decision. It's not a one-quarter decision. That's how we think about these relationships, and that's how we think about what's going on in the energy patch today. Sure. Were there some things we could have done differently? Absolutely. Were there decisions made that I wish we hadn't? Absolutely. But you got to look at it as a whole, and as a whole, we've been in this business for 40 years. We've been through cycles with many of these customers. This isn't the first rodeo we've been through with a lot of them. They're going to reward us with more business. We're going to have more opportunity. As our competitors fall off, Wells Fargo's consistency in it is going to give us huge scope for additional growth, even in that segment that's having a difficult time right now. As you do that, you have the opportunity to do more things with people. Tim talked about all that we do in the wholesale banking space. Again, this slide looks very familiar because it's almost a replica of what we do in the wholesale business. Now, he also mentioned that just because we do a piece of treasury with someone doesn't mean we have all of their treasury. So even though it looks like we don't have a lot of opportunity for growth in some of these areas, we've still got huge opportunity for growth. There are many, many companies that we do some things on the treasury side, but we've got an enormous opportunity to continue to grow that. Now that the insurance business is part of my world as well as treasury management, every time I meet with Tim, he reminds me that that's the lowest number on the slide. We're going to try to work on that a little bit. Our insurance business is an insurance brokerage business, but every customer we have needs insurance. So we should obviously have more penetration there than just 9%. I would remind you that in the middle market, we're the only bank for 85% of our customers. That gives us a great opportunity to have a conversation with them about what other solutions they need. In business banking, that percentage is even higher. When you're the only financial services provider from a credit standpoint to your customer, it gives you the first look at a lot of things. It gives you the first opportunity to have a strategic conversation with your customer that your competitors don't have the opportunity to do. So there's huge opportunities for us just working with existing customers to continue to grow this business over time. Treasury management is a core and fundamental product for all of our customers in commercial banking services and in wholesale in general. We've grown that, as I mentioned before, at a faster rate than we've grown our underlying business. But we've also grown it faster than what the market overall has grown. You see from the chart on the right here that our growth rate in treasury has been at 2X what the market has been. Now, Danny Peltz, who was here two years ago talking about the treasury business, at the time, we were the number three treasury services provider in the U.S. We're now number two because we've taken more share from competitors, and we think we have opportunity to continue to grow this business for a long time. We're recognized as a leader in product quality, so we've got great feature functionality. But what we also do in the treasury business is we have dedicated treasury sales professionals that are focused on each segment. We have a business banking treasury group. We have a middle market treasury group. Within the corporate banking space, we even have treasury management professionals by industry segment, so that when you go talk to a healthcare company, you have a relationship manager who understands the needs of their business pretty intimately, but you also have a treasury professional who understands what large healthcare companies do. That gives us a huge advantage to have a strategic conversation with customers and earn more of their payments business. As we do that, our position in payments continues to grow. Here's just some examples. We're the number one ACH bank with 31% of transactions and 42% of payment value. We're the fastest-growing U.S. merchant in 2015 with 16% growth. We feel that we have an opportunity to become more important to customers. What we're seeing in terms of customer behavior in the payment space is that as the world becomes more complex, they want to aggregate, not disaggregate, who their providers are in the payment space. While fintech companies are able to provide very specific needs, what we find with most commercial companies is they want somebody to bring it all together. Companies want to become more efficient, just like banks want to become more efficient, and the way you become more efficient is you do more things with fewer providers, and you do them at lower cost, and that's what we offer. With our team, with our products, with our ideas, we're able to give that to the customers. We see the fintech companies out there as collaborators with us, where we can work together to provide solutions to our commercial customers. We see them as our customers, and many of them are. Many of the things they do ride on our rails, and we also see them as competitors. We're taking nobody lightly. Only the paranoid survive, and we're very paranoid. We are tracking what they do, and we will copy the best ideas. We will collaborate with people that have ideas that are better than ours, and we will certainly compete with them. In summary, the commercial banking services business has great scope for growth in all of our segments. We've got huge geographic distribution capability, not only through existing channels, but also through our stores and, quite frankly, through our people. Our people are our distribution channel in the commercial banking services area. We've got a great treasury group that does business with almost all of our customers. When you think about the payments business, the payments business is a scale business. Who's got more scale than Wells Fargo? We're number one in business banking. We're number one in middle market banking. We've got a growing presence in the corporate banking space. We're the number three bank in the government banking space. Huge opportunities for growth in the payment area. I think the future is very bright for our organization. I'm very excited that all of you came here today to listen to our presentations in the business. At this point, I'd like to invite Ed Blakey and Henry Jordan to talk about the GE acquisition. Thank you. Good afternoon. Henry and I are actually very excited to spend a few minutes with you talking about the GE acquisition. Just to put it in context, I am going to jump ahead a little bit and say that $43 billion is a huge deal for us. It is actually the biggest transaction when you aggregate the five businesses that we have made since the Wachovia, since we put Wells Fargo and Wachovia together. While Henry and I get the benefit of talking about it, I can assure you that many of the colleagues who are in the room here with us and hundreds of people who are not have been very active in putting this together, and it would absolutely not have come together without a team effort. With that said, let me provide a little context before Henry and I describe the five businesses that we acquired. Many of you probably recall that GE announced at the beginning of last year, I think it was actually in April of last year, their intention to sell GE Capital. That was in no minor part, I think too, driven by the fact that they woke up and realized that they were an industrials company and that all of a sudden they were a SIFI. For many reasons, that included, they made the decision that they needed to exit an otherwise perfectly good set of businesses. All total, GE Capital comprised something like $200 billion total. It was well in excess of 20 different businesses, and Wells Fargo had visibility into all of those businesses, both as a competitor, but also as someone who is very familiar with their culture. We viewed it as a terrific opportunity for us. Despite the fact that we actually looked at all of the businesses at one level or another, we quickly figured out that there were five key businesses that made sense for us and that were strategically aligned with our businesses that we knew a lot about, and that we felt comfortable that we could integrate, and that they would be complementary to what we already have. We will describe each of those in more detail a little bit later. They included a portfolio of commercial real estate loans, GE's rail business, GE's vendor finance business, their inventory finance business, and then a large portfolio of loans and leases. All total, as I said, it was $43 billion worth of assets. Just to put that in context again and personalize it a little bit, I have been at Wells Fargo, as you saw, 32 years. $43 billion is larger than the Wells Fargo that I joined 33 years ago at, so it is a very, very significant issue or transaction for us. It will generate $2.8 billion worth of revenues. You are going to hear some themes as we start to describe each of the individual businesses, very similar to what my colleagues have described already, which is very focused around relationships and team members. Besides the obvious $43 billion and $2.8 billion worth of revenue that are going to be generated from this deal, we are really excited about the new customers that we are going to be acquiring. Like us, GE had a very relationship-oriented culture. The number of new customers that we are able to acquire through this is something like 2,000 original equipment manufacturers, 40,000 dealers, and 160,000 new customers. So the impact for us to be able to deliver our broader relationship strategy into that customer base is going to be huge. It will take time, but the opportunity and upside is going to be very, very significant. Likewise, we are inheriting 3,000 very talented team members. As you have heard many people describe already, we believe our team is our competitive advantage. We have a lot of things to sell people, but at the end, we are only as good as the team members that we have, and we couldn't be more excited over the quality of the team members that are coming with this acquisition. As I say, there is about 3,000 in total. Henry Jordan will describe in a few minutes the international part of it. But just to mention these 3,000 people, about 450 are in our international markets. There is about 300 in Canada, and the rest are in the U.S. In addition to the new customers, the team members, the other really high level and important, exciting thing that we are acquiring is their technology platform. It really touches several of the different businesses, but it will enable us to be able to be more efficient, both impact positively the operational parts of the business, but also the customer-facing technology is going to move us forward very positively in several of these businesses. From a strategic perspective, we believed then, and we believe even more now the more we get into it, that it was very impactful and made a ton of sense for us because we are already in these businesses. The five that we focused on, as we will describe here in a minute, we know a lot about. We have got deep expertise and long tenure in each of the businesses. The culture, both from the standpoint of people and credit risk, we are very complementary to what we have, and we believe that over time, the ability to extract additional revenue through delivering our relationship strategies and delivering on the efficiency benefits that we are going to be able to have are going to be really impactful and drive additional revenue as we go. With that, why don't we dig in a little deeper into the individual businesses? I will start with commercial real estate. I am going to describe that. Our colleague in the room, Mark Myers, runs commercial real estate, and as you saw from John Shrewsberry's comments this morning, commercial real estate is one of the core products at Wells Fargo. We are well-known in that space, and as we have also all been emphasizing, relationships in general mean a lot to us. It really is core to who we are. In this particular opportunity, it is unique because the relationship part of things is actually what drove this, and the relationship wasn't initially with GE, but with Blackstone. We have a long relationship with Blackstone. It touches our organization in many ways. GE actually originally reached out through Blackstone about their interest in acquiring the commercial real estate portfolio. Because of the relationship with them, they reached out immediately to Mark Myers and to Tim Sloan to inquire as to whether or not we would want to partner on that deal. There were parts of the GE real estate portfolio, which by the way, was about $23 billion total, that didn't really make sense for us. It was more aligned with what Blackstone wanted. But when it was all said and done, we were able to acquire a portfolio of $9 billion worth of commercial real estate loans, and we were also able to provide Blackstone financing to the tune of about $4 billion on their purchase of the balance of the portfolio. It was a terrific deal for us at every level. It added to our loan portfolio in Mark's world. That transaction was the first to close of the series of GE transactions. It closed last June, and we now have the benefit of several months' worth of actual performance and are happy to report that performance has exceeded our original expectations, both in terms of credit quality and in terms of return. Let me transition to rail. A little bit of background is that our, and the next two businesses really fall within our commercial equipment areas, which roll into my world. A little bit of background on rail is Wells Fargo's financed rail assets for many years. But it wasn't until the Wachovia merger that we became a railcar operating lessor. And honestly, at the time, we didn't understand that business well, but we quickly learned that business. And for the last seven years, we've actually embraced it. We've made several smaller acquisitions. Along the way, we've really grown to appreciate the returns that we can generate from that business. We've upgraded the staff, we've upgraded our technology and our operational capabilities, and therefore, when the GE rail opportunity availed itself, it was a very natural extension of what we already had. Coincidentally, our business is located in Rosemont, Illinois, as is GE's. Therefore, it was natural. The portfolio that we acquired with GE on the rail business was very complementary in terms of fleet mix to what we already had. It was also very efficient, we believe, over time, and that we were able to effectively acquire or increase our portfolio by 80%, and our belief is that we will only increase staff by about 50%. So the operating efficiencies in that transaction are going to be very positive for us. Longer term, though, back to relationships. The top 25 largest railcar relationships, or customers of the railcar business rather, are customers of our bank. And, by the way, the customer profile are railroads, they're logistics companies, they're shippers. And they're all, for the most part, of a profile that would naturally fit within our commercial banking or corporate banking. The fact that the top 25 largest existing customers are already customers speaks to that. But more importantly, there is a large number of the clients that are in the rail business that are not yet, specifically within the GE context, not yet customers, and we believe given time they will be. So we think we are now the largest railcar operating lessor in the business with 170,000 fleet of railcars. And we believe that the opportunity to continue to leverage additional revenue through the deployment of our strategy at the bank is going to be terrific. Let me conclude by providing you a little context of the vendor finance business that we also acquired. But before I describe that, let me put it in context within our broader equipment finance business. Wells Fargo has been committed to equipment finance, commercial equipment finance for decades. It's a core product. We cross-sell actively within Perry's world. Prior to the GE acquisition, we had balances of about $27 billion. We originated about $12 billion a year in production. We did that through three different channels, for the most part. A direct channel, where we have salespeople in the market that originate transactions, then we have internal referrals through commercial banking, corporate banking, or our business banking clients. Then finally, an indirect channel or the vendor finance program. Of the $27 billion that we had committed to vendor finance, about $5 billion was originated through our existing vendor finance channel. That, by the way, was about $2.4 billion a year in originations. What was different about our vendor finance program versus what I'll describe in a minute is that ours was very regional focused and it was very dealer focused. This is very parallel to Dawn's description of the auto finance business. We effectively had regional people go through their dealership to originate product, but it wasn't a national scope. With that, let me describe the GE acquisition, how it differed from ours, and why we believe it's so complementary to what we currently have. GE has been, first of all, a well-regarded leader in the vendor finance business. We've been very active, but as you can I'm sorry. I want to make sure I'm at the right slides here. Their portfolio was $8.7 billion. It's what we acquired. They originated, unlike our $2.4 billion, they originated $6 billion, and I'm going to peel that apart for you in a moment and describe why we think this is an opportunity for us related to our legacy portfolio. The bigger distinction was that they had a national strategy that was focused first on the original equipment manufacturers. They would develop large program agreements with the OEMs and then distribute through their dealer networks on a national basis. That created consistency in the delivery across the product and a lot of opportunity for us to leverage all regions. The vendor finance business will have a total of about 1,500 new team members. That's a subset of the 3,000 I mentioned earlier, with lots of new customers. From the standpoint of the go-forward opportunity and what this does for us, we talk a lot about the relationship and the cross-sell and the supplemental revenue that will come from that, and that's clearly the case. Another really unique opportunity, and this relates back to the $6 billion in origination volume that GE did versus our $2.5 billion is about 50% of that was in the form of inventory finance as opposed to just retail originations that would come in through their dealer network. We didn't do much of that. We now have the team and the capability to be able to expand those capabilities across our own equipment finance, and we think is going to produce a tremendous opportunity for us. As I alluded to earlier, the technology, over time, the ability to combine all of these platforms, we believe will result in operating efficiencies over time. Henry will describe kind of the strategy for integration and our cautious approach to that. I know there have been questions related to the two-year timeframe, but we will talk through that in more detail a little bit later. The vendor finance business is really, really a terrific opportunity for us. It puts us number one in vendor finance. The acquisition in general ranks us number one in the context of overall equipment finance and number one in the context of our rail business. The last thing I really want to emphasize is that those rankings are something that we are very proud of, but that really is not You will hear all of us at the bank talk about that is not what drives us. What is really important, and you will see in the far right-hand column, shows that huge step up in our outstandings as a result of these acquisitions, which is fantastic. It is not a one-and-done transaction for us. I will point to the fact that if you look at the years leading up to this acquisition, you still see a strong double-digit growth year-over-year. We were not able to do that. That outpaced the market relative to growth. The reason we were able to do that is because we deployed our overall bank strategy of leveraging relationships and doing the best within the context of the existing relationships that we have. The acquisition is terrific, but what is really important to point out is even with the acquisition, we only have an 8% market share in overall equipment finance. There is still a tremendous amount of headroom for us as we go forward. With that, I am going to hand it over to my friend and colleague, Henry Jordan, and he will describe his business assets. Thanks, Ed. Good afternoon, by the way. I am going to walk you through the two other pieces of this acquisition, also our asset-based business, and then wrap up the GE piece. The third exciting opportunity, in addition to the two that Ed talked about, were portfolio purchases. We were very fortunate to be able to purchase two large portfolios, both in the direct lending and in the direct leasing business. The leasing was a $4.4 billion portfolio. The first thing it did is it really enhanced the U.S. leasing platform that Ed and his team already have. Verticals that they specialize in are food and beverage, marine, construction, and technology. That was a great addition. In Canada, what this portfolio acquisition provided was a great Canadian leasing platform that they are going to bolt onto the existing Canadian operations in the equipment financing world. That was very positive. On the loan side, we are able to buy a $3.5 billion book of basically senior secured asset-based loans, which was fabulous. The good news for us is we had about a 48% crossover in terms of existing asset-based customers that our Wells Fargo Capital Finance group that I run was in with the GE customers. It was very accretive to be able to bolt on to both of those opportunities for the same customer. We were also fortunate, we picked up 15 brand new left lead relationships, many of which we would have competed with GE in the past and lost for whatever reason. Those were two very opportunistic and positive acquisitions, both in the direct lending and the direct leasing business. I think the thing I am most excited about is a thing we will call commercial distributions finance, which is CDF for short. That's really part of the asset-based lending business that I run. It's going to fit in very nicely. It's effectively a new specialty for us, and what that business does, it's the largest global provider of customized inventory finance solutions for both original equipment manufacturers and dealers. Imagine this, there's six large verticals they operate in. You've got the marine space, which is obviously boats, marine things of all sizes, RVs, motorsports, outdoor products, technology, and electronics and appliances. This business is an industry leader. They do about $46 billion a year in volume in that space. When we purchased it was about $10 billion in outstandings. It's grown a little bit since we acquired it on March the 1st. It's a fabulous business. They have very deep domain expertise. They have 60 years of industry experience. It's about 1,400 team members in CDF that run this business that got very longstanding, deep customer relationships. Their top 10 original equipment manufacturers, people producing the goods, they have 30 years they've worked with these customers for. Fabulous relationships there. Their average dealer, imagine there's 40,000 of these dealers across the country and the world. They have an average tenure of 20 years. The average dealer's been doing business with this group for 20 years. As Ed mentioned, great technology in both the vendor business and this business. Very customer-focused analytical tools. They process about 6.4 million invoices a year through these platforms. We're excited about that. A very efficient operating business, really strong talent in terms of the people, and great and innovative technology. As Ed mentioned, they do operate on a global basis. About a little over 2 billion in assets we expect to close by the end of the third quarter in a number of different countries. We did close about 90% of this. It was the North American piece on March the 1st. That's already on our side. Let me tell you a little bit about Wells Fargo Capital Finance. That's the asset-based lending group of the wholesale bank, which I've run for a number of years now. It's a great business. It's a traditional asset-based lending business. We provide senior secured financing. We do a number of both international and domestic factoring operations, as well as international trade. We work with companies across a variety of industries, manufacturers, distribution, wholesalers, service providers. You can see that the last four years, just in terms of asset growth, we ended 2015, I think the average assets for 2015 were about $37 billion. When you bolt on the CDF acquisition, it vaults us up to about $52 billion in terms of outstanding assets at the end of the first, as of closing. That's really a transformative acquisition. We have a little over 1,800 people before the CDF acquisition. With it, they're bringing about 1,500 team members to CDF to our operations. It is a transformative acquisition for Capital Finance. We are the number one inventory finance provider. We're the largest factor in the United States. We're the largest import factor, and we're among the leaders in terms of the league tables that Thomson Reuters produces for the asset-based lending industry. That's a very strong business. If you look at summary for all the four businesses, the real estate business for Mark Myers, the rail business, the vendor finance business, and the CDF business, what we are really up to here is we are really going to successfully integrate the acquired businesses and the portfolios. In Mark's real estate world, that is well on its way. That was the first one to close. Rail is coming along, and we are doing a really good job, I think, with vendor and CDF. We want to maintain the acquired businesses, the growth in those businesses, because they were really crown jewels of the GE Capital. In the bidding process, there was a lot of interest in these businesses. We want to maintain the growth in those businesses and really leverage the combined scale of putting the bank together, with these businesses, with the GE operations, and get some efficiencies out of that. Cross-sell, you have heard a lot about today. Imagine the cross-sell opportunities with 160,000 new customers, whether they are vendors or dealers, right? They all need treasury management. Many of them are customers of the bank today. Many are not customers of the bank today, right? The ability for private wealth insurance, all the things we are really good at in terms of Wells Fargo, great cross-sell opportunities, to deepen relationships with the acquired customers. Then also we are bringing to our existing bank customers a new product set, right? The inventory finance product is new. Some of the vendor stuff is new. So it benefits both existing, or it could benefit existing bank customers, as well as being able to cross-sell the acquired customers. I think it fits really nicely with the industry vertical alignment that Perry talked a little bit about in terms of U.S. corporate, in terms of the verticals we focus on. This fits very nicely with that, and it also fits with our international strategy, where we are following our multinational borrowers across the world, where we try to do business where they do business and help them succeed financially, which is what we all do for a living, as you know, and you have heard many times today. So I think that wraps it up for GE, and I think we are going to turn it over to Jon Shrewsberry, and he will get you up for Wells Fargo Securities. So thank you. That would be Weiss. I'm sorry. Jon Weiss. That would be Jon Weiss. Jon Weiss. Wrong John. Too many Johns up here. Well done. Good afternoon. John Shrewsberry has more than a couple of inches and a lot of brainpower over me, so not to be confused. For the next 15 minutes, we're going to be talking a little bit about Wells Fargo Securities, who we are, what differentiates us, and what our opportunity is. Like everything at Wells Fargo, it starts with deep and longstanding relationships. Wells Fargo Securities is relationship-focused. We are integrated fully now into the broader Wells Fargo, whether that's commercial banking services, Wells Fargo Advisors, Capital Finance, international specialized lending. It's very much an integral two-way partnership that we have. We are very disciplined around risk, and we believe we're very well positioned for growth. The key point with us is that the platform has already been built. We're not talking about a massive investment in a new business. We're talking about deepening relationships with clients we already have and increasing penetration based on capabilities that we already have. To the extent we are growing, we're going to do it the Wells Fargo way, which is with discipline. We have the advantage in many of our businesses of having newer, less cumbersome legacy operations, and we have the advantage of designing these new businesses and sizing these new businesses based on what our clients need today and based on and consistent with the new regulatory framework. The thing that's been most exciting for all of us is how the business has seamlessly integrated into the broader Wells Fargo. Looking back, it's been a little over 7 years since the merger between Wells Fargo and Wachovia, and it's been a remarkably smooth integration. This has allowed us to continue to focus on building internal partnerships and deepening relationships with new and existing clients. It requires a certain amount of scale to be a full-service investment bank. We have that scale. As you saw on the previous slide, we have a complete array of products and services that we offer our clients. Our capabilities in the U.S. are complete across advisory, capital raising, sales, trading, research, and risk management solutions. While on the margin, some of our businesses are still being built out, overall in the U.S., we have a complete platform and a complete offering. As a result, we're able to go to market agnostic as to the product, and focus on solving client needs. We market solutions and our culture of collaboration and partnership allow us to work together for the benefit of our clients and for the long-term benefit of the platform. Our business is sized to serve clients well and to be profitable. We downsized significantly during the 2008-2009 period, and we've been growing in a disciplined way since then, always with an eye to where we can grow profitably and strategically. We have a deeply experienced management team that's been working together as a unit for well over a decade now. Importantly, we all worked together through the financial crisis and through this merger, and we work very well as a team. As we compare ourselves to other full-service investment banks, we think we're simpler and more focused. For example, 95% of our team members and about 90% of our revenue is focused here in the U.S. We have a simple and straightforward strategy. We want to do smart business with important clients and manage risk well. As you can see on this slide, Wells Fargo Securities growth has been steady, disciplined, and consistent. Since Q1 2013, we have grown our top line by 7% per annum without much variation, which we believe is favorable compared to the performance of most of our competitors, while maintaining a consistent 5%-6% contribution to the overall Wells Fargo's revenue. 5%-6%. Over the same timeframe, pre-tax profits have grown modestly in excess of revenue growth. We have been enjoying positive leverage, operating leverage in the business. One of the reasons we have been experiencing this growth and stability is that we are diversified and balanced. On the upper left, you see we are diversified by product. We are still weighted somewhat towards credit, as you would expect, given the Wells Fargo legacy as a commercial bank. But with an almost 40% contribution from our equity and advisory activities, which have been growing quite nicely and which we expect to continue to grow well, we are insulated from the vagaries of one market or another. We are also diversified by type of revenue, as you can see in the upper right as our revenue is reported in our financials, or more importantly, on the bottom left, which is how we look at the business internally. Our business is balanced between sales and trading and origination, but weighted 60/40 towards origination. We are, and we will continue to be, an issuer-driven organization serving the customers of the broader Wells Fargo. Our sales and trading businesses are focused on distributing and making markets in securities issued by these clients. Within origination, you can see on the lower right, we are also balanced by sector, which reflects the diversified footprint of Wells Fargo's overall wholesale client base. In any given year, these percentages can move with the trends in the industries, but we have a solid positioning in almost all of them. While we do not manage to lead tables, we do keep track of them. As you can see in the upper left, in the U.S., we are number three in the number of investment banking transactions that we are involved in, again, reflecting the tremendous breadth and reach of the Wells Fargo platform in corporate and middle market America. Having said that, if you look at the lower left, you will see we are number seven in year-to-date fee market share according to Dealogic. While that has climbed consistently from number 10 about five years ago, our future opportunity is to continue to penetrate these clients, up tier our roles, and gain greater economics and greater mind share with each client we serve. Importantly, we do not need more clients. Obviously, we are going to find more clients, but we do not need more clients. We need to improve our roles and economics on deals and with clients that are already clients of the bank and already clients of Wells Fargo Securities. How well we cover these clients is what will determine how well we grow. You can see on the right-hand side, we already have market leadership from a product capability standpoint to achieve this greater penetration, whether that's a number 1 position in middle market loan syndications, a number 1 position in high grade electronic trading, strong positions in high grade, in high yield, and in loan syndications overall, the leading position in real estate advisory or leadership positions in municipal bonds and rates. We've built a top 5 research platform across equities, fixed income, economics, and strategy with number 1 positions in a number of categories. We also have the benefit, as you heard from Mary Mack earlier, of working closely with Wells Fargo Advisors, a top 3 retail broker, which while managed independently, certainly provides differentiated demand for much of our new issue product and further distinguishes our distribution capabilities. We made the point earlier that we are deeply integrated into the fabric of Wells Fargo. The relationships that we're doing business with have, on average, been clients of Wells Fargo for 17 years. These are very long-standing client relationships. 86% of the clients we do business with do business elsewhere within the wholesale bank. Again, underscoring the opportunity, a solid but still under-penetrated 43% of wholesales relationships have actually used our investment banking products in the last 12 months. We believe there's a huge opportunity for further penetration here. To echo the point that I made earlier and that Perry made, we don't need more clients. We need to increase our relevance and leadership with the clients we already have. We also made the point earlier that we're a customer-driven organization. When it comes to risk management, our ethos is to do smart business with important clients. While our trading operations are profitable in their own right, they're there to serve customers and not to pursue trading for trading's sake. We have a robust governance structure from the desk level all the way up through senior management. We've had comparatively little turnover on our platform, which we think adds an important element to our risk management internally. Wells Fargo Securities' risk profile has been fully aligned at this point, fully aligned and fully integrated into the overall company's risk appetite and risk metrics. As far as credit underwriting is concerned, our approach is that we don't approve credit to chase investment banking fees. We approve credit because we know, understand, and like the risk return of the credit. We leverage that understanding and the overall relationship with that client to position ourselves for investment banking business. That's very different than chasing investment banking business with credit. We understand that the easiest way to grow an investment bank is to misprice risk. We're not going to do that. We would rather lose business than lose money. We're decidedly more conservative than most of our competitors. You can see that in these two charts. On the upper right, in terms of the regulatory VaR that we manage versus the regulatory VaR of our competitors, and on the lower right, the size of our trading book, in both cases about a third what our competitors carry. While we've built out activities such as liquid products, mortgages, and prime brokerage, and our business has grown consistently over the last few years, VaR and other measurements of risk have actually gone down. Finally, the momentum that we have in the marketplace is palpable. Most of our clients are looking to do business on the investment banking side with people that they trust, with a stable platform, and on a relationship basis. And relationship by relationship, we've been earning the trust of clients on the investment banking side that Wells Fargo has been banking on the commercial side for many years. Whether it's a middle-market name like Lagunitas, which is a craft brewer up the road in Petaluma, which we sold to Heineken late last year, or bonds we've led for Microsoft in the U.S. and in Europe, both Lagunitas and Microsoft being clients of Perry Pelos' group, or the $1 billion in asset-backed securities that we led for Nissan, a newer client of Ed's and Richard Yorke's on the international side, or the $8 billion advisory, that we advised on for Blackstone's acquisition of BioMed Realty, Blackstone being a name that you already heard touches this bank in many places. We're increasingly viewed as a trusted advisor and as a preferred provider of many of the bank's long-standing and new clients. In terms of growth areas, you can expect us to continue to attract and retain top talent. We've become an employer of choice in investment banking. You can expect us to continue to grow our M&A practice to help our clients achieve their financial and strategic needs. And increasingly, we've become an advisor of choice in the boardroom. You can expect us to continue to build out our prime and FCM businesses to strengthen our client relationships on the institutional side. Continuing to develop our buy side relationships is a key strategic priority of the business. And you can expect us to continue to deepen our partnerships internally because this play of penetration across the firm's clients is our great opportunity. In conclusion, as we've said to our team on many occasions and as we've heard from our clients in boardrooms and in C-suites. We think this combination of a powerful corporate and middle-market franchise with a great culture that is centered around the client and a still relatively under-penetrated presence in investment banking offers Wells Fargo Securities the single best opportunity for sustainable and disciplined growth in the industry today. Thank you very much. I'm now going to invite Tim, or I think Tim's going to lead us and the rest of the team in some Q&A. Thank you. That was great. Thanks. Really good. Are you ready for Q&A, Mike? My question's on Wells Fargo Securities, and you spent 15 minutes on that topic out of a nine-hour day, so I guess that's, what, one out of 36 minutes, but I- A little bit less than 6% total revenue of the company, kind of. Right. That's where I was going too. Feels about right. Mike, we over-indexed a little bit. We'll work on it next time. But in terms of the cultural risk, the regulatory risk, the reputational risk, I know I asked this a couple of years ago. Right But this is still out there. The idea of mission creep and the percentage of revenues has been pretty consistent, but we all remember the financial crisis. We would ask the question, what percent of revenues are CDOs, and it'd be a small number, and then you found out afterwards there was a huge balance sheet risk or contingent risk or all sorts of other risks we didn't realize. So when you say in the annual report, we're a Main Street bank, we don't really think about slide number 46. Okay. So you perform well, you have all sorts of upside. If you could just address some of these downside risks which pop up from time to time. Yeah, Mike, you're absolutely right. All those risks are in this business. That's one of the reasons why we weren't in this business in a big way pre-crisis, because we didn't think the risk-return made sense for Wells Fargo. What's happened post-crisis is the following. First, we got this terrific team when we put Wells Fargo and Wachovia together, and as John mentioned, we're able to add really good and qualified people because taking the risks is all about the people who are making those decisions. This is a people business. We need to be comfortable with those people, that they fit into the culture of Wells Fargo. So that's number one. Number two, the business has fundamentally changed. Everybody in this room understands that. One of the important reasons the business has changed is that people have realized, as we've always realized, as John just pointed out, and that is, I'll use an improper word, you can't prostitute your balance sheet to get a fee. We don't do that in investment banking. We don't do that in treasury management. We don't do that in any of our other businesses. That just doesn't make long-term sense. You book the fee, and then you live with the asset. Then finally, it's just about overall risk management. How risk is managed here is, in some cases, similar to our competitors, but in other cases, different, as John pointed out. Credit risk, credit decisions are made, again, outside the investment bank. Could we make a mistake in this business? Absolutely. We could make a mistake in every one of our businesses. But do I feel confident that we've got the opportunity that John just described to be able to grow this business on a prudent basis? Absolutely. But if we ever get to the point, and guess what? On individual deals, we get to this point maybe once a week, where there's a transaction out there that we're just not comfortable with, we just won't do it. The reason we're comfortable is because it's 6% of the revenue of Wells Fargo. We're not dependent on this business, just like we're not really dependent on any of our 92 different businesses in the company, so that we feel like we have to make the bad risk decisions. Again, I think you should ask that question every time we get together on Investor Day, and we'll see how we're doing, and that's absolutely fine. But I think the other two things, Mike, are the clients that we are doing business with are longstanding clients of the bank. You saw those stats. So I look at this as an extension of the dialogue that Perry and Ed and Henry and others have had for years with their clients, and we are now able to offer them a solution in a different direction than we otherwise could. That is the first thing. And the second thing is, take a look at the VaR, take a look at the size of the trading book. It is a fraction of what the rest of the Street takes. We are managing ourselves much differently than they do. Tonya in the back. Hi. I guess Tim or Jon Weiss, do you think you need an acquisition at all for any of your growth initiatives to build the business to gain some scale in some of the growth areas that you flagged? On the securities side? Yes. So- Well. The standard answer for all of my colleagues at Wells Fargo is we're never going to say no to looking at any sort of acquisition. I think the likelihood that we would ever make an acquisition in the investment banking business is very remote. We don't think that we need to do it, as John described, because of the opportunity that we have with our existing client base. Very remote. Yeah. You want to add another very to that? Exceptionally, very unlikely, and remote. How's that? The reason is that the organic opportunity is so attractive. Yeah, that's exactly right. We can hire people. Why pay a premium to buy a business? We can hire the people, and they are actually coming to us. They'd come to us in droves if we opened the doors. The organic opportunity is so great. If there were a tuck-in somewhere, maybe you could think about that, but we don't need it. No, John just said very. John said very- Very remote tuck-in. Not even a tuck-in. Yeah. Not even a tuck-in. Like up front, Nancy. I just can't get used to talking into this thing. It's like talking to my couch. Yeah. Nancy, what you do on your own time, I'm not- Well, I got used to talking to bankers, so talking- Okay to a couch is sort of the same. It's- Oh. Nancy, you know what? I feel the same way, so no problem. I spend a lot of time now with the large community banks in the Southeast, and by and large, they regard the large banks, Wells Fargo included, as the gift that keeps on giving when it comes to middle market and small business loans. The reason they cite most often is not pricing. It is just that many business owners feel they do not get the attention from the large banks that they can get at the community level. Is there just a certain amount of business that you are going to lose to these guys, some of which are getting big enough now to be significant players in the Southeast? How do you fight them? How do you prevent that sort of, "We are not getting enough attention," and loss of business? Perry, you want to- Well, no, thank you, Nancy. If your couch ever answers back, then that is when you have to worry. We feel the same way. We think the gift that keeps on giving are our large bank competitors. Because if you think about the way we are organized in the middle market and the business banking, we are local. We are more local than any other bank in the country. We are in those communities. We see people on the ball field. We see them in the places of worship. We are growing the business in those marketplaces very well, both in business banking and in middle market. We have not experienced the drop-off in the business that our competitors have. We have local decisioning as well. In Atlanta, where you are, our local team makes 80% of the credit decisions in Atlanta, and they can go up to $50 million in terms of making that credit decision. That is better than most community banks, even going to their limits. We compete very well against the local competitors when you add in all the products and services that Wells Fargo has. From a national competitor standpoint, the fact that we are local, we are going to market with people in that community, gives us an advantage versus the JP Morgans and the B of As. We feel very good about how we compete for middle market and business banking businesses. All right. Thank you. Vivek, you are up next. Yep. Tim, just a couple of questions on the GE Capital acquisition. John Shrewsberry mentioned earlier you expect to be at the high end of the 55%-59% efficiency ratio even on this transaction. Is that just for 2016, or is that long term? What's the long-term ROA, and is that two years for integration? Post that, how should we think about the EPS accretion from that? Sure. Let me start, and then Ed and Henry can jump in. I don't know if the high end of that 55%-59% range will be, and John wasn't making that statement forever. Part of the reason is that we were very conservative when we modeled the acquisition, and the one part of the acquisition that we really haven't started with yet, that Ed and Henry mentioned, is cross-sell. To effectively integrate the businesses, first you need to make sure that the business that they were doing with their customers, you're doing well on the platform, right? You're funding loans, you're making decisions, and the like. We want to make sure that we get the technology integrated correctly, and then at some point, we'll start to take advantage of some of the cross-sell opportunities, and I think that will grow the revenue. In terms of EPS, John said, and I think he said 45 days ago, that it was going to be modestly accretive for this year. We'll stick with that. We think that that makes sense, but over time, it should be more than modestly accretive. But until we finish the integration, until we really appreciate the opportunities from a cross-sell standpoint, I wouldn't want to speculate beyond that. I don't know, Henry or Ed, if you want to add anything. Yeah. Just a couple other things. The international piece, as I said, is going to take probably through the end of the third quarter of this year just to close. So that's people obviously in a number of different countries that requires licensure and that kind of thing. We just want to be very thoughtful. We could do this fast and wrong, or we can do it correctly and slowly. So we're taking the correctly and slowly route with this, and we're really not 100% sure what it's going to cost to get it done, but there is a lot of platform work we have to do to get things to work together effectively. I will tell you on the cross-sell side, we've been already focused on that just for the first couple of months now. There's enormous opportunity that we're finding on the ground with their customers, a lot that we hadn't even thought about when we were thinking about this acquisition. I don't want to speculate longer term what that's going to do to EPS or ROA or other things like that, but I'll just tell you from what the bank can bring to this customer base, it's enormous, and there's a lot of opportunity there from my standpoint. And Ed, you might have thoughts on that. Yeah. Two thoughts on just within the equipment finance space. We have the legacy Wells Fargo Equipment Finance operation has four large back shop operation centers, as does GE. So in our modeling, we've assumed that all of them continue to go forward, and I made reference to the fact that we're acquiring some really good technology that's going to make for a much more efficient process over time. So to Henry's point, we're being very careful to not do things that disrupt the relationships, because what's most important is that we enhance the relationships that we acquired. But eventually, there's no question that we're going to be able to extract more efficiencies out of it. We haven't quantified what that looks like. And we have assumed in our modeling some revenue growth tied to cross-sell. Quite honestly, I believe that our assumptions have been conservative related to what we believe, given time, we're going to be able to do. We have a whole team of people focused on developing strategies by product across these customer segments, from the OEMs to the dealers to the individual customers, and looking at our broad product mix to figure out how we're going to go about driving more revenue. And I can tell you that the assumptions that we embedded in our models going in did not take into account what we really believe over time we're going to be able to achieve there. Other questions? In the middle, it looks like Ken. Thanks. I was wondering if you could talk about the CRE business and the CMBS market a little bit. First, on CRE, a lot of talk about multifamily getting a little overheated. Just wondering if you can kind of walk through the CRE environment. Where are you seeing growth? Where are you worried about buckets of it? Then the second point on CMBS, a lot of refinancing coming due in the next year or so, $40 billion-$50 billion or so. Is that an opportunity? Is it a risk? How are you approaching that as well? Thanks. I'll start with CRE, then you want to hit CMBS? Okay. Mark Myers, who's in the room, that runs the CRE business, would answer this question better. Recall he presented at the last Investor Day. He's available if you want to follow up. I think generally, the CRE business is pretty good because of the market dislocation that we saw in and around CMBS that Ed can talk about. Just generally some concerns about overbuilding, not only in multifamily, but maybe in some other markets. We've seen the pricing start to firm just a little bit. We've seen some transactions that other lenders had committed to, those commitments not be fulfilled, and therefore, we've been able to step in. The business is attractive today. Having said that, I think you've got to be concerned about some of the building that's occurred, and Mike can talk to you about multifamily too. I think generally as we think about multifamily, I think there's been a little bit more of a demographic shift that's occurred that's driven some of the multifamily business. Having said that, we've been concerned about this product type for about the last two years. We've been very careful in terms of what markets we are involved in, and I would throw residential condos in that same mix. While we've been a leader in our multifamily business, we've been a little bit more careful than some of our peers, and so we've avoided, for example, some of the high-end product that we've seen in New York and some of the high-end product that we've seen in some of the other cities on the coast. But overall, the business is performing well. Credit is in check, and we see a lot of opportunity for growth. From a CMBS perspective, John and I co-lead our asset-backed finance team, which has several different verticals, one of which is the CMBS related capital markets business. No question that business has been really dislocated. Spreads in February across all sectors sort of blew out. CMBS it's tightened a lot, but it's still very illiquid. What that's meaning for us and speaks to kind of the broad balance sheet capabilities that we have is that those who work in our CMBS business are probably not as active as they would like to be right now. But those on Mark's team who are using the balance sheet to do term loans are backfilling that opportunity in a really significant way. So we're seeing increasing balances from a CRE term loan perspective. But you're right. You also ask about the wall of maturities coming out of our servicing operation, and it's big. But that's not the first time. We have about a $500 billion commercial mortgage servicing portfolio, and about 60 billion of that is multifamily, but the balance is all CMBS. We've been through cycles before where people wonder whether or not there's going to be capital to fill the refi demands that come out of when the markets are down in CMBS, and there always is. I think there will be. It's actually an opportunity for Mark. Okay. Terrific. Great. Thank you very much. Thanks, everybody. Good job. Okay, we have one break coming up. We will take 20 minutes. We will return at quarter of, and then we have Mike Loughlin, Neal Blinde, and a closing Q&A. Thanks, everyone. Ladies and gentlemen, your event is about to resume. Please take your seats. Our brand is built on a culture of caring. Our success depends on the success of our communities, and we work together to invest and make a difference. With a determined can-do spirit, we provide unmatched community support. Please welcome the head of Corporate Risk, Mike Loughlin. Welcome back from the break. I, too, would like to thank you for your interest in Wells Fargo, and thank you for spending the day with us. We appreciate the quality time. I am going to talk about four things today. Some basic risk management principles that you would have seen before, but I like to repeat them year after year, hour after hour. A little about my organization and how we are structured. My organization is called Corporate Risk. We have continued to invest very heavily in this organization, and we have continued to invest very heavily in risk in all the lines of business. Third, I am going to talk some about how the loan portfolio has changed over time and how we think it has less risk in it than in previous Investor Days. Finally, I am going to talk a little bit about how we are managing one of our major risks, which we call cyber risk. Then finally, my colleagues are going to leave me up here all by myself, and I am going to take Q&A. We will see how that goes. I would like to focus on the second bullet point. We firmly believe that effective risk management helps us maintain and improve our market position. What that means to us is that we want to keep Wells Fargo in the strongest financial condition we can, so that when market turmoil occurs, we are better prepared and can therefore take advantages of opportunities that others may not be prepared for. We do not know when this market turmoil or this stress will arrive, but we want to be prepared. We do not know when opportunities will arrive, but we want to be prepared. We were ready and I think we've taken advantage of that. As you'll see in a moment, we have made and continue to make a significant investment in risk. That is a cost to short-term earnings, but it will make us stronger over the long term. Sometimes it means we leave revenue on the table, like in the mortgage space back in the crisis days when we didn't like how underwriting was going, and we lost market share back then. That is an old example, which everybody knows well. A more recent example would be in our global financial institutions business. That's us dealing with major banks around the world. We have cut our customer count by 30% in the last few years. We had to ask each of them a lot of compliance and BSA/AML questions, and we wanted information from them that we had not asked before. Many of them either could not or would not provide the information, and so we had to exit those relationships. That said, we now do more with major international banks, and the revenue's actually gone up rather than down. We have a written risk appetite statement. This is a summary of that. You've seen this before. I pull it out every Investor Day, I think. It was written in 2010, and this is just a summary. You've probably heard the word relationship today more than maybe you would've liked. It's part of our DNA, and if somebody asked me to define it, I'd define it in the following way. If there was somebody that we did not want to loan money to and they came in here and offered us cash collateral, we'd still say no. There's just people that we won't do business with. What I'd like to do is, back on the risk appetite, I want you to know that we track 128 metrics at the top of the house. We track over 400 in the businesses, and we track those quarterly. If there's a trigger or a breach, those are escalated to senior management and to the board. I think many of you have an expectation that you would see this slide because everybody else used the same one. You can see how we're organized. So in the blue boxes, those are my direct reports, and you can see how long they've been at Wells Fargo. Their years of service are there. We're organized by vertical, so you can see that there's somebody who's head of credit, somebody who's head of market risk, somebody who's operational risk, somebody who's in charge of compliance, somebody in charge of BSA/AML. By the way, we didn't give you their average tenure because the two left boxes are Rich Baich and Yvette Hollingsworth Clark, who we only hired four years ago. So they brought down the average, so I left it off. That goes to another point, which is, I think Wells Fargo has a reputation, maybe deserved, that we promote from within. I want to assure you, as the people who own this company, that when we believe we need help, that we need outstanding outside help, and in this case, Rich Baich, we hired four years ago, is our Chief Information Security Officer. He's the cyber man. Yvette Hollingsworth Clark, we hired four years ago to help us improve compliance. Down below are what we call Group Risk Officers, and so they have a dotted line to me, and they have a solid line into each of the group heads. That's our organization, and you can do the math on the tenure. We might want to take a look at slides 4 and 5 together. Slide 4 is a timeline of the evolution of corporate risk. It has boxes where we have either created a new oversight function, where we believe we've plugged a gap in risk. Or in some cases, for example, in Rich Baich's organization, they came out of technology and into corporate risk at the beginning of 2015. Some units we've just moved in when we think that centralizing the function is better. Let's move on to this slide, which is the growth in FTE. You can see a couple of things here. While we believe we have always invested heavily in risk, and particularly credit risk, you can see a big ramp-up in FTE beginning in 2013, when we started talking internally about being the best risk-managed bank in the world. We continue to grow. I'll say again, the businesses continue to hire people, and they have more risk people than I have. But by the end of 2016, my group will have in excess of 5,000 people. You might wonder why so much investment in model risk and why it's listed first. The fact is that while we consider ourselves an expert judgment bank, which means that we want to rely on our experienced people and that their judgment is better than any model we can build, that experience can benefit from model outputs. In addition, our regulators rely heavily on models, and so we have to have really outstanding model skills, and we have really invested quite a bit of money and hired a lot of people in the model space. Just to catch you on model for a minute. We've developed standards for new models, validation standards, very strict change control procedures. We don't want people putting models in and taking them out unless our central staff and corporate risk is on top of that. This is where I'd like to spend the bulk of the conversation, if you will. It's my favorite slide and the one I want to focus on. We show you the loan portfolio at our first investor day in 2010, when we had $757 billion in loans outstanding. We now have about $950 billion in loans outstanding. In fact, if you haven't picked it up already, we are the largest lender in the United States. We take that responsibility very seriously and continue to invest in not only all areas of risk, but we continue to invest in credit risk. Franklin, this morning, I thought did a great job talking about the residential non-conforming jumbo loans that we keep on our balance sheet. We are hiring another 200 people this year to do quality control over that portfolio. Many of you write about Wells Fargo and start with the phrase, "Wells Fargo, comma, the largest mortgage lender in the United States." That's true. But it's also true that we are the country's largest lender, as I just said. I should say, particularly for the benefit of my colleagues, we never set out to be the largest lender in the U.S. It was never part of our strategy. It has always been part of our DNA to be the best lender in the U.S. and the world. Let me give you a statistic to try to highlight that. Franklin Codel had this stat this morning, but he went kind of fast, and so I thought I'd repeat it. You'll recall two years ago, we gave you some statistics on loans 60 days past due on our non-conforming, held on balance sheet, residential portfolio. I think a number of you asked when I gave you the numbers, maybe we weren't taking enough risk. So let me update you on these numbers and remind you that we rewrote our residential lending underwriting standards in 2008. Installed them in early 2009 and have not changed them since. Since we put them in early 2009, we have funded, through April of this year, 274,953 loans. Residential first mortgages that are on our balance sheet. Through April, 367 of these loans have gone 60 days past due sometime since they were booked. That's 367 out of 274,953. The quality there is absolutely pristine. Recall in 2009, as a result of our merger with Wachovia, the combined balance sheet and complexity of our business operations were beyond our historical risk appetite. You will recall our first step was to strengthen the balance sheet by raising a significant amount of common equity. We also carved out $133 billion of loans that we did not want. That was 17% of our total loan portfolio. Staying on the chart on the left, but looking at today's total, the liquidating portfolio is now just below $50 billion, or 5% of the portfolio. The point I'm trying to make is the portfolio is bigger and better. Turning to the chart on the right of the page, you could see that we have significantly shifted the mix of our portfolio. At the 2010 Investor Day, we were 57% consumer and 43% commercial. We now have moved to what is essentially 50/50. Why did we do that? Commercial loans have a lower loss rate, so we believe while the loan portfolio is larger, it contains less risk. Recall that in Q1 of this year, consumer losses were 57 basis points, while commercial losses, even with the increase in energy losses, were 20 basis points. So this slide gives you a little bit of detail of what the liquidating portfolio was and is, and some of the changes in dollar amount. You'll recall that we spent a lot of time talking to you about the junior lien portfolio, which is now, as you can see, significantly reduced, and performing much, much better. The other area that we would've talked to you quite a bit about was Pick-a-Pay, which is significantly reduced and actually performing much better than we had anticipated. Recall that a good percentage of the Pick-a-Pay portfolio is in Southern California, and Southern California has come back much farther, much faster than we would've anticipated or had modeled. As you can see on slide 8, at our very first Investor Day in 2010, loan losses were very high at $17.8 billion. Thanks to an improving residential real estate market and a lot of hard work by many Wells Fargo team members, losses were reduced to $2.9 billion or 33 basis points in 2015, reflecting some of the mix changes and some of the improvements in the economy. Loss rates increased to 38 basis points recently as continued improvement in the residential real estate portfolios were offset by losses in the energy space. I would like to update you on our latest view of what we call through-the-cycle losses. Four years ago, we told you that number was 100 basis points. Last year, we told you 75 basis points. This year, we would guide you to 65 basis points through the cycle. We see an average cycle of approximately 9 to 10 years, and our 65 basis points includes a recession of average severity. Of course, this reduction from 75 to 65 is due to the shift in the portfolio I just discussed and the improvement we have seen. I wanted to finish with some information on how we have improved our cyber defenses. I think I will frustrate you because I do not want to give you the amount of dollars we are spending. I know some banks have disclosed that. We are not going to, because I think that only provides motivation for bad actors to attack those people spending the most money. They feel challenged by that. I will tell you that cyber spend has been large, particularly since 2012, has increased, and will continue to rise. Some highlights in terms of how we have organized ourselves to defend ourselves against bad actors. We did hire Rich Baich in 2012. We initiated external independent penetration testing in 2013. In other words, we pay people to hack us. We have built three cyber operations centers, one in Charlotte, one in Arizona, and one in India so that we can follow the sun, and they perform round-the-clock detection activities. We completed an external independent assessment in 2014, so we had a consultant come in here and tell us where we were good and maybe some places where we needed to improve. We moved cybersecurity oversight out of technology into corporate risk in early 2015. Also in 2015, we added board member Suzanne Vautrinot, a retired Air Force general, whose last command in the Air Force was Cyber Command. Suzanne is here today and sitting in the front row next to John. To summarize, effective risk management remains a cornerstone of our long-term success. We are committed to it. Every one of us views ourselves as a risk manager. We say that all the time. My colleagues who spoke before me, and those you will meet later, are very good at risk management. With that, I would like to answer as many questions as time allows. Questions for Mike. From Mike, right in the middle. Well, I think you teed up this question now. Could we hear from the Director, Suzanne, on her perspective, having gone from the military overseeing cybersecurity and technology, to her fresh perspective at Wells Fargo? While you answer, maybe just a general comment on your initial impressions of the board and technology more generally. Suzanne, get up. Sure, Mike. Happy to. Mike's statement right at the beginning, where understanding what the behavior of adversaries is and not waving a red flag in front of them is just one indication of a full awareness that this is a little different than other areas of risk, and so has to be treated differently. What I saw even at the beginning was a look at what's the long-term strategy in terms of creating an enterprise that is resilient and aware of risk. All of the visibility that gives you that information that's so necessary. They treat that not as a cybersecurity all by itself, but as a business imperative, that having the insight to all of that data helps you with cybersecurity. It also changes your business model. There's a strategic initiative across the board that looks at both sides of that coin. As you're achieving that, there is a very concentrated and metric-level look at anything that they believe is a gap. They've done a really nice job of identifying those things that are of highest priority, either because the environment is changing, the adversary behavior is constantly changing, or because their enterprise is changing in the way that they're using technology. Mike's team has identified that there will be higher risk or levels of concern that they need to address. In every one of those areas, whether it's looking at the strategy long term or closing the highest priority gaps right now along the way, rather than waiting, has been very insightful, I think. I've been out to the Cyber Command threat center that they have. If you have not been, I'd highly recommend it. It is world-class, and they can do some things that I would have been happy to have authority to do in the government, frankly, if we had been allowed to do some of those things. It really does help at looking at the other side of that, if that answers your question. Yeah, and just on technology more generally, how were you surprised one way or the other, and how does this compare to the public sector where you worked before? In the public sector, we wait 10 years to buy yesterday's technology, and then we have to kind of backfill a method to bolt on some kind of security. I would much rather be in the position that Jon is in, to upfront be able to make smart decisions and to capitalize those as part of the business investment. From the perspective of which place would I rather be trying to deal with these kinds of problems, even having been at Fort Meade and in the Air Force and had extraordinary support and interest and all those things, we were trying to bolt on to very old structure rather than bake in capabilities that were going to be much more relevant to a changing environment. Thank you. Suzanne, I think you hit the cover off the ball. You might want to come up here and answer the rest of the questions. Did I say the script the way that you told me to do it? You nailed it. Anybody else? Yes, Steve. All right. It seems to work this time. You mentioned specifically with regard to mortgage, for example, that you changed the way that you underwrite them in 2009, I think you said, and really haven't changed it since, and the results have been very few credit losses. More broadly, can you talk a little bit about, in most areas, has your underwriting box basically remained consistent over the last five years, and the market may come closer to you or away from you, and you're willing to lose or gain share? Or are there significant areas where your underwriting box has changed in the last five years? On the consumer side, the underwriting has basically stayed the same, which actually I find surprising. I would have thought, given the recovery, given all banks' desire for more assets, more loans in particular, because they yield a lot more than cash. I'm surprised the industry has basically been pretty disciplined on the consumer side. On the commercial side, the competition is red hot. I think you'll find Wells Fargo not changing its underwriting standards. I would argue that we're better off competing on price, which is what I think we have a tendency to do, is not give structure. But if we've got these lifelong relationships and somebody says, "Gee, for 25 basis points, I could go to the Bank of America," we'll give them the 25 basis points and hold on to the collateral and the terms that we can. But the competition's very tough out there. John McDonald Hey, Mike. I was wondering if you could just give a sense of the drivers of the updated through the cycle loss rate. Is that just mix? Can you elaborate on the duration comment you mentioned? You mean 9 or 10 years? Yeah. Just how you think about the waves of the good side and the bad side of the cycle. Thanks. We just did an analysis of our portfolio. We made some economic assumptions, and what came out was a slight improvement from the 75 basis points that we gave you two years ago. That is about all I can say on it. It is mix. Yeah. Just the nine years. Could you just- We looked at recessions or cycles sort of post-World War II and thought that a sort of a nine-year cycle was about average. So that is what we went with. Mike, over to your left. Hi, Mike. It's Jimmy Hanna. This is kind of to John McDonald's question, but it seems like it's been a while since we've had a pure commercial C&I driven cycle. If I think about the mix of the loan portfolio on one of your slides, moving more commercial, a little bit less consumer. How do I get comfortable that we're running away from the last cycle, which was severe on the consumer side, and not running toward potentially the next cycle, which could be more C&I driven or commercial driven, not necessarily C&I? Well, we could, right? Let me go another direction, if you will. Please. If you write off a loan, it used to be on the consumer side that you just wrote it off. Okay, now if we make mistakes on the consumer side, you may have litigation. You may have fines from the CFPB. You may have numerous attorney generals suing us for our consumer activities. Don't get me wrong. We have a very large consumer footprint. We like it, but we thought we were a little out of balance, and we just think the commercial side of the house doesn't come with all that litigation risk that the consumer side has. Could we be running into a C&I driven recession? We could. We don't see it. We don't see it at least for 18 months. We see credit quality remaining really, really strong. Even if I say 65 basis points, we don't expect to move anywhere near 65 basis points in the next couple of years. Thank you. Other questions for Mike? Not seeing hands. Thank you, Mike. Okay. I am the setup guy, and Neal is the closer. I know it has been a long day, so I would like to introduce our Treasurer, Neal Blinde. Thank you, Mike. Good afternoon, everyone. Can you hear me? Okay. We have had a lot of evolution in the economic environment and the regulatory environment over the past couple of investor days. And we have got some pretty significant things in front of us as well. In the treasury division, not surprisingly, we are really focused on TLAC. That is going to change our balance sheet. And we have got a range of outcomes in front of us with the rate environment. Let me give you some context around that. When we were last here two years ago, the 10-year was at 2.5%, and the forwards at that time would have implied that we would be at 3.5% today. It turns out forwards and dot plots are not always good predictors. We have had to react to that. What I am going to do this afternoon is I am going to spend a little time talking about how our balance sheet has evolved in response to some of the changes, and I am going to talk a little bit about how we position the balance sheet for what we have in front of us. Then the extension of that is the profitability outlook for the balance sheet. What you see in front of you is an illustration of how the balance sheet has evolved over the last couple of investor days. Back to the first quarter of 2002, or 2012 rather. First thing you will take away on the asset side is it has been a tremendous period of growth for our company, 38.6% growth over that time period. That is about an 8.5% CAGR. Really remarkable growth given the environment during that period. The second thing that you will notice is that top section of the bar chart represents cash and short-term investments. Tremendous growth in liquidity over that time period. Now we have also seen loans come down as a percentage of the balance sheet. That is a natural extension of what is happening with the build in liquidity. On the right-hand side of the balance sheet, the percentage changes are not as large, but there are some pretty important changes. In the long-term debt line item, we have grown from 10% to 12%. That is going to continue to grow with TLAC, and deposits have come down a bit. Let us unpack what is happening with liquidity a little bit. First and foremost, if you look at the right-hand side of this chart, tremendous liquidity position today. What is probably a little bit more informative is if you look at the line at the top of the chart, that is liquid assets as a percentage of total assets. What you see is for several years, we have got a very consistent upward slope as we are building liquidity to comply with LCR. But what you see on the right-hand side is we have reached stability in liquidity at the company on percentage terms because we are compliant with, I am sorry, LCR requirement. We are compliant with the LCR requirement today. We have a healthy internal buffer today, and that provides us cushion to fund growth in the future. We also have a new rule in the liquidity area, the net stable funding rule ratio. That is a proposed rule. We will see that in 2018, but based on our read of the rule and the structure of our balance sheet, we feel very well positioned for that. I would like to provide a little context around the decline in deposits. I like to use the loan-to-deposit ratio when thinking about the amount of loans, the decline in loans rather, the amount of loans on a company's balance sheet. The reason for that is this ratio illustrates how successful a company is in deploying the deposits it generates in the loan product. What you will see if you look over to the left-hand side of that chart, 2006 pre-crisis, the brown bar represents the U.S. commercial banking industry. Between 80% and 90% loan-to-deposit ratio pre-crisis. If you look at the red bar, that is Wells Fargo, significantly higher than the industry at that time. Through the middle part of this time cycle, you see a decline in the loan-to-deposit ratios. That is coincident and related to the build in liquidity over that time period. What you see on the far right-hand side, the most important takeaway is we have also stabilized here. The other important takeaway is that Wells Fargo, at 76% loan-to-deposit ratio in the most recent quarter, is higher than all of the G-SIB peers, and we are higher than the U.S. commercial banking industry as a whole, which is at 71%. Let us talk a little bit more about deposits. When you think about the competitive advantages at this company, the deposit franchise has to be one of the top competitive advantages on that list. In the treasury division, we probably view it as the most important competitive advantage. I am going to put some numbers behind it. If you look at the upper left-hand chart, deposit franchise is at $1.24 trillion as of the most recent quarter. That is the second-largest deposit franchise in the U.S. market. If you look at that middle chart, I talked a little bit about how deposits have come down from 70% to 67%. When you compare that 67% to the G-SIB peers, we are much higher than the peer group, and we look much more like the regional commercial banking peers that you see to the left, very similar levels. To put some numbers behind the health of the franchise and how it has grown since first quarter 2012, we have had a 7.5% CAGR in deposit growth. Not only have we had a really good growth rate, but it has been very stable during that time period. To put it in dollar terms, that is $311 billion in deposit growth over that time period. In terms of the efficiency, the cost of our deposits as of the most recent quarter was 10 basis points, one of the lowest in the industry. Let us talk a little bit about long-term debt. The room is aware of the TLAC rule and the growth that we have. What you can see is in 2014, we had about $100 billion of deposits. As of the most recent quarter, we had about $125 billion. We are starting to grow, and this is parent company-only long-term debt. I would like to talk a little bit about what we did in the first quarter and a half of this year to illustrate our approach to raising TLAC. In the first quarter, we raised $5.3 billion, and second quarter to date, we have raised $7.8 billion. That is actually as of the end of April. It is a little bit higher today. The reason I highlight this is in the first quarter, we had some market volatility, particularly in February. We saw liquidity decrease. We saw spreads for banks widen out. We pulled back at that time. You saw some other banks pull back. You saw some banks issue into that environment. But we chose to pull back at that time. In the second quarter, when we saw real depth in liquidity, significantly oversubscribed order books, spreads came in dramatically. You saw us be opportunistic and issue into that environment. That illustrates an important point about how we are approaching compliance with TLAC. The approach is very simple. We've established a time horizon for compliance, and that timeline has a cushion. The reason for that cushion is so that cushion can be used. When we have periods like we had in the first quarter, we're going to pull back and issue less into the market. The reason for that is this is a big part of the balance sheet. We need to be very efficient in the way that we fund it. It's going to be a big component of our cost structure going forward. Second reason is risk management. We don't want to find ourselves in a period where we need to raise a large amount of debt in a short period of time, perhaps at market terms that we don't like. This is new disclosure. It's my first gift to you as Treasurer. It's pretty dense stuff, so stick with me. I'm going to give you a couple of qualifiers first. This is a proposed rule. We've got some significant assumptions around this. First and foremost, we're assuming that we'll have grandfathering for a majority of our long-term debt instruments. We're assuming some of the major instrument classes do not count. We've taken those out. We're assuming no structured notes, probably no surprise to the room. We're also assuming no debt issued under foreign law, so we've stripped that out as well. What you'll see on the left-hand side is total qualifying instruments as of the most recent quarter. We estimate it $250.3 billion. That equates to 18.6% of our risk-weighted assets. That's a 2.9% shortfall versus our 21.5% requirement. In dollar terms, that's $38.9 billion. Now, if you assume that we're going to run with some level of buffer over time, and we will run with some buffer over time, for illustration purposes, I'm showing 100 basis points. That's not a policy buffer, but it's a good illustration. That brings the shortfall up to $52.3 billion. So that's a little bit lower than the range that John Shrewsberry described a quarter or two ago. The reason for that is we've been in the market. We've had some issuance. Now, if you look at the right-hand side, the long-term debt component of the rule, we had $77.6 billion of qualifying assets. That's a little bit different than the $86 billion that you see for the same line items on the left. The reason for that is we have a haircut in the long-term debt component of the rule. So you lose 50% of the credit for those between one and two years to maturity. So that's the difference. So at $77.6, we're at 5.8% of risk-weighted assets. That's a 2.2% shortfall versus the 8% requirement. That's $30 billion. Now, if you look at the relationship between that and the TLAC requirement, if you assume that what we would issue to fulfill the TLAC requirement is qualifying long-term debt, and that's the most efficient form of TLAC, then you'd see that we would naturally, just by coming into the minimum requirement, create a 70 basis point buffer in the long-term debt requirement. So you should focus on TLAC. Most important topic right now in our group is how do we manage through the rate cycle? I'm going to set the table by talking about our philosophy. First and foremost, the philosophy at our company is to remain conservatively positioned for a range of outcomes. Now, it is our job to have a view, but it is our job to be positioned for outcomes that are different than our view. The second pillar of our philosophy is to be active and be prepared to respond as the environment changes and those outcomes are different, to actively manage for the changing rate environment. The reason for that is, as you know, rates do not shift in 100 basis point instantaneous parallel shocks like you see in disclosure packages, like we all model. Rates change over time. They change at different paces. They change with different shape in the yield curve. Most importantly, they change as things are happening in the economic environment. For that reason, when I think about what makes banks most successful in managing through interest rate cycles is being prepared to adjust to those changes. The types of banks that are best positioned are banks with diversified business models. Because what you see happen as the environment changes, you see opportunities in product areas. The banks that are best positioned to capitalize on those opportunities are going to drive better net interest income through that change in the rate cycle. I would encourage you to think about those things in addition to the things that happen within the treasury division to adjust the amount of asset sensitivity on the balance sheet. That gets us to our view on today. On the one hand, we see a lot in the news today about the likelihood of a June increase. It has come up a lot. We see in the dot plots and what we read in the Fed minutes that the Fed would really like to start raising rates and not just raise them this summer, but raise them consistently, prospectively. On the other hand, we have got some very significant pressures, and we have had that slope of dot plots for a long time. Some of the pressures are the global rates, including negative policy rates in a lot of environments. That is an impact. We have really modest economic expansion globally, and we have seen above target inflation. We have seen at target inflation. We have seen a lot of below target inflation. Any way you cut it, we do not have inflationary pressures in this country right now. When you add all that up, the position that we took, and this is going back several quarters, to position the balance sheet for a lower for longer scenario, has been beneficial to the company. Now, I would really like to be talking to you about how we are positioning the balance sheet and changing the balance sheet for really rapidly rising rates. But that was the right decision, and I think we are going to need to see some real movement in some of these other factors before you see the type of pace that you saw in 2004 to 2006, 17 consecutive rate hikes. Where we have been positioned is very similar to where we are positioned today. We remain very conservatively positioned so that we are protected against a lower for longer scenario. The last point that I'd make, which is also a very important takeaway, is while we have that conservative position, we're asset sensitive. We hope that rates rise. If rates rise, we're going to benefit in that environment. This asset sensitivity illustration is the same chart that you saw at our last Investor Day. It's another dense chart. I'm going to make a couple of qualifying comments on this as well. First, this is a static scenario. When I say it's a static scenario, we're not assuming that we're taking any of the actions that I described earlier. We're also assuming that there are no other changes in the environment through the scenario. This is everything else held equal, one scenario, 100 basis point parallel shock. What's the response over the next 12 months? I'll use interest-bearing deposits as an illustration, and this is what people tend to focus on the most. We have 874 billion of interest-bearing deposits. That's lower than the 1.2 trillion because we have a lot of non-interest-bearing deposits. The yield on those deposits is 14 basis points as of the most recent quarter. The response rate that we'd expect relative to 100 basis point upward move is 45 to 55 basis points. That's very similar to what we described in our last Investor Day. We've had a little insight into how it's working because we had a rate hike in December. The response that we had in December, quite frankly, was lower than what we expected. Now that said, you expect a little bit more response later in a rate hike cycle. When you look at the ultimate net positioning for the balance sheet, we're at 5 to 15 basis points. That again I would highlight you shouldn't view as a change because the midpoint of that, 10 basis points, is really where we've been since the second quarter of 2015, very close to when we moved to that level. This is an area that we've been at for some time. What we've done is we've taken the range in recognition that we think it's very possible that we could want to be in a less asset-sensitive position for some time. But as I mentioned, as the cycle changes, we'll take actions to adjust for those changes. Let's talk a little bit about NIM and NII. First with NIM, it's tricky. My perspective is NIM is an output or a result. When we model, we like to model the asset categories, the liability categories with growth rates and yield rates, and NIM is an output. The reason for that is something that we talk about a lot. There are a lot of good things that happen, like growth in deposits, the 7.5% cumulative average growth rate we've seen for several years now. Those are very good for ROE, and those put downward pressure on the net interest margin. That's the way that we model. But to look at some of the pressures that have led to where we are and a lot of our peers are, because a lot of this is certainly environmental and structural. In the industry, we're roughly at a 25-year low right now. TLAC will be something that is a structural permanent change because we will all have this in our capital structures, and that has more cost associated with it than most of our other sources of funding. We also have some of these growth characteristics that are very beneficial to NII that have put downward pressure on the NIM. To list those out, really consistent asset growth. I mentioned the structural advantage in funding. That's a competitive advantage for our company. And the balance sheet positioning that we've taken. All of those things benefit net interest income. And this is what we encourage people to look at. This is much more modelable. This is what flows down to your earnings per share and return to shareholders. To put some perspective on it, we should look at the lower left-hand chart. This gives you a perspective of how we performed in 2015, and that's an example of an environment where we really didn't have a rate increase. We had one in December, but it was halfway through the 12th month of the year. That doesn't have much impact. So even in an environment with no increases to rates, we grew the net interest margin by 4%. And you can see how that compares to our peers. Most of the G-SIB peers had declining NII, and we had one regional bank peer that had some growth in NII, but it was half of the level of growth that we had. So where we are today is we're positioned again, even if we have no further increases in the rate environment, that we would expect to have growth in NII. And the 4% is a good starting point for how to think about that growth. There could be changes that move that number up. There could be things that move that number down. But that's a very good starting point. So in terms of capital, we're above all of our regulatory minimums. We're above our internal minimums with internal buffers. And what I'd call out is the CET1 ratio. As of the most recent quarter, we were 60 basis points above our 10% target. And that 10% target is an important number. And the reason for that is the binding constraint for our firm from a capital perspective, and I believe it should be for every bank, is the CCAR process and our internal capital planning and stress testing process. Because the amount of capital that you should hold at any point in time should be informed by the amount of capital that you need in a deep stress. So that number for our company is 10%. So we have 60 basis points above that 10%. That's dry powder from a capital perspective. Now, the pace at which we may move from 1060 to 10 is really going to depend on the opportunity set in front of us and the risk set in front of us. There's a tremendous discipline around how we allocate and deploy capital and liquidity at this company. So with the right opportunity set, you could see a much more rapid move towards 10%, but there may also be environmental conditions where you would want us to hold back and save that for deployment in the future. So one of the other pillars of the framework when we think about return of capital is strength of earnings, stability of earnings, and predictability of earnings. We also think that that is very central to the CCAR process. We know it's important to the banking supervisors. That's the heightened scrutiny that people get when they decide to move above the 30% dividend payout ratio. We look at those same factors. Let's look at those relative to the peer group. In 2015, our return on equity was very strong, 12.6%. In that environment, that was a strong level, second highest of the peer group, highest of the G-SIB peers. We've also shown for the first time a return on tangible common number. That's not something that we manage to, but we see that is being used much more frequently in peer presentations, so we want to give you an accurate number from us that you can use for comparison. When you look at the volatility or stability of earnings, look at the x-axis on the left-hand chart. That's the normalized standard deviation of ROE from 2009 to 2015. That's a little bit different than the slide that John showed earlier, which was ROA driven. Very low volatility in our earnings. So we've had good stability and we believe very good predictability in earnings. You probably noticed that the ROE target is a point lower this year. Most of the factors that drive that are environmental, and you're aware of those, so I won't walk through all of that detail. But I'm going to call out just two points here. The first is, we get a lot of questions, particularly on the treasury side, about the growth in high quality liquid assets and also the amount of cash that we have on the balance sheet. People see real opportunity in that with that level of cash, couldn't we roll that into securities tomorrow and have a real pop in earnings? The answer is, yes, we could. What informs those decisions is that view on the rate outlook and the economic outlook perspectively. So you will see that view evolve over time. So you will see certain quarters like the first quarter where we pull back and we're not particularly active in investing. Then you'll see other quarters where we're much more active in investing. It also relates to the loan production opportunities that we have in front of us. Loan production is a very profitable way to deploy excess capital and excess liquidity. So that informs the decision as well. The other thing that I would highlight is under expense considerations, and that's the ongoing risk and compliance spend. That's an area where I would encourage you to assume that all banks should be making zero sacrifices in this area because it's that spend and investment on compliance and risk infrastructure that allows us to deliver those very stable returns over time. The other element is with the CCAR governance over the return of capital process, it is really important that we're not only hitting all of the hurdles that we set for ourselves, but it's very important that we've got very good response to the regulatory requirements in front of us. We've made a lot of progress in that evolution, but we're in the second half. We've got a ways to go before that's done. I would suggest that it's a good thing for all banks in this sector to continue that spend and to be best in class, because the reality is being best in class in risk and compliance is another real competitive advantage. The other thing that I would highlight when you think about ROE is take it out of an absolute context. When you see our 11%-14%, that's a 2-year number. When you look at what a lot of our peers put out, it's long-term or steady state. When you're making those comparisons, I'd encourage you to view ours as a 2-year number. The reason we give you a 2-year number is, A, it's much more predictable, and B, it's much more usable for you in the modeling that you're doing in the near term. How have we done in return of capital? In 2015, we returned on a net basis, $12.6 billion to shareholders, one of the highest levels in the industry. Dividend payout ratio was 35.3%, also one of the highest levels. Net payout ratio was 58.8%. I also want to call out in the first quarter of 2016, you saw dividend payout ratio move from 35.3% to 37.5%. You shouldn't expect that to be a projection of the ongoing trend. This is something that cyclically happens in the first quarter because earnings tend to be a little bit lower in the first quarter of each year. I would expect that to migrate back down towards the mean for the year. The outcome of all of this is coming from our target of 11%-14%, we would expect that we would retain 25%-45% of capital to fund growth in the balance sheet. That equates to growth in capital on an annual basis of 4%-5%, and a payout ratio of 55%-75%, which is consistent with where we've been and is also one of the best in the industry. Where do we stand from a treasury perspective? In summary, the liquidity is incredible dry powder. Net interest income is poised to grow even without a rate increase. Capital and returns are at very healthy levels given the rate environment, and you can expect 55%-75% return of capital perspectively. To wrap up on a personal note, I would say I've worked in this sector for a very long time. At Wells Fargo Securities, I worked with bank clients and have worked with bank clients all over the U.S., globally, and of all sizes. My perspective over that time has always been when you think about the value proposition for banks, the most important factor by far is the team. You've heard about team today. You've heard from some of our team today. I get to work with that team every day, and I get to work with a lot of people that you didn't hear from every day. I can tell you with that visibility into the rest of the universe, that's the best team in the industry. Thank you very much for your time. I know we're over. Do we want to take some questions? We will take questions. Thank you. Yes, in the middle. We will get to you back there. Yeah. That is all right. Go ahead, Tonya. Thank you. A three-part question related to TLAC. Given that the proposed requirement has a PCA component to it for dropping below and also debt in general has a natural attrition process, debt matures. In your view, what is a suitable internal buffer for TLAC and also the long-term debt requirement? That is one. The second one I thought was, do you see yourself issuing more longer-dated paper, more towards the 10-year part of the curve than, let us say, threes and fives, given that the amount of 100% TLAC value diminishes as we get closer? Then, the third part is there an ability for the company to issue in foreign currencies under the U.S. shelf and qualify as TLAC? Yeah. Let us go in reverse order. Yes, we can issue in foreign currencies if we are under U.S. law. You should expect that as we evaluate issuance opportunities, we will be looking at all markets. Second question. You will have to remind me. Longer dated. So longer dated, the expectation is, of course, with what we have in front of us, you should expect that there will be a shift towards longer-dated maturities. Now, what you'll see is continued issuance along the curve and an increased weighting in those areas. And you should expect that we'll be active at all of those points. So on the short end, but in terms of TLAC eligible, we'll be in five, seven, 10, and even longer. And then in terms of the buffer, I think that at this point, we're not going to provide a policy buffer for TLAC. We will provide a buffer at some point in the future. We very much take into account the maturities that you highlighted. When I describe that we have a horizon-driven plan, that's a net horizon-driven plan. So we're factoring in all of the maturities during that time period. That's part of the way we'll be operating. Thank you. Yes, John, in the back. Hi. Me? Go ahead, Chris. Yeah, I was wondering, the debt that you are issuing, is there an opportunity over to that time to run down longer-dated debt at the sub-level to offset that, or is the new parent company debt a pure headwind, or can you offset that with less issuance at the subs? Yeah. I would say it is going to be totally dependent on what we are funding from a growth perspective. There is absolutely the opportunity for offset, but the question is, will we want to retain some of that efficient funding that we have to fund the growth in the balance sheet? The opportunity does exist. Susan. Thanks. I realize there's not all that much you can say about the CCAR process this year, but you did talk about capital payouts. You didn't raise the payout range, and I'm curious how the process has changed this year. We're right now in the middle of the process, so what I can say is fairly limited. What I'll tell you is you've probably heard that in this point in the cycle where banks are very flush with liquidity, banks are very flush with capital, and there's probably a perspective that we're in the second half of the cycle. The process that you all saw in the public distribution of the assumptions for the scenarios is we had negative rates, which was a curveball for the industry, and we had the toughest set of assumptions that we've all had. Now, all of that said, I think the reason we got those is the sector was very well prepared for those, and that's a very natural approach that you would expect at this point in the cycle. That's probably the most that I could say. I don't think I can comment on where our payout ratios would be other than what we've shared. If I could just follow up, in terms of the negative interest rate scenario, can you just comment on your preparedness to implement? Sure. The way that we inform this process is we not only did a tremendous amount of internal analytics and inventorying of systems and data, but we went out and talked to the treasurers in Japan where they've got negative policy rates. We talked to treasurers in Switzerland where they have negative policy rates. We did legal analysis for how it affects contracts with and without floors. Very deep and robust analysis in the process. What I can tell you is in all of those other areas, in Japan and Switzerland, I'd expect that this would be the case for all banks in the U.S., when a negative policy rate comes, most people aren't set up that you flip the switch tomorrow and it's the same as not having negative policy rates. But in all of those jurisdictions, what you saw was virtually no disruption. There were no legal issues. There were no significant system issues. My expectation is in the U.S., as a result of this exercise, I think that all banks will probably be evolving readiness for negative rates. But I also think the industry was pretty well positioned for it. I should also say, I think the negative rate scenario is very unlikely. When I talked about the CCAR process, it's natural when banks are so flush with capital and liquidity to throw some of these curve balls and test us. I think it was more of that than it was an expectation or signal that we would have a negative policy rate in the U.S. Right here in front, Neal. Yeah. If the 2017 or 2018 CCAR process puts a buffer in for the G-SIB buffer, what impact would that have on your comfort level with the 10% common equity Tier 1 ratio? Would that change if they put 200 basis points into the minimum you could have after a stress and a shock? Would the 10 go to 12? Would it go to 11? I know it's not a done deal, but I'm just curious what would happen if they changed that. Sure. Very good question. This is a big topic in the industry right now. What I would say is, of course, in a vacuum if you had addition of the G-SIB buffer into CCAR, that would put that type of upward pressure for all banks. What you should be aware of is, A, I think this is something that will evolve over time. We know this is something that's being evaluated. There may be an addition. There may be a partial addition. There may be a full addition. It's also entirely possible that there are other changes to the process that provide offset. It's possible that the assumption that we have now that we need to retain or we need to assume all of the base capital actions in the severely adverse scenarios. That means we can't assume that we would back off any repurchase or dividend activity, even in that depth of the negative scenario. That could be changed. That would have a netting effect. There are a number, I think, of puts and takes that are on the table right now. I think that we're at an inflection point in this process, and my expectation is we'll probably see that evolve over the next one to two years. My expectation is because of the time sequencing and when we would get the next set of instructions, it's probably more likely that it's 2018 than 2017, but we'll see. If they move very quickly, it could potentially make it into 2017. But if there were no offset, would it be one to one, the buffer versus your buffer level with the current CET1? I don't think it would necessarily be one to one. If you're holding everything totally static and you say that your minimum during that trough has gone up by 2%, the logic would be you should assume that you're moving up what you carry before you go into the stress by a similar amount. But my expectation, again, is when you roll into future CCAR processes, you'll have different balance sheet positioning. You'll have different risk expectations. You'll have some of this netting. So I wouldn't expect that you'd see that. The other thing that I'd highlight is if the rule is implemented in that fashion, it's probably not going to be implemented point in time. What probably happens is you get an NPR, a comment period, a rule, a phase-in period. So it's probably quite some time before we have final implementation of that type of change. I am very focused on it for the longer term, less focused on it for the immediate term. Here we have Betsy and then Kevin. Yeah. Hi. Two questions. One on liquidity. You mentioned you have a healthy cushion of liquidity. I view that as excess liquidity. I am just wondering what would drive you to reduce that excess liquidity that you have right now? Sure. There are a number of factors that would drive that. Obviously, good loan growth production opportunities are a great place to deploy liquidity. Outlook on the rate environment is really important because that shapes that decision-making process of when and how much we move from cash into HQLA, which typically will not have that much impact on the LCR. The second thing that I would highlight is there is the level of liquidity that we have on the balance sheet today, but I will use GE as an example. We funded independent of the liquidity that we had on the balance sheet, that entire transaction. So we not only have robust liquidity on the balance sheet, but we have shown that we have got access to liquidity to grow our resources if there are opportunities that warrant it. Just seems really conservative, especially since you are assuming as well deposit growth, and your deposit growth should be funding your loan growth, right? You have this excess liquidity, which is funding extraordinary loan growth. I am just trying to understand why not utilize it now in HQLA, for example. Sure. The two real logical places because you can see the loan production that we have had. Okay. Really remarkable loan production. I would say that the growth is strong, and we are using a lot of the liquidity that we have to fund that growth. The two other logical places are do you move some of it in HQLA, and trust me, that is really attractive. You look at it, and that creates a real pop to earnings in the short term. We want to be very conservative about the rate outlook because there are implications around that. One of the things that informs that is the amount of held to maturity that you hold at any time. That is an easier decision to make. If you put assets on with held to maturity, you do not have the same OCI impact as if you put the assets on in available for sale. The other thing that will be certainly a use for liquidity over time is return of that capital to shareholders. That would use some of that, but that is going to be very driven and informed by the CCAR process over time. Then you indicated the 100 basis point shock summary on 5 to 15 basis points to NIM benefit that you could get, but that was static. That's right. Right? If we get this 25 basis points in June or July, how are you thinking about what would happen over the next, call it, 12 months, just if that one event happened? It's- No, very good question. Directionally, if we have a higher rate environment, that's going to be a more attractive deployment environment for that cash and securities decision-making process. Now all of that said, it's not just informed by what happens in June, but it's more informed by what we think is going to happen after June. We'll take our last question with Kevin, then we'll pivot to our closing Q&A. Just a couple of questions. You mentioned in TLAC that you would have a 100 basis point buffer over the minimum. Would you have a similar buffer within the CCAR process? Would you expect to have a 100 basis point minimum in CCAR? Yeah, very good question. First, I do want to qualify the 100 basis points was for illustration purposes. You can assume that we would have a buffer, but we don't at this time have a 100 basis point policy buffer. In the CCAR process right now, there is no TLAC minimum. What we have in the CCAR process prospectively will be really informed by, A, what the requirement is in terms of a CCAR minimum through the process, and B, what our internal capital planning and stress testing process suggests that we should hold during that time period. Would you maintain 100 basis points buffer over the minimum CET1 ratio in the CCAR process? Well, the way that I think about the CCAR process, and hopefully I'm answering your question, is the buffer is established for that pre-stress period. The reason it's established in that pre-stress period is we want to have enough capital for the trough of the stress, and we want to know that as the rate environment moves and we're exposed to things like changes in OCI that become a deduct to capital and could put downward pressure in that interim period, we're still at a place that we have good minimum capital levels. So that's how I think about it. Once you're into the trough, obviously you're below your buffers and your minimums anyway once you're in the trough. But hopefully that answered your question. I think you mentioned in 2016 that you expect net interest income to increase year-over-year basis. Absent the GE acquisition, would you expect net interest income to be up year over year? Yes, we would. GE is certainly part of the story. It is a very good part of the story, but without the GE transaction, we would expect to be up. Great. Thank you, Neal. Thank you. Okay. It has been a long day, and we thank you again for such a great attendance and staying until the end. We have a question answer now for Tim, John, and me. Anything you want to ask, there are microphones around. Do not feel like you have to. But Mike, I would ask Tim one more time about that Wells Fargo Securities business. I have two questions. I will ask one now and then go back in the queue, if that is okay. Sure. You say you are a growth company, but you look at the last five years, and you have revenues still around $86 billion for the last five years. I just got an email from some investor far away saying, "I do not think Wells Fargo can grow much anymore without actually ramping up securities, without ramping up expansion Europe, and everything else." So in very simple terms, and you just talked about GE and NII going higher, where should the revenue growth come from over the next two years? If we were to make a list, this is what Wells Fargo says why revenue growth is at an inflection point. I will take a first shot. As I started out today's meeting with, if we look at the long-term fundamental growth where you grow shareholder value, we see it as a real economy business in loans, deposits, relationships, depth of relationships. Not all of that shows up in the top line the same quarter, maybe even the same year, and not the bottom line. We are facing pretty strong headwinds yet in a number of areas. But as we look at this company long term, those fundamental attributes of growth have never been stronger. In addition, Neal just ended by saying we have tons of liquidity on the balance sheet that is sub-optimized. In fact, it is making us nothing. So there could be some decisions along the way there. I cannot promise you that NIM will go up, but I can promise you this, we see ourselves as a growth company, and we believe we can grow net interest income this year and next year even under these extraordinary circumstances. Yep. Mike, I can only see it growing in four areas: Consumer Lending, Community Banking, Wealth and Investment Management, and Wholesale Banking. I will be deferential to the foreign investor who probably was not able to see the presentation. I do not know how you can come away with the business line presentations that you saw from 20 of the best leaders in financial services and not imagine that we are going to be able to continue to grow, right? There is no question that growth has been more challenged in the last eight years because of all the change that has gone on in the industry, when you think about large pieces of revenue that we had historically that were taken away for a variety of reasons, or we proactively decided to take away because we wanted to build the company for the long term. Given the presentations today, it is going to happen across the entire company. Another question. Hi, Vincent D'Agostino. Just two quick ones. Recently we have seen some court cases start to go against the government, and it also feels like the advancement of the regulatory agenda has started to slow somewhat. I am curious if you feel that way, and then maybe finally, if you think that we are starting to see a more rational and balanced regulatory and litigation environment. Who knows. If you take the litigation side, I think we're in the later innings of that. Yes, I saw something yesterday or today where there was a reversal on appeal on something that was for one of our big competitors. I think a lot of that is yesterday's news. Not that it always be completely yesterday's news, but I see us in the late innings of that. On the regulatory side, still half of Dodd-Frank is still not codified into laws yet. Most of the quantitative things that will happen to us, capital, liquidity, that have big balance sheet or income statement impacts, either is knowable or done right now. We mentioned TLAC just a few minutes ago. I think there's no question that's been a big change for us. Even though it's been difficult, the growth we're seeing today that helps offset the environment that we're seeing in loans and deposits, it's a pretty good environment for us now to differentiate ourselves. The regulatory costs are increased, and they're going to stay increased for a while. Thank you, and then the follow-up is earlier in the consumer presentation, there was a comment about how consumers are spending more on experiences than just products and merchandise. I'm curious if you're seeing this also manifest itself in the commercial side of your business, and then if you could talk about any ways that you've had to adapt to better serve some of these more service-oriented clients of yours, and then maybe talk about some areas that you might be pulling back within some of these more asset-intensive commercial lines. Thank you. Yeah. There's no question that some of the changes that we're seeing, some driven by demographics, some by reaction to how people fared during the last downturn have changed priorities and tastes and the like. For example, on the retail side, we're a big credit provider and product provider to the retail industry, particularly in Henry Jordan's business, in the asset-based lending area. We're continuing to monitor how a lot of that change in taste is impacting some of the particularly mid-size retailers because you've seen a tick up in bankruptcies there. Having said that, to the extent that we've got exposure to any of the firms in Henry's business, it's very well-secured. We clearly use the information that we're seeing on the consumer side, on the commercial side, and vice versa. But we're not really pulling back anywhere else in a significant way across the wholesale platform. Yeah. I was just wondering if you can give a little bit more color around the living will issue that the Fed flagged. Given last year, you fared okay, and then this year you had an issue. If you could just kind of delve into a little bit more detail about what drove that, and also if you could put that into context in terms of your confidence around CCAR. Could there be a qualitative issue that comes out of that? Sure. It's a good question. We felt our submission this past year would be sufficient to achieve our outcome, which was to pass the test. It was certainly stronger than the year before where we did pass the test. But the standards had been raised over the course of the year, apparently beyond where our submission got us to. Hopefully, you've taken time to read the detailed letter that they posted to their website about their feedback to Wells Fargo, because it'll give you even more detail than that. I think the bar is definitely higher. Resolution planning or resolvability has become one of the big three tenets of bank supervision. Capital stress testing, CCAR, as you mentioned, liquidity stress testing, including LCR and their view of our internal liquidity stress testing and resolvability. So the bar is very high. We've got some deliverables in October to remedy the shortcomings they found in the last go around. Then we have the next go-around, which is next July, which is an even higher standard, frankly, for the whole industry. And it is an all-hands-on-deck opportunity for us to embed resolvability into how we run Wells Fargo, which we've begun to do. So we feel good about the outcome for the future. With respect to what it means for CCAR, it's tough to say how the industry will be treated in the CCAR. It's been very rigorous. As Neal mentioned, we're later in the cycle. Banks have more capital and liquidity. Some of the scenario elements that they dealt are quite tough. And on the qualitative side, anything is fair game. So we'll see what the outcomes are. We feel obviously good about our submission and our process. But nobody knows until the results are distributed. Question here. Betsy's got a- One from Betsy. Good. I'm sorry, is that Jason right there? Jason. While you are there? Yeah. At the Investor Day in 2014, you guys mentioned the word cross-sell 80 times, which was down from 110 times in 2010. Do not have the final tally yet for this year, but I suspect it is lower than two years ago. Just want you to talk to, is there a change in emphasis in terms of the company, in terms of how it approaches the consumer or a change in consumer's behavior? Just because that is a phrase that we heard many times from Wells Fargo previously and seem to hear about it less in today's sessions. Well, we reduced it, just because we did not want to break the record again. No. You know what? I would not take that as any indication of that we have fundamentally changed the business. Whether you call it cross-sell or you call it mining the relationships that we have, fulfilling our vision of satisfying our customers' financial needs, you can call it whatever you want. I think the word that John started the morning about was, and to really reinforce the day, it is about relationships. The business has not fundamentally changed, in terms of how we think about our relationships and how we think about serving our customers. The absolute best opportunity for us to do more business is with our existing customers. We have, as you heard today, a very compelling culture, view, mutual value exchange as we think about serving our customers. When they are thrilled, we are thrilled. We are as committed today as we have ever been to deepening customer relationships, helping them succeed financially, partnering, using plural pronouns. That will result in more cross-sell, deeper relationships, more satisfied customers, more raving fans, and that is what it is all about. There is no change in that area. Betsy. Betsy. A question on the mix of commercial and consumer. You indicated that part of the reason why you've got the ROE decline is because of a mix towards commercial. I'm wondering, and that's over the next two years because you just brought in the GE business, but I'm wondering how you feel about that. Are you interested over time to migrate back towards a little bit of a richer margin consumer business? Acquisitions come into play or you just want to do it organic? It seems like there could be some interesting opportunities out there for more acquisitions. Maybe you could speak to how you're thinking about hurdle rates, et cetera. Start with you, John. Sure. I wouldn't think of it as migrating from commercial to consumer to move toward a higher ROA. Our activity in consumer front is really focused on what customers need. There, of course, we're the scale player in mortgages. We're the scale player in autos, and we've talked about wanting to do more in card for some time, which is a higher ROA business. You heard earlier today the emphasis that we've put on that business. It's generally organic. I think you could consider things like in-flight co-brand acquisitions as being strategic. We've done a small one in the past. There are obviously big ones that come up from time to time. Those could be considered, in addition to issuing core cards to our general customer base and strategic activity. But not because we're looking for a different ROA outcome, just because that's a good risk-return proposition, and of course, it's an everyday financial need for our consumer customers. Yeah. I would say, Betsy, our growth or the ratio between commercial and consumer would be guided by opportunity. If we have more opportunity in card, for example, to grow that, and there's a great risk-reward return in that, terrific. Who would've known a year ago or so that GE would become available? It could've been a consumer portfolio that could've been just as attractive. But the balance today, is more the result, not the reason. Yeah. And Betsy, I wouldn't just look at that mix between consumer and commercial as being an indication of interest in either of the businesses. I think to some extent, it's the natural result of when we put Wells Fargo and Wachovia together eight years ago, the part of the $133 billion of loans that Mike talked about, the more disproportionate share of that was on the consumer side as opposed to the commercial side. And so we've had really good loan growth across the platform on the consumer side. It's just that the headwind in terms of growing it on an absolute basis has been greater because of that portion of the 133 that was related to consumer in 2008. We have one from Keith across the aisle. With the higher capital, clearly it's had an impact on returns. The bullish argument for investors is now that you're going to be safer, the banking industry in general. You put a nice chart up showing the volatility of returns is low for Wells Fargo. What's your view? Do you feel like that your returns are now more predictable now with the business model today than it was maybe, call it seven years ago? And if so, why? Yeah, I guess I would say, maybe we'll get three different answers. This will be interesting. I would say it's more predictable only because we've been through so much over the last seven years, when you think about the regulatory change, the competitive change, the uncertainty in terms of what economic growth was going to be and what the recovery was going to look like, as well as the impact of low rates. I think I feel more confident about the predictability relative to where we were in 2009, because in 2009, we had just put two large companies together, and we hoped it was going to work out, but we hadn't demonstrated it to you yet. Well, so we were more levered then, which I think is at the root of your question. Yeah. As a result, we were definitely going to have more volatile returns then, than we would now. We also had meaningful higher risk consumer portfolios in our mix then, which were going to have a more cyclical and elevated loss content, which was going to be exacerbated by the leverage. I think we definitely have a more predictable return profile now. Yeah. I totally agree. Just think back to 2009, 2010, 2011, the mortgage business played a much larger role in the income stream than it does today. Today it's much more balanced. Okay, Paul. Going back to technology, you guys have done a great job in increasing your technology spend and whatnot. That has a tendency to drive foot traffic outside the branches, which has been really where a lot of the cross-sell has taken place. Have you been able to cross-sell on the technology front through the mobile apps? If you're driving foot traffic out, how do you think about cross-sell going forward? Are there other avenues? I'm sorry, go ahead. After you. No. You're the President. I think as we talked about during the community banking presentation, I thought Carrie and team did a great job. We're not investing in technology to drive any of our consumer activities outside of the stores. We're investing in technology to give our consumer customers more ways in which they can work with Wells Fargo, because that's what they're telling us they want to do. In fact, what's happened, as you saw, I can't remember the page number in Carrie's slide, but that the traffic in the more traditional areas has been relatively flat, which I think was a surprise to a lot of folks in the room, if I got some of the comments back correctly. But because of that investment, it's allowed us to also satisfy the needs on the mobile side. I would say that we're in the very, and digital side, we're in the very early innings of appreciating the opportunity from a sales and a customer standpoint on the mobile and the digital side. So far, as Jim mentioned this morning, we're pretty excited about what we've seen to date. I think the opportunities are pretty significant, but it's very early in the process. It was purposeful that we started today out with, after John's comments about technology and innovation, because today we do 14,000 customer interactions a minute in this company, and over 10,000 of those are digitally driven. Those digits, that volume continues to grow where the other ones are fairly flat. In fact, by customer, the in-person is going down, but we're having the same numbers because we're having new customers come. So it's not that inconceivable that customers will use their mobile devices and their non-physical locations to do more business with us, actually pull business, if you will. That's why we have a sense of urgency around here to make sure that we are serving customers as completely, as eloquently, as easily as we possibly can, allowing them to choose the distribution channel they want to. But there's no question that we're seeing, like Tim said, the early stages of customer behavior shifts, even though they hugely value our physical distribution, our stores, and our ATMs. I think I can see them doing that for a long time. But they'll spend more time with us, not in person. And this is another place where scale really matters. You bet. Because what we talked about today, whether it was in the innovation panel or in any of the other business line presentations, about how we're investing billions of dollars to get this right and to get it connected. So if you're a smaller institution or you're a monoline fintech product provider, the competitive advantage we have is just so much greater than you would imagine because of all the change that you were referring to. Saw another hand in the middle here. Is that Marty? John, when you had the first quarter with the impact of the 25 basis point increase, you were one of the few banks that actually, I think, underperformed what we expected in margin expansion and NII benefit because you had several things going on. First quarter really wasn't representative. Even your chart that has the higher deposit betas is really very conservative for what you would expect over the next 25 basis point rate hike. Were your expectations wrong, or did we underperform? I think there were circumstances or decisions made. There were a few things going on in the first quarter. We mentioned that we had pre-funded a lot of the right side of the balance sheet to bring the GE assets on without any interruption in liquidity. One of the things that might have been an incremental part of the answer to the question of why do you need to do that if you're sitting on $200 billion in cash is we're trying to keep that liquidity buffer constant during that time frame. We had a market freak out during that period of time when we were talking, and it was really handy to have that funding in place when it happened. I would say you had the funding. We saw also that we allowed a big portion of our amortization and maturity of our AFS portfolio to go un-reinvested in the first quarter because risk-free rates plummeted, and we didn't want to use that as an entry point. There was some carry that might have otherwise been there that wasn't there. Then you saw the impact on deposit pricing. As you say, it was the first quarter of it rather than a full year, and those betas reflect a 12-month expectation, which still looks a little bit conservative. But we had 2 basis points in total on the whole deposit franchise as an immediate response to the 25 basis point move. So that was some of the noise, and I would agree that 45-55 feels like a very safe place to estimate with respect to that analysis. Then John, maybe rephrasing Mike's question a little bit, you had all these positive business drivers in the last two years. Maybe we think of it on the negative side. What were the headwinds that have lessened now that would kind of uncap that and let that start to show bottom-line growth again in the next two years? Well, I think that we've got, I would take the redeployment of liquidity into HQLA, which is still liquidity, by the way, but it's duration rather than cash. That's one. Loan growth, meaningful loan growth, and the GE components are a big piece of that. Put organic loan growth on top of it, I think that will begin to have an even bigger impact. We've got expense discipline, so I think we'll have operating leverage if we have the revenue growth that I'm talking about that should give rise to a bottom-line benefit. Listen, it's not easy to make $5 billion a quarter, so I don't want to make it sound like it's that way, but those elements are certainly in place, and they're working right now. Of course, if we get a June rate increase, which we're not counting on, but if it happens, that would be helpful. Depending on what comes after that would be a benefit as well. I think Nancy, do you have a question, and a question with Jimmy? Yeah. Then Mike, I think, had a question also. Yeah, this is a question about the living will again, but a different aspect of it. As I recall, the Fed's letter to you basically said that they were not convinced of your plans to break the company up along regional lines. I guess we on Wall Street have always, or I think generally have put the issue of resolution apart from the issue of operation. Does this issue of they want to be convinced that you can break the company up along regional lines force you to think about the company in a different way? Because you have never thought, I think, about the company, at least since Wachovia was fully absorbed, on a regional basis. Do you now have to carry extra expenses or whatever to maintain that framework for breaking the company up regionally? Sure. It's a good question. Thank you. The short answer is yes. We're not going to run the company on a regional basis or establish legal entities on a regional basis, but we do have to have a complete program in place for shared services that demonstrates that we could sell off five regions and retain the one that gets sold at the end of a resolution runway with shared services in place until the buyers that we say are likely buyers were in a position to absorb the customers, the assets, and the liabilities in each of those five regions. If we're saying that we would sell Wells Fargo in bits and pieces to regional banks who have their own technology, for example, their own systems, and they could board our assets and liabilities, then that requires one level of shared service from Wells. If we're saying that we would sell to private equity investors who would need to stand up a de novo bank to accept it, then we have to demonstrate that we could provide probably a higher level of service to them until they were in a position to have completed that. All of that has to be completely codified, updated, and maintained forever forward as part of this process. The issue of resolution is an operational issue, not just a theoretical one. It's an operational issue. That's right. Okay. Thank you. Yep. Jimmy and then Mike. And then Mike. I have the privilege and pleasure of attending quite a few investor days of other banks. I just say that How did we do? Well- Do you live anywhere? Do you have a home? God, come on. I am going to lead off and just say to the question that Mike fielded, I was very impressed. All four of your big business lines I can see. I thought it was very impressive how each of your leaders highlighted areas to grow. Very easy to see that your scale allows you to have each of those opportunities. That is on the organic side. One question I have, which is a little bit more discretionary where I can get your input is on the inorganic growth opportunities. Two come to mind. One on the wealth management side, the manufacturing side of investment management. Is that an area of interest for you? Then two, on the credit card side for co-brand deals. If I think about Wells Fargo, and I think about your cost of funding advantage, your balance sheet capability, your strong brand, your strong customer service, it seems like Wells Fargo could be very competitive on the co-brand space. I am just interested in your thoughts on potentially competing for those deals in the future. As it relates to the wealth management question, the answer is yes. That is an area that we would like to try to add inorganically, again, if it makes sense to David and the team. As it relates to the co-brand transactions, I think Avid made a really good point today in responding to the question about how other credit card businesses were performing, and one of the reasons that they are not performing as well is because of the pricing challenges that have occurred in these very competitive situations. There have been some notable ones that have been well-reported in the media. We look at all those transactions, and for the most part, notwithstanding our advantage from a funding standpoint, they do not look particularly attractive. We may find one that is attractive, but to date, we have decided to put our pencils down, and I think that shows a lot of discipline on the part of Avid and Shelley and the whole credit card team. Mike? Yeah. Is Stephen Sanger still here? Stephen Sanger's right over there. He just left. So- That's great. I guess you're stepping down as CEO in 2 years, John. Is that correct? Oh, no. John Stumpf. Steve? Is that true? I didn't know. You've been talking to Mike? Seriously, I'm 63. Then we'll have to go to bachelor number two, I think, or three. That's a good line. That's the best line of the deal. I'll be 63 in September, and as you know, the rule here is 65 and we'll see you later, if the board wants me to stay from here until 65, and that's a board decision. As you know, we do transitions in this company without a lot of fanfare. You saw 23 terrific leaders here today, and there's tons of them behind you, so there's a deep field here. The board will make that decision as we go forward. As you know, as I mentioned earlier, Tim Sloan was named our President and Chief Operating Officer in November. So I guess the question for Steve, if you look at the S&P 500, there's 39 CEOs that are 65 or older. So why not have a CEO that's older than 65? John's, it's a nice returns, nice stock price performance and- Nice growth. Growth. Maybe. And nice picture in the annual report. So what's the thought process behind the 65 age limit, and can you just give a little more color on the process of selecting a CEO, when that began, how deep that goes, and just your general view as lead director for the last two years? I don't know whether it's anything formal about 65, but it's been our practice. I think most companies have a practice that they kind of think you better be prepared for a CEO succession when the CEO is approaching 65. But in reality, the process of thinking about succession never ends. I mean, it goes on through our performance appraisal processes, our personnel reviews. We are constantly evaluating potential successors to John because you never know. He could go to Africa and be trampled by an elephant or something. God. I think the important thing is, and this company certainly does it well, it is a constant discussion because the succession point itself is not really even necessarily the critical thing. It is what are the roles that various people in the organization have put in to prepare them to be ready to assume the CEO role when the transition occurs. I do not know exactly when the transition will occur. I think that is going to be a matter of how John feels, how the board feels. But our job is to make sure that we always have a good, well-thought-out succession plan in place. And without telling you what it is, we do have that. Moving right along. Thank you. Thank you, Steve, and thank you, Mike. I do not want to cut this short. We are having so much fun here, but I know people have plans. Is there anything else? Otherwise, I will wrap up. Let me just say, first of all, to all the people who made sure the room stayed cool enough, thank you. But seriously, for those of you who put this all on, we really appreciate that. For our guests, you, our owners, those who are analysts, who follow us, who have an interest in us, this was really an honor for us. You had to come here and spend the whole day with us, and you asked terrific questions, and we very much appreciate and that we are honored to be in your presence. For all of my colleagues who presented today, I could not be prouder and more humbled by the leadership that this team provides. So thank you very much. We will see you in 2 years. We do have a closing reception. Reception is out in the same room where we had lunch, the Gold Ballroom, out to the hallway and take a right. Thank you.

Data Source: Quartr Last updated: May 24, 2016

Earnings call transcripts are provided by Quartr and are published within hours after each earnings call.

Update frequency:

Quarterly

Data Sources Report a data error

• Slides