At this time, I would like to welcome everyone to the Wells Fargo First Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Please note that today's call is being recorded. I would now like to turn the call over to John Campbell, Director of Investor Relations.
Sir, you may begin the conference.
Thank you, Regina. Good morning, everyone. Thank you for joining our call today where our CEO, Charlie Scharf and our CFO, Mike Santamassimo, We'll discuss Q1 results and answer your questions. This call is being recorded. Before we get started, I would like to remind you that our Q1 earnings materials, including the release, financial supplement and presentation deck are available on our website at wellsfargo.com.
I'd also like to caution you that we may make forward looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8 ks filed today containing our earnings Information about any non GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings and the earnings materials available on our website. I will now turn the call over to Charlie.
Thanks, John, and good morning, everyone. I'll make some brief comments about our Q1 results, the operating environment and update you on a few important topics. I'll then turn the call over to Mike to review the Q1 results in more detail. We are in $4,700,000,000 or $1.05 per common share in the Q1. As you can see, these results included a 1.6 $1,000,000,000 decrease in the allowance for credit losses.
Higher net interest income more than offset a decline in net interest income And expenses are just beginning to reflect progress on our efficiency work. The impact of this work should increase in the latter half of the year. Credit quality continued to outperform our expectations with charge offs at historical lows, but low interest rates and tepid loan Demand remained headwinds for us during the quarter and we continue to manage within the constraints of our asset cap, which require us to anticipate the inflows from government stimulus, effects of QE and additional fiscal actions, which could impact our balance sheet. Overall economic trends improved during the quarter and while there are risks, the likelihood of improvement continues to increase And you certainly see this in the markets. Equity markets are rising, spreads have tightened and liquidity is strong.
Additional fiscal stimulus, Continued monetary support and the acceleration of vaccine availability provide a path to a more complete reopening and further economic expansion. U. S. GDP growth is on track to surpass its pre pandemic peak by the end of the summer and is expected to increase in 2021 by more than any year since 1984. Overall, the consumer is strong, though there are inconsistencies, which I will address later.
Consumer net worth was up 10% in 2020, hitting a new all time high of $130,000,000,000,000 Personal savings is approximately $1,300,000,000,000 greater today than it was a year ago. It's expected that more than $1,000,000,000,000 will be spent over the next 5 months. And this does not include the impact of President Biden's proposed initiatives. For Wells Fargo customers, Specifically, as of last week, over $46,000,000,000 has flowed into deposit accounts related to round 2 and round 3 of federal stimulus payments and we estimate that half has been spent and half remains in their accounts. For our customers who received federal stimulus payments, their median deposit balance was up 80% from a year ago.
And for All of our customers, including customers who did not receive stimulus payments, median balances were up 62% from a year ago. Weekly debit card spend was up every week compared to a year ago during the Q1. The year over year increase accelerated in March and mid March due to the impact of last year's COVID related restrictions and the impact of stimulus payments and was up approximately 70% during this week last year in both travel and restaurants, 2 categories that have been particularly suppressed since the onset of COVID-nineteen. Specifically for travel, For the week ended April 2, debit card spend was up 4 22% compared to 2020, but was still down 4% compared to 2019. Consumer credit card weekly spend continues to strengthen over the course of the Q1 as well and ended up and ended the quarter up approximately 70% during the last week of the quarter compared to a year ago, but importantly up 8% compared to the same week in 2019.
Businesses remain strong as well. Most clients still have strong cash positions And line utilization remain low. Demand for consumer products is high and dealer inventory levels are meaningfully lower versus historical levels. After declining during the second half of the year, commercial loan balances seem to have stabilized and if the economy continues to pick up, We would expect to see increased loan demand from our commercial customers in the second half of the year. With vaccine distribution accelerating, I'm hopeful that we will be shifting to a more normal way of life soon, but there's still many that will continue to need help As not all have benefited equally during the recovery, throughout the pandemic, our focus has been providing support for our customers and the communities we serve, and we continued those efforts during the Q1.
Since the pandemic began, we've helped 3,700,000 Consumer and small business customers by deferring payments and waiving fees. In addition to our $10,500,000,000 of PPP funding in 2020, In the Q1, we funded approximately 70,000 loans totaling $2,800,000,000 under the latest round of the Paycheck Protection Program. This year, we focused even more on small and diverse businesses and our average loan size was $40,000 down from $54,000 last year. We have the lowest average loan size amongst our large bank peers. 96% have been for businesses with fewer than 20 employees, 43% have gone to businesses in either low to moderate income areas or majority minority census tracts totaling more than $6,000,000,000 between this year and last year.
We committed last year to donate approximately $420,000,000 of our fees from the PPP program and established our open for business fund. We're in the process of distributing these funds to a combination of CDFIs and not for profits that serve diverse small businesses. To date, we have distributed over $125,000,000 and are working to accelerate distribution of the remaining funds. We estimate that these actions have protected more than 66,000 jobs and hope to make an even more substantial impact with the funds remaining. As we announced yesterday, we have invested in 11 Black minority owned deposit institutions as part of our $50,000,000 commitment to support MDIs.
We expect to complete our investments in another 2 by the end of the second quarter. As I mentioned before, we processed over $46,000,000,000 of customer deposits related to the federal stimulus payments through last week and the cashed Stimulus payments for non customers without charging fees. While we're proud of these actions, we know there is still more to do. Lower income families and individuals As well as minority owned small businesses will continue to need support and we will continue to look for ways to help. Climate change It's one of the most urgent environmental and social issues of our time.
And last month, Wells Fargo announced a major step And our efforts to support the transition to a low carbon economy by setting a goal of net 0 greenhouse gas emissions, including financed emissions by 2,050. We committed to publish data on our finance commissions and set interim goals as we work closely with our clients in this transition. We also released our first task force for climate related disclosure I'm sorry, task force on climate related financial disclosures report in the Q1, which provides an update on our progress managing climate related risks and opportunities. Let me turn make some comments about our strategic priorities. Last quarter in my shareholder letter, I discussed the and in the shareholder letter, I discussed the actions We're taking to improve our performance and we're making good progress.
We continue to prioritize the work necessary to build the appropriate risk and control infrastructure and it remains our top priority. As a reminder, this is a multiyear journaling. Progress may not be a straight line and while we Still have significant work to do. We are diligently doing what's necessary issue by issue. It's hard to share specifics given the nature of the work, But I believe we're making progress and we're confident in our ability to complete the work.
In terms of business exits, I highlighted on the call last quarter that we were focusing our efforts On our core scaled businesses and after rigorous reviews, we were in the process of exploring options for businesses that were not consistent with our strategic priorities. Mike will cover the financial details, but in the Q1, we announced agreements to sell Wells Fargo Asset Management and The Corporate Trust Services businesses and both are expected to close in the second half of this year. In addition, We completed a portion of the sale of the student loan portfolio and we completed the sale of the majority of the remaining portfolio recently. We're pleased that we have found buyers who we believe have a similar approach to service and are focused on providing clients with innovative products and solutions. These announcements are an important step to simplifying our business and allowing us to focus on our core strategic priorities.
Our work To simplify how we operate and create a more efficient organization continues. We made progress on our branch staffing and network optimization plans As we calibrate for changing customer behaviors and more traffic migrates to digital channels, We continue to execute on our commercial banking transformation as we optimize our coverage and operations model, consolidate lending platforms and automate and standardize many manual processes such as onboarding a customer pain point, which has been key for us. And across the entire enterprise, we continue our ongoing efforts to reduce management layers to speed decision making and reduce unnecessary bureaucracy. We are also focused on moving our businesses forward. A few examples, on the consumer banking side, we're accelerating our investments Digital with a particular focus on delivering a simple, easy to use, best in class customer experience For the most used mobile app features, we're also simplifying enhancing our product line, including launching Clear Access Banking, our low cost, no overdraft product, And we've opened over 500,000 new accounts since the launch last fall.
And this summer, we will be improving the benefits of our portfolio by Wells Fargo Checking customers. As I spoken about before, we're underpenetrated in credit card given our customer footprint And we're working on developing a significantly improved value proposition that we can introduce to the market. And on the commercial side, We're going after the middle market investment banking opportunity in a different way than we have previously. This includes joint accountability, investments in talent, name by name client prioritization and joint account planning. Mike will discuss capital more in his remarks, but our position remains extremely strong.
We repurchased almost $600,000,000 of common stock in the quarter and based on the restrictions still in place for the 2nd quarter, We have the capacity to return approximately $1,800,000,000 to shareholders. As a reminder, our asset cap limits our ability to deploy excess capital to our customers. Returning capital to shareholders remains a priority and we look forward to resuming capital returns under the stress capital buffer methodology starting in the Q3. Last quarter, I discussed constraints to achieving return on tangible common equity greater than 10% and then around 50%. I should note that those returns did not include credit loss reserve releases.
The asset cap and capital return restrictions continue, But the progress on vaccination distribution, ongoing monetary policy, additional fiscal stimulus and higher interest rates are helpful. We're in the midst of a multi year transformation and I'm confident that our operational and financial performance will continue to benefit from the progress we're making. I'd like to end by acknowledging that we've asked so much of our entire Wells Fargo team and I'm proud of all the work they've done to support our customers and the communities we serve. We will continue to do all we can to support an equitable recovery and help those most in need of our support. I will now turn the call over to Mike.
Thanks, Charlie, and good morning, everyone. Charlie highlighted many of the ways we're actively helping our customers and communities, which we highlighted on Slide 2. So I'm going to start with our Q1 financial results on Slide 3. Net income for the quarter was 4 point $7,000,000,000 or $1.05 per common share. Revenue grew from both a year ago and the 4th quarter The decline in net interest income was more than offset by higher non interest income.
Our first quarter results included a $1,600,000,000 decrease And as a reminder, in the first half of last year, we built reserves by a total of $11,500,000,000 And we had $18,000,000,000 of allowance for credit losses at the end of the first quarter. We completed the sale of Approximately half of our student loan portfolio in the Q1, which resulted in a $208,000,000 gain and $104,000,000 goodwill write down, And we closed the majority of the remaining portfolio just this past weekend. Our effective income tax rate in the Q1 was 6.4%, which included net discrete income tax benefits related to closing out prior year's tax matters. Our capital and liquidity remained strong. Our CET1 ratio increased to 11.8% under the standardized approach and 12.6% of the advanced approach.
We repurchased 17,200,000 shares of common stock for a total of $596,000,000 And we had $33,000,000,000 of excess capital over our CET1 regulatory minimum at quarter end. Our liquidity coverage ratio was 127%. Turning to Slide 5, which summarizes the financial impact of the business sales Charlie highlighted. We had included We have included the 2020 revenue and expense associated with the businesses in the slide. While they represented a little over 3% of 2020 revenue, the pretax earnings is much smaller.
Note that the table does not include the credit cost associated with the student loan portfolio, which can have a meaningful impact on the business' P and L and the expected expense related to this business are incorporated into our $53,000,000,000 outlook for the year. Also the expenses we've included related to the Corporate Trust Asset Management Businesses are the total expenses for those businesses. Some of those expenses may continue after we close the deals as we have transitioned service agreements and roughly 10% to 20% of those expenses are items such as corporate overhead that will take time to manage out of the expense run rate. In terms of segment reporting, the Asset Management business is now reported in corporate. Given that we announced the sale of Corporate Trust business late in the quarter, that business is still included in Commercial Banking and will move to the corporate sector in the second quarter.
Turning to credit quality on Slide 6. Our net charge off ratio in the Q1 declined to 24 basis points, the lowest it's been in a number of years And down 14 basis points from a year ago. Our losses have trended significantly better than our expectations due to the impact of forbearance programs and the unprecedented amounts of government stimulus. While there's still a lot of uncertainty, there are encouraging and improving trends related to commercial credit quality. Commercial net loan charge offs declined $159,000,000 from the 4th quarter to 13 basis points, the lowest loss rate since the Q3 of 2019.
The improvement was broad based with declines in all asset types, including $116,000,000 of lower commercial real estate losses. As we have done since the start of the pandemic, we continue to closely monitor our exposure to retail, hotel and office property types. The reopening of the economy has had a positive impact on retail and hotel as cash flow levels have begun to improve. That said, stress remains And retail, in particular, was the driver of charge offs in the Q1. Though clearly, there are negative demand trends in many office Markets, the office portfolio continued to perform well and we're not seeing any widespread stress in the portfolio as of now.
Consumer net charge offs declined $221,000,000 from a year ago with improvements across all asset types, but increased $88,000,000 from the 4th quarter with higher losses in other consumer loans and credit card, but still continue to be low. Nonperforming assets declined $692,000,000 or 8 percent from the 4th quarter driven by lower commercial non accruals primarily due to declines in energy and commercial real estate non accruals $10,700,000,000 of our consumer loan portfolio excluding government insured loans remained in COVID related payment deferrals at the end of the Q1. We stopped offering non real estate related COVID deferrals in the 4th quarter and 98% of the balances that were still in deferral at quarter end were real estate related. Loans that have already exited COVID deferrals have continued to perform better than we anticipated with over 95% of the balances current as of the end of the Q1. Though we're not though we're still not all the way back to pre pandemic levels, we've continued to adjust our credit policies to reflect better economic conditions.
Due to the reserve release in the Q1, our allowance coverage ratio declined from the Q4, but was up 90 basis points from a year ago. Similar to the Q4, well observed performance has been strong. There was still a significant amount of uncertainty reflected in our allowance level at the end of the Q1, We'll continue to assess the level of our allowance. If the economic trends continue, we would expect to have additional reserve releases. On slide 8, we highlight loans and deposits.
Our average loans declined for the 3rd consecutive quarter and were down 9% from a year ago. The decline from the Q4 was driven by lower residential real estate loans due to continued high prepayments and re securitization of loans we purchased out of mortgage backed securities last year. Real estate loan balances have been impacted by actions we took early last year to discontinue correspondent non conforming originations in home equity lending. We have started to originate correspondent non conforming loans again and should start to see more volume from this channel over time. Commercial loans were relatively stable from the 4th quarter, but were down 8 from a year ago when there was a strong borrower draw activity during the early stages of the pandemic.
Average deposits grew 55,500,000,000 4% from a year ago and 1% from the 4th quarter with growth in our consumer businesses and commercial banking, partially offset by declines in the corporate Banking business, corporate treasury, reflecting targeted actions to manage under the asset cap. With continued deposit growth, we have Actively managing down our long term debt outstanding, we tendered for $6,800,000,000 of senior and subordinated debt in the Q1 and along with maturities, Total long term debt declined $29,600,000,000 or 14% from the 4th quarter and was down 23% from a year ago. Turning to net interest income on Slide 9. Net interest income declined 5% from the 4th quarter driven by 2 fewer days, Unfavorable hedge ineffectiveness accounting results, continued repricing of the balance sheet and lower loan balances. These Impacts were partially offset by the benefit of lower long term debt.
On the call last quarter, we provided our 2021 net interest income outlook. We still expect net interest income to be flat to down 4% from the annualized 4th quarter level of $36,800,000,000 The benefit of a steeper yield curve has been largely offset by softer than anticipated loan demand, low utilization rates on commercial loans and faster than expected prepayments on residential mortgages. That said, it's important to recognize we are still early in the year and our momentum, which is expected by the industry, we would expect NII to land near the high end of the range. However, if loan demand proves softer than expectations, our total loan balance or and our total loan balance remains flat compared with where we ended the Q1, We would expect to finish closer to the middle of the range. We continue to closely monitor the evolving trends across each of the major drivers and we'll provide updates to our outlook as the year progresses.
Turning to expenses on Slide 10. Non interest expense increased 7% from a year ago, driven by increased personnel expense. Deferred comp expense reduced personnel expenses in the Q1 of last year by $598,000,000 As a reminder, late in Q2 of last year, We changed how we hedge deferred compensation, which reduced the volatility in our reporting for this item starting in Q3 of last year. Personnel expense also increased from a year ago from higher incentive and revenue related compensation, including the impact of higher market valuations on stock based compensation, which was partially offset by lower salaries. All other expense was down 4% from a year ago, driven by lower professional services expense due to efficiency initiatives.
Our expenses declined 5% from the 4th quarter, a seasonally higher personnel expense was more than offset by lower restructuring charges and operating losses. Our 2021 expense outlook is unchanged at approximately $53,000,000,000 with lower annualized expenses toward the end of the year. As we said on our last earnings call, our outlook excludes restructuring charges and the cost of business exits such as the $104,000,000 goodwill write down related to the sale We assumed $1,000,000,000 of operating losses in the outlook. The Q1 included $213,000,000 of operating losses. But as you know, these expenses can be lumpy, We also assumed approximately $500,000,000 of incremental revenue related expenses as these have been higher than expected So far this year due to strong equity markets, which is a good thing, as revenue more than offsets any increase, if the current market level holds, we would expect revenue related compensation this year to be approximately $800,000,000 but we are still early in the year and will update you as the year progresses.
We are continuing to execute on efficiency initiatives and additional initiatives continue to be identified and vetted. Turning to our business segments, starting with Consumer Banking and Lending on Slide 11. Net income increased from a year ago driven by revenue growth in home lending and lower provision for credit losses. Consumer and Small Business Banking revenue declined 6% from a year ago, primarily due to the impact of lower interest rates and lower deposit related fees. The decline in deposit related fees was driven by higher average checking account balances and higher COVID related fee waivers.
We Expect a high level of Paycheck Protection Program loan forgiveness in the 2nd quarter, which would result in higher net interest income. But as a reminder, the fees Those loans originated last year are being donated, so you will see a corresponding increase in donation expense, so it won't impact the bottom line. Home lending revenue increased 19% from a year ago on higher retail originations on gain on sale margins. The 12% increase from the 4th quarter was primarily due to higher mortgage banking income related to the re securitization of loans we purchased from mortgage backed securities last year and an increase in retail originations. Credit card revenue declined 2% from both the 4th quarter and a year ago due to lower loan balances reflecting elevated payment rates.
We continue to make progress in executing our efficiency initiatives in our branches. Transaction volume continues to shift away from our branches with 82 Percent of consumer and small business deposits in the Q1 done digitally, up from 76% a year ago. We have closed 3 95 branches since the Q1 of 2020, including 90 branches in the Q1 of 2021. We are on track to complete the remainder of the 2 50 branches we expect to consolidate this year. We've also continued to adjust staffing levels, including the reductions related to branch closures.
Importantly, to date, we've been able to make these adjustments while reducing customer attrition and improving client satisfaction. Turning to some key business drivers on Slide 12. Our 1st quarter retail mortgage origination volume was the highest since 2016. Total mortgage originations increased 8% from a year ago as a $6,700,000,000 decline in correspondent originations was more than offset by $10,500,000,000 of higher retail originations. Total mortgage originations declined 4 from the Q4 due to the seasonal slowdown in the purchase market and as growth in retail originations was more than offset by decline in correspondent originations.
While the mortgage origination market is expected to decline in the 2nd quarter as the anticipated increase in the seasonal purchase market is expected To be more than offset by decline in refinancings, we currently expect our origination volume to be robust as we have strong demand in the retail channel The Q4 8% from a year ago in a strong market with supply shortages for both new and used cars. With improving economic with the improving economic forecast, we are gradually returning Pre pandemic underwriting policies. Turning to debit card, purchase volume increased 3% from seasonally strong 4th quarter levels. Debit card volume increased 20% from a year ago, reflecting higher consumer spending due to stimulus payments and improving economic conditions And credit card purchase volume declined from seasonally high 4th quarter levels. Purchase volume was up 6% from a year ago as lower year over year volume early in the quarter due to Continued reductions in travel and entertainment spend was more than offset by growth in March.
Commercial Banking net income was up from both the Q4 and a year ago due to a decline in the provision for credit losses. Middle Market Banking revenue declined 20% from a year ago driven by the impact of lower interest rates as well as lower loan balances from reduced client demand in line utilization. Asset Based Lending and Leasing revenue grew 7% from a year ago, driven by higher net gains and equity securities in our Strategic Capital business As Q1 2020 included impairments due to a decline in market valuations. This was partially offset by lower net Interest income in Q1 2021 from lower loan balances. Non interest expense increased 4% from a year ago, primarily driven by higher technology spend, partially offset by lower headcount and consulting expense related to efficiency initiatives.
Average loans declined for the 3rd consecutive quarter and went down 19 a year ago stimulus programs have injected significantly significant liquidity into the market. Turning to the Corporate Investment Banking business on Slide 14. In banking, revenue declined 6% from a year ago, driven by the impact of lower interest rates and lower deposit balances and grew 7% from the 4th quarter. The linked quarter growth was driven by a 20% increase in Investment Banking revenue with strong debt and equity originations, partially offset by decline in advisory fees from strong 4th quarter levels. Commercial Real Estate revenue grew 5% from a year ago, primarily due to improved CMBS gain on sale margins driven by spread tightening as well as an increase in low income housing tax credit income.
Market revenue increased 19% from a year ago and strong client demand for asset backed finance products, other credit products and municipal bonds, which was partially offset by lower demand for rates, products and lower equities and commodities revenue. Average deposits declined 27% and average trading related assets were down 14% from a year ago, primarily driven by continued actions we've taken to manage under the asset cap. As I mentioned earlier, Wealth and Investment Management results exclude Wells Fargo Asset Management, which is now reported in corporate and prior periods have been revised. Net income declined 18% in the business from the 4th quarter. Revenue grew reflecting higher asset based fees and higher retail brokerage Transactional activity.
Expenses were up due to seasonally higher personnel expense. Net income declined 8% from a year ago reflecting the impact of low interest rates on net interest income partially offset by the higher asset based fees. We ended the Q1 with record client assets of $2,000,000,000,000 up 28% from a year ago, reflecting strong market performance. Net flows into advisory accounts improved in the Q1 from a year ago in Q4. Average deposits were up 19% From a year ago and average loans increased 4% from a year ago largely due to customer demand for securities based lending offerings.
Slide 16 highlights our corporate results, which included $1,200,000,000 of lower net interest income from a year ago, primarily due to the impact of lower interest rates, offset by a $1,400,000,000 increase in non interest income. Q1 2020 included equity impairments in our Affiliate Venture Capital and Private Equity Partnerships and results in the Q1 of 2021 included a $208,000,000 gain on the sale of the student loans portfolio. Non interest expense declined from the 4th quarter on lower restructuring charges. And we'll now take your questions.
Our first question comes from the line of Scott Siefers with Piper Sandler.
Good morning, guys. Thanks for taking the question. I guess, first one I wanted to ask about is on NII guidance. So Specifically in terms of premium amortization, there's about a $250,000,000 delta between today's level of premium am and where it was a year ago. Does that last year's level of about $360,000,000 or so, does that represent in your mind a pretty typical level?
And then kind of how quickly does it move back down to there?
Hey, Scott, it's Mike. I think you really got to remember what happened last year that would have impacted Premium amort, right? It was a bit of an abnormal quarter as you sort of got to the end of the quarter. I think from here, I think Based on what we're seeing, premium amort probably has peaked in the Q1 and starts to trend down from here. How long it takes to sort of get to a Kind of normalized view, I think we'll see over the next we'll have a better clarity on that I think over the next couple of quarters, but we would expect it to start trending down from here.
Okay, perfect. Thank you. And then, just a separate question. So the lending recovery is kind of a big question for You guys and others, I guess just regardless of what happens with industry trends, maybe if you could speak to where you feel you guys are getting your fair share Of loan growth, and where you think you might still need to do better? I know you had mentioned, for example, credit card as being very underpenetrated, but Just curious to hear broader thoughts there as well.
Yes. Look, as what you'll probably hear from a lot of folks, the demand across really Most commercial client segments has been pretty weak now and probably it stabilized or Seems to have stabilized over the last couple of months, but I think we'll sort of See how that progresses into later this quarter. I think as we sort of look at where the opportunity is as the economy and the momentum in the economy really starts Take off more. It's really across the board in our core client segments, in our middle market, our commercial banking more broadly. I think there'll be opportunity in kind of the core large corporate segment maybe to a lesser degree.
But we do really expect See that commercial banking demand start to pick up as the economy picks up. And so I would sort of highlight that. I think Charlie has talked a lot about The credit card space, I think there'll be growth there. But given sort of the relative size of our portfolio to the balance sheet, I think that The impact there will be modest to the overall size of sort of our loan portfolio.
All right.
That's perfect. Thank you very much for taking the questions.
Your next question comes from the line of Ken Usdin with Jefferies.
Thanks. Good morning, guys. I'm just wondering, Mike, if you can kind of just re Modify that expense commentary for the year, you said the $53,000,000,000 number and then you also talked about the Revenue related lift of about $800,000,000 So is that just the reset to $58,000,000 $5,38,000 all things equal? I just want to make sure we know what that includes and doesn't include and how you expect it to traject from here? Thanks.
Yes, sure. Ken, thanks for the question. If you recall how we sort of set the $53,000,000,000 target, I'll just give you a little bit of the background there, so that we covered last quarter. So embedded in that $53,000,000,000 target was an increase of about $500,000,000 of revenue related expenses and about $1,000,000,000 of Operating losses sort of embedded in there. And what we excluded from there is the cost to exit the businesses, which saw a little bit this quarter the $100,000,000 or so this quarter for the student loans business and any restructuring charges that come Come throughout the year.
So as you sort of think about the go forward piece of it, the $53,000,000,000 we still feel really good about. I think that What's putting a little bit of pressure on that is the incremental $300,000,000 of revenue related expense. So I don't think it's a foregone conclusion that We're going to be $300,000,000 higher, but I do think that's putting pressure on the $53,000,000,000 So it's possible we're a little over that if the revenue related expenses Hold. Which by the way should be a good thing, right? Because that means there's plenty of revenue on the other side of that to offset it.
And that was going to be my follow-up, Mike, which is, Was the revenue uplift what you had already seen in the Q1 or is it things that you feel better about Going forward, that we haven't necessarily seen yet, but you're now anticipating a better revenue environment.
Yes. We did see a little bit of it in the Q1 As equity markets outperformed, I think everyone's expectations. So if those market levels hold throughout the rest of the year, that's when you'll see The rest of that revenue related comp come in and so you'll see the revenue associated with it with throughout the rest of the year. Okay.
And then I'm sorry, just last one on it. Are you still expecting the end of year on expenses to be lower than the beginning as you had said also in the Q4 that trajectory still holds directionally? Yes, yes, directionally that's right. Do we still hold directionally?
Yes, yes, directionally that's right. We'll get more benefit from the efficiency initiatives that we're executing later in the year. So That will sort of impact the run rate. And I would just point out and remind people that we do have a lot of seasonal expenses That hit the Q1 and so you sort of need to normalize for those as you go out for the rest of the year as well.
Great. Okay. Thanks, Mike.
Your next question comes from the line of Erika Najarian with Bank of America.
Hi, good morning. My first question is a clarification For Mike, clearly the market responded to this comment. I think you noted that if loan growth was going to be continuing Tough this year that you would be NII would be down 2% from annualized 4th quarter, which I think the market is taking that you're bringing in your NII guide for the year. And I just wanted to make sure we interpreted that correctly that it seems like A more realistic outlook for NII now with the curve steepening and perhaps green shoots on loan growth is flat to down 2%.
Yes. Thanks, Edgar, for the question. Our guidance still holds at down it's somewhere between flat to the 4th quarter run rate to down 4%. And consistent to what we said in the Q1, to get to the top of the range, we needed to see some loan growth. That's still the case, although rates have offset some weakness that we've seen so far.
And I think to get to kind of the middle of the range, we really need rates that kind of hold where they are. And we won't need a lot of loan growth from Here to hit that, but I think there's plenty of scenarios that you can sort of think through that put you somewhere else In the range, but what we tried to give you were a couple kind of realistic data points relative to where we think it's what's possible In terms of where we'll land within the range.
Got it. Very helpful. And my second question is Charlie, clearly the market is reacting to what seems to be a brighter revenue picture for Wells and continued in your transition and turnaround, and it feels like it's shrugging off. Typically, your stock wouldn't be up 3% After saying that expenses could slip higher and clearly the market doesn't care given the revenue outlook, I guess I'm wondering as we look forward to 2021, I'm hearing you loud and clear in some of the investments that You've already planning to make in the consumer side, what are the puts and takes in terms of a greater bottom line or Benefit from the second half of that $8,000,000,000 cost savings that you've identified versus an economic picture that is clearly brightened even over the past 3 months. In other words, should we think of your expenses Having a higher floor, let's say $50,000,000,000 to $51,000,000,000 as we look out to 2022, and Obviously, that would come with greater efficiencies as revenue continue to improve.
Thanks, Eric. Listen, I don't think there's anything more that We're going to say in terms of what we would expect expenses to be going forward beyond what Mike covered in his remarks and what we said On last quarter, when we look at the opportunities to continue to drive efficiency in the company, which is really all about Just running a better company. Those continue to be extremely significant. We laid out just On a gross basis, what we thought those opportunities were and our degree of confidence in Being able to achieve that given the level of specificity that we had in line of sight. And I think that still Holds true and over time, we would expect to continue to find more kind of peeling the onion back.
And at the same time, we are Investing in the business and it's on the consumer side, it's on data, it's across The home lending platform, the card platform, our products in the consumer bank, what we're doing in our middle market business with Technology account, I mean, I can go on and on of all the things that we're doing. And so I think that's all embedded in our statement that we would expect the 4th quarter In order to get to $53,000,000,000 just would clearly be a lower run rate than the $53,000,000,000 itself. And that as we look forward, we hope to see net expense reductions as we continue to drive efficiency while continuing to add investments into the business. So Hopefully, that's responsive to what you're asking.
Thank you, Charlie. Strong message this quarter. Appreciate it.
Your next question comes from the line of Betsy Graseck with Morgan Stanley.
Hi, good morning.
Hi, Duffy.
I had a question around how you're thinking about the dividend and the buybacks. We know that Post CCAR stress test, assuming you passed that, that there's a little bit more room for you to Do both of those things. So maybe you could give us a sense as to how you would approach, the buyback and the dividend decision post stress test? And in particular, what kind of time frame are you thinking about that you would Need to optimize the capital structure down to your management targets because you're sitting with a lot of excess capital today as you know?
Sure. Mike, why don't I start and then you can pick up. I guess we'd start with the dividend. It's not lost on us that our dividend is quite low, certainly relative to where we're earning today and as we look forward. And we all know that's a consequence of Two things.
It's a consequence of the restrictions that were put in place by the Fed in terms of what those limitations were, But it was also a point of view that we had, which was we didn't want to have to if the environment Even would get worse from that point in time, be in a position to have to reduce the dividend again. So we would like to increase the dividend to a more Reasonable level, we think about it as targeting a payout ratio excluding reserve releases and things like that. And then beyond that, it is investment in the business. It's deploying our capital for our clients and then the difference Being buybacks ultimately just given the amount of excess capital that we have today. And Mike, you can talk a little bit about the timing.
Yes. And as you sort of think about timing, obviously, we've got a lot of components to sort of think about there. But You sort of think about it over the next year or so or year, I think that sort of gets you probably a reasonable timeframe to sort of work our way Assuming as we've been told that the restrictions come off and we're back to sort of a more normal stress capital buffers regime. And so I would sort of think about it over that timeframe, Betsy, in terms of what the timing looks like. Okay.
And I would say some of that is
dependent upon CCAR and the results and how that all plays out.
Got it. And on The payout ratios, I mean, the dividend had been on the higher end of the peer group, but your peer group is running somewhere Between 30% 40% and that's I would think what you mean by reasonable. I'm not asking you to tell me what ratio, but I guess I'm asking you, is that the right peer group or would you say you should widen your aperture a little bit and go
Yes. Look, I think as you sort of think about the payout ratio over time, I think we'll sort of come up and obviously it's going to be a Board decision Betsy in terms of what the dividend trajectory sort of looks like. But it's not lost on us that we need to sort of be in a reasonable sort of payout range over And obviously that's going to be dependent upon what we think the earnings capacity is going to look like. And so I think you'll see that sort of come through Over time and as we sort of have more ability to distribute capital.
Yes. And I guess what I would just Betsy, just real quick is, I think the way you I mean, I think the numbers and whatnot, the way you talked about it is generally the right way to think about it in terms of how I mean, number 1, we were Clearly high, relative to what others were and in terms of what we probably make sense That's not the way we're thinking about it. More long term range in terms, I think, what you talked about is right. We would like Do something sooner rather than later and that might not get us to where we ultimately want to be, but it would be, I think, an important step That's the direction that we're going.
Got it. Okay. Thanks so much for the color, Charlie. I appreciate it.
Sure.
Your next question comes from the line of John Pancari with Evercore ISI.
Good morning. Just on the margin front, I just wanted to see
if you could quantify the impact of the hedge and effectiveness on the net Margin this quarter and then separately, could you just talk about margin expectations from here just given the rate backdrop as you look We're looking at
a bottom here. We could see some upside as we move through the rest of the year. Thanks.
Yes. Sure, John. It's Mike. The hedging effect in this had about a 3 basis point impact on net interest margin. And as you probably know, we'll get that back A negative three basis point impact and we'll get that back over time.
These are hedging effectiveness is sort of a temporary difference that comes back. As you sort of think about the outlook from here, if the case that we sort of laid out that gets us to the top of our NII range plays out in the way that underpins that, then we should see some growth In both NII and NIM from here. And so this hopefully will be either bottom or pretty close to the bottom As you sort of look forward, if that case plays out, now as you know NIM can move around a little bit quarter to quarter. So you might have that bounce around, But the general trajectory should be positive.
Okay. Got it, Mike. Thanks. And then last separately on the cost save side, I know you expect about $1,500,000,000 to follow the bottom line Of the $3,700,000,000 this year, can you maybe help us think about the magnitude that could fall to the bottom line of the remaining Savings of
the remaining $4,300,000,000 as they're received. Any additional color you can provide this quarter now that you're beginning to peel the onion as you noted earlier? Thanks.
Yes. John, I would just go back to what we just talked about a few minutes ago. As you sort of think about the trajectory of the expenses, we'll get more of that impact As we go throughout the year and as Charlie just mentioned, the run rate as we go into the Q4 will be a lower At a lower rate, and as we sort of think about the investments we need to make and also the additional efficiency initiatives that we vet Sort of are working on top of what we talked about last quarter play out. We'll provide more guidance on that As we think about 2022 when we get later in the year.
And this is Charlie. I just want to add a couple of things if I can. First of all, I just remind everyone that we have a tremendous amount of work to do on our control environment. And mean, you look at the consent orders and all those things. And so no one has asked about that.
And again, there's really very little that we can say, as I said in my prepared remarks, But we have a lot of work to do. We're going to we're committed to spend whatever is necessary, and it is a significant amount of money. And as we get into next year, We're not going to lock ourselves into a certain number because we have to spend what's appropriate. So as we get closer, we'll be in a better position to give you more color. But it's given it's 3 quarters away, it just doesn't make any sense.
And I also just want to just remark, we are very focused on improving efficiency of the company, But the world is moving really quickly. We have a lot of work to do in terms of building the businesses and putting ourselves in a position So that we do create the kind of revenue growth that we would expect to be able to get out of this franchise. And so that's Just a reminder, part of the reason why we're not being too specific about what we expect beyond this year because as we continue to do our work and Plan for the future, we need to have the ability to do what's necessary to build the company for the long term, while we've still said we still would That expenses to be down on a net basis as we look into the out years, but more to come as time goes on. Got it. All right.
Thanks, Charlie.
Your next question comes from the line of David Long with Raymond James.
Good morning, everyone. Charlie, we've talked a lot about the businesses and becoming More efficient, if you will, in focusing on those that impact your strategic priorities. Are there any Businesses that you would like to increase your critical mass in or new businesses to get into that you think would be Helpful to your strategic priorities.
I think, so on your first point, I think, when we look at these There are 4 businesses that we report publicly. We generally believe that there are Material growth prospects in all of them, all for very, very different reasons. And so, it's hard to sit here today and say whether One should be a little bit higher than the others, but I think we feel great about the positions we have. We feel great about the opportunities in each. And so, I think that should be a that's an honest assessment of the way we view Our businesses.
What was the second part of the question again? I'm sorry.
Yes. Just are there any holes or any opportunities that you see to increase Critical mass and any specifics in any of those business lines, just thinking about any areas where you had some excess capital, could you invest it there To gain some market share, enhance your goal to improve your strategic priority outlook.
Yes. I think all the things that we have to do at this point are continuing to build out the products and services that we have at the core of the franchise. I mean, we are spending a significant amount of money. I think we've got a significant opportunity Given the size of our consumer footprint and in terms of what we should be doing from a digital perspective, The way we kind of look at it internally is we're in the game, but we're not at all a market leader, in terms of what our digital capabilities are. We have a very, very clear roadmap about what we intend to build out, and we would start to We'll be bringing those things to market this year.
But as I said, when we talk about what we're spending this year in that 53,000,000,000 That is included in there. And we've got opportunities like that across all the businesses. So I think We're not in a position to buy anything at this point. Our focus is on spending our money to strengthen what we have, But still believe that there are material opportunities to do that, some shorter term and some longer term.
Got it. Thank you, Charlie. Appreciate the color. Sure.
Your next question comes from the line of Matt O'Connor with Deutsche Bank.
Good morning. Just a long term strategic question, trying to look past the asset cap and everything. As we think about the Investment Bank, What is the vision for that longer term? You've got a competitive advantage in the SLR, which is becoming more and more evident With the Fed exemption going away, I think you're about 100, 150 basis points above peers. Is there a way to better leverage that?
And then maybe if Just also comment on the equity trading and it's not huge numbers, but was that impacted by a hedge fund out there?
So let me start. I think our aspirations in the for our Corp Investment Bank, It's actually interesting because I actually other than the fact that we're not afraid to talk about it, I actually don't think about it being Really all that different from what we've been doing over the past bunch of years. When you look at our results, the Corporate Investment Bank An extremely important part of the company. That's not because I declared anything differently. All we did is we broke out the results.
We actually saw the importance of it. A significant part of it is the corporate bank, but the investment bank is a meaningful portion of it as well. And so as we think about what it should look like going forward, We want to continue to build out the Corporate Investment Bank as we've been doing in a very linear way, not in an exponential way, Not moving beyond our risk appetite that kind of defines what Wells Fargo is. But just by serving the existing customers that we have in most parts of the company in a much more holistic way, Ultimately, over a period of time, that does allow you to expand your reach in terms of what your client base is. And so we're focused on the products and services that Our predominantly U.
S. Customers want from us. We've talked about the opportunities to penetrate the corporate investment banking products Into the middle market, but it's true of there's significant opportunities in the large corporate market in the U. S. Where we've got Significant treasury management relationships, material lending relationships and we're completely underpenetrated So, that's the way we're thinking about it.
And again, I would just stress, it's a continuation of building it out in a methodical way, Not focusing on using risk in order to grow share, but focusing on our customer relationships that we have because we have a shot. And just to be clear on the equity The piece that you're talking about, just remember, we do have an equity platform, which you can see in our results. I would just describe in terms of our prime brokerage business, because I'm sure we'll get a question on it, so I'll just answer it now. Our exposure in total and our individual exposures, I would describe it as just very consistent with the size of our platform. We manage it the way we in terms of risk, the way we Manage all the risks in the Corporate Investment Bank, and I think we've seen the results over a period of time there in terms of what that means, Because it's not just what you do, it's how you do it.
And so, we did have a relationship with Archegos. We said publicly that we were always well We exited it with all of our exposure with no loss. And I'll just add that we had substantial excess collateral after liquidation. So, it just says, again, in terms of the way we think about How we want to manage businesses that have risk in it, not that we will be perfect all the time. And as is the case in all events, the lessons to Learn both in terms of what we've done and what others have done and we'll factor that into how we manage the businesses as we always would.
And I would just add just one thing as you sort of think about our growth from here. We are a bit constrained in growing our investment bank with the asset cap restrictions that we have in place Given the significant growth that we've seen in consumer deposits in particular. So as you sort of think about that timeline and that approach, Charlie said that will take some time to sort of play out.
Yes. Just to reiterate that as we look at the actions that we've had to take to accommodate all the liquidity that we've seen, The Corporate Investment Bank has buried the biggest brunt in terms of where we've actually gone to create a bunch of that capacity. So As we think about the future, the first step is actually just getting back to where we were.
And then just to clarify, the decline in equity trading year over year, is that just if it wasn't from Archigoes, is that distortion from The retirement, there's some noise I think related to that in a year ago comp. Was that what's driving
Yes. It's just activity levels in our business and our business is a little bit different than others, a little bit smaller cash business that sort of I think drove a lot of activity This quarter, so I think there's a number of factors sort of driving it. No individual sort of item that's significant.
Okay. Thank you.
Your next question comes from the line of Steven Chubak with Wolfe Research.
Hi, good morning. So I wanted to start off with a question for Mike just on the fee income outlook. Lots of moving pieces in the quarter, But how should we be thinking about the appropriate jumping off point for core fee income As we think about the completion of the business sales and maybe some normalization in IB and mortgage activity, I know that there's more explicit guidance that's been given on the NII side. I was hoping you can maybe unpack how we should be thinking about that core fee income run rate from here pro form a the completion of those sales.
Yes. So obviously, we've given you a lot of detail on those sales, so you can model in the impact That that's going to have on fee income pretty easily. As you sort of think about some of the other big line items underneath that, We had about $2,800,000,000 in the quarter for advisory and other asset based fees primarily in our wealth business. And as you sort of think about the key driver there, it's going to be equity market levels. And so you can model what you think is going to happen there Plus flows that may come in.
As you said, another $1,300,000,000 in the mortgage business, that is a bit cyclical as you sort of pointed out. But given what we see at this point for the Q2, we expect to have robust origination volumes in our business. And so that should be a good quarter at least. And as rates You'll see some impact there in terms of volume impact there. As you look at some of the other pieces, you got deposit and lending fees Just under a couple of $1,000,000,000 there too.
I think those are pressured in the short run, but should see some normalization in growth over time. You've got card fees, which should grow with economic activity. And then you've got another couple of $1,000,000,000 that's kind of I'd kind of characterize as more transactional in nature whether it's commissions or investment banking fees. And so I think if you sort of think about it that way, you can probably come up with a fewer A few drivers that sort of help you model that in a way that gives you some it gives you a view on where it's headed.
Thanks for that color. And just for my follow-up on NII, maybe focusing on liquidity You guys are in a very strong excess liquidity position. I know that a couple of quarters ago, and I Mike. It was actually your predecessor who alluded to the fact that your appetite was tepid to redeploy some of that access into securities Just given at that point in time, the curve was flat as a pancake. Now that we've seen some incremental steepening, I was hoping you could speak to what's contemplated in the NII guidance in terms of excess liquidity deployment and your appetite to actually grow the securities book from here given your liquidity capacity to do so?
Yes. No, as you point out, we've got plenty of capacity. And As you look at what happened in the quarter, kind of in a marginal way, a little under $10,000,000,000 we've increased the portfolio. So we've started to We redeploy a bit of it. But as you sort of point out, although the curve has steepened, rates are still relatively low.
And so We're working to balance sort of the short term carry we're going to get by redeploying faster with OCI impacts over And how to do this in the most effective way. And when we get good entry points, we're taking advantage of it. So I would think that we're going to continue to redeploy at a prudent pace as we see opportunities that sort of make sense from Not just the short term carry view, but also all the other items that we sort of need to take into account as we sort of look forward.
That's great. Thanks so much for taking my questions.
Your next question comes from the line of Saul Martinez with UBS.
Sorry about that. I was on mute. Mike, I believe you mentioned that The expenses or some of the expenses associated with the Asset Management business and the Corporate Trust business will be sticky and will Remain for a bit. And we're talking about annual in 2020, about $1,700,000,000 in aggregate. What's still a little bit unclear to me is in the $53,000,000,000 expense number, what proportion of that $53,000,000,000 or one $7,000,000,000 is embedded in the $53,000,000,000 guide.
And I guess as an adjunct to that, I guess, Can you just talk about how sticky those expenses, how what proportion of those expenses will stick around? How do they roll off over what time period? I guess what I'm a little bit sensitive to is with the sale of the 3 businesses, you're creating about a $2,300,000,000 Revenue
hole and
just want to make sure that there that we understand that there is No notable impact on the expense base. So if you can just help us unpack some of this stuff, it would be helpful.
Yes. No, it's That's a good question. So as you sort of think about corporate trust and asset management, we assume that those expenses would be here for the full year and the 53,000,000,000 So there's no savings assumed relative to the outlook we gave you. So that's sort of I guess point number 1. On the other parts of the question, What we were trying to point out is with both of these businesses probably certainly for the Corporate Trust business maybe a greater degree, we'll have some transition services agreements as they take on and migrate these businesses.
So some of the expenses stay. Some of that will get offset Yes, and other items, but some of the expenses will stay as part of those agreements. So not everything transitions sort of day 1. That's sort of point number 1. Point number 2 on it is that As you would expect, there's a portion of these expenses that are more shared across the organization.
I use Corporate overhead just as an example. So it will take us a little longer to work the majority of that out. And so I characterize that as Somewhere between 10% 20% of it will take a little bit longer. And then I guess lastly as we sort of get to closing on these deals, we'll be transparent and provide An update to our guidance on how these will impact it.
Got it. But if we're thinking about 2020 2, in relation to the sort of the ongoing expense run rate, which is reflected in the 53,000,000,000 Really the $1,700,000,000 I'm just looking at Asset Management and Corporate Trust, the bulk of that Should by that point, assuming the deal is closed, should call it, I don't know 80%, 90% of that should be out of run rate by next year?
Yes, subject to any impact from transition services agreements. Got it. Right. So as we get closer, we'll you more
experience around that. Which we would say more in revenue.
Yes. As Charlie said, in most cases for these transition service agreements, we'll have We'll have some expense still there, but we'll get reimbursed and the way the accounting works on that is just geography. We'll get some revenue and offset by these expenses.
Is there a reason why these are not placed in discontinued operations until the deal closes?
Well, I think we moved asset management to corporate. And so we moved it out of the segment that it's in. And as I noted on the call, we'll move Corporate Trust out of the Commercial Banking segment in the 2nd quarter. So you'll be able to clearly see sort of the impact of it in the operating segments.
Got it. All right. Thank you very much.
Your next question comes from the line of John McDonald with Autonomous Research.
Hey, Mike, 2 quick cleanup items. Just on the tax rate, can you remind us what's making the tax rate low this year? And whether the reserve releases put Some upward pressure on that. And then more importantly, what is it sustainably low as you could look at into further years because of tax advantage investments Or is part of it profitability related? Just give us the factors there.
Yes. The biggest impact, John, on the Tax rate relative to kind of the marginal rate that we've got is the impact we get from the tax credits we get on our low income housing and Renewable Energy Investments. And as you can see from the K disclosures, those are those have been growing year after year and they grew They will we expect them to grow in 2021 as well. And those are what they are, right? There's no those are pretty easy for us To identify and forecast and that's the biggest piece of what's bringing down the effective tax rate and that those will Those credits will continue.
Obviously, the more pretax income that we have above and beyond what we expect we'll sort of be at the marginal tax rate. And so presumably if we obviously theoretically if we earn more money then you'll see that effective tax rate In shop over time.
Okay. And then just on the mortgage outlook you mentioned.
John, this is Charlie. The only one I want to add on that is just and Mike, you can correct me. The reserve releases Affect the rate, but the size of our total tax number, not that big. Again, the Substantial impact on the lower rate is the dollar benefit that we get from these tax advantaged investments that we have. And as Mike said, Just on income going forward, think about it in terms of the marginal rate.
Got it. So you're still expecting a single digit tax rate this year, Mike, correct?
Yes. No, at this point, that's the case. Okay.
And then just to clarify on the mortgage outlook, Mike, I think you said like the industry might be down in volume, but you guys expect to buck that a little bit because of some of the retail strength you have? Or, were you kind of just saying that you'll be down a little bit, but still robust? If you could just clarify your outlook on mortgage that would be great.
Yes. Look the industry data typically their forecast lag a little bit Relative to what the industry is actually seeing. And so I think the industry is projecting that second quarter is going to be down a little bit, but We'll see how that sort of plays out over the coming weeks in terms of what their forecasts are. But I think based on what we're seeing in our pipeline, We feel like it will be a pretty robust quarter on the origination side. You're likely to see that gain on sale margins Come down, but we were likely to see an increase in volume as well.
Okay. Thank you.
Your next question comes from the line of Vivek Juneja with JPMorgan.
Hi, Charlie, Mike. Thanks for taking my questions. Just Couple of cleanup ones, just a little bit further on mortgage banking. My sense you just answered that partly. The question I have is Ginnie Mae buyouts, you talked about that boosting your mortgage banking gains.
How much was that? And because then that give us a sense of what did your gain on sale margin do in Q1 versus Q4? And how much are you expecting that gain on sale margin I'm sorry, the Ginnie Mae buyouts To continue in the next couple of quarters, how much more to do?
Yes. I think, in fact, I don't have the number in front of me on The impact from the buyouts, but I would also sort of point out, so we can follow-up with the after, but I would also point out that The early buyouts as we re securitize them that impacts sort of our balance as well sort of our loan balance in home lending. And so I think that's another big driver. And we give you some data in the Qs in terms of what those balances look like quarter to quarter. So we would expect that over the coming quarters that we're going to continue to re securitize more of those loans.
Okay. And then the second one for both of you. I saw that Numbers on the expected gain on sale on the businesses, well, the Asset Management and Corporate Trust, Is that net of goodwill or is that would we need to adjust a goodwill write down On that and that will obviously play into your share buybacks. And Charlie, Given that we're all anticipating the asset cap to be lifted at some point, how you're thinking about the pace of share buybacks That will give you an opportunity to put some of that capital to work in terms of growing the balance sheet too. Don't worry, I'm not trying to pin you down On timing of asset gapping lifted, but just thinking
Yes. Vivek, I'll start there. So I don't want to get wonky on accounting, but The way we accounted for the student loan business was a sale of the portfolio. And so there was a goodwill write down that showed In the P and L and how that flows through. As you sort of look at the Corporate Trust business sale and the asset management sale, you won't have a corresponding write The gains net of all everything that goes into exiting there, so you don't need to adjust For that, I think as it comes to sort of the asset capital question, we'll go back to our stock answer around Not that sort of not commenting on that at all other than the fact that as Charlie has said a couple of times On the call that we're it's our top priority and we're continuing to do whatever we need to do to sort of work our way through that and we continue to believe we're making And good progress there.
And as you sort of look at our capital and liquidity levels, we've got a significant Continue to have a significant amount of excess capital.
Okay. All right. Thanks.
Our final question will come from the line of Charles Peabody with Portales.
Yes. I have two questions, 1 on cards and 1 on NII. On the card front, I mentioned that you are punching below your weight. And Curious, you're hearing from a lot of the card companies in JPMorgan this morning that they're going to really accelerate their marketing spend on cards in the second half of the year. So are you expecting to grow it?
How are you expecting to gain market share? Is it pricing? How are you going to improve your relative position in that business?
Sure. This is Charlie. Thanks for the question. I would say first of all, I would say, Again, kind of like my comments on the Corporate Investment Bank, when we think about the opportunity, we're not talking about doing anything That is materially different from a risk perspective for the company. The way we look at it is, we have a business today, which has $35 ish billion of receivables.
When you look at the size of the consumer base that we touch across The franchise, it's hugely substantial and we're hugely underpenetrated, even though we do have a reasonable sized business Ultimately, when you look at what we do as a card company, the fact is our card propositions are not competitive, What is available today in the marketplace or where people are going? When we look at our things that we do on fraud, when we look at Customer service, every step of the way, we think we have opportunities to make material improvements in what our offerings look like, which will make our products far more attractive, for those that currently have the products, So that becomes their primary product, so more attractive for the customers that we currently touch. And It's a very, very it's we're very, very clear about what we think we've got to do To increase that penetration, in a lot of ways, it's very, very basic, because we're building on something, which is Particularly uncompetitive, which I just look at like it creates great opportunity for us.
And as a follow-up question on NII, I believe you guys modeled scenarios for negative rates at the short end. Can you share some of your findings on that?
Yes. Negative rates in the short end won't have a significant impact on us at all. I think we have the outlet at the Fed At 10 basis points and so I don't see that being an impact for us.
Thank you.
I'll now turn the conference back over to management for any concluding remarks.
This is Charlie again. I just want to thank everyone for the time, and we look forward to talking to you during the quarter and then on the call next quarter. Take care.
Ladies and gentlemen, that will conclude today's call. Thank you all for joining. You may now disconnect.