We’re seeing a bunch of that be given back today even. And what we’ve seen over the last couple of years is that every time you have this strong reaction, either up or down in expectation for rates, that reaction tends to moderate a little bit over a pretty short period of time. And so we’ll see how that plays out.
Betsy Graseck: Okay. And obviously, we’ve had quite a bit of activity volatility on the long end of the curve. How do you think about that? And is there opportunity set for maybe pulling in some more deposits and reinvesting in securities given the slightly improved long end rates here?
Mike Santomassimo: Yeah. And we’ve started to do that to some degree in the first quarter where we have been starting to buy some securities, mainly mortgages, given where rates and levels have been. And that’s been a good trade, I think, for us so far. And so I think you’ll certainly see us continue to deploy more cash into securities, at least at some modest levels as we look forward over the next quarter.
Betsy Graseck: Okay, super. Thanks so much, Mike.
Operator: The next question will come from Erika Najarian of UBS. Your line is open.
Erika Najarian: Hi, good morning. Just to follow up on Betsy’s question, on the net interest income outlook, you had a peer that had a more modest upgrade to that outlook than expected. You held firm on your NII guide. I guess to that end, as we think through whether or not there are [three cuts] (ph) or no cuts, above and beyond just marking to market, the NII to the rate curve is the implication to volumes, right? Like, you mentioned in response to Betsy’s question, the client behavior. And so I guess I just wanted to understand in terms of the range of outcomes of zero, which is being talked about a couple of days ago, to — with three embedded in your estimate, how should we think about how you’re thinking about volumes in terms of loans and deposit behavior? In other words, have you considered a wider range of volume outcomes as you think about the curve outlook?
Mike Santomassimo: Yeah. No, I’ll try to — I’ll take an attempt at that, Erika, and you can tell me if I covered it all. But it’s certainly — we’re at a point in time, and I said this on a call with media earlier this morning, like, we’re at a time where it’s difficult to sort of model the different outcomes that you could expect to see with net interest income, just given all the dynamics that are happening there. And as you said, like, I think the fact that rates might be higher than what people expected a week ago, that could change first of all, but let’s stipulate. At this point, people are thinking it’s going to be higher for a little bit longer. We do have to wait and see how clients are going to react. And I think we do our best to try to come up with a range of outcomes there.
And given that — given what’s happening in rates plus what’s happening in quantitative tightening, what’s happening in sort of the economy overall, it’s going to all matter in terms of what happens with deposit levels. And let’s see how that plays out. But I think as I come back to what I said earlier, we feel better than we did today than we did in January about where we are, but there’s a lot to play out for the rest of the year.
Erika Najarian: Got it. And just a follow-up, kind of a two-part question but hopefully very related to one another. It was — the lifting of the consent order was clearly huge for how the market was perceiving Wells. As we think about further remediation, how should we think about how you’re thinking about the potential cost saves that you could extract from all the processes that may be in place has been focused solely on the remediation? And I ask that not in light of the usual recycled question, but clearly had a massive outperformance, like Ebrahim mentioned, on investment banking and trading. And as we think about those expenses, should we start expecting the reinvestment back to potentially accelerate? And also on investment banking and trading, I know there’s a lot of seasonality, but are these new run rates?
I guess it’s hard for us to tell what the base is because obviously, as you — as Charlie mentioned, you’re underpenetrated across the board. So should we continue to see a moving up of this base despite the seasonality as we look forward?
Charlie Scharf: Okay, there’s a lot in there. Let me start, Mike, and then you chime in. So first of all, Mike, you can comment on like investment banking and trading. But again, we’re — I mean, we’re not going to answer the question on how you should think about what investment banking and trading will be in the future. What we’re focused on are, are we building businesses? Are we taking share in a way which is profitable? And that’s exactly what we’re starting to do. And there is volatility of the business, but we’re focused on building it over a period of time and that’s what we’re seeing. And so the way we would think about it when we look at our own forecasting is we would expect to see our market shares rise over a period of time, and quarter by quarter, know that it will be subject to volatility that exists.
Mike Santomassimo: And when you think about the first quarter in particular, there’s always going to be seasonality on the trading side. That happens pretty much every year. So you can’t just take that as a run rate. And on the investment banking side, you’ve certainly seen some very high issuance volumes on the investment-grade debt side. So that’s likely maybe pulling some issuance forward later in the year but we’ll see. And then some of the M&A revenue that’s embedded in there can be somewhat episodic and volatile, just given the timing of deals and closings and stuff. And so you do have to look at those two lines over a longer period of time.
Charlie Scharf: And then on your question on expenses, again, it is — we were in the exact same place that we’ve been, which is we’re not thinking about at all. We’re not doing work. We’re not thinking about whether there are efficiencies to be gotten out of all the risk and control work that we’re doing. In fact, we’re still on the other side of that, which is, we still have more open consent orders and we’re still committed to do whatever is necessary, including spending whatever is necessary to get that work done properly and build it into the infrastructure of the company. I’ve said there’ll be a point at which when it’s built into what we do and there’s a high degree of confidence that it is part of the culture and our processes, that we will have an opportunity to figure out how to do some of those things more efficiently.
But that’s not on our radar screen at all. What is on our radar screen is the fact that there’s still a lot of inefficiency left within the company completely away from the money that we’re spending on this. And that’s where we’re focused, and that’s why we have the ability to invest in card and invest in investment banking and trading and accelerate the branch refurbishments and hire more bankers in commercial banking and things like that. So I would just still continue to separate the fact that we’re committed to get the work done, we’re going to do whatever is necessary to spend there, and that’s not the area of focus for us when it comes to efficiency.
Erika Najarian: That was clear, Charlie. Thank you.
Operator: The next question will come from Steven Chubak of Wolfe Research. Your line is open, sir.
Steven Chubak: Hi, good morning, Charlie. Good morning, Mike. So I wanted to start off just on a question maybe unpacking the NII commentary a bit more. In the prepared remarks, Mike, you noted that you expected NII to be troughing towards the end of this year. So less concerned about the full year ’24 outlook. I was hoping you could just speak to the inputs or assumptions that, that’s supporting that expectation around troughing or stabilization, given further rate cuts that are reflected in the forward curve beyond ’24.
Mike Santomassimo: Yeah. When you look at all the different factors, Steve, there’s obviously nothing that’s sort of unique to sort of our balance sheet. But when you look at both the asset repricing that’s happening in securities, you look at what’s happening and you just sort of project forward on sort of the loans and the other parts of the balance sheet, that’s obviously a key input as you sort of look forward. And then at some point, you would expect that the migration and deposit mix starts to stabilize as you go forward. And I’m a little intentional, and I’m intentional in the words we use in terms of towards the end of the year. Is it right at this year? Is it early next year? Like, it’s going to be — we’re getting closer to that point in terms of when it’s going to trough.
Calling the exact date with a high degree of certainty is difficult in this environment. But it’s all the things that sort of we’ve talked about over the coming — over the last few quarters are going to drive that. And it starts with like deposits and deposit mix and deposit pricing and then goes through the rest of where we think the assets sort of net out.
Steven Chubak: That’s helpful color. And for my follow-up, might be regretting this question, but Charlie, it relates to how you responded to Erika’s last one relating to the asset cap specifically. I recognize that you’re focused internally on just addressing or remediating all the various consent orders. But externally, investors are clearly spending much more time evaluating the different potential sources of earnings or return uplift once these regulatory restrictions are eliminated, whether it’s deposit recapture, growth in trading book and reduction in that elevated risk and control spend. Don’t expect you to quantify it, don’t expect you to speculate on timing for when the asset cap can get lifted. But just given that focus for investors, it might just be helpful if you can contextualize how you’re thinking about some of those potential benefits.
Charlie Scharf: Sure. And I’m not sure you shouldn’t feel, like, [afraid] (ph) you asked the question. You guys always should ask whatever you want. I just try to be as clear as I can on what I think we’ll be in a position to answer, and I don’t want you guys to get frustrated by the level of consistency of the things that we want to be careful about. But to your question, which is, I think, entirely reasonable, I’d put into a couple of categories. I think first of all, probably the most important thing with the asset cap, quite frankly, is not the pure economics at this point that will come from the lifting of the asset cap. It is still a reputational overhang for us. And while the lifting of the sales practices consent order was extremely important for those that have just read the newspapers, certainly those that follow the stock care a lot about the asset cap and we understand that.
And so that is just initially, I think, an important factor in terms of how we’ll be viewed as opposed to what we’ll actually do. I think when we look at what we have done to proactively manage the company to keep ourselves below the asset cap, there are two — you’ve got two categories. You’ve got places where we have gone and said, please make your business smaller because — just because of normal deposit flows and consumer business and things like that, we’ll have some asset pressure and we need to offset at some place. And then there’s the opportunity cost of what we haven’t been able to do because we’ve had the asset cap. And then what does that mean going forward? On the first piece, we have limited our ability certainly within our trading businesses for some very low-risk things such as financing our customers and things like that.
So by not allowing them to provide a level of financing, which is very low risk, we have not captured as much trading flow as we otherwise would have seen. In our corporate businesses, we’ve been very, very careful to encourage our bankers to bring in sizable corporate deposits that weren’t clearly operational deposits, and in some cases, been a little more aggressive about asking them actually not to have it here because we wanted to make room for other things that we thought were really important strategically such as not being closed for business on the consumer side, which those folks would not understand, is hopefully just something that’s temporary. So those are the places that in the short term would benefit from the asset cap being lifted.
I think when you get beyond that, the reality is, when you look at what we’ve been able to do and the amount of excess capital that we have, we’re trying to deploy that by — through the dividend and through our share buybacks because there’s only so much that we should keep around and not return to shareholders. But we still — as I talked about, we think there are plenty of opportunities when you look around our different businesses to achieve higher returns by reinvesting it inside the business. It’s not anything which is — I would describe it as dramatic. But in terms of the things that we can do when we don’t have the constraints, take our — whether it’s our consumer business or our wealth business to build out our banking product set, to be more aggressive about being full spectrum in terms of where we are on the lending side and the deposit side.
