Tim Sloan
Wells Fargo CEO Tim Sloan
Tim Sloan
Wells Fargo CEO Tim Sloan
Inside the Stagecoach
March 15, 2018

CEO: ‘Year of transformation at Wells Fargo’

In his annual letter to shareholders, CEO Tim Sloan writes, “We are working every day to rebuild trust with our stakeholders, and I am confident that we will achieve our six goals.”

Editor’s note: In a letter published in the 2017 Wells Fargo Annual Report, CEO Tim Sloan details the company’s six goals, reviews the company’s financial performance, and reports on how Wells Fargo is working to rebuild trust with stakeholders.

To our owners,

This was a year of transformation at Wells Fargo. We achieved a great deal in 2017 and look forward to building on our momentum in the months ahead. Our top priority remains rebuilding the trust of our customers, team members, communities, regulators, and shareholders. We have made foundational changes to identify and fix problems so they do not happen again and achieved significant progress in our commitment to make things right for our customers and build a better bank. Our transformation is grounded in our vision of satisfying our customers’ financial needs and helping them succeed financially. While we have more work to do, I assure you that the Operating Committee and I are fully committed to building on our accomplishments. In addition, we take very seriously the consent order we entered into with the Board of Governors of the Federal Reserve System in February 2018, and we will work diligently, yet swiftly, to meet the requirements.

In response to feedback from our team, we introduced a streamlined Vision, Values & Goals of Wells Fargo in late 2017 — replacing what previously was a 37-page expression of our culture. Today the wallet-sized booklet focuses exclusively on our guiding principles and goals, clearly expressing the beliefs that guide every team member as we work together to build the best Wells Fargo possible:

  • Our consistent vision of helping customers succeed financially.
  • Our five values, which articulate what’s most important to us: what’s right for customers, people as a competitive advantage, ethics, diversity and inclusion, and leadership.
  • Our six goals: becoming the financial services leader in customer service and advice, team member engagement, innovation, risk management, corporate citizenship, and shareholder value.

Our Operating Committee is committed to ensuring that our Vision, Values & Goals are embedded in everything we do and in every decision we make, and more than 260,000 team members bring it all to life. In 2017 we added two new senior leaders to our Operating Committee. In March, Allen Parker joined Wells Fargo as general counsel, after Jim Strother announced his retirement. Allen has a distinguished career as one of the country’s leading practitioners of banking and finance law as a partner, and subsequently managing partner, at Cravath, Swaine and Moore LLP. We have benefited immensely from his experience and advice. In July, Jon Weiss became head of Wealth and Investment Management when David Carroll retired. Jon had been head of Wells Fargo Securities, and his significant and diverse expertise in financial services — spanning capital markets, advisory, and investment banking — will ensure we continue to deliver market-leading investment advice and services to our clients.

Another change we have made is to consolidate leadership of the Community Bank and Consumer Lending under Mary Mack. This change will support our consumer strategy — our approach that seeks to deliver an outstanding customer experience by recognizing the distinct needs of each customer segment and that extends across business lines and products. In January 2018, Chief Risk Officer Mike Loughlin announced his intention to retire after 36 years with the company. Mike is staying on to assist with the transition to his yet-to-be named successor. I wish to thank Jim, David, and Mike for their leadership and tremendous contributions to Wells Fargo over many years.

I am grateful to the board of directors for their support and for the strong leadership of Stephen Sanger and Betsy Duke during the past year. With their experience and active involvement, Steve and Betsy have been indispensable as we worked to rebuild trust and grow stronger. As Betsy outlines in her letter, the board has undergone a significant evolution, including adding new members, making changes to the leadership and composition of the board’s committees, and strengthening oversight and reporting.

Our actions

The first step toward building a better Wells Fargo was to take actions to address our challenges. We have acted to fix what was wrong, make things right, and ensure that such problems do not happen again.

On Feb. 2, 2018, we entered into a consent order with the Board of Governors of the Federal Reserve related to the board’s governance oversight and the company’s compliance and operational risk. Under the terms of the consent order, the company will submit plans to the Federal Reserve within 60 days that detail our completed and planned actions to further enhance the board’s governance oversight and the company’s compliance and operational risk management program. After Federal Reserve approval, the company will engage independent third parties to conduct a review to be completed no later than Sept. 30, 2018.

Until the third-party review is completed to the satisfaction of the Federal Reserve, we are required to hold our total consolidated assets at Dec. 31, 2017, levels. Fortunately, our balance sheet provides us with flexibility to manage within the asset cap and continue to serve customers.

The consent order is not related to any new matters but instead to prior issues in which we have already made significant progress. The Federal Reserve acknowledged our progress, and we agree that there is more work to do. As we do with all regulatory matters, we take the consent order very seriously, and we are confident in our ability to meet the requirements while continuing to serve customers’ financial needs.

Some of the broader changes we have made across our company following our sales practices settlement in September 2016 include eliminating product sales goals for retail bankers who serve customers in branches and call centers; implementing a new incentive compensation program focused on customer experience, stronger oversight and controls, and team versus individual rewards within the retail bank; centralizing key enterprise staff functions like Human Resources and Finance; and strengthening our risk and compliance controls as we further our cohesive approach to managing risk companywide. We also established a Conduct Management Office to centralize the way we oversee ethics at Wells Fargo (including our internal EthicsLine) as well as how we handle internal investigations, complaints, and sales practices oversight.

We simplified and streamlined the Community Bank’s leadership structure so we can continue to put our focus and resources on what matters: the unique needs of customers, the branch team member experience, and our business priorities. This new structure is more efficient, improves risk management, and brings Community Bank leaders closer to customers and front-line team members.

Other changes in our Community Bank include an automatic notification to any customer who opens a new personal or small business checking account, savings account, or credit card. We have also implemented a robust “mystery shopper” program encompassing 15,000–18,000 visits a year, and our independent internal Community Banking Risk Management team completed 450 unannounced conduct risk reviews during 2017 to evaluate retail branch sales and service activities to ensure customers received only the products and services they requested.

We are committed to making things right for any customer who was financially harmed by unacceptable sales practices — regardless of when they occurred. We reimbursed customers who incurred fees or financial harm from potentially unauthorized accounts identified through an extensive third-party account review. We’ve conducted broad outreach and worked directly with customers to resolve issues through our complaints process and free mediation services. And we are in the final stages of completing the actions required by a $142 million class-action settlement to make things right for customers impacted by improper sales practices.

As part of our transformation, we committed to a thorough review of the products we offer and the internal procedures we use to get things done. When we uncover anything that may be questionable, we address it. For example, we made fundamental changes to our auto lending business and have begun to remediate customers who may have been financially harmed by issues related to Collateral Protection Insurance policies. These were policies purchased through a third-party vendor on their behalf where the bank was unable to determine whether the customer maintained insurance covering physical damage to the vehicles that secured their loans.

“I can say without reservation that Wells Fargo today is a better company than it was a year ago, and I am confident we will be even better a year from now.”

Additionally, we are working to reach out to all home lending customers who paid fees for mortgage interest rate lock extensions requested between Sept. 16, 2013, and Feb. 28, 2017, and to refund, with interest, customers who believe they shouldn’t have paid those fees. We also changed how we manage the mortgage interest rate lock extension process by establishing a centralized review team in March 2017.

I am pleased and optimistic about the actions we took in 2017 and am confident we will be able to resolve the matters included in the Federal Reserve consent order while we continue to serve customers, support team members, and help our local communities. We still have work to do. We have put the right leaders in the right roles to drive that work, and together we are focused on rebuilding the trust of our stakeholders and becoming a stronger company.

I can say without reservation that Wells Fargo today is a better company than it was a year ago, and I am confident we will be even better a year from now.

Financial report

Our financial results in 2017 reflected the strength of our diversified business model as well as the strides we are making in transforming our company. Once again, we delivered solid financial performance for shareholders. Wells Fargo generated $22.2 billion in net income, or $4.10 of diluted earnings per common share, in 2017, an increase of 1 percent and 3 percent, respectively, from 2016. Revenue grew modestly from $88.3 billion in 2016 to $88.4 billion in 2017, as 4 percent growth in net interest income was predominately offset by a decrease in noninterest income.

Our performance benefited from a healthy economy and our disciplined credit risk management. Credit quality remained strong, and our loan portfolio continued to be the largest of all U.S. banks, with $956.8 billion in outstanding loans. Net charge-offs of 0.31 percent of average loans remained at historic lows. Average deposits grew by 4 percent to a record $1.3 trillion.

Client assets in Wealth and Investment Management reached a record $1.9 trillion. Debit card purchase volume increased 6 percent over 2016, and balances in our consumer general purpose credit card portfolio grew 6 percent. We also set a record for new financings in Wells Fargo Capital Finance in 2017, illustrating the benefit of the GE Capital acquisition and our effective collaboration across our Wholesale Banking businesses.

We continue to enjoy strong liquidity and capital levels. We ended 2017 with total equity of $208.1 billion, Common Equity Tier 1 capital of $154.0 billion, and a Common Equity Tier 1 capital ratio (fully phased-in) of 11.98 percent 1, which is well above our regulatory minimum of 9 percent and our internal target of 10 percent.

As we transform into a better, stronger Wells Fargo, we are pursuing a $4 billion expense-reduction target by driving cost savings and developing more effective processes. This work, led by Chief Financial Officer John Shrewsberry, affects nearly every area of the company. We expect to achieve these savings through a range of initiatives, including centralization and optimization of similar work in staff and business groups, rigorous control of professional services and third-party expenses, consolidation of corporate properties, and a reduction in travel.

The first $2 billion target by the end of 2018 is being reinvested into our business to fund improvements in a range of programs, including those that are transforming and modernizing compliance, technology, risk management, cybersecurity, and data; the second $2 billion target by the end of 2019 is expected to drop to our bottom line.

Data modernization is a significant element in driving efficiency at Wells Fargo. It encompasses reducing the number of internal platforms and databases we manage, consolidating single customer data from multiple businesses into one place, and improving fraud detection based on aggregated information. In addition to making us more streamlined and effective, data modernization also can increase the speed with which we bring innovative new products and services to market. In the end, we believe that using data and technology to help our customers better manage their finances will enable us to grow and build more long-term relationships.

Our transformation

To focus our transformation efforts, we have established the six long-term goals mentioned earlier that our entire company can rally around. We believe these can make Wells Fargo over time not just a leader but the financial services leader in customer service and advice, team member engagement, innovation, risk management, corporate citizenship, and shareholder value. We have good news to report in each of these areas.

Customer service and advice

Whether we are working with an individual, a family, a small business, a growing company, a public institution, or a global firm, we want to know and understand our customers and their financial goals. Then, to help them be financially successful, we want to provide best-in-class service and guidance that will help them reach their goals.

Our diversified business model enables us to advise and serve our customers at every step of their financial lives. Take Pam and Larry Hall of St. Paul, Minnesota, who three decades ago started a company called Logistics Planning Services (LPS), which facilitates the shipping of goods between different points. Pam was a checking account customer, and she turned to our Business Banking Group, which took care of LPS as it grew. Over the years, the Halls turned to Wells Fargo for advice, financing, and services that helped their business succeed. The Halls decided to sell their business last spring, and now they have transitioned from being Business Banking customers to working with Wealth Management as they move to the next phase of their lives. The Halls’ story illustrates how we are at our best when we work together, focus on our customers’ specific needs, and build long-term relationships to support them as they grow. This kind of relationship banking is a hallmark of our company.

A key element of rebuilding trust for customers and team members in our Community Bank is Change for the Better, a new framework that seeks to reshape and improve the Wells Fargo experience. Change for the Better includes new systems, processes, and tools introduced in phases. We have already devoted more than 300,000 hours of training to implementing the first phase of change. Among many other improvements, Change for the Better empowers team members to have more meaningful conversations with customers about their financial goals and to solve problems for them on the spot. We also are increasing the digital offerings in our branches so both bankers and customers can benefit from speed, convenience, and aggregated financial information. Change for the Better’s first phase of improvements launched in September 2017, and we have received positive feedback from customers and team members about the experience we are providing.

We also have made a number of customer-friendly changes to help customers better manage their accounts. For example, in March we introduced automatic zero balance alerts, and we now send more than 18 million real-time alerts a month, enabling our customers to make a deposit or transfer so they don’t overdraw their account. In November, we introduced Overdraft RewindSM, which in its first two months helped more than 350,000 direct-deposit customers avoid overdraft charges by including direct deposits received by 9 a.m. the next day in a re-evaluation of the prior day’s transactions which resulted in a fee.

We continue to expand our offerings for small business customers. Wells Fargo is training and hiring team members: More than 11,000 of our branch bankers have completed our Business Advocate Program training, and we are expanding our teams that serve small businesses with $2 million to $5 million in annual revenue. Through Wells Fargo Works for Small Business®, we are delivering a wide range of financial resources, guidance, and services that will help small businesses take the next step toward their goals. Today, wellsfargoworks.com includes a Business Plan Tool, giving business owners a way to create and update a business plan, a Business Credit Center to make it easier to find credit options and increase understanding of how credit decisions are made, and a new Marketing Center to help address the marketing needs of small business owners.

Our Wholesale Banking team, under the leadership of Perry Pelos, is one of the largest sources of financing to help maintain and grow the country’s essential infrastructure. Through lending and underwriting bonds, we provide funding sources for roads, bridges, airports, ports, water and sewer systems, not-for-profit hospitals, affordable housing, higher education, and K-12 schools nationwide. As an example, in December 2017 we served as lead underwriter for a $929 million financing for Miami-Dade County to improve its water and sewer system with infrastructure that is critical to sanitary sewer and clean water efforts.

In every line of business, we are taking a hard look at the advice and service we are providing and asking ourselves, “How can we do better?” Whether it’s through additional training, more readily available data, or an entirely new customer service model, we are focused on how we can help our customers every day.

Team member engagement

Team members are our most valuable resource and a key competitive advantage for Wells Fargo. We cannot transform into a better, stronger Wells Fargo without their talent and dedication. We work hard to create an atmosphere for our team members in which everyone feels respected and empowered to speak up, and we seek to nurture a diverse and inclusive workplace. How our work gets done is as important as getting the work done. Promoting an atmosphere of engaged team members not only makes Wells Fargo a great place to work, it results in great customer service.

In 2017, we asked for ideas and feedback from our team members — a lot. We conducted surveys, assessments, and focus groups on everything from company culture to the benefits we offer to how our team members feel about Wells Fargo overall. We’ve listened as team members asked questions in town hall meetings and through our internal channels so we can understand themes and trends. Our teams have sifted through tens of thousands of comments and survey feedback so we can better understand what’s important to team members and where we may not be fully living up to their expectations.

The information we get from our team members is key to understanding where we need to strengthen our culture so we are all living Wells Fargo’s values every day. Under the leadership of Chief Administrative Officer Hope Hardison, we are driving for a consistent culture across the company, and we aim to communicate more effectively so team members are clear on what we expect of them. This is especially important in a time of transformation.

We are making investments in our team members. At the beginning of 2017, we raised the minimum wage base range for U.S.-based entry-level team members to $13.50 an hour, benefiting about 36,000 team members. Following the passage of the federal Tax Cuts and Jobs Act in December 2017, we announced plans to increase the minimum pay rate again, to $15 an hour, in March 2018. This will benefit approximately 70,000 team members, including those already earning $15 an hour or close to that amount, who will also receive a pay increase. In November, we announced an award of restricted share rights equivalent to 50 shares of Wells Fargo stock to eligible fulltime employees, and the equivalent of 30 shares to eligible part-time employees, with a two-year vesting period. Approximately 250,000 team members will receive this benefit in the first quarter of 2018. In the past year, we have added two company holidays to our paid time off program, plus two “personal holidays” that team members may use to take time off to celebrate days that are of religious, family, cultural, patriotic, community, or diversity significance.

We continue to offer a compensation package that includes competitive salaries, training and development options, leadership opportunities, and benefits that include affordable health care options, work-life balance programs, 401(k) matching contributions, a discretionary profit sharing plan, and family leave. Team member turnover is at its lowest level since 2013.

Diversity and inclusion is a longtime value at Wells Fargo, and we seek to foster that in many ways. We offer leadership development programs that serve team members with diverse abilities and Latino, Asian-Pacific, LGBTQ, Black/African American, and Veteran team members, as well as other recruiting, training, and development initiatives. We have 10 robust Team Member Networks through which team members with a shared affinity or background can connect and build their skills. In September, I was proud to join other business leaders in signing an open letter supporting the Deferred Action for Childhood Arrivals program and calling on Congress to pass the bipartisan Development, Relief, and Education for Alien Minors Act or similar legislation to provide young people raised in the U.S. a permanent solution.

“We use innovative technologies to create new kinds of lasting value for consumers and businesses.”


Wells Fargo is a longtime leader in providing innovation to customers, and our pace of innovation increased in 2017. Today, under the leadership of Avid Modjtabai, we use innovative technologies to create new kinds of lasting value for consumers and businesses — and increased efficiency for our own internal operations. The year marked many successful technology rollouts, including card-free access for our 13,000 ATMs; Near-Field Communication, or NFC, at more than 50 percent of our ATMs to authenticate account holders for card-free access using a mobile wallet; Zelle® 2, a fast, person-to-person payment option embedded in our mobile and online banking experiences; and new transaction level receipt imaging on mobile devices for commercial customers. These offerings are, in many cases, the first of their kind. And our customers are using them! For example, since March 2017, our customers have conducted more than 5 million card-free ATM transactions. And since June 2017, our customers have used Zelle® to transfer $10 billion in person-to-person payments.

We are enhancing our branch experience, allowing customers to authenticate at the teller line using a mobile app on an NFC-enabled mobile phone. By knowing who our customers are, bankers can have meaningful conversations focused on our customers’ needs. In November, we launched Intuitive InvestorSM digital Wells Fargo Advisors3 accounts for the next generation of investors. This offering combines innovative investing technology with phone based advice, giving customers affordable access to personalized investment portfolios. Conveniently integrated with Wells Fargo’s online banking services, Intuitive Investor provides features like automated account rebalancing as well as investment insights and strategy from the Wells Fargo Investment Institute4.

We expect to introduce more exciting innovations in 2018. In the first quarter of this year, we plan to nationally launch our Online Mortgage Application, which combines the power of Wells Fargo data with a digital interface to create a “know me” experience for current Wells Fargo customers. It uses third-party-hosted technology that enables a customer to submit a credit application electronically and to append account documentation from Wells Fargo or other lenders. When a customer logs into the Online Mortgage Application, they won’t be asked to provide certain information that we already have in our database.

We also plan to introduce GreenhouseSM by Wells Fargo, a new, low-cost mobile banking experience with tools geared toward those who may find budgeting a challenge, are new to banking (such as students), or have several income sources (such as freelancers). Greenhouse is a combination of two accounts that work together: one for weekly spending, tied to a debit card, and one dedicated to saving and paying bills. Among its features are spending trends, personalized insights based on an artificial intelligence engine, and reminders to help consumers keep their spending on track to reach their financial goals. The experience is intuitive, personalized, and aligned to each applicant’s individual situation. Control Tower, an innovative customer experience, is also expected to launch in 2018. With this digital banking feature, our customers will be able to view and manage the places where their Wells Fargo card and account information is stored, including personal finance websites, digital wallets, retail sites, and other third parties. Another important area of innovation is how we are improving information security to protect our customers — from consumer and commercial biometric options to leveraging artificial intelligence to help strengthen our risk management and fraud detection capabilities.

I am excited about the new kinds of value we are creating. The true value of innovation is when technology provides our customers more control and transparency to help them succeed financially.

Risk management

Managing risk is complex and challenging, and we have strengthened our risk framework substantially over the past year. With greater oversight of risk, we have created more consistency and have a better enterprise view of how we are managing risk. As we refine and build upon this work, we are expanding our efforts in 2018 with a focus on compliance and operational risk management, consistent with the Federal Reserve consent order. We want to ensure we have a fully integrated, cohesive, and companywide approach to risk management.

Our Audit Services function, led by Chief Auditor David Julian and reporting to the board of directors, continues to provide independent perspective, influence, and challenge on our governance, internal controls, and risk management.

The Conduct Management Office increases our oversight across the company. It seeks to ensure that all Wells Fargo team members and customers are protected and that we listen when they suggest the company might have fallen short.

We are building a strong, industry-leading compliance program within the Corporate Risk organization and have welcomed Mike Roemer, who has 27 years of financial services industry experience, as our new chief compliance officer. The enhancement of our compliance program will positively affect many other areas. We also welcomed Mark D’Arcy as chief operational risk officer and Sarah Dahlgren to the newly created role of head of regulatory relations. More than 2,000 external team members have been hired to risk roles to strengthen our capabilities during the past two years.

In 2017, we worked hard to strengthen our “raise your hand” culture. Team members know that they are expected to be risk managers in their own areas and report anything that doesn’t seem right. An example is Lead Teller Ciarra Wagner of Omaha, Nebraska, who was suspicious when an older man — a noncustomer — wanted to make a large cash deposit into an acquaintance’s account at Wells Fargo. Wagner alerted the branch service manager, who spoke with the man and learned that he feared he was the victim of a “lottery jackpot” scam. The man asked for Wells Fargo’s help in contacting the police, and weeks later, he returned to thank the team for saving him from a painful loss — and to inquire about moving his accounts to Wells Fargo! I appreciate that our team cared, spotted a questionable situation, and helped resolve it. Our “raise your hand” culture also encourages team members to be vocal when they have ideas to make things better or identify areas that can be improved at Wells Fargo.

Corporate citizenship

We want to make every community in which we live and do business better — through the products and services we offer, the way we operate, our support of diversity and inclusion, and our many forms of philanthropy. We continue to be one of the largest corporate cash donors in the U.S., contributing $286.5 million to more than 14,500 nonprofits in 2017.

Following the passage of the federal Tax Cuts and Jobs Act last year, we expect to increase our annual philanthropic donations by 40 percent in 2018, with a longer-term goal of investing 2 percent of our after-tax profits for corporate philanthropy beginning in 2019.

In tandem with our corporate philanthropy, our work to improve communities is special because it is led by team members who devote their time and resources to causes they care about. At Wells Fargo, we are all corporate citizens, and our team members are how we make “better” happen wherever the Wells Fargo name appears.

In 2017, our team members volunteered a record 2 million hours and contributed $85 million to 40,000 nonprofits during our annual Community Support Campaign, recognized by United Way Worldwide as the largest workplace-giving campaign in the U.S. for the ninth consecutive year. And 91,000 team members — or about one-third of our company — participated in volunteer groups, including Volunteer Chapters, Green Teams, and Team Member Networks. As an example of this work, our team members taught money management skills to 227,000 children, veterans, seniors, and other people in their communities through the Wells Fargo Hands on Banking® program.

Following devastating hurricanes, wildfires, and other disasters, Wells Fargo donated more than $10.6 million to the American Red Cross and other local nonprofits to support recovery and rebuilding efforts, including $6.5 million to the WE Care fund, which provides financial grants to our team members who face disaster-related expenses or hardships. Our team members and board of directors personally contributed an additional $1.27 million to the WE Care fund. This was in addition to hundreds of hours of volunteer support for activities like blood drives, beach cleanups, fostering displaced pets, and other rebuilding efforts.

As a company, we focus and organize our corporate citizenship activities around three priorities: advancing diversity and social inclusion, creating economic opportunity in underserved communities, and accelerating the transition to a lower-carbon economy and healthier planet.

One of the most critical issues facing our world today is the lack of employment and opportunities for income mobility in economically disadvantaged areas. In fall 2017, students at Harris-Stowe State University in St. Louis began using the Wells Fargo Finance Education Center, an investment lab and mock trading floor that offers real-world experience in finance and banking. Our $250,000 gift to build and outfit the lab is part of a long-standing relationship between Wells Fargo Advisors and Harris-Stowe, the only historically black college in St. Louis. The finance lab is a promising way to both build a diverse workforce and increase high paying career opportunities for students of color. Wells Fargo Advisors team members serve as guest lecturers at the Wells Fargo Finance Education Center and mentor Harris-Stowe students.

To advance economic recovery and revitalization on a much broader scale, we are expanding our support for small businesses and low- and moderate-income homebuyers. This includes a commitment to provide $100 million in capital, technical assistance, education, and other resources over the next three years to support the growth of diverse small businesses through the Wells Fargo Works for Small Business®: Diverse Community Capital program. We also plan to double our investment in Wells Fargo’s NeighborhoodLIFT® program to $75 million in 2018.

In 2017, we announced a 10-year commitment to create at least 250,000 African American homeowners. It includes $60 billion in home loans and $15 million for homebuyer education and counseling initiatives. In our first year, we have helped more than 23,000 African American families become homeowners and invested $1.8 million to support homebuyer education and counseling. We marked the second year of our 10-year, $125 billion lending commitment to help increase Hispanic homeownership through our support of the National Association of Hispanic Real Estate Professionals’ Hispanic Wealth Project. From 2016 through 2017, we helped more than 87,000 families become homeowners and provided about $2.8 million in funding for homebuyer education and counseling programs. Like many of our customers, shareholders, and team members, we are concerned about climate change and other environmental challenges affecting our planet. We’ve launched the “Greener Every Day” campaign to educate and inspire our team members to join our environmental efforts by making simple changes in their behavior each day at home, work, and in the community. Our goal is for team members to make a total of 250,000 commitments to improve sustainability by 2020.

In 2017, we achieved a significant milestone by powering 100 percent of our global electricity needs with renewable energy. As one of the largest financers of renewable energy, energy efficiency, and clean technology in the U.S., we are committed to supporting new growth in the sector through product innovation and collaboration with public and private organizations to help speed the path to market for early-stage companies focused on sustainability.

I am very proud of the many ways we support members of the military, veterans, and their families — both as customers and as members of the Wells Fargo team. Since 2012, we have donated more than $100 million to support military service members, veterans, and their families through financial education, career transition, and housing initiatives. For the fourth year in a row, we sponsored a No Barriers Warriors to Summits team in 2017. This program assembles about a dozen veterans with disabilities and helps them overcome barriers and unleash their potential through a wilderness-based curriculum and experiences in challenging environments.

Within our offices, we continue to expand the Veterans Employment Transition program, which is focused on identifying and hiring veterans who are moving into the private workforce for internships with Wells Fargo Securities and other lines of business. And in 2017, we launched an ApprenticeshipUSA program, which allows eligible veterans to use GI Bill education benefits to earn a salary while acquiring high-value job skills.

I am deeply moved by the commitment our team members bring to bettering our communities, and I am pleased that we are able to support their work to help others.

Shareholder value

Our goal to create long-term shareholder value is the last on our list because each of the other five goals contributes to it. We recognize that you, our investors, have placed your trust in Wells Fargo, and we are focused on managing the company to achieve long-term value through a diversified business model, strong risk discipline, efficient execution, a solid balance sheet, and a world-class team. While the asset cap under the Federal Reserve consent order remains in place, I believe we will be able to continue to serve our customers, and the financial impact will be manageable.

Our financial performance in 2017 was solid, but we can and should do better. In 2017, our return on assets was 1.15 percent, and our return on equity was 11.35 percent.

Our capital and liquidity are strong, which is important to long-term shareholder value creation and provides flexibility in managing the company. We returned $14.5 billion to our shareholders through common stock dividends and net share repurchases in 2017, up 16 percent from 2016.

Our quarterly common stock dividend increased to 39 cents per share, and our net payout ratio5 in 2017 was 72 percent. For the fourth straight year, we reduced our average number of diluted common shares outstanding, which were down 91 million shares from 2016.

We’re on track with our expense initiatives, and we remain committed to our target of $4 billion in expense reductions by the end of 2019.

Our day-to-day efforts to transform Wells Fargo are the foundation of creating long-term success. I am optimistic that the investments we are making will allow us to serve our customers better and result in growth over the long term. We are committed to living up to our potential for you, our shareholders.

In closing

I want to express my appreciation to our board of directors for the knowledge, experience, and leadership they have shown during the past year. Special recognition is due to Steve Sanger, Cynthia Milligan, and Susan Swenson, who retired from the board at the end of 2017. Their contributions and service have helped our company immeasurably over the years.

During the past year, I have been asked many times, “Tim, why are you so optimistic?” My answer is, “How can I not be?” Wells Fargo is a strong company with a rich, 166-year history. We have overcome challenges many times during our history. We have a solid foundation, exceptional businesses, and an outstanding team. Our more than 260,000 team members are dedicated, talented, and committed — and, without a doubt, they are our most important resource. We are working every day to rebuild trust with our stakeholders, and I am confident that we will achieve our six goals. Thank you for placing your trust in Wells Fargo and for your support. Our commitment to you is unwavering as we continue our transformation into a better, stronger company.
Tim Sloan signature
Timothy J. Sloan

Chief Executive Officer and President
Wells Fargo & Company
February 15, 2018

Read other featured stories in our Annual Report special section.

Investment and insurance products: NOT FDIC-insured/NO Bank Guarantee/MAY Lose Value

1 For more information on our regulatory capital and related ratios, please see the “Financial Review — Capital Management” section in the Annual Report.

2 Zelle and the Zelle-related marks and logos are property of Early Warning Services, LLC.

3 Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.

4 Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly-owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

5 Net payout ratio is the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock.