As part of its latest Investor Day event, Wells Fargo’s senior leaders outlined the company’s accelerated digital strategy for serving customers and announced new expense-management measures.
CEO Tim Sloan and Chief Financial Officer John Shrewsberry led the first Investor Day gathering of stock analysts and institutional investors since the company’s retail sales practices settlements last September. About 120 analysts and investors attended the May 11 event in San Francisco.
Sloan and Shrewsberry detailed the opportunities and challenges ahead as the company focuses on sustained growth amid rapid technological change, managing expenses, cutting costs, and building a better bank.
The leaders also highlighted the company’s solid financial performance during challenging times and the extensive actions taken to address the improper sales practices issues and rebuild trust in Wells Fargo.
“We have an unwavering commitment to continue to fix what went wrong and to strengthen how we serve our customers and lead our team members,” Sloan said.
At the same time, Wells Fargo is positioning itself to succeed as significant advancements in digital products and service delivery continue to drive what customers expect from their bank, he said.
“Shifting consumer preferences are compelling us to rethink how we best serve our customers,” Sloan said. “We have restructured our business and leadership to better navigate this changing landscape.”
“We are committed to improving our efficiency while we continue to invest in our business for the long term.”
The company’s focus on effectiveness and innovation is expected to result in cost savings, according to Sloan. Though Wells Fargo has been an industry leader in operational efficiency, he said, rising expenses have impacted its efficiency ratio.
“Operating at this (efficiency ratio) level is unacceptable,” he said. “We are committed to improving our efficiency while we continue to invest in our business for the long term.”
Shrewsberry said the company has a $2 billion goal in additional expense reductions by the end of 2019. That is in addition to the $2 billion annual savings goal by the end of 2018 that was announced earlier this year and will be reinvested into key areas like innovation and the customer experience, he said.
The additional $2 billion goal in cost savings “will be driven by a deepened focus and continued improvement on effectiveness and productivity to drive efficiency,” Shrewsberry said. Those initiatives, he said, will include operational and process consolidation; increased use of digital technology to automate manual processes; outsourcing of certain general capabilities, and ongoing reduction in facilities driven by the move from physical to digital.
The end result, Sloan said, will be a streamlined, more productive Wells Fargo.
“As we look ahead, we still have work to do, but I’m fully confident in our path forward,” he said. “I am so proud of our 273,000 team members, including those who are here today. We are all committed to continuing to do the hard work necessary to build a better Wells Fargo. I know we will be successful.”
“We are all committed to continuing to do the hard work necessary to build a better Wells Fargo. I know we will be successful.”
Other senior leaders of the company’s lines of business shared their presentations to the investor group.
Mary Mack, head of Community Banking, said the division has made significant strides (PDF) in rebuilding trust and building a stronger, better retail bank for customers, team members, and shareholders.
From the elimination of sales goals for retail bankers to the strengthening of risk functions, she noted the many changes that have been made since the sales practices settlements last September. The company continues to invest in increased supervision, oversight, controls, and monitoring “to ensure what happened in the past will never happen again,” Mack said.
“While we still have work to do,” she added, “it’s exciting and heartening to see our business continue to grow. Primary checking customers, point-of-sale active credit card accounts, consumer and small business deposits, and the number of specialty bankers have all grown year-over-year.”
Payments, Virtual Solutions and Innovation
Avid Modjtabai, head of the company’s Payments, Virtual Solutions and Innovation division, detailed the wide range of customer-payment technologies (PDF) that have been introduced or are being developed.
The group’s business opportunities, she said, include accelerating digital account acquisition with experiences that are simple, fast, and end-to-end; provide best-in-class payments for all customers; deliver personalized advice to help customers reach their financial goals; and build a platform for innovation to re-shape Wells Fargo’s infrastructure and deliver services at greater speed to customers and team members.
Consumer Lending Group
With a lineup of new homeowner programs and customer-friendly technologies, Wells Fargo expects to strengthen (PDF) its place as the largest U.S. mortgage lender, said Franklin Codel, head of the Consumer Lending Group, which includes mortgage, auto, and personal consumer lending. The company is already boosting its Home Lending business by reaching more first-time and millennial homebuyers, he said.
“We believe the unique balance within our business positions us exceedingly well for success,” Codel said. “We have industry-leading share in both purchase and refinance, while many of our closest competitors continue to draw more of their volume from refinance.”
Wealth and Investment Management
David Carroll, head of Wells Fargo Wealth and Investment Management, said the group is poised for continued growth (PDF) in the coming year through its client-driven approach, customer-service focus, and solid referral-relationship with Community Banking.
In 2016, WIM averaged about $1 billion a month in new investment assets through referrals from the Community Bank, he said.
Perry Pelos, head of Wells Fargo Wholesale Banking, also has a positive outlook (PDF) for the coming year.
“While recent events have had a limited financial impact on Wholesale Banking to date, we continue to closely monitor, proactively anticipate, and programmatically respond to adverse news,” Pelos said.
Strategic priorities for the division include simplifying its operating model; accelerating growth through a number of emerging opportunities; competing more effectively against large, regional, and niche players; investing in people, products, services, and data to enhance customer and team member experience; fostering innovation with online and mobile solutions; and managing risk as a competitive advantage.