Newscasts - Reuters interview with Wells Fargo CEO Charlie Scharf 1
05/11/2025 19:36
Click the following link to watch video: https://share.newscasts.refinitiv.com/link?entryId=1_v1vrod1d&referenceId=1_v1vrod1d&pageId=Newscasts Source: 'Reuters - Business videos' Description: Wells Fargo CEO Charlie Scharf is interviewed by Reuters U.S. Finance Editor Lananh Nguyen at The Clearing House annual conference in New York. Short Link: https://lseg.group/49AOTrB Video Transcript: >> Important to be able to serve consumers or companies more broadly with a set of products that actually fit together and/or have great returns or great growth opportunities. So what I say is when you look at everything that we do with the exception of our home lending business, which we think is really important for us to be in, we feel great about our opportunities to be able to grow in every one of those. We focused, over the past bunch of years, on places we could grow that didn't require balance sheet or didn't require significant balance sheet or we just thought it was competitively important. So if you look at what we've done, we've refocused away from the home lending business, pivoted much more towards the credit card business, not just because of the lending characteristics because of what it means for just being in the middle of the payments flow. In that part of the business, we've focused on growing our corporate investment bank, both our advisory and our underwriting businesses, and we've seen great success there. But when you look at all of our businesses, we now can grow our check accounts, we can grow deposits alongside that, we can grow the rest of our lending products. And so literally every one of the businesses we have plans to grow, utilize the balance sheet, which is now over $2 trillion for the first time since we were capped at 1.952 trillion. Both take advantage of the way we've been investing up till now, but use the benefits that we have as a company of having all these things under one roof with the scale and scope of who we are. >> So I'm going to be a little glib into an M&A lightning round and see if I can get you to tell me hot or cold in terms of different types of things you might be interested in. >> Before you do that, I'm sure everyone says this. I'm not sure everyone says this, because if they do say, that's not true. We don't feel the pressure to do any M&A whatsoever. We have amazing opportunities in every one of our businesses. We have scale in everything that we do, which we laid out over the last earnings call. So when we think about what our future holds, our future, we think is going to be extremely bright with or without something that's inorganic. >> So on the inorganic side, what do you think about wealth? Is that an area where you could grow inorganically? >> We love the wealth business. Adding capabilities might be interesting, but you don't ever want to pay twice for something. And that's true in the investment bank as well. Meaning, if you go buy wealth manager, you don't want to go pay for the wealth management business, then you have to go pay to keep all the wealth managers there as well. You never say never to anything, that's really difficult. >> Does that thinking apply to investment banking? Does it make sense to hire investment bankers or does it make sense to buy an investment bank? >> Listen, I love what we've been doing which is we've had great success, figuring out what industries, what product areas we want to grow in, targeting people that are really great in the industry, but also fit in culturally with Wells Fargo, giving them the Wells Fargo platform and the resources to invest, and it's worked really well for us, both in terms of growing share but growing profit. That is, for us, probably the most interesting way to grow the investment bank. >> And finally, a senior deal maker suggested this to me yesterday. I'm curious for your thoughts on it. Given the change in the regulatory environment, the person said it might make sense for you to buy a commercial bank. What are your thoughts on that? >> When you say a commercial bank, you mean like a traditional bank in the US? Yeah. That could make sense if the right opportunity were available at the right price in geographies that we thought were attractive. Could that make sense? Absolutely. Could it make sense to add some capabilities in the payment space? Yes. Could it make sense to add some capabilities in the wealth space as you suggested? For sure. I think, in this kind of environment, it's the right thing to think about all those things. But again, our future is not dependent on having to do one of those things. >> Got it. Now, we're switching gears, I think, a little bit to contraction and one of the things that has contracted at Wells Fargo in the last few years is headcount. So I want to get a sense from you where you stand on headcount. Do you still have further to go and how is that going to affect expenses? >> Sure. I'd say, we actually don't talk a lot internally about headcount. Headcount is the outcome of the conversations that we have about, we're way too inefficient, we're way too bureaucratic, we have way too many processes inside the company that don't add value, and how do we get better at all those things and create the opportunity to take those resources and reinvest them in the company elsewhere. That is literally the conversations that we have and the result has been headcount has declined a lot since we've been there. We had over 275,000 people when I joined and we have a little over 210,000 today. I think it's likely we'll have less headcount as we look forward, both because of just our continuing opportunities to get more efficient. We'd like to do as much of it through attrition as possible. So we try and be very conscious about where do we see efficiencies coming, where do we have too much process in place? And then as we have attrition in those areas, try and force ourselves to not rehire so we don't have to have people who wind up without jobs. So we have those just continuing opportunities, and the reality is the opportunities that exist with AI are very significant. And anyone who sits here today and says that they don't think they'll have less headcount because of AI, either doesn't know what they're talking about or is just not being totally honest about it because it's not the right thing to say. >> Interesting. So how do you manage that as a leader? If you look at this large workforce that you have, more than 200,000 people, what are you telling them when people are worried about their jobs? >> I think it's a great question. I think it gets back to this conversation that we have at the operating committee. The best thing that we can do is think as much in advance as possible about where these benefits will come. It doesn't matter what your attrition level is, you always have attrition, and the worst thing you can do is rehire someone and then find that you've got to terminate the person because you figured out a way to do with less people. So put the cart ahead of the horse a little bit. Then the other thing I would say about these opportunities is, even though everyone's incredibly excited about it and there are certainly significant opportunities to do things differently, it's not going to happen tomorrow. At least for us, it's not like we are going to look at everything that we do, re-imagine everything that's possible, and be in a position to implement that over the next six months, year, or whatever. It's going to happen over a period of time and that allows us to help manage and also figure out where we can retrain people so that they can be effective in the way the new world look. >> So how is Wells Fargo saving money and making money using AI? What are you doing differently that the people in this room can learn from? >> Sure. I think, first of all, the most obvious place which people talk about is just in coding. When you look at the tools that are available today for code generation, R developers are 30-40% more efficient in writing code and generating code than they were before they had these tools? But that's a great example when we talk about efficiency. We haven't actually reduce the number of people we have. We're just doing more because we have a very big agenda. I think that's true of most companies in some of these areas. It will allow you to do a whole bunch more. We are looking at opportunities. When you go into our commercial bank, we write credit memos. Before we approve any credit, there's a long process to actually create the credit memo document. Most of that should be automated and we want the eyes on it to be focused on talking and thinking about the credit as opposed to preparing the memo or investment banking pitch books. When it comes to call centers, some of the very simple things that get done that are very repetitive over the phone where people actually still want to talk to someone can be done by an agent today, an agent that actually talks to you. So those are all places where we've got real live things in place. But the reality is, these are the types of things where everyone across the whole company needs to be thinking about it. And if you don't have something where you reimagine what you do and how you're doing it, then you're not thinking about what the opportunities are today. >> So is it fair to say that with those use cases, if you take those use cases out into the future, those are also the jobs that are going to be the ones that will be endangered or reduced or shifted elsewhere, a call center agent, for instance. >> Well, I think that there are some jobs absolutely that will be replaced over time with AI, but that's no different from what we've been seeing. You'll just see it's just easier to get more efficient in some of these things. But in a lot of these roles, take investment banking analysts, for instance, we need investment banking analysts. The analysts are the ones who are going to be the MDs of the future. So we're not going to hire analysts, but we are very focused on how do they learn in a different way? I think the reality is they're going to be able to learn more quickly because they're going to be able to focus on the underlying information and facts as opposed to the preparation that keeps them here all night. >> So that's an important question, and I think it's an important one for all of us as learners and also as professionals. How do you learn how to write a pitchbook if you don't write the pitch boook? How do you learn how to write an S1 if you've never done one? >> Listen, there's some people out there that say, the only way you learn is by writing something. I've had people tell me, when I prepare for something, I have to write it down because it's the only way I learn. Maybe some people are like that and they'll have to continue to do that. I don't write anything anymore. In all seriousness, if you come into my office, I have no paper. Literally, there is everything that I do in my laptop. And by the way, it was a progression to get there. It didn't happen overnight. I go back to when this all started, Kevin's here, we used to work together. I used to print everything out. I couldn't do anything on my screen. I couldn't do anything that way. And so you learn to work differently, and you learn to learn differently. That's going to continue to happen and continue to evolve. But I do think your point is like, one of the things that we're focused on, as I'm sure most people are is that's not going to necessarily happen on its own. We can't teach people the same way that we were teaching them yesterday. We need to teach them differently and teach them different things. Otherwise, people will be short on skills. >> Got it. So let's pivot to some other topics, industry wide topics. First of all, we had a pretty significant event in New York City last night. So we're going to have a new mayor. I'm very curious as an employer here, as someone who's based here, what are your thoughts on the newly elected mayor, particularly on his policies and plans to raise taxes and spending? >> First of all, we're a California bank. >> Sure. I've been to your office [inaudible 00:12:07] >> Our headquarters in California? We have 25,000 people in Charlotte. We have 12,000 people in Minneapolis. We have 15,000 people in Des Moines. We have 8,000 people in Phoenix. We just built and opened a fabulous campus outside of Dallas in Las Colinas which is going to hold four or 5,000 people. So when we think about who we are, we are really an employer that has significant groups of people across the whole country and our business is that way. So in all seriousness, that is the way we think of ourselves. Our business is national. It's not concentrated in any one location. Every one of those locations, including New York is important. Since I've joined the company, I've said very consistently when people talk about politics and they talk about the left or they talk about the right is, you got to work with both sides of the aisle, and you got to do that on a national basis and on a local basis. People pick who they want to represent them, and it's up to us to figure out how to make sure we're working with the different folks in these jobs and their staffs, to make sure that we at least bring the knowledge that we have about what we think works or doesn't work. And so everyone who won the election yesterday and those that are all the incumbents, that's the way we're going to approach it. >> Should be planning to call the mayor and meet with him and give him the talking points from this conference? >> New York is one place for us that matters. I know we're sitting in New York and a lot of people here are in New York. New York is not the center of our world. >> A lot of people here would say so. >> It's just not. I know. When you look at our business, I would say, 35% of our business is in California. When you look at the percentage of business we have, including the investment bank, we are not a New York centric company. I love New York personally. I live here. I want it to be successful. I think it will continue to be successful regardless of who the mayor is because it's got so much going for it. But I don't obsess about New York. >> A lot of New Yorkers do obsessed about New York, particularly in the last few days. >> New York's going to be fine. >> So let's expand the lens to many of those other places that you mentioned. Let's talk about the US in general. You have been pretty optimistic about the US economy and businesses, and talked about consumers and businesses staying relatively resilient. What's your outlook going forward, and what is also your outlook for investment banking businesses and wholesale businesses that have really rebounded in the last few months? >> I'd separated into what do we see versus what are we concerned about and how do we think about it. Just to reiterate what you said is, everything that we see is just continued strength, just like when you look at the underlying facts and you hear from all the bank CEOs. The consumer is incredibly strong. Consumer spend through last week, we did a review on Friday. Credit card spend, debit card spend, delinquencies, balances, there's almost no change and that's so continued strength in terms of the consumer both on average, and for the majority of folks with those the least affluent still living on the edge. But that's not new. That's something that continues. Business is also very strong. When you look at just our credit performance, the only places where you see weakness are in the large office market, which certainly at this point seems to even look like it's hit a bottom, and individual episodic events in different companies. Credit performance is strong. Having said that, it's not totally clear what the ultimate impact of the tariffs that are in place will be. I've talked about this. The experience that I have in talking to our middle market clients across the country is that they're very supportive of dealing with what they view as unfair trade practices. >> And so again, putting politics aside, you just talk to our middle market customers. What they'll say is we are not able to compete on an equal playing field across the world. And when you look at this country, folks that we have to compete with are subsidized by their governments and so the fact that the administration is willing to deal with that is a good thing. Now, as time goes on, it becomes harder to think about it in terms of theory and it becomes more realistic in terms of what it means for individual tariffs and how different industries are impacted. But I think both in terms of what that ultimate impact will be, time will continue to tell. So there is nervousness out there, and so as we think about the future and you look at just the strength that we've seen for a long period of time, strong credit performance, strong spend, when you look at just equity market values, when you look at credit spreads, everything assumes that this is all going to continue. And our view is that it's more than a 50% likelihood that it will continue, but there's more downside than upside from here, and so you should make sure that you're not surprised if something negative does happen, and it takes one thing. It takes something in the market, it takes something which can be viewed as a little more systemic than the three issues that we saw a couple of weeks ago to get people nervous and markets can react negatively, and that can create consumer sentiment which carries through to declines in spend. So you got to be prepared for the fact that things have been really good for a long period of time, and at some point, it's not going to continue. We just don't know exactly what that trigger is going to be. >> Speaking of two triggers, you mentioned the credit issues. The market sells first and analyzes after. So whether we're talking about idiosyncratic issues on bankruptcies or frauds or specific situations, the market reacts regardless of whether we know there are something specific going on there. So how concerned are you about that market reaction and then also the potential bubbliness of what we're seeing in markets right now? >> You have to be concerned about it because anytime when you have again, this period of prolonged strength across a broad number of industries, again, on both the equity side and the credit side, first of all, you've got a bunch of people out there that don't recall what it's like to see a real downturn, not a COVID downturn. But a real downturn that's caused by a downturn in the economy or something which is more systemic, it's been a long time since that happened. So there are those that don't remember it, but there are also a lot of people that are sitting there waiting for it to happen, are going to pounce all over it, and that will move markets very quickly. And so to your point, I think you've got to be prepared for that. You can't get over your skis in terms of your own risk taking inside your institution and don't be surprised when it happens, and so this whole conversation when you go around and ask people and you get different points of view about how nervous we should be, I think everyone feels the same way, which is things are really good the underlying trends that you see in the economy are still strong. It doesn't mean that there can't be a market event which could impact markets fairly broadly. >> Got it. So you mentioned earlier you don't like talking about politics, so let's talk about politics. So we are in a new administration which is making vast sweeping changes across many different domains, including business and in particular banking. So I'm going to talk a little bit about some of the changes that you're seeing here, especially given your evolution at the company now. How are you seeing the changes in, say, supervision and enforcement coming through to your neck of the woods? >> Sure. One of the things I should start with is I think what this administration is doing is exactly what you would want someone to do when it comes to any regulation or supervisor set of frameworks. And they're doing it in the banking industry but more broadly. And what they're doing is, they're not just saying, let's deregulate, let's stop a whole bunch of things. The questions that we get asked all the time, both individually and as an industry are what stands in the way of you being able to do what you should be doing as a bank in this country. Where are there things that are happening on the supervisory front or where there are regulations that whatever it is, stop you from lending that limit your ability to take deposits, put you in a position not to be able to provide the right level of intermediation in the markets. Those are the questions you get, not give us the list of things that you want to see thrown out. And so when it comes to supervision, it's the same concept. The concept that you have is there are rules and regulations that are out there, and the questions that get asked are where in the supervisory practices have regulators gone beyond what is law and put you in a position not to be able to do the things that you should be able to do. These are all things that are very hard to talk about because they're confidential, confidential supervisory information. If we share it, it's a felony, so you can't talk specifically about it publicly, but the regulators know. >> Sure. >> And it comes through in individual examiners questioning why you're doing something. Giving you MRAs or MRIAs or ultimately fall into broader agreements that you have, and so they are looking at all those things and saying, we should be doing things that relate to safety and soundness that relate to rules and regulations, and if we want to do something different than that, we should go through the appropriate process, which in most cases is put something out for formal comment. >> So we at Reuters have reported on CSI and the rollback of certain examinations and parameters within the examinations. So it sounds to me like that's consistent with what you're seeing in terms of the narrowing focus on financing. >> Listen, Jonathan Gold was here yesterday and he talks about it. Absolutely. Making sure that examiners are focused on the core mission of safety and soundness. That is what we see and feel in a way, which I think is very helpful to focusing on the things which are the most important. >> So the war on MRAs and MRIAs, I think is something that was on the industry's wish list. Maybe something that wasn't on your wish list is the debanking discussion. So talk a little bit about how you are responding to the president's executive order on debanking. Your colleagues at J.P. Morgan obviously discussed this in their cue yesterday as well in terms of answering government questions about this. How do you get your arms around? >> Well, I think, go back to predate the executive order, which is, we want to bank as many people as we can bank. We don't have an incentive to bank less. We have an incentive to bank more. The reality is, when you look back over whatever it is the past decade, I'll say, to pretend that there aren't political pressures that surround that, you wouldn't be telling the truth. And all you have to do is go back and look at the hearings that myself and others have to sit through and the questions that you get, the challenges that you get. Literally you get attacked, why are you banking in that industry and why are you banking in this industry? And so that is the reality, and I think the focus on making sure that institutions, again, are just required to follow what's in the law is a very good thing. I think that is the practice certainly at our institution that we've always had in our minds of, as we think about who are we allowed to bank, we want to bank those folks. And if there's a specific reason not to for good business reasons, we shouldn't. And we all know there are good reasons not to bank people. We look at companies and individuals all the time and make decisions whether we think they're credit worthy, and sometimes those are based on numbers. Sometimes those are based on prior experiences that either you or other institutions have had with those entities, and so that all goes into your decision making process, which we should have the ability to make those decisions. But to the extent that the administration is focused on ensuring that there aren't additional boundaries behind that, that's a good thing. >> And how do you actually assess whether you debanked somebody or this industry? How do you go through all of your client books in order to understand whether you're compliant or not? >> Listen, you can do a whole bunch of things. You can look at customers that accounts you close and say, why did you close them and were there good reasons that you think are justifiable and supportable. You can look at complaints that you have. Lots of questions that the regulators are asking coming out of the executive order can get at those things, and so listen, I think it's a good thing for everyone to answer those questions and to ensure that we're all doing what we should be going forward. But I do also just want to point out that I think it's not just things that we've done or pressures that you get from sitting in hearings like that, but the regulators themselves are also looking at their practices and asking the questions, have they done things either formally or informally that would encourage debanking and to the extent that they want to change that as well, and they should. >> Interesting. And then moving more broadly on to the policy environment in terms of how you advise clients and businesses on dealing with the new administration and dealing with new government policies, how do you talk to them about the government taking stakes in companies or getting involved in drug pricing, for instance, in this new world, what do you do when you talk about a more interventionist government? >> Well, listen, our job when we talk to our clients is to figure out how they can be more successful, and that can mean us providing capital or it can mean us providing advice and then access to capital that allows them to do more. So those are the conversations that we have. We talk about the regulatory environment, which across a bunch of industries allows them to do things that were harder for them to do historically. We talk about the ability to have transactions approved that would not likely have been approved in prior administrations, and so the opportunity to create value and to be able to do more through those strategic conversations, those are the conversations we have. We don't sit around and talk about these other things and what that means. The conversations are, how are we going to put you in a position to be more successful? >> Charlie, so this is just about our time, but I want the audience to be able to learn from your experience. You took a job that I think many people say was probably the least fun job in banking, and you've been in the seat for quite some time and you've managed to rebuild the bank. What have you learned in that process? What was the toughest thing and what was the easiest thing? >> The toughest thing was making the people changes that we had to make to get the work done. And whenever I think about mistakes that I have made, and I've made plenty of mistakes on the business side as well in my career, but it's always not recognizing fast enough those people changes you have to make to get the work done. Because you always want to see the good side in people, and you want to say, we got to provide the right framework and the right priorities, but in my experience, the biggest mistakes I've made have been waiting too long to make changes that you know you need to make, and they're hard. So we've replaced, when we look at our operating committee of whatever it is 16 or 17 people, two have been at Wells Fargo for a long period of time. The rest are new to the company. That's not something I anticipated that we would have to do, but it's something that's just unfolded over time. The top 220 people, something like 180 are new to their jobs of which 160 are new to the company. And it's not that we didn't have great people inside the company. It was the more senior jobs over a period of time that we didn't create the right environment to put the right people into those roles. And one of the things I did discover when I got there, which made the job a hell of a lot easier was that the company wanted leadership. They wanted someone to walk in and say, we've been unsuccessful at fixing these things. They don't seem all that complicated. When you think about what we had to do, we had to create compliance, we had to create operational risk. We didn't have to invent the COVID vaccine. We had to put things in place that all the other big banks had done, and so people were sitting there going, we want you to do what needs to get done to do that. And so that's actually provided a great tailwind over the last bunch of years to make some of the difficult changes that need to get made. >> Excellent. Well, that's a great lesson for the audience. Thank you so much, Charlie. Really appreciate your time. >> Thank you. 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