Wells Fargo CFO Mike Santomassimo Talks Earnings, Interest Rates

Mike Santomassimo · Wells Fargo

Consumers are in good shape: low unemployment and falling debt-to-income ratios support credit, if jobs hold.

Wells Fargo's CFO says consumer credit is healthy. Unemployment is still quite low, so most people who want jobs have them. Wages have kept up with inflation cumulatively over the past several years. Debt-to-income ratios are still good and have edged down over the last couple of years rather than rising. He concludes consumers are in pretty good shape, and expects that to continue as long as the employment picture stays strong.

“On the consumer side, unemployment is still quite low. So, you know, most people that want a job have jobs... And the debt to income ratios are still quite good, you know, and are down slightly over the last, you know, couple of years, not increasing. So on the consumer side, people are in pretty good shape.”at 2:54

Mike Santomassimo · Wells Fargo

Corporate borrowers are not overlevered and show no systemic credit stress, with revolver usage still low.

Wells Fargo's CFO argues commercial borrowers are in good shape. Businesses entered the higher-rate environment with plenty of liquidity and did not over-lever. Revolver utilization on the commercial side is still relatively low by historical standards, though it has risen slightly in recent months. He says this, plus credit performance across the portfolios, points to a good credit picture. Idiosyncratic problems at individual companies are possible, but he sees no systemic risk.

“On the commercial side, most businesses came into this environment in a really good shape. They had a lot of liquidity. They weren't over levering themselves.”at 3:20

Mike Santomassimo · Wells Fargo

Higher rates will hurt commercial real estate over time, though Wells Fargo's portfolio shows no impact yet.

Higher interest rates will have some impact on commercial real estate, but over a longer period of time. The effect is not yet showing up in Wells Fargo's loan portfolio. He frames this as a slow-building pressure rather than a current problem.

“Now, higher interest rates will have some impact in places like commercial real estate over a longer period of time, but you're just not seeing that come through the portfolio yet.”at 3:41

Mike Santomassimo · Wells Fargo

Consumers are not yet ready to give AI agents banking credentials, so the agent trend won't matter soon.

Asked whether consumers linking AI agents to bank accounts will matter, the CFO says it is not clear most people will trust agents with their banking credentials yet. People may use agents for other tasks, but trust may not be there. Wells Fargo will consider offering aspects of this if it makes sense for clients. However, he does not see agents being a big driver, and says they are hard to see having a significant impact in the near future.

“it's not clear yet that most people will have, at least at this point, trust putting their banking credentials into, you know, those agents and have them act on their behalf... it's hard to see that be, you know, significant have a significant impact in in any in the near future at least.”at 5:32

Mike Santomassimo · Wells Fargo

M&A pipeline remains strong after the third-quarter slowdown, and more deal activity should follow soon.

After a sharp third-quarter drop in announced deals (down 15% globally and 31% in North America), the CFO argues the slowdown is not a trend. Clients are still in active dialogue about acquisitions for growth or scale. One quarter of weak deal flow does not mean activity will stay low. He notes early October already shows some deal activity, and says pipelines are strong across investment banking.

“one quarter in terms of deal flow doesn't necessarily mean it's going to become a trend at a lower level. And so I do think that, you know, the pipelines are quite good, and I think you'll see more activity.”at 6:58