Wells Fargo (WFC) Q4 2022 Earnings Call Transcript

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Wells Fargo (WFC 3.25%)
Q4 2022 Earnings Call
Jan 13, 2023, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome, and thank you for joining the Wells Fargo fourth-quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. [Operator instructions] Please note today’s call is being recorded.

I would now like to turn the call over to John Campbell, director of investor relations. Sir, you may begin the conference.

John CampbellDirector, Investor Relations

Thank you. Good morning. Thank you for joining our call today with our CEO, Charlie Scharf; and our CFO, Mike Santomassimo, who will discuss fourth-quarter results and answer your questions. This call is being recorded.

Before we get started, I would like to remind you that our fourth-quarter earnings materials, including the release, financial supplement, and presentation deck are available on our website at wellsfargo.com. I’d also like to caution you that we may make forward-looking statements during today’s call that are subject to risks and uncertainties. Factors that may cause the actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8-K filed today, containing our earnings materials. Information about any non-GAAP final measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings and the earnings materials available on our website.

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I will now turn the call over to Charlie.

Charlie ScharfChief Executive Officer

Thanks, John. I’ll make some brief comments about our fourth-quarter results, and then update you on our priorities. I’ll then turn the call over to Mike to review fourth-quarter results in more detail and some of our expectations for 2023 before we take your questions. Let me start with fourth-quarter highlights.

Our results were significantly impacted by previously disclosed operating losses, but our underlying performance reflected the continued progress we’re making to improve returns. Rising interest rates drove strong net interest income growth. Our continued progress and our efficiency initiatives helped to drive expenses lower excluding operating losses. Loans grew in both our commercial and consumer portfolios, and charge-offs have continued to increase but credit quality remains strong.

Our capital levels also remained very strong. And our CET1 ratio increased to 10.6%, well above our required minimum plus buffers. We also continue to make progress on putting legacy issues behind us. Our broad reaching agreement with the CFPB in December is an important step forward that helps us resolve multiple matters, the majority of which have been outstanding for several years.

Over the past three years, we have made significant changes in the businesses referenced in the settlement, and many of the required actions were already substantially complete prior to this announcement. While our risk and regulatory work hasn’t always followed a straight line and we have more to do, we’ve made significant progress, and we will continue to prioritize our work here. In addition to our risk and regulatory work, it’s also critical for us to continue to invest in the future as we build off the great market positions we have. We are confident our processes will enable us to continue to prioritize our risk and control work.

At the same time, we invest in our future. And as I look back at ’22, I’m enthusiastic about the progress we’ve made this past year and feel even better about the opportunities ahead. Let me start with the changes we’ve made during the year to help millions of customers avoid overdraft fees and meet short-term cash needs. These efforts included the elimination of non-sufficient funds fees and transfer fees for customers enrolled in overdraft protection, early payday making eligible direct deposits available up to two days early, extra-day grace, giving eligible customers an extra business day to make deposits to avoid overdraft fees.

And in the fourth quarter, we launched Flex Loan, a new digital-only small dollar loan that provides eligible customers convenient and affordable access to funds. Teams from across the company came together to roll out this new product in record time. The rollout has been smooth and though it’s still early, customer response is exceeding our expectations. These actions build on services we’ve introduced over the past several years, including Clear Access Banking, our account with no overdraft fees.

We now have over 1.7 million of those accounts, up 48% from a year ago. We continue to transform the way we serve our customers by offering innovative products and solutions. We continue to improve our credit card offerings including launching two new cards, Wells Fargo Autograph and BILT. Our new products helped drive a 31% increase in new credit card accounts in 2022, while we continued to maintain strong credit profiles.

We launched Wells Fargo Premier, our new offering dedicated to the financial needs of affluent clients by bringing together our branch-based and wealth-based businesses, to provide a more comprehensive, relevant and integrated offering for our clients. We continue to enhance our partnership within our commercial business to bring corporate and investment banking products such as foreign exchange and M&A advisory services to our middle-market clients. Our different approach to technology is helping us better serve our consumer and corporate clients. We rolled out our new mobile app with a simpler, more intuitive user experience, which has improved customer satisfaction.

In 2022, mobile active customers grew 4% from a year ago. We launched Intuitive Investor, making it easier for customers to invest with the streamlined account opening process and a lower minimum investments. And total active Intuitive Investor accounts increased 56% from a year ago. We completed the development of Fargo, our new AI-powered virtual assistant that provides a more personalized, convenient, and simple banking experience, which is currently live for eligible employees and set to begin rolling out to customers early this year.

Last month, we announced Vantage, our new enhanced digital experience for our commercial and corporate clients. Vantage uses AI and machine learning to provide a tailored and intuitive platform based on our clients’ specific needs. Over the past year, our industry-leading API platform team continued the development of payment APIs for commercial and corporate clients invested in solutions to support our financial institution clients, ramps up in group product offerings in consumer lending and began developing commercial lending solutions. We are investing heavily in modernizing the IT infrastructure and the way we develop code.

We’re implementing a cloud-native operating model that allows us to innovate faster. We’ve also been investing in modernization in the areas of payments and corporate lending, taking out legacy applications and digitizing processes end to end. These enhanced digital capabilities are just the start of initiatives we have planned as part of our multiyear digital transformation. We also continue to evaluate our existing businesses.

As we announced earlier this week, we plan to create a more focused home lending business aimed at serving primarily bank customers as well as individuals and families and minority communities. This includes exiting the correspondent business and reducing the size of our servicing portfolio. I’m saying for some time that the mortgage business has changed dramatically since the financial crisis, and we’ve been adjusting our strategy accordingly. We’re focused on our customers, profitability, returns, and serving minority communities, not volume or market share.

The mortgage product is important to our customer base and the communities we serve, so it will remain important to us, but we do not need to be one of the biggest originators or services — servicers in the industry to do this effectively. Across all of our businesses, we must evolve as the market regulation and competition has evolved. And while it may seem counterintuitive, we believe the decision to reduce risk in the mortgage business by reducing size and narrowing our focus will actually — this will actually enable us to serve customers better and will also improve our returns in the long term. Changing gears now.

I’m proud of all we did last year to make progress on our environmental, social, and governance work. We are balanced in our approach to these issues and believe that thinking broadly about our stakeholders will enhance returns to shareholders. And we provide many examples on Slide 2 of our presentation. So, let me just highlight two examples here.

We published our first diversity, equity, and inclusion report, which highlights the progress that we’ve made on our DE&I initiatives. We’ll continue to make progress in our commitment to integrating DE&I into every aspect of the company under the new leadership of Kristy Fercho, who joined Wells Fargo in 2023 to lead our home lending business and was named the company’s new head of diverse segments, representation, and inclusion in the fourth quarter. We’ve commissioned an external third-party racial equity audit, and we plan to publish the results of the assessment by the end of this year. 2022 is a turning point in the economic cycle.

The Federal Reserve has made clear that reducing inflation is its priority, and it will continue to take actions necessary to achieve its goal. We are starting to see the impact on consumer spend, credit, housing, and demands for goods and services. But at this point, the impact of consumers and businesses has been manageable. And though there will certainly be some industries and segments of consumers that are more impacted than others, the rate impact we see in our customer base is not materially — I’m sorry, the rate of impact we see in our customer base is not materially accelerating.

This plus the strength with which consumers and businesses went into this slowing economy is a helpful set of facts as we look forward. Our customers have remained resilient with deposit balances, consumer spending and credit quality still stronger than pre-pandemic levels. As we look forward, we’re carefully watching the impact of higher rates on our customers and expect to see deposit balances and credit quality continue to return toward pre-pandemic levels. While we’re not predicting a severe downturn, we must be prepared for one, and we are stronger company than one and two years ago.

Our margins are wider, our returns are higher, we’re better managed, and our capital position is strong, so we feel prepared for a downside scenario if we see broader deterioration than we currently see or predict. We still have clear opportunities to improve our performance as we make progress on our efficiency initiatives and continue to make the investments necessary to grow the business through technology and product enhancements. Two years ago, we shared a path to higher ROTCE by returning capital to our shareholders and executing on our efficiency initiatives. While high levels of operating losses in the second half of ’22 impacted our results, our underlying business performance demonstrated our ability to improve our returns.

In a moment, Mike will highlight the key drivers of our path to a 15% ROTCE, which we believe is achievable based on the strength of our business model and our ability to execute. While we’re focused on improving our returns, making progress on building the appropriate risk and control and infrastructure for a company of our size and complexity will remain our top priority, and we will dedicate the time and resources necessary. I want to conclude by thanking our employees across the company who are working hard each day to continue to make progress in our transformation. I’m excited about all that we will accomplish in the year ahead.

I’ll now turn the call over to Mike.

Mike SantomassimoChief Financial Officer

Thank you, Charlie. And good morning, everyone. Slides 2 and 3 summarize how we helped our customers, communities and employees last year, some of which Charlie covered. So, I’m going to start with our fourth-quarter financial results on Slide 4.

Net income for the fourth quarter was 2.9 billion, or $0.67, per diluted common share. Our fourth-quarter results included 3.3 billion, or $0.70, per share of operating losses primarily related to a variety of previously disclosed historical matters, including litigation, regulatory, and customer remediation. $1 billion of impairment of equity securities, or 749 million after noncontrolling interest, predominantly in our affiliated venture capital business, primarily driven by portfolio companies in the enterprise software sector. Both, slowing revenue growth rates and lower public market valuations of enterprise software companies impact the valuations.

It’s important to note that even after recognizing this impairment, the current value of these investments at the end of 2022 remained above the amount of the initial investment. $353 million of severance expense, primarily in home lending. While we’ve reduced headcount in this business throughout 2022, this charge includes the actions we plan to take in 2023 related to the mortgage announcement we made earlier this week. These reductions were partially offset by 510 million of discrete tax benefits related to interest and overpayments in prior years.

We highlight capital on Slide 5. Our CET1 ratio was 10.6%, up approximately 30 basis points from the third quarter, reflecting the benefit from our fourth-quarter earnings, the annual share issuance for our 401(k) plan matching contribution, and an increase from AOCI. Our CET1 ratio remained well above our required regulatory minimum plus buffers, which increased by 10 basis points to 9.2% at the start of the fourth quarter as our new stress capital buffer took effect. As a reminder, our G-SIB surcharge will not increase in 2023.

While we have not repurchased any common stock since the first quarter of 2022, we currently expect to resume share repurchases in the first quarter of this year. Turning to credit quality on Slide 7. Credit performance remained strong with 23 basis points of net charge-offs in the fourth quarter. However, as expected, losses are slowly increasing from historical lows, and we expect them to continue to return toward pre-pandemic levels over time as the federal needs to take actions to combat high inflation.

Credit performance remains strong across our commercial businesses with only 6 basis points of net charge-offs in the fourth quarter. Total consumer net charge-offs increased 88 million from the third quarter to 48 basis points of average loans, driven by an increase in net charge-offs in the credit card portfolio but remained slightly below consumer net charge-off levels in the fourth quarter of 2019. Nonperforming assets increased 1% from the third quarter as lower residential mortgage nonaccrual loans were more than offset by higher commercial real estate nonaccrual loans. Our allowance for credit losses increased 397 million in the fourth quarter, primarily reflecting loan growth, as well as a less favorable economic environment.

We are closely monitoring our portfolio for potential risk and are continuing to take some targeted actions to further tighten underwriting standards. Let me highlight trends in two of our portfolios. The size of our auto portfolios declined for three consecutive quarters, and balances were down 5% at the end of 2022 compared to year-end 2021. Meanwhile, originations were down 47% in the fourth quarter compared to a year ago which reflected credit tightening actions and continued price competition due to rising interest rates.

Of note, our new vehicle originations surpassed used vehicles in the fourth quarter, reflecting a combination of credit tightening actions that we’ve implemented and the industry dynamic of higher new vehicle sales growth. Turning to the commercial real estate office portfolio. The office market is showing signs of weakness due to weak demand, driving higher vacancy rates and deteriorating operating performance, as well as challenging economic and capital market conditions. While we haven’t seen this translate to significant loss content yet, we do expect to see stress over time and are proactively working with borrowers to manage our exposure and being disciplined in our underwriting standards with both, outstanding balances and credits down compared to a year ago.

On Slide 8, we highlight loans and deposits. Average loans grew 8% from a year ago and 3.1 billion from the third quarter. Period-end loans increased for the sixth consecutive quarter with growth across our commercial portfolios and higher consumer loans driven by credit card and residential loans, partially offset by continued declines in our auto portfolio. I’ll highlight the specific growth drivers when discussing our operating segment results.

Average loan yields increased 181 basis points from a year ago and 85 basis points from the third quarter, reflecting the higher rate environment. Average deposits declined 6% from a year ago and 2% from the third quarter. Compared with the third quarter, we saw declines in each of our business. Lower consumer balances reflected customers continuing to reallocate cash in higher-yielding alternatives, particularly in wealth and investment management and continued consumer spending.

As expected, our average deposit cost increased 32 basis points from the third quarter to 46 basis points, driven by higher deposit costs across all operating segments in response to rising interest rates. Average deposit costs are up 44 basis points since the fourth quarter of 2021, while market rates have increased substantially more during that same time. As rates continue to rise, we would expect deposit betas to continue to increase in customer migration from lower yielding to higher yielding deposit products to continue. Turning to net interest income on Slide 9.

Fourth-quarter net interest income was 13.4 billion, which was 45% higher than a year ago, as we continue to benefit from the impact of higher rates. I’ll provide details on our 2023 expectations later on the call. Turning to expenses on Slide 10. The increase in noninterest expense from both, a year ago and from the third quarter was driven by higher operating losses.

Excluding operating losses, other noninterest expense was flat from a year ago as higher severance expense was offset by lower revenue-related compensation and continued progress on our efficiency initiatives. Our operating losses in the fourth quarter included accruals related to the December 2022 CFPB consent order. As part of that settlement, we agreed to one incremental remediation and one new remediation related to overdraft fees. The accrual related to these two remediations was approximately 350 million.

Our operating losses in the fourth quarter also included accruals for other legal actions. And reflecting these accruals, our current estimate of the high end of the range of reasonably possible losses and accessible for legal actions as of December 31st, 2022, is approximately 1.4 billion. This is down approximately 2.3 billion from September 30th, 2022. While we still have outstanding litigation resolved, this estimate would be the lowest level since the second quarter of 2016, though, of course, new matters will arise and existing matters will develop over time.

The estimate for December 31st, 2022, will be updated at the time of our 10-K filing in February and may change. While we acknowledge the elevated level of operating losses, the past two quarters has been significant. They are important steps in putting historical issues behind us as we’ve been able to absorb the cost while increasing our CET1 ratio as I highlighted earlier. Turning to our operating segments, starting with consumer banking and lending on Slide 11.

Consumer and small business banking revenue increased 36% from a year ago, driven by the impact of higher interest rates. Deposit-related fees continued to decline as we completed the rollout of the overdraft fee reductions and new product enhancements that we announced early last year to help customers avoid overdraft fees. The majority of the revenue impact of these changes was reflected in the fourth-quarter run rate. We continue to focus on branch rationalization as digital adoption and usage among our customers have steadily increased.

In 2022, we reduced branches by 179 and branch staffing levels by 10%, and we expect to continue to optimize our branches and staffing levels in response to changing customer needs. While industry mortgage rates declined in the fourth quarter, they were still up over 330 basis points since the beginning of the year, and weekly mortgage applications as measured by the Mortgage Bankers Association were at a 26-year low at quarter end. The economic incentive to refinance is extremely limited. And refinance applications for the industry were down 87% in December compared to a year ago.

Reflecting these market conditions, our home lending revenue declined 57% from a year ago, driven by lower mortgage originations and gain-on sale margins, as well as lower revenue from the resecuritization of loans purchased from securitization pools. We expect the mortgage origination market will continue to be challenging and gain-on sale margin or remain under pressure until excess capacity industry has been removed. As we announced this week, we will be exiting our correspondent business, which we expect to be substantially complete by the end of the first quarter. We don’t expect this action to have a significant impact on our 2023 financial results.

Credit card revenue was up 6% from a year ago due to higher loan balances driven by higher point of sale volume and new product launches. Auto revenue declined 12% from the year ago driven by continued loan spread compression from rising rates and credit tightening actions in certain areas, as well as lower loan balances. Personal lending was up 9% from a year ago due to higher loan balances, partially offset by lower spread compression. While originations grew 19% from the year ago driven by strong consumer demand in investments and the business, we have remained disciplined in our underwriting.

Turning to key business drivers on Slide 12. Mortgage originations declined 70% from a year ago and 32% from the third quarter, with both declines in correspondent and retail and originations. Refinances as a percentage of total originations were over half of our volume a year ago to — declined to 13% in the fourth quarter of 2022. I already highlighted the drivers of the decline in auto originations.

So, turning to debit card. Spending was up 1% compared to a year ago. Holiday spend for debit card was flat compared to the 2021 season with lower transaction volume, offset by higher average ticket size. Entertainment was the only category with double-digit spending while growth — while categories such as home improvement, general retail goods, and fuel were all down compared to 2021.

Credit card spending increased 17% from a year ago, and while the year-over-year growth rate slowed from the third quarter. Almost all categories continue to have double-digit growth. Average balances were up 22% from a year ago. Payment rates have started to moderate, but we’re still well above pre-pandemic levels.

Turning to commercial banking results on Slide 13. Middle market banking revenue increased 78% from a year ago, driven by higher net interest income due to the impact of higher rates and higher loan balances. Asset-based lending and leasing revenue declined 4% from a year ago, driven by lower net gains from equity securities, partially offset by loan growth. Average loan balances were up 18% in the fourth quarter compared to a year ago, while growth in the first half of 2022 was driven by higher realization.

Utilization rates stabilized in the second half of the year. Average loan balances have grown for six consecutive quarters and were up 5% in the third quarter, with growth in asset-based lending and leasing driven by continued growth in client inventory, which are still below pre-pandemic levels. Growth in middle market banking was driven by larger clients, including both, new and existing relationships, which more than offset declines from our smaller customers. Turning to corporate and investment banking on Slide 14.

Banking revenue increased 22% from a year ago driven by stronger treasury management results due to the impact of higher interest rates, as well as improved lending results. Investment banking fees declined from a year ago, reflecting lower market activity with declines across all products and industries. Commercial real estate revenue grew 16% from a year ago driven by stronger lending results to a higher loan balances and the impact of higher interest rates. Markets revenues increased 17% from a year ago, driven by higher trading revenue in equities, rates and commodities, foreign exchange, and municipal products.

Average loans grew 10% from a year ago after growing for seventh consecutive quarter, average loans declined from the third quarter as utilization rates stabilized across most portfolios. On Slide 15, wealth and investment management revenue was up 1% compared to a year ago, as the increase in net interest income driven by the impact of higher rates was partially offset by lower asset-based fees due to the decrease in market valuations. The majority of win in advisory assets are priced at the beginning of the quarter, so asset-based increased slightly in the first quarter, reflecting the higher market valuations at the end of the year. Expenses decreased 6% from a year ago, driven by lower revenue-related compensation and the impact of efficiency initiatives.

Even as loan growth in securities-based lending moderated due to demand caused by market volatility in the interest rate environment, average loans grew 1% from a year ago. Slide 16 highlights our corporate results. Both revenue and expenses were impacted by the divestitures last year of our Corporate Trust business in Wells Fargo Asset Management. We sold these businesses in the fourth quarter of 2021, which resulted in a net gain of 943 million.

Revenue also declined from a year ago due to lower results in our affiliated venture capital and private equity businesses, including the impairments in equity securities I highlighted earlier. The increase in expenses from a year ago was driven by higher operating losses. Turning to our expectations for ’23, starting with Slide 17. Let me start by highlighting our expectations for net interest income.

We are assuming that — we are assuming the asset cap will remain in place throughout the year. Moving from left to right on the waterfall, based on the current forward rate curve, we expect our net interest income will continue to benefit from the impact of higher rates, even with deposits repricing faster than they did in 2022. However, this benefit is expected to be partially offset by continued deposit runoff and mix shift to higher-yielding products with these declines, partially offset by modest loan growth. We also expect a headwind for lower CIB Markets net interest income due to higher funding costs.

This reduction is expected to be partially offset by an increase in trading gains and noninterest income, so the impact to revenue is currently expected to be small. Putting this all together, we currently expect net interest income to grow by approximately 10% in 2023 versus 2022. Ultimately, the amount of net interest income we earned in 2023 will depend on a variety of factors, many of which are uncertain, including the absolute level of interest rates, the shape of the yield curve, deposit balances, mix, and pricing in the loan demand. Turning to our 2023 expense outlook on Slide 18.

Following the waterfall from left to right, we reported 57.3 billion in noninterest expense in 2022, which included 7 billion of operating losses. Excluding operating losses, expenses would have been 50.3 billion, which is — which was in line with the guidance we provided at the beginning of last year. If you also exclude operating losses from the guidance, our 2022 expenses were impacted by inflation and higher severance expense. However, revenue-related expenses were lower than expected by market conditions.

So, we believe a good starting point for discussion of 2023 expenses was 50.3 billion, which excludes operating losses. We expect expenses in 2023 to increase by approximately $1 billion due to both, merit increases, including inflationary pressures and an approximately $250 million increase in FDIC expense related to the previously announced surcharge. These increases are expected to be partially offset by approximately 100 million of lower revenue-related expense, primarily driven by decreases in loan lending. Based on current market levels, we expect revenue-related expense in wealth and investment management for 2023 to be similar to 2022.

We’ve successfully delivered on our commitment of approximately 7.5 billion of gross expense saves over the past two years. And through our efficiency initiatives, we expect to realize an additional 3.2 billion of gross expense reductions in 2023. A piece of this is related to the announcement we made earlier this week to create a more focused home lending business, but expense savings from reducing our servicing business will take more time to be realized. We highlighted on this slide the largest opportunities for additional savings this year, and we believe we’ll have more opportunities beyond 2023.

Similar to prior years, the resources needed to address our risk and control work separate from our efficiency initiatives. And we will continue to add resources as necessary to complete this important work. And while we continue to focus on executing our efficiency initiatives, we’re also continuing to invest and expect approximately 1.7 billion of incremental investments in our businesses in 2023. As Charlie discussed, investing in our businesses is critical to our growth across the company and better serve our customers, but we’ll also continue to be thoughtful and evaluate the level of investments throughout the year.

So, putting this all together, expenses, excluding operating losses, are expected to be relatively flat in 2023 compared with 2022, even with inflationary pressures, a higher FDI surcharge, and increase incremental investments in our businesses. As 2022 demonstrated, operating losses can be significant and hard to predict, and therefore, we have not included them in our expense outlook for 2023. However, we currently anticipate ongoing business-related operating losses, such as fraud, theft, and other business-as-usual losses to be approximately 1.3 billion this year, which is the same assumption we provided last year. As previously disclosed, we had an outstanding litigation — have outstanding litigation, regulatory, and customer remediation matters that could impact the amount of operating losses.

It’s important to note that while we made substantial progress executing on our efficiency initiatives, we still have a significant opportunity to get more efficient across the company. This remains a multiyear process with the goal of achieving an efficiency ratio along with our peers based on our business mix. Given how critical continuing to invest to our — continue to invest in our story, on Slide 19, we provide details on our primary areas of focus for 2023. As we’ve highlighted, continuing to build the right risk and control of infrastructure remains our top priority, and we will continue to invest in this important work.

Charlie discussed many of the investments we started to make in digital payments, and we plan to continue to invest in these areas this year to make improvements for both our consumer and commercial customers. We also plan to continue to invest to expand our client coverage and investment banking, commercial banking, and wealth and investment management and to continue to transform our technology platforms, including moving more applications to cloud, consolidating our data centers, and increasing investments in cyber. Finally, by investing in our operations and branches, we expect not only to improve the customer experience, but also improve efficiency, reduce operational risk, and drive and account growth. As we show on Slide 20, in the fourth quarter, we reported an 8% ROTCE.

But as I highlighted at the start of the call, our fourth-quarter results were impacted by several notable items, including higher operating losses, elevated impairments of equity securities, severance, and discrete tax benefits. As we show on this slide, you will — if you exclude these notable items, our fourth-quarter ROTCE would have been approximately 16%. However, we don’t believe this accurately reflects our longer-term expectations for the following reasons. Net interest income was higher than our long-term expectations due to interest rates, funding, penalties, mix, and pricing, Also, net loan charge-offs were at historically low levels.

If rates, funding balances, mix, and pricing were closer to our long-term expectations and charge-offs were higher, our ROTCE would be lower. Depending on what adjustments you make here, we may all get to a slightly different answer. So, to be clear, because the interest rates are higher and freight costs are lower than our longer-term expectations, we believe we have more work to do to improve our returns. On Slide 21, we highlight our path to higher returns.

Since we first discussed our ROTCE goal in the earnings call for the fourth quarter of 2020, we have executed on a number of important items. We executed a $20 billion of gross common stock repurchases, 16 billion in net issuances, including our 401(k) plan. We increased our common stock dividend from $0.10 to $0.30 per share. We delivered approximately 7.5 billion of gross expense saves and reduced headcount by 11% since the end of 2020.

So, we’ve made good progress over the past two years on things that we can control, and we believe we have a clear line of sight to a sustainable ROTCE of approximately 15% in the medium term. In order to achieve that, we need to continue to optimize our capital, including returning capital to shareholders and redeploying capital to higher-returning products and businesses. Adding more focus on our home lending business should also be a positive contributor to higher returns. We also have additional opportunities to execute on efficiency initiatives.

Additionally, we expect to benefit from the investments we are planning in our businesses, which I highlighted earlier. While some of these investments will be dependent on the market environment, we expect them to increase ROTCE. At the same time, we will continue to prioritize building our risk and control infrastructure. In the longer term, we believe that running a company in a more controlled and disciplined manner will continue to benefit returns.

And our goal is for our four operating segments to produce returns comparable to our best peers. In summary, although the high level of operating losses we had in the fourth quarter significantly impacted our results, the underlying results in the quarter continue to reflect an improvement in our earnings capacity. As we look forward, we expect to continue to grow net interest income. And our expenses, excluding operating losses, are expected to be relatively flat even after inflation and incremental investments in our businesses to drive growth.

Both our credit performance and capital levels remained strong in the fourth quarter. And we expect to resume share repurchases in the first quarter. We will now take your questions.

Questions & Answers:

Operator

Thank you. At this time, we will now begin the question-and-answer session. [Operator instructions] Please stand by for our first question. Our first question of today will come from Ken Usdin of Jefferies.

Your line is open, sir.

Ken UsdinJefferies — Analyst

Hi. Good morning. Good afternoon, I should say. Mike, just a follow-up on the NII outlook for the year.

So, you obviously had a good high end to the year at 13.5% FTE. And just looking at what the guide implies a step down — a little bit of a step down from thereafter, can you just kind of walk us through just how you expect the betas to move through and then like what doesn’t necessarily follow through from here in terms of some of the moving parts? Thanks.

Mike SantomassimoChief Financial Officer

Yeah. Sure, Ken. Thanks for the question. I’ll just kind of walk you through some of the drivers there.

And then, obviously, also the timing of when we expect to realize some of those matters as well. And so, as you look at the key things, you look at stick loan growth, we’ve got — we’re expecting kind of low to mid-single-digit loan growth throughout the year. So, not super fast pace, but at a moderate pace of loan growth. We are expecting some moderate declines across the deposit base stabilizing later in the year, but some moderate declines as we look over the next few quarters.

And then we would expect the betas to continue to move up a little from here. And then when you think about the pacing of it, the first half of the year will certainly be higher than the second half of the year if all of these things play out. And so, you shouldn’t expect a really big step down in the first quarter for sure. And then I think that provides the opportunity potentially in the second half of the year if things — if we don’t see that step down in deposits or the betas are a little bit better than what we expected.

And then I’d just point out is even as we looked at the fourth quarter, betas were a little bit better than what we had modeled. And so, we’re all in a little bit of uncharted territory here, but I do think that there’s some opportunity potentially in the second half of the year as we look at the forecast, but it will be dependent upon how we fare over the next quarter or two.

Ken UsdinJefferies — Analyst

OK. Got it. And so, second question, I heard your commentary about the 1.3 billion of op losses and the fact that the RPO is down to way down to 1.4 billion. Just how do you kind of help us understand your range of confidence? Obviously, last year, op losses ended at 7 billion as you made progress.

So, how wide the range of expectations around your confidence on that level of op loss for the year?

Mike SantomassimoChief Financial Officer

Well, I think if you look at what we’ve said over the last quarter or two, there’s been roughly in the third and fourth quarter 200, 250 just BAU op losses that have happened, just broad normal stuff that you should expect to continue. So, that gives you sort of a bottom end. And then I think the rest of it is — will be a little dependent upon how we work through the rest of the issues that we’ve got to work through for next year. But I think as you look at the RPL going from 3.7 billion to 1.4 billion, as those big items have moved to be more probable and estimable for us, we booked them.

And hopefully, that gives you confidence that we’re putting some of the big things behind us. But we still have stuff to work through, and there’ll be more over time, I’m sure. But we’ve put a lot of big things behind us.

Ken UsdinJefferies — Analyst

OK, great. Thanks, Mike.

Operator

Thank you. The next question will come from Scott Siefers of Piper Sandler. Your line is open.

Scott SiefersPiper Sandler — Analyst

Afternoon, guys. Excuse me. Thank you for taking the question. I think maybe a question along the same lines there.

So, the tone around the regulatory issue certainly sounds better than like 90 days ago and that reasonably possible losses seems to have a better quantitative thinking as well. But what — maybe, Charlie, what are the major touch points sort of on your plate right now? I know all roads ultimately lead to lifting of the asset cap, but maybe would be curious to hear your thoughts on just sort of the biggest things left in your mind.

Charlie ScharfChief Executive Officer

Yes. Well, let me just — so, listen, we still have a series of consent orders, of which, and I always point this out, the asset cap is a piece of one of them. So, all roads don’t lead to the asset cap. The roads in this respect lead to us building the proper control environment, which will satisfy ultimately all the consent orders.

And I’ve tried to be clear that we are making progress on that work. It is a lot to do. And our tone hasn’t changed relative to the confidence in the progress that we’re making there. So, we’re going to continue doing it.

And hopefully, it’s done to the satisfaction of the regulators, but they’ll have to decide that. And as we continue to tick off the to-dos on that work, the control environment gets better and better. And we become a better run company that doesn’t have those kinds of operating losses that you’ve both seen in the past.

Scott SiefersPiper Sandler — Analyst

OK. All right. Perfect. And then, Mike, when you talk about resuming share repurchases in the first quarter, maybe you can give us sort of a sense for sort of magnitude and maybe just an even higher level, sort of how you get comfortable repurchasing in the face of what same sort of still uncertain rules out there.

Mike SantomassimoChief Financial Officer

Well, I would start with where our CET1 ratio is at the end of the year at 10.6%. So, we’re well above our current regulatory minimum and the buffers that are included there. So, we have plenty of flexibility regardless of any outcome that comes out of the new rules that will be proposed. And keep in mind, that will take some time to come out and get implemented and phase in.

And so, there’s — it’s not going to happen in a day. And I think we’ll go back to what we’ve been saying the last number of quarters as we think about the buffer that we’ll put on the reg minimum, buffers of 9.2%, we’ll be managing somewhere in the 100, plus or minus, a little basis point range. And depending on what happens with loan growth and RWA growth that we see in the quarter, that will help guide the share repurchases.

Scott SiefersPiper Sandler — Analyst

Perfect. OK. Thank you, guys, very much.

Operator

The next question comes from John McDonald of Autonomous Research. Your line is open.

John McDonaldAutonomous Research — Analyst

Hey, Mike, I wanted to clarify your answer to Ken, about the first quarter NII. I think you said you do not expect a big step down in the first quarter. Maybe you could just frame first quarter NII a little bit for us relative to the 13.4. What are some of the headwinds, tailwinds? And what might you expect at this point?

Mike SantomassimoChief Financial Officer

Yeah. Thanks, John. Well, first, you have to normalize for a couple less days in the quarter. So, that’s going to be a step down of, call it, 150 million to 200 million step down just there from the flex days.

And then as you look at — it should be relatively stable to the fourth quarter, but there could be some — little bit of wiggle room in there.

John McDonaldAutonomous Research — Analyst

Stable minus including the day count or —

Mike SantomassimoChief Financial Officer

You got to take the day count — adjust for the day count.

John McDonaldAutonomous Research — Analyst

And then stable.

Charlie ScharfChief Executive Officer

You have to — reducing for the day count. Yeah.

John McDonaldAutonomous Research — Analyst

OK. Got it. And then, Charlie, maybe a bigger question, just kind of where are you on the efficiency journey when we think about 50 billion of core expense for this year. And the timeframe for ROTCE, what will it take? Is there an efficiency ratio we should keep in mind? Or is that too hard to forecast? Maybe a little bit on that would be helpful.

Charlie ScharfChief Executive Officer

No, it’s a good question. I think — so, first of all, I think when — just make a — just a couple of comments around the expense guidance we gave. Embedded in that expense guidance, we’re still continuing to reduce the core expenses of the company. But as you can see on that slide, we’re anticipating that we will spend more money on investments that are around technology, digital, building out products, and things like that, that offset that some extent to get to an overall flat expense base.

Mike did say in his comments, and I just want to repeat it, that we’re not going to spend this money at all costs. We’re going to see how the year continues to pan out. It’s money that we would like to spend. We’re planning to spend it, but there’s a lot of discretion in the expense base.

So, we think it’s prudent, as we sit here today, to plan to spend it, but we’re going to constantly be looking at our performance and make judgments on what that should be. And so, as we look at the efficiency of the company, we do expect to continue to get efficiency ratio improvement in the place. And if we don’t see revenue growth and if we don’t see payoffs from the things that we’re doing, then we will spend less money. And so, that’s the way we’re approaching it.

We’re either going to get the efficiency ratio to continue to improve because we’re getting real payoff on some things, or we will reduce on a net basis. But overall, there’s still gross expenses that should come out of the company, which gives us the latitude to continue to grow the investments inside the company. The timing to get to 15%, listen, it’s a great question. As we talked about it, it’s medium term, which is obviously not long term or short term.

But I would say it’s — without putting a specific time frame, it is — it should be something that we have in our sights as we look out over the future. It’s not something that’s theoretical. It’s something that we believe we should get to. And just the problem and we’re just trying to stay a little bit away from, quantifying exactly where we’re starting from just because everyone will make their own adjustments.

And it’s just — I think what we’re just trying to do is be really clear that we don’t want to take credit for the outperformance in NII. We don’t want to take credit for the outperformance in charge-offs, and that we still have to continue to drive improved performance each and every year at the company.

John McDonaldAutonomous Research — Analyst

Got it. Thank you.

Operator

Thank you. The next question comes from Steven Chubak of Wolfe Research. Your line is open.

Steven ChubakWolfe Research — Analyst

Hi. Good afternoon. So, Charlie, I was hoping to ask a follow-up to that last line of questioning around expenses. You indicated that the expense work, it’s going to continue beyond 2023.

And the one metric that we’ve been tracking is headcount. And in terms of the benchmarking analysis that we’ve done, headcount is down more than 10% since the 2020 peek or roughly 30,000, but it’s still elevated versus your money center peers. I was hoping you could just speak to what inning you’re in currently in terms of optimizing headcount. And whether — as we look beyond ’23, whether there is a credible path to actually driving investments lower, you had talked about balancing investment with the need to drive those efficiency gains.

I just want to think about the expense trajectory beyond ’23, whether further reductions are achievable given some of that inflated headcount still?

Charlie ScharfChief Executive Officer

Yeah. Listen, I think — I mean, I think that your point on headcount versus peers is one that we’ve made. And so, yes, we are all different in terms of the businesses that we’re in and what we do. But we do — and some insource and some outsourcing things.

But when you look at it, we still have higher headcount and higher expenses than people who are more complex than us. You know, some of that is explained by the work that we’re doing and the expenses and heads that are building out the control infrastructure, but there’s a lot more beyond that. That’s the work that we’re doing to peel that back piece by piece by piece. We still have a huge amount of manual processes inside the company.

We have duplicate systems, and that is — that’s the work that we’re on. So, when I say that we still have gross expenses to be reduced in the company, we — there’s — that’s exactly what we’re talking about. On the — the question is when we get to a net basis, where does that come out? As I said before, I think that’s a decision that we want to be able to make at each and every point in time when we look at what the overall performance of the company is. So, again, I just want to repeat what I said.

We’re not going to spend under any environment at all costs. That’s not the way we’re thinking about it. If we don’t see net improvements in performance of the company, we’ve got the ability to ration back the discretionary spend so that we do continue to see improved performance of the company. What we’d like to see is that these things are paying off.

We’re seeing real sustainable revenue growth based upon these things and the ability to invest. And so, that’s just kind of how — that’s the framework that we’re using to make the decisions. And as we get to each point in time, and it’s not even just an annual decision. I mean, Mike and I and the operating committee are going to have these discussions regularly about how are things panning out, what does it look like, and how do we feel about our willingness to continue to invest in these things? And have it — it’s got to be living and breathing.

Steven ChubakWolfe Research — Analyst

That’s helpful color, Charlie. And for my follow-up, just also as it relates to the discussion around the buyback. You guys are uniquely positioned in that you aren’t migrating into a higher G-SIB bucket. Because of the asset cap, you’re not going to necessarily see quite as much expansion in terms of balance sheet.

And you’ve conveyed a high level of confidence around a 15% ROTCE, where your stock is trading today, at least on price intangible, reflects a pretty healthy degree of skepticism and your ability to get there. Just given the strength of your capital position, why not get a bit more aggressive with the buyback here? Just recognizing the significant amount of capital you’ll generate, some of the concerns around AOCI seem to be abating. Would be helpful to get some perspective as to whether you might be willing to step it up meaningfully closer to 100% type payout here?

Charlie ScharfChief Executive Officer

Well, so just — it sounds like you’re drawing conclusions to the pace at which we said we’re going to buy stock back, which I don’t think we have actually said. What we’ve said is that we haven’t been buying stock back. We’re absolutely — we anticipate we’re going to begin buying it back. As we think about how much we have available in that capacity, what Mike said was our CET1 went up to 10.6%.

Our required minimum buffers are at 9.2%. And we — it said that we’ll manage 100 basis points above the 9.2% plus or minus. So, we do have substantial capacity but the ongoing earnings capacity of the company. And so, that is — that’s — our framework is to target a reasonable CET1 ratio.

If in the future to raise the levels of capital because of Basel III in-game or whatnot, we’ve got earnings capacity to be able to do that. But we do have the flexibility. And now that we’ve got resolution with CFPB and things like that, to be able to go buy stock back. And we’ll be making that decision based upon our views on the value of the stock and the liquidity in the market and things like that.

But as we said, we do anticipate we’ll be back in — as opposed to where we’ve been.

Steven ChubakWolfe Research — Analyst

OK. Fair enough. More of my effort to assess the cadence and the magnet, but it sounds like you guys are quite comfortable leaning in here. So, thanks for taking my questions.

Charlie ScharfChief Executive Officer

Sure.

Operator

The next question from John Pancari of Evercore ISI. Your line is open.

John PancariEvercore ISI — Analyst

Good afternoon. I wanted to see if you could just give a little bit more color on the net interest income side. Maybe if you can talk a little bit more about the noninterest-bearing deposit mix shift that you think could continue here. How — it looks like that could be a pretty material offset to your interest rate benefits.

So, I just wanted to see if you can perhaps talk about that and maybe also help quantify the runoff that you expect to continue on the deposit side in terms of balances overall. Thanks.

Mike SantomassimoChief Financial Officer

Yeah. John, it’s Mike. I think overall, as I said earlier, we do expect a moderate decline in balances and some more mix shift changes as we go throughout the year. And so, you should expect that to continue.

And it’s all the stuff that should be expected as we’re in this environment, and that’s what we’re seeing. And if you look at each of the businesses, we’re seeing it kind of most acutely happen in the wealth business as people move into cash alternatives, out of deposits, and that’s what’s happening in a lot of wealth management businesses these days as people move that cash around. And then across the rest of the consumer businesses, it’s part people looking for higher yields, but it’s also part people spending more. And so, you’re seeing some of that decline come down as overall balances continue to decline as the stimulus has worn off and people continue to be out there spending.

So, it’s a little bit of a number of drivers there. And I think as I said earlier, the — as you think about the NII pacing for this year, this first half of the year will certainly be higher than the second half of the year, given the trends that we expect to happen. And if those are a little bit better than what we’re modeling, then I think that provides some opportunity as we look at the second half of the year.

John PancariEvercore ISI — Analyst

OK, Mike. Thank you. That’s helpful. And then separately, you gave some pretty good color obviously, around NII expectations now.

And then also on expenses. On the fee side, can you perhaps give us your expectation there around overall growth that you expect in noninterest income and maybe some of the major drivers of where you see growth and if you could possibly size it up perhaps around the investment banking area, etc.? That would help. Thanks.

Mike SantomassimoChief Financial Officer

Sure. And so, as you break apart fees, the biggest line item there is the investment advisory fees, and that’s going to be somewhat dependent upon where the market goes. So, if we start to see recovery in the equity markets at a more substantial pace, that will obviously be a big benefit for that business. When you look at some of the other line items, deposit fees, as I mentioned in my commentary, most of the decline that we were expecting to see as a result of the overdraft policy changes and new products that we implemented is in the run rate.

You may see some pressure there related to earnings credit on the commercial side, but the run rate decline for overdrafts is really in there. When you think about investment banking fees, that’s going to be somewhat market dependent. We’ve seen — it’s too early to know how that’s going to shape up in terms of the overall industry volume there. But as we continue to make the investments in our investment banking business over a longer period of time, we would expect to see some growth there, both in how we go after that opportunity in the commercial bank and middle market space, as well as our other large corporate clients there.

And so, a lot of that’s going to be dependent on the market. But we’re confident that we’re going to be positioning ourselves better and better to take advantage of it. And then we talked about mortgage. Mortgage is a small piece of the — it’s a much smaller piece of the puzzle than it was today.

So, we don’t expect that to be —

Charlie ScharfChief Executive Officer

A smaller piece today than it was historically.

Mike SantomassimoChief Financial Officer

Sorry. Smaller piece today than it was historically. And so — and that’s going to be a pretty challenging market until — in this rate environment. So, I think we’re confident in the investments we’re making that will pay off over time, but it may take a little time to start to see some of that come through depending on the market dynamics.

John PancariEvercore ISI — Analyst

Got it. All right. Thanks, Mike. Appreciate the color.

Operator

The next question comes from Ebrahim Poonawala of Bank of America. Your line is open.

Ebrahim PoonawalaBank of America Merrill Lynch — Analyst

Good afternoon. I just have one question. I guess, Charlie, in your opening remarks, you mentioned that the impact on customers from higher rates, I think you implied was not getting worse with the incremental sales. Was that the right takeaway? And if so, and if the Fed were to stop after another hike, do you actually see that the impact your customers may not be as meaningful as feared over the last six to 12 months and implications of that on the credit quality and the credit performance of your book? Would love to hear any perspective you can share.

Charlie ScharfChief Executive Officer

Sure. What I was trying to say in those remarks was the impact on rising rates is continuing to impact customers on a period-over-period basis, and we would expect that to continue, but it’s not accelerating. It’s much more linear than exponential. And the fact that it’s much more linear is actually a very helpful thing because that gives people — that’s just — that’s a more orderly transition to a slower growth economy and gives consumers a chance.

It shows that they’re adjusting their spending patterns and saving patterns and borrowing patterns to adjust for the reality of higher rates. And on your second question, we would anticipate that we would continue to see deterioration in those metrics continue after the Fed stops raising rates, for a period just because of the amount of time that it takes those things to filter through the economy more broadly. So, hopefully, that was helpful.

Ebrahim PoonawalaBank of America Merrill Lynch — Analyst

That’s helpful. And just a quick follow-up. I think you mentioned earlier around commercial real estate. Like are you seeing any stress? There some discussion around the ability of these loans to get refied given the move in rates we’ve seen over the last year.

Any steps within the CRE book? And anything just in terms of home state, a lot of negative headlines around San Francisco. Would love to your perspective on that, too.

Mike SantomassimoChief Financial Officer

It’s Mike. I’ll try to take that and Charlie can add if he needs. When you look at the — and you’re really getting at the office, I think, space more than anything there. There’s certainly more stress in the office space than there was a quarter or two or three quarters ago.

And I think you’re seeing that. Now, it hasn’t translated into lost content at this point. And so, we’re keeping a careful eye on it. And I think it is — as you look at where you see it most, it is in older, lower-class properties.

And over 80% of our portfolio is in Class A space. And so, we feel like the quality of it’s pretty good, but we will see some stress as we go through here. So far, it’s been pretty idiosyncratic in terms of individual buildings and individual places. But we are very watchful on cities like San Francisco, like Los Angeles, like Washington, D.C., where you’re seeing lease rates overall be much lower than other cities across the country.

And so, certainly, those are markets that we’re keeping a pretty close eye on and making sure we’re being proactive with our borrowers to make sure we’re thinking way ahead of any maturities or extensions, options that need to get put in place to help manage through it.

Ebrahim PoonawalaBank of America Merrill Lynch — Analyst

Got it. Thank you. 

Operator

The next question comes from Erika Najarian of UBS. Your line is open.

Erika NajarianUBS — Analyst

Hi. Good afternoon. Just one more clarification question, if I may, on net interest income. You know, Mike, your underlying assumptions to your NII outlook in terms of low to mid-single-digit loan growth, moderate declines in deposit balances in the first half and stabilizing, it doesn’t feel very different from what consensus had been assuming to get to 51.5 billion for ’23, which is clearly higher than what’s implied by your outlook.

So, I’m wondering if I could reask Ken’s question, what deposit betas, what terminal deposit betas, what range of expectations are you baking into that 49.5 billion forecast? And did you make a significant amount of conservatism as you think about your NII outlook? And I’m asking that question because one of your peer CEOs said their 74 billion outlook was not conservative. So, I think that given the outlook versus consensus expectations, I did have to reask that question here.

Mike SantomassimoChief Financial Officer

Yeah. No, look, it’s —

Charlie ScharfChief Executive Officer

Can I just ask to start before Mike actually goes to the facts? Again, I think one of the things that you’re hearing from all of us that were all very consistent on, which I know you appreciate, but I just want to say it anyway, is we don’t know what the rate path is going to look like from here over the next 11.5 months, which is exactly what you’re asking and exactly what the competitive environment is going to be month by month versus all of the people we compete with. So, you’re looking at — we don’t know what the alternative is going to be in nonbank deposits, and we don’t know what the alternatives are going to be in bank deposits, but we’re trying to make those predictions. So, I think when we go through all of this, we’re all just trying to, in our own way, make sure that there’s clarity that we’re — and I’ll speak to myself now. We’re trying to give you what we think is achievable.

And in our case, based upon the rate curve that we’ve laid out in the document, and it might or might not turn out that way. We’re also assuming, and I talked about this at a conference in December that we are going to continue to raise rates in which we pay our consumers because we’re thinking about this not in terms of maximizing short-term NII, but thinking about it in terms of the value of the relationship and making sure that we pay properly for that, so that we’re continuing to recognize how expensive it is to get a new relationship and how profitable it can be to keep an existing relationship. And so if your views are different toward the end of the year as to what the rent scenario could be, that’s fine. Specifically, what we’ve tried to do, as we’ve gotten closer to the periods with which we see is give you some clarity as Mike did on what we’re — the first quarter is a little clearer to us.

But beyond that, is pretty difficult, and we’re not going to go through every last beta that we’re assuming in terms of what those forecasts are.

Mike SantomassimoChief Financial Officer

Yeah. The only thing I’d add to it is as you — as the Fed does — when the Fed does ultimately peak in terms of rising rates, you will see a lag on pricing as that will continue — pricing will continue to increase over a quarter or two quarters, three quarters. Really, it all depends on the competitive environment. So, you’re going to have some lag there.

But I’m sure all of us have our own points of view and assumptions underneath those models. But what we’re trying to give you, as Charlie said, is a case that we think is achievable through the year. And as I said earlier on the call, I think if we’re — if we’ve — depending on how it plays out over the first and second quarter, we could have some opportunity in the second half. But I think it’s unclear exactly how that will play out.

So, we’ll obviously keep you updated as it goes.

Erika NajarianUBS — Analyst

OK. Thanks.

Charlie ScharfChief Executive Officer

Thanks, Erika.

Operator

Thank you. The next question is from Betsy Graseck of Morgan Stanley. Your line is open.

Betsy GraseckMorgan Stanley — Analyst

Hi. Good afternoon.

Charlie ScharfChief Executive Officer

Hey, Betsy.

Betsy GraseckMorgan Stanley — Analyst

I did want to just unpack a couple of things around the correspondent exit and also some follow-up questions as it relates to the mortgage business in general there. I think you mentioned that it’s not substantial impact. Maybe you could help us understand revenues, expenses, EPS. I made my own assumptions, but I got a lot of questions from people on what managements say.

So, I would like to understand that piece of it. And then could you help us understand how you’re thinking about the mortgage business once you exit correspondent, is there any originate and sell servicing retained left in any panel? Or are you staying with this correspondent exit — your exit that you’ll be moving entirely to portfolioing for yourself, and the MSR will wind down over time? Just give us some color around that. It would be appreciated. Thanks.

Charlie ScharfChief Executive Officer

Yes. So, maybe I’ll start on the second, and then Mike will circle around to the first. So, we are not assuming that we will balance sheet every loan that we underwrite in the future. Again, what we’re just — what we’re trying to do in the path that we’ve laid forward is just to make very clear that we’re not interested in running and having a business which is focused on a stand-alone mortgage product.

We very much appreciate the importance of mortgage to the consumer base. And we’re going to continue to stay in the business. But we’re going to view it as part of the importance in the broader relationship. So, that means we’ll be originating both, conforming and nonconforming mortgages.

And we’ll continue to make the decision as to what goes on our balance sheet as we have done in the past. The fact that we’ll be originating a lot less will certainly mean that over time, the MSR and the overall servicing book will come down very naturally based upon that, over a fairly long period of time. But we’ll also look for intelligent and economic ways to reduce the complexity and the size of our servicing book between now and then. And if those present themselves, we’ll certainly be interested in doing that.

And I know Mike will talk a little bit about this, but I think one of the things we were just trying to say when we think about the size of the impact of exiting the correspondent business immediately is given the fact that mortgage volumes are so low, and revenues are so low. The revenue impact of exiting the correspondent business in the short term is not meaningful. It’s a very small number of people. So, that’s not all that meaningful in the short term.

The real benefit comes over time as we reduce the size of the servicing business, which, as we’ve tried to make the point is, it’s not just reducing expenses, but it’s not profitable for us today in a whole bunch of these segments where we continue to have the servicing. And so, it becomes a positive over time. And it’s just — but that is not a short-term benefit for us but certainly a medium- to longer-term one.

Mike SantomassimoChief Financial Officer

Yeah. And the only thing I’d add is all you lose initially, Betsy, is the gain on sale on the origination. The servicing is still here. And that in any given quarter over the last couple of years is low tens of millions of dollars.

So, it’s a really small impact.

Betsy GraseckMorgan Stanley — Analyst

The servicing cost is low tens of millions?

Mike SantomassimoChief Financial Officer

The only thing you lose today by exiting correspondent is the gain on sale on the origination of mortgage.

Betsy GraseckMorgan Stanley — Analyst

The low tens of millions is the gain on sale?

Mike SantomassimoChief Financial Officer

Correct.

Betsy GraseckMorgan Stanley — Analyst

OK.

Mike SantomassimoChief Financial Officer

The servicing of the existing portfolio is still here and —

Charlie ScharfChief Executive Officer

Part of the broader servicing dialogue.

Betsy GraseckMorgan Stanley — Analyst

Because one of the follow-ups I got was it, does it impact the scale? Obviously, it reduces the flow over existing plants. So, does that matter to how you price your reach?

Charlie ScharfChief Executive Officer

[Inaudible]

Betsy GraseckMorgan Stanley — Analyst

Yes, I mean —

Charlie ScharfChief Executive Officer

No, it’s not even close. I mean, the amount that we’re originating today relative to the scale we have in the business is — it’s immaterial. And we’ll — and even as we downsize the portfolio on the servicing side, the whole point — our servicing portfolio can be substantially, substantially lower, and we’ll still have scale to be able to originate the product and we would say in a more profitable way than we’re doing it today.

Betsy GraseckMorgan Stanley — Analyst

OK. So, the remaining mortgage origination channels are 100% retail, is that right?

Charlie ScharfChief Executive Officer

Yes.

Betsy GraseckMorgan Stanley — Analyst

OK. Right. Because you’re at a wholesale, you’re out of correspondent?

Charlie ScharfChief Executive Officer

Yes. That’s correct.

Betsy GraseckMorgan Stanley — Analyst

All right. Thank you.

Charlie ScharfChief Executive Officer

OK.

Operator

The next question comes from Vivek Juneja of JPMorgan. Your line is open.

Vivek JunejaJPMorgan Chase and Company — Analyst

Thanks. Thanks for taking my questions. Question for you. With the CFPB settlement, there was a comment by the head of CFPB about growth initiatives slowing your progress.

So, Charlie, as a question to you is what are you planning to do in regards to that comment in terms of the growth initiatives? Are you trying to slow anything? Any color on that?

Charlie ScharfChief Executive Officer

Yeah. I addressed it in my remarks, which is we’ve been very, very clear. And I think if you look back on every earnings call, let alone any time I speak publicly, we’re very consistent in making sure that everyone understands both, internally and externally, that our No. 1 priority is getting that work done.

That is how we’re running the company. We have very clear processes internally to make sure that, that happens. And we’re very confident that’s the case. And the things that we are doing to grow the business, we think, are actually helpful to actually making it a more controlled place.

And we’re going to continue to go forward the same way we’ve been going forward, being very conscious of making sure things don’t get in the way.

Vivek JunejaJPMorgan Chase and Company — Analyst

Thanks. A completely different question. On — in the past, you’ve given some color on deposits and among different tiers of customers. Any color, any update on where those stand currently and your outlook on that?

Charlie ScharfChief Executive Officer

It’s still very much the same, which is kind of intuitive that those who went in with lower balances are the ones who are living more paycheck to paycheck. And they are seeing more stress than those that have not had that. But I would say that it’s the rate of change, it’s still the same across most of the affluent spectrum. So, the trends are still very consistent.

Vivek JunejaJPMorgan Chase and Company — Analyst

Thanks. 

Operator

And our final question for today will come from Gerard Cassidy of RBC. Your line is open.

Gerard CassidyRBC Capital Markets — Analyst

Thank you. Good afternoon. Charlie, kind of to — excuse me — flip this question from your answers to the servicing and the residential mortgage business, are there any lines of businesses that — I know you can’t go out and make an acquisition, of course, but any lines of businesses you’re looking to grow and enhance and beef up maybe through hiring groups of people to do that, you know, strategic increase?

Charlie ScharfChief Executive Officer

Listen, I think when we look at all of the — I mean, I’ve said this in the past, when we look at each of these businesses that we have, and that’s going to be a consumer bank, it’s consumer lending, wealth, commercial and the corporate investment bank. With the exception of the home lending business and that the rest of the consumer lending businesses that lend, it’s all going to be based upon returns and what we’re seeing in terms of market competitiveness. All of these businesses have the opportunity to continue to grow share. And when we think about the things that we’re doing to invest, we are targeting investment banking ads in both coverage and products.

We’re focused in commercial banking, the build-out of both the corporate investment offerings for that customer base, both the corporate investment bank and the commercial bank of opportunities to continue to improve what we do from the treasury services perspective. And so, we see growth opportunities there. I’ve talked about the opportunities in our wonderful wealth management business to bring on some more investment teams as we’ve reoriented that business. And when we wind up looking on the consumer lending side, you’ve seen growth in the credit card side of the business, which we would expect to continue.

And our consumer bank is — we very carefully evolve from fixing the problems that we’ve had, taking advantage of the franchise. So, when we talk about — and we have this page in the deck, Page 19 in the investor — in the earnings presentation, we do see multiple places for us to be able to increase the rate of growth by just organically, which sometimes involves adding people. Sometimes it’s building technology. Sometimes it’s just improved execution.

And there are other things like affluent and whatnot that I haven’t mentioned, but they’re a bunch, and they’re pretty broad.

Gerard CassidyRBC Capital Markets — Analyst

Great. And then just as a quick follow-up. Mike, you guys mentioned that there was a private equity or equity write-down in the quarter. Can you share with us how big that was? And then just — I know over the years, you guys have done very well in this area.

But — and then second, how big is the portfolio? What’s the remaining there?

Mike SantomassimoChief Financial Officer

Sure. It was about $1 billion write-down, 750 million after noncontrolling interests. And so, that’s on the first page of the release, if you want to refer back. It was primarily driven by some write-downs in enterprise software companies.

And in particular, it was really one investment that drove most of it. And I would just point out, we had a — that investment is still a very good investment. The company is a good investment, and we’re still holding it well above where we — where the invested amount is. 

Charlie ScharfChief Executive Officer

Just to be clear, we’re holding it at something like still —

Mike SantomassimoChief Financial Officer

A little under $0.5 billion.

Charlie ScharfChief Executive Officer

Yeah. I would say 10 times what we invested in it.

Mike SantomassimoChief Financial Officer

Yeah.

Charlie ScharfChief Executive Officer

But like all of — all enterprise software companies, it’s the company — it’s just — it’s the rate of growth over the next year or so has come down substantially, but it’s still a very high-quality company.

Mike SantomassimoChief Financial Officer

And then just more broadly, on the venture business, we’ve done — the team has done a great job over a very long period of time, and we still think it’s a very good business.

Operator

And that was our final question.

Charlie ScharfChief Executive Officer

OK.

Mike SantomassimoChief Financial Officer

OK. Thank you, all. And we appreciate the time, and we’ll talk to you next quarter. Take care, everyone.

Bye-bye.

Operator

Thank you all for your participation on today’s conference call. [Operator signoff]

Duration: 0 minutes

Call participants:

John CampbellDirector, Investor Relations

Charlie ScharfChief Executive Officer

Mike SantomassimoChief Financial Officer

Ken UsdinJefferies — Analyst

Scott SiefersPiper Sandler — Analyst

John McDonaldAutonomous Research — Analyst

Steven ChubakWolfe Research — Analyst

John PancariEvercore ISI — Analyst

Ebrahim PoonawalaBank of America Merrill Lynch — Analyst

Erika NajarianUBS — Analyst

Betsy GraseckMorgan Stanley — Analyst

Vivek JunejaJPMorgan Chase and Company — Analyst

Gerard CassidyRBC Capital Markets — Analyst

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