Joining me in Boston right now is Wells Fargo CEO Charlie Scharf. Thank you for having us.
Thanks for being here, Sara. It's great to be with you.
I know you've been doing this for a really long time, but it does feel like an exciting moment at least when it comes to healthcare M&A. That's been a big story for Wall Street and a big story for you. Is that part of the play here?
Listen, I think there's no question about it. I mean, you know, healthcare is dynamic. There's a huge amount going on. You know, we're in the middle of a lot of it. This conference is a great example of it. You know, we have over 300 companies, 850 investors, which is almost double what we had last year. And they're here because we get to convene these two groups to talk about all the changes that are going on.
Deal making, it's happening. I mean, you know, there's capital available. There is a huge amount of evolution and change going on in the industry. And so, you got a lot of people wandering around having conversations about what's next, what makes sense. And so, I'd expect more of that to continue.
I was going to ask how sustainable, I mean, just broadly, beyond healthcare, the wave of deal making that we've seen. How sustainable is it?
Listen, there's a huge amount of capital available. There's a huge amount of change going on in the world broadly. And people are very active in the markets and thinking about if they can get deals done in this administration, now's the time to get them done. So, unless something happens in the markets to change liquidity or change spreads, I'll assume that's going to continue.
Where does Wells Fargo play? Because I know a big priority for you has been growing the investment bank. And there's been some progress there. Where are you in terms of taking share and how much more do you see to go?
Listen, I think we're in the beginning of what we view as what our opportunity is, but we've made great progress. Our market share in the investment bank in the US is 4.3%, up from 2.5% just a couple of years ago. We're number six in announced M&A, I think up from 14 a couple of years ago. But we've got, you know, big aspirations because of the relationships that we have and our opportunity to convene these groups of people and to be able to participate more broadly in a value-oriented way for all of them. So, it's a huge part of our future and we feel like we're just getting going, but you're seeing it in our results.
And you go up against the Goldman's and Morgan Stanley's and JP Morgan.
Listen, there are a lot of great competitors out there, the traditional banks, you know, the smaller institutions that focus just on these things. But what we have is we've got a balance sheet, we've got intelligence, we've got relationships. We lend to people, we provide cash management services. We've been banking a lot of these customers for decades and decades and they like doing business with us and we intend to do more with them.
Yes, so the lending, I mean that's another key part of the story right now in the investment bank and the investor debate sort of around your stock. That's been growing double digits after you had the asset cap lifted. I think some of the concerns were around the cost, the margin for instance when it comes to competing and whether you have to aggressively price these loans to grow the business.
Yeah, I mean that's not what we're doing. I mean what we've seen is as you pointed out coming out of an environment where you can't grow, we had cut back significantly on our financing assets in the investment bank. Those are high return but lower margin. So, we basically added those back. That impacted our net interest margin, but we're making more money and our returns are higher. You know, that's moderating. That's not going to be a big part of the story going forward. We're not competing on price out there. We're competing on our abilities, our relationship and that's what's going to drive the higher returns that we see in our future.
What do you think is the most underappreciated upside potential for your earnings growth right now in the market?
I don't think it's underappreciation. I think, you know, our investors want to see results and so it's up to us to show that across all of our businesses we're showing real growth and we're starting to see that in every single one of our businesses and we would expect to see it more consistently across every one of them. Our return on tangible common equity when we started our journey was high single digits. We set a target of 15, we achieved that, we said now 17 to 18. We feel very comfortable that we're going to get there in a reasonable period of time and then we're going to raise it from there because the natural mix of our business supports a higher number and so we feel really good and we just want to show investors that this franchise is capable of delivering the things that we think it's capable of delivering.
Also helpful that I mean credit quality has been remarkably strong. Any change there?
No, it's not just credit quality. It's overall health of our customer base. It's consumers, it's businesses. When we think about credit on the consumer side, delinquencies are actually improving from very, very healthy levels already. We don't expect that to continue. It's not going to go on forever, but the health of the consumer from a credit perspective is really strong. Their spending, their savings levels are sustainable and one of the things that we see which is super interesting is the idea of this K-shaped economy that did exist which the more affluent customers were growing faster and those with lower incomes were suffering somewhat. Then we saw a period where the affluent were continuing to grow and the lower end was stabilizing. Now they're growing in tandem. So still at a lower level, but you are seeing growth there and so it's interesting because this tells you that there's broad-based strength out there regardless of what you hear when you hear about some of the polls in terms of how people are actually feeling.
I was going to say is that surprising given the inflationary pressure and the higher gas prices?
Listen, I think it comes down to people have jobs and their wages are growing. And as long as those two things exist, yes, we should be concerned about inflation. Inflation is very, very real, but when people get their paycheck, they see more money in their paycheck, they have the ability to spend it. So that's what we're seeing the results and that's contributing again broad-based growth consumer which also translates through to what we see with small businesses, our commercial banking customers across the US, and large corporates.
Yeah, because I was also going to ask if higher interest rates are going to ultimately put pressure on, you know, the small businesses or those that are taking out loans.
Probably not smaller businesses because they don't borrow long at those rates and we'll see what happens with shorter term rates. But again, what you see is that the underlying strength of their customer base is strong. And so as long as their customers are strong, they'll continue to do fine.
You did just say a moment ago though that inflation is real. So, how big of a problem do you think we have on that front?
