Wells Fargo & Company (WFC) Q4 2017 Earnings Conference Call Transcript

Wells Fargo & Co. (NYSE: WFC)Q4 2017 Earnings Conference CallJanuary 12, 2018, 10:00 a.m. ET

Prepared Remarks:

Operator

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wells Fargo Fourth Quarter 2017 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]

I would now like to turn the call over to John Campbell, Director of Investor Relations. Sir, you may begin the conference.

John Campbell -- Director, Investor Relations

Thank you, Regina. Good morning. Thank you for joining our call today, where our CEO and President, Tim Sloan, and our CFO, John Shrewsberry, 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 release and quarterly supplement are available on our website at wellsfargo.com. I would 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 actual results to differ materially from expectations are detailed in our SEC filings including the Form 8-K filed today containing our earnings release and quarterly supplement. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures, can also be found in our SEC filings, in the earnings release, and in the quarterly supplement available on our website.

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I will now turn the call over to CEO and President, Tim Sloan.

Timothy Sloan -- President and Chief Executive Officer

Thank you, John. Good morning, everyone, and thank you for joining us today. 2017 was a transformational year for Wells Fargo as we made significant progress on our efforts to build a better bank. Our vision of satisfying our customers' financial needs remains unchanged, but how we execute this vision has evolved. This evolution includes developing new ways to more efficiently serve our customers and create a better customer experience, which includes investments and innovation, streamlining and centralizing processes and organizational structures, strengthening the foundations of the way we manage risk, and building a robust and more modern data and technology infrastructure.

[Inaudible -- call breaks up] will highlight a few of the actions we've taken to make Wells Fargo better for our customers, our team members, our shareholders, and our communities.

Starting with our customers, in order to help those impacted by the hurricanes last year, we provided payment relief and proactively waived fees to approximately 100,000 customers. We also made a number of customer friendly changes to help all of our customers better manage their accounts. For example, in March, we introduced automatic zero balance alerts and we now send over 18 million real-time alerts a month, enabling our customers to make a deposit or a transfer so they don't overdraw their account.

In November, we introduced Overdraft Rewind, which has already helped over 350,000 customers avoid overdraft charges. We believe that using data and technology to help our customers better manage their finances will enable us to grow and build more long-term relationships.

In 2017, we accelerated the pace of innovation and launched value added technologies, including card free ATM access, which our customers have used more than five million times since March. And, since June, our customers have sent more than $10 billion through Zelle for P2P payments.

As our customers have increased their use of online and mobile channels, we've made it easier for them to interact with us digitally. For example, digital credit card account openings were up 47% from a year ago. In November, we launched Intuitive Investor, our digital brokerage advisory offering. And, later this quarter, we will fully roll out our digital mortgage application, which combines the power of Wells Fargo data with a You Know Me customer experience.

In 2018, we expect additional innovations, including instant issuance of debit cards to customers' mobile wallets and Control Tower, a central hub for customers to view and manage the places where their Wells Fargo cards and account information is stored.

In addition to these innovations, we rely on our team members to help drive an exceptional customer experience. In 2017, we took a number of steps to enhance team member benefits, including adding four additional paid holidays, announcing plans to grant restrictive stock rights to approximately 250,000 team members, and increasing the minimum base pay for all U.S. based team members. We increased the minimum hourly rate to $13.50 in 2017, which impacted 31,000 team members.

After the passage of the Tax Cuts and Jobs Act, we announced another increase to $15.00 an hour, starting in March 2018. We are also reviewing team members who were already making $15.00 an hour or slightly above, to ensure that they are paid appropriately based on their role. We estimate that approximately 70,000 team members will receive a pay increase related to these changes.

Our goal is to deliver long-term value for our shareholders through a balanced business model, strong risk discipline, efficient execution, and a world-class team. In 2017, we generated $22.2 billion of net income with an 11.35% return on equity. From that, we returned $14.5 billion to our shareholders through common stock dividends and net share repurchases. This is up 16% from 2016. Returning more capital to our shareholders remains a top priority.

Another goal is to make a positive contribution to the communities we serve. In 2017, we donated $286 million, including more than $4 million to areas that were impacted by hurricanes, California wildfires, and other natural disasters. We also announced that we are targeting $400 million in donations to nonprofits and community organizations in 2018, an increase of approximately 40% from last year. Beginning in 2019, we are targeting 2% of our after tax net profits for corporate philanthropy.

Our results in the fourth quarter were strong and included a net benefit from the Tax Cuts and Jobs Act. While it's too early to determine the full impact, it appears that tax reform will benefit our customers and help grow the economy. Surveys indicate business confidence has increased. Other items that impacted our results in the fourth quarter included the gain on the sale of Wells Fargo Insurance Services and higher litigation accruals.

Our efforts to transform Wells Fargo were evident in our results in 2017, including record deposit balances, improved retail banking, household retention, increased branch satisfaction with most recent visit scores, which are now back to the levels we had prior to the sales practice settlements, growth in debit card and credit card purchase volume -- both up 6% in the fourth quarter from a year ago -- record levels of client assets and wealth and investment management, historically low credit losses, and exceptionally strong capital and liquidity levels.

And, while our expenses increased, driven by higher litigation accruals and investments in our businesses and capabilities, we're on track with our expense initiatives and we remain committed to our target of $4 billion in expense reductions. John will provide more details on this later in the call.

In summary, Wells Fargo is a much better company today than we were a year ago. And, notwithstanding our challenges, I am confident that the hard work, dedication, and resiliency of our team members demonstrated through 2017 will make Wells Fargo even better in 2018 as we continue our transformation.

John will now discuss our financial results in more detail.

John Shrewsberry -- Chief Financial Officer

Thanks, Tim, and good morning, everyone. We earned $6.2 billion, or $1.16 per share, in the fourth quarter. As Tim mentioned, our results included three noteworthy items I'll describe in a minute. First, I want to quickly highlight the impact from our election to early adopt a new hedge accounting standard, which was mentioned on the call last quarter and we discussed in our third quarter 10-Q filing. It's described in a note on the highlight slide four.

As a result of this early adoption, our previously reported EPS for prior quarters in 2017 as revised, resulting in a net $0.03 per share increase in EPS for the first nine months of the year. We have more information on this accounting standard in the appendix.

On page five, we summarized the noteworthy items, which included a $3.35 billion after tax benefit, or $0.67 per share, from the Tax Cuts and Jobs Act. I'll be providing more details about this on the next page. Our results also included an $848 million gain on the sale of Wells Fargo Insurance Services, which benefited EPS by $0.11. We had a $3.25 billion litigation accrual in the quarter for a variety of matters, including mortgage related regulatory investigations, sales practices, and other consumer related matters. The majority of this expense was not tax deductible and it reduced EPS by $0.59.

On page six, we provide more details on the impacts of the Tax Act. The estimated tax benefit from the reduction to net deferred income taxes was $3.89 billion. We're somewhat unique, in that the tax effect of our temporary differences results in a net deferred tax liability, which is primarily driven by differences between the book and tax treatment of our leasing and mortgage servicing businesses and mark-to-market timing differences.

In addition, we have not had big historic net operating losses, which are now less valuable under the tax act, and we earn substantially all of our income in the U.S., so we have lower amounts of foreign cash subject to deemed repatriation. This benefit was partially offset by a $370 million after tax loss from valuation adjustments related to leverage leases, low income housing, and tax advantage renewable energy investments.

In addition, there was a $173 million tax expense from the estimated deemed repatriation of undistributed foreign earnings. We currently expect our full-year 2018 effective income tax rate to be approximately 19%.

I'm going to highlight much of what's on page seven later on the call, so let me just point out on the asset side. We purchased $20.9 billion of securities in the fourth quarter, which were largely offset by run-off in sales. On the liability side, our long-term debt balances declined $14.2 billion, primarily driven by lower federal home loan bank debt.

I'll be highlighting our income statement drivers on page eight later on the call. Turning to page nine, average loans declined $521 million from the third quarter with commercial loans down $692 million, partially offset by $171 million of higher average consumer loans. However, we did have some positive momentum in our loan growth during the quarter with period end loans up $4.9 billion from the third quarter.

Let me highlight the drivers starting on page ten. Commercial loans increased $3.2 billion from the third quarter, with C&I loans up $5.2 billion. C&I growth was broad based and included seasonal growth in financial institutions and commercial distribution finance, as well as growth in asset backed finance in corporate banking. Commercial real estate loans declined $2.1 billion from the third quarter, reflecting our continued credit discipline in a very competitive market.

Consumer loans grew $1.7 billion from the third quarter. Similar to trends we've highlighted throughout the year, we had growth in first mortgage loans and credit card balances and declines in junior lien mortgages, auto, and other revolving and installment loans. As a reminder, growth in the first quarter will be impacted by seasonally lower mortgage origination and credit card balances.

Auto originations were relatively flat linked quarter and were down 33% from a year ago. We've reduced volumes while strengthening the credit profile of this portfolio, and our original volume with a FICO score above 640 grew to 85% of total originations in the fourth quarter, up from 76% a year ago. We expect balances will continue to decline throughout 2018, given the transformational changes we're making in the business.

Our deposits reached a record high in the fourth quarter, and our average deposits increased 2% from a year ago. Our average deposit cost increased two basis points from the third quarter and was up 16 basis points from a year ago. The market hasn't made changes to the rates paid on consumer and small business banking deposits and neither have we. As fed funds and LIBOR have increased, we have had incremental deposit repricing for commercial and wealth and investment management customers. If the Tax Act drives stronger industry loan growth this year, deposit betas could be impacted somewhat as market demand for deposits increases to fund this growth.

Our full-year 2017 net interest income increased 4%, consisting with the expectation we provided at Investor Day. Net interest income in the fourth quarter declined $136 million from the third quarter, primarily driven by the $183 million reduction to net interest income from adjustments related to leverage leases due to the Tax Act, which we do, slowing yields in the quarter.

Similarly, our NIM was down two basis points to 284 as the negative impacts from the adjustment related to leverage leases and growth in average deposits was partially offset by lower average long-term debt and a modest benefit from all other growth, repricing, and variable terms.

Investors often ask us about or loan swaps, so let me provide some additional details on our position. As we've previously disclosed, between 2014 and 2016, we entered in to receive fixed rate swaps to hedge some of our LIBOR based commercial loans when the expectation was for interest rates to be lower for longer. We converted lower yielding floating rate loans into higher yielding fixed rate loans. At the peak, we had $86 billion worth of loan swaps.

We actively managed these positions, and starting in the third quarter, we began to unwind some of them. At year end, we had $51 billion of notional outstanding and we've unwound more early this year, leaving us with a current notional value closer to $30 billion. The reduction in swaps will reduce interest income from these loans in 2018, but it's increased our interest rate sensitivity from the low end back to near the midpoint of our range of 5-15 basis points for a 100-basis point parallel shift in the yield curve.

Being modestly more asset sensitive at this point in the rate cycle should be beneficial, however it's important to note that, during the extended period of low interest rates since the swaps were entered into, they generated incremental revenue of approximately $3 billion for Wells Fargo. The cost of unwinding the swaps, which is approximately $700 million, will be amortized over the remaining life of the original derivative, which averages approximately three years.

Our net interest income for full-year 2018 will be dependent on a variety of factors, including the level and slope of the yield curve as well as deposit betas and earning asset growth trends.

Non-interest income grew $337 million from the third quarter. This increase included the benefit of the $848 million gain in the sale of Wells Fargo Insurance Services, which was partially offset by a $414 million reduction from impairments on low income housing and renewable energy investments resulting from the Tax Act.

Deposit service charges declined $30 million from the third quarter, driven by customer friendly changes, including the launch of overdraft rewind in November, which Tim highlighted at the start of the call.

Trust and investment fees increased $78 million on higher asset based fees and retail brokerage transaction activity. Mortgage banking non-interest income declined $118 million from the third quarter, largely due to a $71 million decline in residential mortgage origination revenue, driven by a 10% reduction in origination volumes primarily from seasonality in the purchase market.

The gain on sale margin in the fourth quarter was 125 basis points, relatively flat from the third quarter. And, based on current pricing trends and channel mix in our held for sale pipeline, we expect the margin to decline in the first quarter.

Servicing income declined $47 million, primarily from lower net hedge results due to the impact of changes in MSR evaluation assumptions, including the impact of increasingly competitive industry pricing, lower carry on our MSR hedge in a flatter yield curve environment, and increased customer payment deferrals in areas impacted by recent hurricanes.

On page 15, we provide details on our trading related revenue, which declined $49 million from the third quarter, primarily driven by declines in customer trading activity from lower volatility and compressed spreads.

Turning to the expenses on page 16, expenses increased $2.4 billion from the third quarter, largely driven by the $2.2 billion higher operating losses. On page 17, I'll highlight the other drivers of the increase.

$142 million increase from the third quarter in compensation and benefits expense reflected higher stock award expense, primarily from stock price and performance impacts on prior period awards. Higher salaries expense was largely driven by higher costs from the additional paid holidays we granted our team members in 2017. Increases in running the business discretionary and infrastructure costs were driven by typically higher advertising and equipment spending in the quarter.

On page 18, we show the drivers of the year-over-year increase in expenses, which was also primarily driven by higher operating losses. Compensation and benefits expense increased $475 million, primarily due to annual salary adjustments and higher benefit costs, which were partially offset by lower FTE. Our FTE were down 2% from a year ago, reflecting the sale of our insurance services business as well as declines in consumer lending and community banking. Higher compensation and benefits expense also reflected $115 million of higher deferred comp expense, which was P&L neutral.

On page 19, we highlight the progress we made in 2017 on our expense initiatives, which was primarily driven by the efforts we've made through centralization and optimization. We've centralized enterprise functions that were previously distributed across our organization. In addition, we realigned businesses to eliminate redundancy and leverage customer synergies. We've continued to make transformational changes to our operating models, including in contact centers, technology, and operations.

We also saved money through continued improvement in vendor leverage and contract pricing. We've done this by using our centralized contract team to negotiate rates based on the aggregated volume of the entire company. We reduced travel and entertainment expense by 2% by enhancing our travel policy standards and leveraging technology.

We also exceeded our target of 200 branch closures in 2017, and to date the closures have had minimal impact on household retention and growth. Based on customer channel usage, we currently expect to close 250 branches or more in 2018. Branches play an important part in serving our customers and we will have as many branches as our customers want for as long as they want them.

Based on our current assumptions regarding consumer channel behavior and our own technology advances, as well as other factors, we could see our total branch network declining to approximately 5,000 by the end of 2020. We're also reducing properties in other businesses, including stand-alone mortgage locations, which is down by over 10% in 2017.

We're also transitioning operational activities in our auto business from 57 regional banking centers into three larger regional sites. We expect to complete the consolidation in the first half of 2018, helping us further standardize process in the business. As we pursue these reductions, we will continue to support team members by helping them find other positions while we also consider the banking needs of the communities we serve.

We're on track to achieve our targeted $4 billion of expense reductions, which have been identified and assigned to the business leaders who have specific responsibility for achieving them. As a reminder, the first $2 billion we've targeted expense saves by year-end 2017 supports our ongoing investment in the businesses, which includes a number of key areas such as enhancing our compliance and risk management capability, building a better bank, and strengthening our core infrastructure.

We expect the additional $2 billion target of annual expense reductions by the end of 2019 to go to the bottom line and be fully recognized in 2020. These expected savings do not include the completion of core deposit and tangible amortization expense at the end of this year, which will amount to $769 million in full-year 2018. It also doesn't include the completion of the FDIC special assessment, which we expect should happen by the end of 2018. Finally, it doesn't include expense savings due to business divestitures, which we highlight on page 22.

As part of our efforts to be more transparent, and in response to investor requests, we're providing more detail on our expense expectations for 2018 on page 21. We currently expect, for the full-year 2018 total expenses, to be in the range of $53.5-54.5 billion. This expectation includes approximately $600 million of typical operating losses this year and excludes any outside litigation and remediation accruals or penalties.

As I mentioned on the call last quarter, we expect to achieve a quarterly efficiency ratio with a 59 handle by the end of 2018, not including any outside litigation accruals. 2018 revenue, which will impact the efficiency ratio will be influenced by a number of factors, including the absolute level of rates, the shape of the yield curve, loan growth, deposit betas, credit spreads, cash redeployment, and the absolute level of the equity markets.

Just as a point of reference, we estimate our efficiency ratio sensitivity to be plus or minus 60 basis points for every 1% increase or decrease in revenue from the $88.4 billion we earned in 2017. We will provide guidance on the expenses for 2019 at our Investor Day in May.

For the past couple of years, we've been taking a hard look at all of our businesses and their contributions. As a result, we've had multiple divestitures. We thought it would be helpful to share the revenue and direct expense associated with the businesses we sold over the past two years, which we provide on page 22. As you can see, there was a revenue impact from selling these businesses, but they were sold for sound economic reasons and generated nice returns for our shareholders. As a reminder, Wells Fargo Insurance Services was sold at the end of November and sale of share owner services is expected to close later in the first quarter.

Turning to our segments, starting on slide 23, the majority of the impacts from the Tax Act, as well as the litigation accruals in the quarter, were included in our community banking results.

On page 24, we highlight that customers continued to actively use their accounts. We had strong growth in digital secure sessions, up 8% from a year ago, and we continued to have declines in branch and ATM interactions reflecting the increased use of digital channels by our customers.

On page 25, we highlight balance and activity growth, which included an increase of 6% in both credit and debit card purchase volume from a year ago. As Tim mentioned, branch satisfaction with the most recent visit scores are now back to the levels we had prior to the sales practice settlements. I believe the transformational changes we're making to better meet our customers' financial needs, including providing bankers with innovative tools to enable more meaningful financial conversations with our customers, not only improves customer service, but will also drive growth.

Turning to page 26, wholesale banking results in the fourth quarter included the gain on the sale of our Insurance Services business. Total wealth and investment management client assets reached a record high of $1.9 trillion and average closed referral investment assets were up 12% from a year ago.

Turning to page 28, our credit quality remained exceptionally strong. Our loss rate for the full year was among the lowest in our history. And, in the fourth quarter, our loss rate was 31 basis points of average loans. All of our commercial and consumer real estate loan portfolios were in a net recovery position in the quarter, including our home equity portfolio.

Nonperforming assets have declined for seven consecutive quarters, and were less than 1% of total loans for the second consecutive quarter. Continued improvement in the oil and gas portfolio have benefited this trend.

During the oil and gas cycle over the last three years, we established a peak oil and gas reserve of $1.7 billion in the first quarter of 2016 and incurred through the cycle losses of $1.2 billion. We believe we've largely put this issue behind us and will no longer provide credit updates on this portfolio in future quarters unless factors change. But, we will continue to include the size of the portfolio in our 10-Q filings. We had a $100 million reserve release in the quarter, reflecting continued strong credit performance.

Turning to page 29, our estimated common equity tier one ratio fully phased in increased to 11.9% in the fourth quarter, remaining well above our internal target level of 10%. We remain focused on returning more capital to shareholders and returned a record $14.5 billion through common stock dividends and net share repurchases in 2017, up 16% from 2016. We had net share repurchases of $6.8 billion in 2017, up 42% from 2016, and period end common shares outstanding declined 2% to 4.9 billion shares.

In summary, we begin 2018 with exceptionally strong asset quality, liquidity, and capital. We're on track to achieve our expense targets and the transformational changes we're making throughout Wells Fargo will help us achieve our six goals and drive our long-term success.

...

We will now take your question.

Questions and Answers:

Operator

[Operator instructions] Our first question comes from the line of Erika Najarian with Bank of America. Please go ahead.

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

Hi. Good morning. I expect you to defer me to Investor Day, but I'm going to try anyway. I'm sure that your investors are going to refine their 2019 and 2020 outlook for the company following your results. As we think about your new guidance for dollar expenses in 2018 -- again, fully acknowledging that you will get more color in May -- is it fair to take that $53.5-54.5 billion range, assume a growth rate -- and this for 2020 -- assume a normal growth rate over the next two years, and then take out the $2 billion in cost savings, the $769 million in CDI expense, and the $573 million in sold business expense that isn't included?

Timothy Sloan -- President and Chief Executive Officer

Erika, I think that's a fair description of what could happen. One of the big impacts of that could be what revenues look like in 2020. But, I think that's fair.

John Shrewsberry -- Chief Financial Officer

The one thing I'd add -- we'll talk about it more at Investor Day, as you mentioned -- is the arch of the ongoing reinvestment, or investment, in the various programs we have to transform Wells Fargo. Some of them are regulatory in nature. Some of them are evasion in nature. But, there are a variety of them. Each of them has their own arch. They're in place today, so how they come off the total is going to be the missing link for what happens in 2019, and maybe even into 2020 for some of them.

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

Got it. On the consumer loan side, it was up $1.7 billion on a linked quarter basis. Two of your peers were relatively upbeat in terms of the consumer outlook for 2018, especially relative to tax reform. Has the attrition in the consumer book bottomed in 2017? On the mortgage side, as we think about nonconforming loan growth and loan originations, is there still a gap between where your underwriting standards are today and what you think they could go down to if we have better guidance, or reformed guidance, from the agencies on mortgage?

Timothy Sloan -- President and Chief Executive Officer

First, I think it's absolutely fair. The feedback we've been getting from out customers is that we should all be cautiously optimistic on the impact of the Tax Reform Act on consumers. There have been millions of employed folks across the country that have gotten pay raises and bonuses and the like, and I think that's the net positive for economic growth.

As it relates specifically to our consumer loan growth, we believe that we'll grow mortgage loans this year. We believe that we will grow credit cards this year. But, we believe that it's likely that the home equity book will continue to decline. If you look at the home equity book and you divide it into the post crisis and pre crisis book, the pre-crisis book continues to decline, as we've been talking about for years. But, we expect the post crisis book to grow. But, I don't think that growth will offset the decline in the home equity book for 2018.

Likewise, as John mentioned as it relates to auto, we believe that with all of the changes that are going on in the auto portfolio -- notwithstanding the underlying credit improvement in new originations -- we will see a continued decline in that portfolio throughout 2018. Our current estimate is that maybe the lines will start to cross there fourth quarter of this year, maybe first quarter of 2019. We'll find out. But, that's how I would think about our consumer portfolio. We're optimistic, again, about the impact of the Tax Act on consumers.

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

Follow-up on the underwriting side?

Timothy Sloan -- President and Chief Executive Officer

Yeah, we don't anticipate making any changes to our underwriting, as it relates to mortgage. We look at those every day and we're going to be competitive from a market standpoint. But, we're also going to take the long-term view and not get too aggressive at any one point in time.

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

Thank you.

Operator

Your next question comes from the line of Matt O'Connor with Deutsche Bank.

Matt O'Connor -- Deutsche Bank Securities, Inc. -- Analyst

Good morning.

Timothy Sloan -- President and Chief Executive Officer

Congratulations, Matt. You were right. We needed to provide dollar expense guidance. We listened to you. Can you mark that down on your calendar?

Matt O'Connor -- Deutsche Bank Securities, Inc. -- Analyst

I do think it's a good first step given [inaudible -- laughter] '19 and 2020 trajectory, I think it's very important. I appreciate that that's coming in a few months. The other thing I've really been focused on, and the market as well, is the legacy issues. At this point, a year and a quarter after taking over as CEO, and obviously being in very senior roles for many years before, do you feel like you've identified, Tim, all of the legacy issues and they've been all disclosed and now you're at the point where you're just finishing up working through them internally and hoping to reach settlements this year where applicable.

Timothy Sloan -- President and Chief Executive Officer

It's a very fair question, particularly with the accrual that we took this quarter. My answer continues to be very consistent. I think we've made a lot of progress in terms of looking at the operations of the company. But, I can't provide you with a guarantee or absolute assurance that we won't be making additional changes in the future to anything that we might find. But again, we've made a lot of progress.

Matt O'Connor -- Deutsche Bank Securities, Inc. -- Analyst

I guess I wonder why you can't. I feel like you've been there a long time. John's been there a long time. I appreciate it's a big company. Any company can have issues that arise, so I'm not trying to get the all clear on everything for forever. But, it does feel like there are a number of issues that are probably legacy in nature that you've identified and I would assume you've reviewed and rereviewed and triple checked things -- or are doing that now. I do still think it's very important to be able to turn the page, whether it's for the investors or employees. That's why I continue to push on this.

Timothy Sloan -- President and Chief Executive Officer

No, no. It's a very reasonable question and I'd love to live in a world where I can give you an absolute guarantee and certainty, but it's just not the world we live in. We've been working very hard at looking at operations across the company. We have invested a significant amount of money in doing that. We've been very transparent when we have issues for all of you. I know sometimes it's disappointing, but that's the promise that we made. And, when we find that we've made any sort of mistakes, we fix them. And, if there's a customer on the other end that's been harmed, we'll remediate them.

But, I just can't provide you with that absolute guarantee at this moment in time. Maybe someday I will, but I think it's going to be something we look at in the rearview mirror over a longer period of time as opposed to having some inflection point today, tomorrow, or the week after that.

Matt O'Connor -- Deutsche Bank Securities, Inc. -- Analyst

Are there certain businesses or regions or customer segments that you're still reviewing? Maybe they're not as close customers to you -- like, if they're those third-party relationships that can be a little trickier. Are there still segments that you're reviewing that you're just not 100% sure there are no issues?

Timothy Sloan -- President and Chief Executive Officer

Again, a fair question. I would say that we're continuing to look across the entire company as opposed to in any specific area. We've made a lot of progress. But, as I reflect on my first year and a quarter in this role, it's fair to say that one of the mistakes we made at the company was that we didn't have a thorough enough review of the businesses on an ongoing basis. Our review will be continuing. We're never going to declare victory. We're always going to make sure we have the right checks and balances from a corporate risk standpoint and an audit standpoint. We're making even more investments in the infrastructure and collecting data in a different way. So, we want to continue to make improvements.

So, the punchline is that we've made a lot of progress and we've been very disclosive, but I can't provide you with absolute certainty.

Matt O'Connor -- Deutsche Bank Securities, Inc. -- Analyst

Okay. Thank you.

Operator

Your next question comes from the line of Ken Usdin with Jefferies. Please go ahead.

Ken Usdin -- Jefferies LLC -- Analyst

Hi. Good morning. Questions on the fee side of the business. It's nice to see that trust side directionally moving the right way. How much of that is any improvement in transaction side? How much of it is the higher markets? What's your basic outlook for how that business can do going ahead?

Timothy Sloan -- President and Chief Executive Officer

We're optimistic. We've seen growth in that business for the last few years. We've had a nice transition and --

John Shrewsberry -- Chief Financial Officer

Referrals are coming in nicely.

Timothy Sloan -- President and Chief Executive Officer

That's a good point, John. We've had a nice transition in the senior leadership from David Carroll, who did a terrific job, to Jon Weiss. I think Jon mentioned in the fourth quarter that he thought we'd see a 4-5% type revenue growth this year. So, we continue to be optimistic.

A large part of the increase in the fourth quarter, to your point, was related to higher underlying values. But again, that tends to drive revenues in the future, too. But, we continue to be optimistic about that business. And, to reinforce John's point, about the improvement in referrals from community banking to wealth and investment management.

Ken Usdin -- Jefferies LLC -- Analyst

I guess I'm just wondering the markets are up a lot and your referrals are up a lot, and obviously the revenues are up but not as much. So, that whole underlying shift to fees and fee compression, does that start to stabilize or is that an ongoing burden you always just have to overcome with volume?

Timothy Sloan -- President and Chief Executive Officer

Your point is fair because there have been some changes in the business that affected the entire market because of the DOL rule and implementation last year. It's a competitive business, but again, I think Jon Weiss was clear that he thought we'd see 4-5% growth on the top line. So, we're comfortable with that.

John Shrewsberry -- Chief Financial Officer

I also think this secular shift -- this intentional shift to emphasizes recurring asset management relationships over transactional revenue means you've got the outcome that you're describing but less volatility around it because you're less reliant on people trading stocks and more aligned with a managed solution, which is a more stable form of revenue.

Ken Usdin -- Jefferies LLC -- Analyst

On the mortgage business, here you've got your new platform rolling out and there is obviously this major potential transition happening just with rates, tax, and the housing market. So, what's your expectation for just your size of the mortgage market and what you think share can be? Within that, you've got a big, big mix still of correspondent versus retail as a percentage. Can your new platform start to change that mix?

John Shrewsberry -- Chief Financial Officer

I think the MBA is calling for the overall mortgage market size to be down a little bit. They can't have fully factored in what might happen with more economic expansion as a result of the Tax Act, but call the size of the market unchanged to down, it probably going to continue to be a little bit more of a purchase market from a refi market, or trending more in that direction, which is a more competitive market for us to operate in. As a big servicer, we have an advantage in the refi market.

As a result, our retail share may end up being a little bit lower, but we do a lot of correspondent lending and servicing, and our volumes represent the aggregate of what we originate directly and what we fund and service for correspondence. So, that's part of why margin is down, because of that mix from retail to correspondent means our costs are less but our revenue opportunity is less too.

So, I think it's our expectation that the market is flat to down a little bit -- again, unless the tax reform does something remarkable -- which would be great. I think it's our expectation that it stays competitive. I mentioned in my comments we think the first quarter's going to be a lower margin quarter than the fourth quarter based on what we can see. Some of that is specific behavior on the part of the agencies because of programs they run in the fourth quarter to get things done.

As it relates to our competitiveness, whether it's our feet on the street or our technological innovation that is rolling out right now, we anticipate being as competitive as we can possibly be in every market and maintaining our leading share. It's a big point of emphasis for Michael DeVito and the folks who manage that team. But, we don't want to cede that position.

Ken Usdin -- Jefferies LLC -- Analyst

Understood. Thanks, guys. Appreciate it.

Operator

Your next question comes from the line of Brian Kleinhanzl with KBW. Please go ahead.

Brian Kleinhanzl -- Keefe, Bruyette & Woods, Inc. -- Analyst

Hey, good morning. A quick question on loan growth. It looks like CRE saw negative loan growth again this quarter. You did mention that you were focusing on continued credit discipline, but could you maybe break down what you're seeing in that market currently? How much further do you have to wind down this book? How much lower can it go?

Timothy Sloan -- President and Chief Executive Officer

Brian, we don't want to wind down this book. We're the largest commercial real estate lender by far, not only in total but in almost every product type. We have the most diverse and broadest commercial real estate platform in the market. We are committed to this business long term. But, to be committed to the real estate business long term, you need to also make important and disciplined decisions when you see that you're at a period in the cycle -- that doesn't last forever -- where credit underwriting standards or pricing might be a little out of bounds. That's how you get to stay in this business through cycles, because you make good decisions.

So, we want to grow this book, but we want to grow it in a way that makes the right decisions for our shareholders. So, what we've seen this year is an increase in competition, slightly lower in credit standards, and a little bit more aggressive pricing. And that has meant that our book has declined a little bit. But again, we have a balanced business here, so our real estate capital markets business has absolutely been on fire and you can see that in other parts of the revenues in the company.

So, I wouldn't look at this as we're purposely rolling down this book because we don't like the business. We love the business. We want to grow it. We want to grow it so that we are ready for next year and the next cycle.

Brian Kleinhanzl -- Keefe, Bruyette & Woods, Inc. -- Analyst

On the retail bank metrics, looking at the primary consumer checking account growth, it was just barely positive year-over-year. If you look at it to where it was last December, you were up 3% year-on-year. Maybe you can break down what you're seeing with regards to new customer acquisition versus the attrition. I thought you said the attrition had slowed. Did you see an acceleration in the fourth quarter? Thanks.

Timothy Sloan -- President and Chief Executive Officer

No, I don't think we saw acceleration. I think that Mary Mack and team are doing a terrific job in terms of fundamentally changing that platform. It takes time to make changes in a business that has 5,800 branches and call centers and tens of thousands of team members who are working very hard today. We made changes in terms of the incentive plan. We made changes in terms of the management team to streamline that. We've improved training and we've also delegated responsibility so that our folks in branches can address customer opportunities and needs more quickly. That takes time.

But, I'm pleased with the progress. Our expectation for 2018 is that we're going to see primary checking account growth, in an improvement over what you saw in the fourth quarter. But, I would also say that the underlying value of those accounts has increased. We talked about that at Investor Day last year, and we're continuing to see that trend.

John Shrewsberry -- Chief Financial Officer

One thing I would add is that the 2015-16 primary checking account growth numbers were also benefited by a major attempt to convert people who weren't primary. They were customers of Wells Fargo, but they weren't, at that point, primary -- into primary customers. So, we had a backlog of relationships to convert to primary that we've basically worked through. Now, it's really about net new customers to the bank and making them primary customers. So, it's tough to comp over.

Brian Kleinhanzl -- Keefe, Bruyette & Woods, Inc. -- Analyst

Thanks.

Operator

Your next question comes from the line of John Pancari with Evercore ISI. Please go ahead.

John Pancari -- Evercore ISI -- Analyst

Good morning. Back to the loan growth front, thanks for the color on the areas you've commented on already. I know you're seeing some of the attrition still in auto and declines in home equity, and you're being selective in CRE. So, given that, as you look at 2018, can we see growth in '18 in average loans versus full-year '17? Is it commercial that can really drive that growth despite the headwinds?

Timothy Sloan -- President and Chief Executive Officer

Yeah, I hope so. That's what our plan is, to do that. The wild card is just the pace of underlying economic growth. We're the largest lender in the country, so we're dependent not only on the hard work and effort of a great team of relationship managers, but it's also a function of economic growth. If we see an increase in economic growth, that should be a net positive. Just anecdotally, I would tell you that I've spent a lot of time in the last week and a half with our commercial and corporate customers. There is a lot of optimism out there.

John Shrewsberry -- Chief Financial Officer

But C&I loans, credit card, and first mortgage is likely where net loan growth is going to come from in 2018, similar to the quarter we just finished.

John Pancari -- Evercore ISI -- Analyst

Got it. Thanks, John. Secondly, on capital, I know we've seen the article recently in the Journal and the CAMEL ratings. Secondly, if that is true, is there an implication in terms of capital deployment? Can you talk about how you're thinking about deployment as you look at '18?

Timothy Sloan -- President and Chief Executive Officer

Fair question given the media coverage. We can't comment on confidential supervisory information from our regulators, so we won't. But, as it relates to capital return, I think that I said it early in the call and John repeated it -- we're pleased to have increased the amount of capital return of our shareholders by 16% year-over-year and our expectation is that we will continue to increase capital return because we have excess capital at the company to fund our growth.

So, our goal is to reduce our 11.9% tier one common equity number over the next few years to something closer to 10%. I don't know exactly what that means in terms of what our submission for CCAR is this year or next year, for that matter, but we're certainly going in that direction.

John Shrewsberry -- Chief Financial Officer

I think that's right. I was interpreting the question also to mean deployment for growth in the loan portfolio. That would be the first call on our capital, to make loans for our customers.

Timothy Sloan -- President and Chief Executive Officer

Sure.

John Shrewsberry -- Chief Financial Officer

There's no M&A in our future that would be a use of capital that we could possibly imagine at this point. Thus, the high starting point and the ongoing relatively high level of capital generation should lead to attempting to return more of that to shareholders.

John Pancari -- Evercore ISI -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of John McDonald with Bernstein. Please go ahead.

John McDonald -- Bernstein Research -- Analyst

Hey, good morning. I just wanted to clarify the outlook on expenses, the range for 2018. That would include the community contribution stuff that you list on page three, the $400 million in donations and the other things there?

John Shrewsberry -- Chief Financial Officer

Yes, it does. And the higher base pay for the roughly 70,000 team members.

John McDonald -- Bernstein Research -- Analyst

Okay. You also mentioned hoping to get to 59 handle on the efficiency ratio by late 2018. I guess you have to make some assumptions about the economy and rate hikes there. Could you give us some sense of what it would take to get there?

John Shrewsberry -- Chief Financial Officer

I think we are imagining three rate hikes built into our baseline scenario. We don't have a lot of economic impact from tax reform built into our current forecast for 2018, to the extent that it achieves its desired goals. There could be some upside there. I think those would be the big drivers. One of the key estimations we have to make is what's going to happen with deposit pricing throughout the course of the year. I think we're anticipating normalizing betas over the course of the year. That feeds into that range.

John McDonald -- Bernstein Research -- Analyst

Okay. How do you evaluate further reduction in the swaps? What's the calculus you go through as you look at that remaining 30 that you've got?

John Shrewsberry -- Chief Financial Officer

Sure. The calculus is what is our outlook for rates over the next couple of years versus what the forward curve implies, because that's where swap pricing comes from. If we think that there's a chance that we're going to be earning more over the next couple of years, then it might make sense to get out of today's fixed rate to get back into a floating rate scenario. And we do the math to figure out what the swap mark is and the amortization cost and the benefit of increase asset sensitivity. We've been doing that, and it's made sense to us to reduce that position.

John McDonald -- Bernstein Research -- Analyst

Okay. On the expense outlook and efficiencies, I know you don't want to get into 2019 and 2020 too much, but just maybe broader thoughts. I'm not sure if this came up before, but with all of the tailwinds that you have in '19 and '20, is there any reason that directionally the 2019 expenses wouldn't be down absent a material pick-up in business operations? Maybe, John, you can address that. And then, Tim, is there any reason you wouldn't be holding the team to getting back to that efficiency ratio, middle of that range, the 55-59, by 2019 and further deeper into the range in 2020? Is that broadly a goal that you're going to hold folks to?

Timothy Sloan -- President and Chief Executive Officer

That's a goal that I'd hold myself to as well as the senior management team. You're spot on there, John.

John Shrewsberry -- Chief Financial Officer

For the reasons that we've laid out, the expectation is that those incremental costs would be coming off in '19 and '20 and expenses would continue to trend lower. The caveat I would give is if there is some -- several years ago, we went through a period like this where we gave specific expense guidance, and then there was a wild mortgage refi wave where the revenue opportunity was used and direct expenses grew to take advantage of it. So, absent something like that -- which, we'd all be happy about if it occurred -- then, there's no reason to believe the expenses shouldn't keep coming down based on these structural items we're talking about that will fall off.

John McDonald -- Bernstein Research -- Analyst

Just to clarify, Tim, how would you phrase the efficiency ratio goals over the next two or three years?

Timothy Sloan -- President and Chief Executive Officer

As we said, our expectation is to get, by the end of this year, down to a 59 handle and then continue to make progress year after year after year. We should be within the 55-59% -- that's a goal to get in that. And then, once we're in that range, we're going to continue to make progress. We've got to improve the efficiency of this company.

John McDonald -- Bernstein Research -- Analyst

Okay. Thank you.

Operator

Your next question comes from the line of Betsy Graseck with Morgan Stanley. Please go ahead.

Betsy Graseck -- Morgan Stanley & Co. LLC -- Analyst

Hi. Good morning. The $53.5-54.5 expense targets that you put out for this next year -- what is the relative number that we're assessing that against in 2017? I know there are a lot of one-timers here, so I wanted to get what your view on 2017 like-for-like is.

John Shrewsberry -- Chief Financial Officer

We don't really normalize our 2017 expenses. Many people would obviously look to take out the larger operating losses that we experienced, but beyond that I wouldn't do much of a normalization for you. Just because it's a slippery slope.

Betsy Graseck -- Morgan Stanley & Co. LLC -- Analyst

Okay. On liquidity, if loan growth accelerates beyond what we're generating today, your expectation is that you might need to reset deposit rates? Did I hear you right on that?

John Shrewsberry -- Chief Financial Officer

Yeah. Actually, my reference there is more to the market. I don't think people appreciate how much the industry is holding the line on retail and small business deposit prices might be as a result of the fact that there's been lackluster loan demand. If the economy heats up because of tax reform, and everybody's got higher loan growth, then somebody may very well begin to defend their deposit franchise in order to fund it -- or to attract deposits in order to fund it. So, that's more of an industry comment than a Wells Fargo comment, specifically.

Betsy Graseck -- Morgan Stanley & Co. LLC -- Analyst

Do you mind giving us your view on your situation? Your LDR looks like it's around 73 or 74, so it seems like there might be room to grow.

John Shrewsberry -- Chief Financial Officer

I'd say we don't think we have to do much, although if there is a big cyclical change that causes betas to catch up to where people might've previously imagined they should be looking at prior cycles of rate increases -- if we're looking for a catalyst, or imagining one, that could cause that, one of the things that could cause it is a big pick-up in loan demand. It hasn't been there, and we've been studying deposit response as an industry without that loan demand. If you were to add loan demand, it could change things. That's my point.

Your point is right. Our loan to deposit ratio is very modest. We have a lot of liquidity. We're not in a position where we think we need to attract a lot of incremental deposits to fund the next $10 billion in loans. But, the industry overall should be thinking about whether an increase in loan demand overall changes the calculus for deposit pricing.

Timothy Sloan -- President and Chief Executive Officer

Betsy, just on deposit pricing for a minute. I would also make an observation separate from John's point, which I completely agree with on loan demand and the potential impact. When you think about the interaction and relationship we have with consumers, it's not just about deposit pricing. It's about how much firms are spending from a marketing standpoint, which doesn't go into the deposit pricing line. I think there has been a lot of discussion about that this year, that that's maybe ramped up for some firms more than others.

It's also about the massive investment that we've been making in technology to improve innovation so that we're not at the margin just competing on price. We're competing upon the value of the relationship and the convenience and service that we can provide. When you look at the pace of innovation, particularly for us, I think that's been one of the drivers and some of the reasons why we've been able to continue to attract deposits. We're providing real value to all of our customers because of the massive increase in innovation. And we're going to continue to do that so we're not just competing on price.

Betsy Graseck -- Morgan Stanley & Co. LLC -- Analyst

I appreciate that. Thank you.

Operator

Your next question comes from the line of Scott Siefers with Sandler O'Neill. Please go ahead.

Timothy Sloan -- President and Chief Executive Officer

Hey, Scott. Thank you very much for those comments on CNBC this morning. My mother thinks -- you're now her favorite analyst.

Scott Siefers -- Sandler O'Neill -- Analyst

At least I'm somebody's favorite analyst.

Timothy Sloan -- President and Chief Executive Officer

You've got a fan out there.

Scott Siefers -- Sandler O'Neill -- Analyst

Thank you. Please pass along my gratitude. John, on the NII outlook for '18, are you still thinking a low single-digit number for NII growth year-on-year is good for '18?

John Shrewsberry -- Chief Financial Officer

I think it's a little early to fully forecast it. There's a lot going on. We were just talking about deposit pricing and what that means. That could be a huge driver of this year, that wasn't really as much of a topic as last year. We're shaving some NII off the top on the tax equivalency front four our tax exempt investments. That's probably worth $400-and-change million in '18 versus '17. And then the pace of loan growth and cash deployment is going to matter, too.

It is a stated goal that we are trying to grow net interest income period-over-period, year-over-year, so that's what we're vectoring toward. But, at this point in the year -- maybe at Investor Day, it'll be easier to think about the year as a whole because we'll have a quarter and some change behind us. But, I wouldn't pencil in last year's growth rate this year until we get a little bit further into it and we know what tax reform means and a couple of other things.

Scott Siefers -- Sandler O'Neill -- Analyst

Alright. Perfect. Just on the effect of tax rate guidance, when you look at the gap between your effective tax rate and the FTE tax rate, any noticeable change that we should expect now that tax reform is done in there?

John Shrewsberry -- Chief Financial Officer

No, I don't think so. We'll certainly call out changes in our guidance on the effective tax rate overall. If conditions change throughout the course of the year, it'll be impacted by a couple of things, most notably how much money we're making. But, that's the number for now.

Scott Siefers -- Sandler O'Neill -- Analyst

Alright. Thank you, guys, very much.

Operator

Your next question comes from the line of Saul Martinez with UBS. Please go ahead.

Saul Martinez -- UBS Securities LLC -- Analyst

Good morning. Thanks for taking my question. On the Overdraft Rewind product, did you quantify how much that adversely impacted deposit fees in 4Q and how much more it could linger on into the 1Q18 results?

John Shrewsberry -- Chief Financial Officer

It was $19 million in the quarter, although it came in during the quarter. So, it will probably be more in the first quarter, and we'll see how customers adapt to that capability over time. Just for anybody who isn't familiar with the product, essentially if you overdraft a payment tonight and your direct deposit hits in the morning, we don't charge you for the overdraft that happened the night before. That's where the rewind comes in.

We'll see a full quarter of it in Q1. We'll call it out at the end of the quarter and make it transparent so that people can model it in. But, we think it's a very useful capability to help folks who are generally speaking right at the end of a pay cycle when they have an overdraft situation and then rectify it the next day.

Saul Martinez -- UBS Securities LLC -- Analyst

Okay. That's helpful. On John's comments on deposit betas and the possibility of a nonlinear type of increase in deposit betas, if you were to see loan growth pick up to mid-single digits, is there any way to think through the parameters about how much deposit betas can move up maybe based on history or some assumptions of consumer behavior? Is there any way to think about the parameters around which you might see deposit competition and deposit betas move up in that type of scenario?

John Shrewsberry -- Chief Financial Officer

I don't have a silver bullet for it, but I can tell you can stress or model some sort of a catch-up to historically normal levels -- the 40-ish-percent level -- and then ask yourself by bank who might go first and why. As Tim mentioned, there are a lot of noneconomic reasons for customers to want to maintain relationships and balances with one bank over another, call it very full service with the less full service. All of those things matter.

But everybody's deposit franchise is going to look a little bit different. Some people have more core primary types of transactional account relationships and some people are funded with hotter money that's seeking the highest yield at any point in time. So, different banks are going to behave differently.

My general guess is that within the relevant range for likely loan growth for Wells Fargo, if we achieve the higher end of that range, and the impact on our deposit price isn't really going to be because we think that we need to go out and raise more money and jack up our deposit costs, but rather that it's happening to others and they're doing it. And, if we feel we need to, we'd be responding to what's happening in the market.

Saul Martinez -- UBS Securities LLC -- Analyst

Okay, got it. Thank you very much.

Operator

Your next question comes from the line of Nancy Bush with NAB Research. Please go ahead.

Nancy Bush -- NAB Research LLC -- Analyst

Good morning, gentlemen. For many years, you were the lowest rate payer in the nation and you were able to maintain that through the location of branches, etc. From a competitive standpoint, and given the issues of the last couple of years, do you need to get in the middle of the pack or top? How do you feel competitively you need to be positioned with deposit pricing in a rising rate environment?

Timothy Sloan -- President and Chief Executive Officer

It's a very fair question. I don't think our view, particularly as it relates to retail consumer customers, has really changed. What you've seen in our deposit pricing so far this year is that we're one of the lowest, if not the lowest, in the industry. Our expectation is that we'll continue to be able to do that because of the franchise that we have -- not only the physical franchise but also the digital franchise we've continued to invest in based upon innovation and convenience we're providing to our customers.

When you move from traditional retail deposit customers to wealth customers, it's more competitive, and you've seen a higher beta there. We're in the middle. That's fine with us. I think we're comfortable there. As you move to larger corporate customers, or financial institutions and the like, it's very competitive, where your deposit betas are about as close to 100% as you can get. I think that's been pretty consistent through cycles for us, as well as the rest of the industry. So, that's how I would break it down.

John Shrewsberry -- Chief Financial Officer

On that last point, I would just add that we've been a little bit more active with some of the financial institution customers to get their deposits because we don't have a leverage ratio problem. So, we can afford to have a slightly bigger balance sheet. We can use the liquidity from time to time. So, if we weren't doing that, because that is the highest cost deposit in our book, we'd probably look on a weighted average basis for like a lower deposit cost payer. But, it's some purpose to do more business of various types with those customers by having that deposit relationship.

Nancy Bush -- NAB Research LLC -- Analyst

About branch closures -- I'm sure you guys have seen the articles over the past couple of months. There was a series, I think, in the Wall Street Journal a few weeks ago about how rural America is being impacted by branch closures. There are many small towns now that basically have no bank branches. Is this becoming a bigger regulatory issue or is coming more onto the regulatory radar screen? Do you guys anticipate that you may, in the future, have to not close branches that you would've closed otherwise because of their locations?

Timothy Sloan -- President and Chief Executive Officer

It's a fair question. I think when we look at our branch network, we include a number of factors beyond just a P&L for the branch or the likely expectation for growth or quality of customers. There's also CRA type requirements and other reasons that we want to keep branches open in certain markets. But, to your specific question about regulatory interaction, we haven't had a significant increase in regulatory interaction related to rural branches as of this point.

John Shrewsberry -- Chief Financial Officer

I would say this big investment in digital capability that allows people to bank from anywhere, including opening accounts and applying for and having credit granted and deposit taking, eases the burden. It doesn't completely remove it, but it makes it easier for people who live far from branches. Even if there is a branch there, it may be 30 miles away, but still be in the county. We're making it easier for people to do that from home. So, it is a better situation than it was 20 or 40 years ago, when that same calculus was being weighed.

Nancy Bush -- NAB Research LLC -- Analyst

Okay. Thank you.

Operator

Your final question comes from the line of Gerard Cassidy with RBC. Please go ahead.

Gerard Cassidy -- RBC Capital Markets LLC -- Analyst

Good morning. Can you guys share with us -- you talked about bringing this efficiency ratio down with a 50 handle on it by the end of the year and then further improvement in following periods. What percentage of the improving comes from revenue versus expenses, or vice versa, how much is going to come from expenses versus revenues?

John Shrewsberry -- Chief Financial Officer

Well, you can see the range that we're talking about for expenses for the year. While that's an annual number and not a quarterly number, we show some sensitivity around our 2017 revenue item. Right now, we're very focused on specific actions that are being taken on the expense side, and we have to make some assumptions about what's happening to revenue to estimate what the range would be on efficiency later in the year.

Very importantly, I'd remind everybody that Q1 is high for seasonal expense. John asked a question earlier about what's going to happen with -- I forgot to answer you question about NII in 2018. There's a range of estimates depending on the drivers that I mentioned similarly on the non-interest income front. We have a lot of things that are core and easier to forecast. But, there will be other items as well. So, we're always trying to grow our revenue. We have control over expense and it's the expense that we're specifically pointing to in terms of what's driving the outcome.

Gerard Cassidy -- RBC Capital Markets LLC -- Analyst

In your community banking metrics on slide 24, you give us good data on the digital customers and such. You guys have alluded on the call to opening up new accounts and selling product through this line since that seems to be where the industry's going and you're going. Can you share with us what kind of penetration you have -- credit cards or other types of consumer loan products -- that you're actually opening up through the online channel versus people having to come into a branch?

John Shrewsberry -- Chief Financial Officer

Right now, I'd say credit card is probably the easiest one to point to. I think we're at 43% of card originations in 2017 were digital. To be fair, it's not so important to us what that percentage is. We want more of our customers to have our card in their wallet. And, if they get it digitally or in person, either will work. But, 43% trending toward half of our card openings, were digitally transacted in 2017. That's up from a very small percentage in prior years.

Mortgage -- this will be the year to see what the trend is there as we fully roll out the digital mortgage application to people who aren't -- including people who aren't already customers of Wells Fargo. And in wealth, we have the digital account opening process for Intuitive Investor, which is something that we'll be measuring all year to figure out how much benefit our customers and prospects drive from interacting with us in that way.

Gerard Cassidy -- RBC Capital Markets LLC -- Analyst

On the mortgage, when do you guys go live with that again? Is it first or second quarter?

John Shrewsberry -- Chief Financial Officer

It's live now for people who are already customers of Wells Fargo. I know you all are customers of Wells Fargo, so when you log onto our online or digital banking platform, you can see it there. But, it will be available for all comers in the first quarter.

Gerard Cassidy -- RBC Capital Markets LLC -- Analyst

In your wholesale banking slide, you talk about investment banking market share dropped to 3.6% versus 4.4%. The narrow scope focus -- can you give us some background or color on what you mean by what you did when the market share came down?

John Shrewsberry -- Chief Financial Officer

In any given quarter, that's going to reflect from large deal volume. It could be some leverage finance volume. It could be cross border activity, some of which there's probably higher beta for us depending on whether we get it or not. On an annual basis. We probably assume that we're still going to trend toward the 5-6-plus-percent market share range, which is where we've been recently. But, I can't think of anything terribly different.

Timothy Sloan -- President and Chief Executive Officer

Just to reinforce John's point, what we saw in fourth quarter were more leveraged buyout type transactions just. Because of our underlying credit discipline, we tend to have a lower percent market share in those types of deals. So, that would at the margin probably have driven most of that decline.

Gerard Cassidy -- RBC Capital Markets LLC -- Analyst

Thank you. Appreciate it.

Timothy Sloan -- President and Chief Executive Officer

Thank you all for joining us this morning. I know it's always a busy morning the first day of earnings for the industry. I want to reiterate the fact that 2017 was a very transformational year for Wells Fargo. I also want to emphasize the hard work, dedication, and resiliency of our team members who made the company a better bank today than it was a year ago. And again, notwithstanding the challenges that we have had, I'm optimistic that Wells Fargo will again be a better bank a year from now. So, thank you for your support.

...

Operator

Ladies and gentlemen, this concludes today's conference. Thank you all for participating. You may now disconnect.

Duration: 77 minutes

Call participants:

John Campbell -- Director, Investor Relations

Timothy Sloan -- President and Chief Executive Officer

John Shrewsberry -- Chief Financial Officer

John McDonald -- Bernstein Research -- Analyst

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

Ken Usdin -- Jefferies LLC -- Analyst

Betsy Graseck -- Morgan Stanley & Co. LLC -- Analyst

Scott Siefers -- Sandler O'Neill -- Analyst

John Pancari -- Evercore ISI -- Analyst

Matt O'Connor -- Deutsche Bank Securities, Inc. -- Analyst

Gerard Cassidy -- RBC Capital Markets LLC -- Analyst

Saul Martinez -- UBS Securities LLC -- Analyst

Brian Kleinhanzl -- Keefe, Bruyette & Woods, Inc. -- Analyst

Nancy Bush -- NAB Research LLC -- Analyst

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