U.s. Bancorp · NYSE:USB
U.s. Bancorp — Q3 2023 Earnings Presentation
34 slides from U.s. Bancorp's earnings presentation, Oct 18, 2023
Slide 1: U.S. Bancorp 3Q23 Earnings Conference Call
October 18, 2023 U.S. Bancorp 3Q23 Earnings Conference Call U.S. Bank | Confidential 1
Slide 2: Forward-looking Statements and Additional Information
Forward-looking Statements and Additional Information The following information appears in accordance with the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including st
Slide 3: 3Q23 Highlights
3Q23 Highlights Reported Adjusted 1 • Post‐Acquisition Commitment Relief $0.91 | $1.05 › U.S. Bancorp will not be required to meet Category II Earnings per share requirements by December 31st, 2024 • Accelerated CET1 accretion 9.7% 60bps vs. 2Q23 › Driven by enhanced earnings generation and capital
Slide 4: 3Q23 Highlights
3Q23 Highlights Income Statement Credit Quality Adjusted Reported Adjusted 1 change vs. Change vs. 1 1 $ in millions, except EPS 3Q23 3Q23 2Q23 3Q22 $ in millions 3Q23 2Q23 3Q22 2 Nonperforming assets $1,310 20.7 % 93.5 % Net interest income $4,268 $4,268 (4.1) % 10.7 % Noninterest income 2,764 2,76
Slide 5: Performance Ratios
Performance Ratios Return on Return on Return on Efficiency Ratio1 & Average Assets Average Common Equity Tangible Common Equity1 Net Interest Margin2 22.3%1 21.4%1 21.0%1 1.24%1 16.2%1 63.7% 64.4% 21.0% 1.22% 1.07%1 14.6%1 1.04%1 57.5% 15.8% 13.7%1 18.4% 56.8%1 59.2%1 60.4%1 17.1% 0.91% 11.9% 0.81%
Slide 6: Sustainable Earnings Power
Sustainable Earnings Power Strong annualized fee income generated by our diversified business model supports our short- and long-term growth objectives 25% $0.3B | + ~12% 37% Total noninterest income revenue As a % of 3Q23 year-over-year growth Total Revenue1 38% $0.5B | + ~14% Tech-led2 Merchant Pr
Slide 7: Post Conversion Synergy Opportunities
Post Conversion Synergy Opportunities Opportunity across Union Bank’s loyal customer base to leverage our broad product set, distribution network, digitization, and payments ecosystem Legacy capture rate of Consumer Legacy capture rate of Business Legacy USB clients holding clients with a Credit Car
Slide 8: Balance Sheet Summary
Balance Sheet Summary The strength and stability of our balance sheet enables us to withstand economic pressures while continuing to meet the needs of our customers Total Average Assets ($B) Total Average Deposits ($B) $665 $673 $664 $510 $512 $497 1Q23 2Q23 3Q23 Highlights 1Q23 2Q23 3Q23 • Focused
Slide 9: Investment Securities Portfolio
Investment Securities Portfolio Our balanced securities portfolio supports effective management of interest rate volatility End of Period Balances ($B) AFS Portfolio Duration (Years) Meaningful yield improvement Duration continues to move lower $161.2 $163.8 $162.1 45% 47% 47% 3.8 2.87% 2.75% 3.7 2.
Slide 10: 3Q23 Earnings Summary - Detail
3Q23 Earnings Summary - Detail Excluding Notable Items2 3Q23 % Change 3Q22 2Q23 Notable vs. 2Q23 vs. 3Q22 $ in millions, except EPS Reported Reported Reported Items2 Adjusted Adjusted Adjusted Net Interest Income $3,827 $4,415 $4,236 - $4,236 (4.1) % 10.7 % Taxable-equivalent Adjustment 30 34 32 - 3
Slide 11: Net Interest Income
Net Interest Income 3Q23 2Q23 3Q22 Loans $5,700 $5,605 $3,603 Loans held for sale 42 38 49 Investment securities 1,152 1,077 867 Other interest income 860 806 209 Total interest income $7,754 $7,526 $4,728 Deposits $2,580 $1,939 $534 Short-term borrowings 450 740 169 Long-term debt 488 432 198 Total
Slide 12: Noninterest Income
Noninterest Income 3Q23 2Q23 3Q22 Payments $1,037 $1,048 $987 Service Charges 334 324 317 Mortgage 144 161 81 Trust & Inv Mgmt 627 621 572 Other 622 594 512 1 Noninterest Income, Adjusted $2,764 $2,748 $2,469 Notable Items1 - (22) - Noninterest Income, Reported $2,764 $2,726 $2,469 Reported +1.4% Li
Slide 13: Noninterest Expense
Noninterest Expense 3Q23 2Q23 3Q22 Compensation & Benefits $2,615 $2,646 $2,260 Technology & Communications 511 522 427 Occupancy & Equipment 313 316 272 Professional Services, Marketing/Business Development 303 263 257 All Other 504 512 379 1 Total Noninterest Expense, Adjusted $4,246 $4,259 $3,595
Slide 14: Credit Quality
Credit Quality Credit quality migrating towards normalized levels Net Charge-off and Nonperforming Assets Allowance for Credit Losses Change vs. by Loan Category, 3Q23 Reported Adjusted1 Amount Loans and Leases Outstanding 3Q23 2Q23 2Q23 3Q22 ($B) (%) Non-performing Assets Commercial $2.1 1.6% Balan
Slide 15: Accelerated Capital Accretion
Accelerated Capital Accretion CET1 capital ratio is 270 bps above our regulatory capital minimum CET1 Ratio at pre-acquisition level 9.7% +0.2% 9.7% +0.2% +0.2% 9.1% 60 bps vs. 2Q23 8.4% 7% CET1 Ratio Regulatory Minimum Binding Capital Constraint Earnings Net of Capital Distribution 3rd Quarter High
Slide 16: Fourth Quarter 2023 Outlook
Fourth Quarter 2023 Outlook1 Year-to-Date 4Q23 Guidance Net interest income2 $13.4B $4.1B - $4.2B Total Revenue, adjusted3 $21.4B $6.8B - $6.9B Includes purchase $265M ~$65M accounting accretion Total Noninterest expense, $12.8B ~$4.2B adjusted3 Includes Core Deposit Intangibles Amortization $364M ~
Slide 17: Post-Acquisition Commitment Relief
Post-Acquisition Commitment Relief U.S. Bancorp will not be required to meet Category II requirements by YE 2024 Full relief from Category II commitments 1 made in connection with Union Bank acquisition Now subject to existing capital rules or, if adopted, the same transition rules as all other
Slide 18: Appendix
Appendix U.S. Bancorp 18
Slide 19: Average Loans
Average Loans Average % of Average Change vs. $388.8 3Q23 Balance Total 2Q23 3Q22 $376.9 Commercial $135 36% (2.4) % 4.8 % Commercial Real Estate 54 14% (1.2) 35.6 Residential Mortgages 115 30% (2.5) 36.4 Credit Card 27 7% 3.2 11.5 Other Retail 46 12% (11.0) (22.8) $336.8 Total loans $377 (3.1) % 11
Slide 20: Average Deposits
Average Deposits Cha nge vs . $497.3 $512.3 3Q23 Average Balance 2Q23 3Q22 $456.8 Noninterest‐bearing deposits $98 (14.3) % (14.5) % Money ma rket s a vi ngs $177 16.0 % 41.4 % Interes t checki ng 133 3.6 16.9 Sa vi ngs a ccounts 50 (15.0) (26.0) Ti me depos i ts 55 25.4 51.2 Total interest‐bearing
Slide 21: Payment Services Fee Revenue Growth
Payment Services Fee Revenue Growth Card Revenue1 3Q23 vs. Prior Year 20.0% 17.2% Card fee revenue improved 5.4% YOY driven by 15.0% sales growth and the Union Bank acquisition. 10.0% 6.5%5.8% 5.4% Merchant processing fee revenue improved 5.2% 5.0% YOY driven by sales growth. 0.5% 0.0% -0.5% C
Slide 22: Payment Services
Payment Services Payments Revenue Breakdown Seasonal Considerations A Shift to Tech-led3 Revenue Payment Fees as a % of Historical Linked Quarter Seasonal Tech-led3 Merchant Processing Fee Net Revenue (3Q23) Trends for Payment Fees Revenue2 Revenue Growth Segment 1Q 2Q 3Q 4Q 78% 5.9% Card1 Stabl
Slide 23: Credit Quality – Commercial
Credit Quality – Commercial Average Loans ($M) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth(a) $ in millions 3Q22 2Q23 3Q23 Average Loans $128,519 $138,085 $134,720 6.5% 3.4% 2.1% 1.8% (2.4%) 30-89 Delinquencies 0.25% 0.25% 0.24% $135,683 $138,085 $134,720 90+ Delinquencies 0.03% 0
Slide 24: Credit Quality – Commercial Real Estate
Credit Quality – Commercial Real Estate Average Loans ($M) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth (a) $ in millions 3Q22 2Q23 3Q23 Average Loans $40,010 $ 54,934 $54,253 1.2% 14.3% 21.6% (1.2%) (1.2%) 30-89 Delinquencies 0.02% 0.13% 0.07% 90+ Delinquencies 0.05% 0.00% 0.00% $
Slide 25: Credit Quality – Residential Mortgage
Credit Quality – Residential Mortgage Average Loans ($M) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth (a) $ in millions 3Q22 2Q23 3Q23 Average Loans $84,018 $117,606 $114,627 4.7% 15.6% 19.8% 1.1% (2.5%) 30-89 Delinquencies 0.10% 0.11% 0.11% $116,287 $117,606 $114,627 90+ Delinquen
Slide 26: Credit Quality – Credit Card
Credit Quality – Credit Card Average Loans ($M) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth (a) $ in millions 3Q22 2Q23 3Q23 Average Loans $24,105 $26,046 $26,883 6.0% 4.4% 1.6% 1.9% 3.2% 30-89 Delinquencies 0.97% 1.15% 1.35% $26,883 90+ Delinquencies 0.74% 1.02% 1.17% $25,173 $25
Slide 27: Credit Quality – Other Retail
Credit Quality – Other Retail Average Loans ($M) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth (a) $ in millions 3Q22 2Q23 3Q23 (1.5%) (2.0%) (9.0%) (2.7%) (11.0%) Average Loans $60,126 $52,146 $46,394 30-89 Delinquencies 0.41% 0.50% 0.56% 90+ Delinquencies 0.11% 0.12% 0.13% $60,126
Slide 28: Non-GAAP Financial Measures
Non-GAAP Financial Measures (Dollars in Millions, Unaudited) Three Months Ended September 30, June 30, September 30, 2023 2023 2022 Net interest income $4,236 $4,415 $3,827 Taxable‐equivalent adjustment (1) 32 34 30 Net interest income, on a taxable‐equivalent basis 4,268 4,449 3,857 Net interest in
Slide 29: Non-GAAP Financial Measures
Non-GAAP Financial Measures Three Months Ended September 30, June 30, September 30, (Dollars in Millions, Unaudited) 2023 2023 2022 Net income applicable to U.S. Bancorp common shareholders $1,412 $1,281 $1,718 Intangibles amortization (net‐of‐tax) 127 126 34 Net income applicable to U.S. Bancorp co
Slide 30: Non-GAAP Financial Measures
Non-GAAP Financial Measures Three Months Ended September 30, June 30, March 31, December 31, (Dollars in Millions, Unaudited) 2023 2023 2023 2022 Net charge‐offs $420 $649 $373 $578 Less: Notable items (2) ‐‐ 309 91 368 Net charge‐offs, excluding notable items 420 340 282 210 Annualized net charge‐o
Slide 31: Non-GAAP Financial Measures
Non-GAAP Financial Measures Three Months Ended Nine Months Ended September 30, September 30, (Dollars and Shares in Millions Except Per Share Data, Unaudited) 2023 2023 Income before taxes $1,955 5,865 Taxable‐equivalent adjustment (1) 32 100 Less: Notable items (2) (284) (1,103) Income before taxes
Slide 32: Non-GAAP Financial Measures
Non-GAAP Financial Measures Nine Months Ended September 30, ($in millions) 2023 Line of Business Financial Performance Net Revenue Wealth, Corporate, Commercial and Institutional Banking $ 7,813 Consumer and Business Banking 7,669 Payment Services 5,018 Treasury and Corporate Support 882 Total Compa
Slide 33: Notes
Notes (1) Based on a federal income tax rate of 21 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. (2) Notable items for the three months ended September 30, 2023 included $284 million ($213 million net-of-tax) of merger and integrati
Slide 34: U.S. Bancorp
U.S. Bancorp 34