U.s. Bancorp · NYSE:USB
U.s. Bancorp — Q3 2010 Earnings Presentation
34 slides from U.s. Bancorp's earnings presentation, Oct 20, 2010
Slide 1: U.S. Bancorp 3Q10 Earnings Conference Call
U.S. Bancorp 3Q10 Earnings Conference Call October 20, 2010 Richard K. Davis Chairman, President and CEO Andy Cecere Vice Chairman and CFO
Slide 2: Forward-looking Statements and Additional Information
2 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
Slide 3: 3Q10 Highlights
3Q10 Highlights Net income of $908 million; $0.45 per diluted common share Record total net revenue of $4.6 billion, up 7.9% vs. 3Q09 Net interest income growth of 14.8% vs. 3Q09 Noninterest income growth of 0.8% vs. 3Q09 Achieved positive operating leverage on a linked quarter basis Average loan gr
Slide 4: Performance Ratios
Performance Ratios 3Q09 4Q09 1Q10 2Q10 3Q10 Return on Avg Common Equity 0.1 0.096 0.105 0.134 0.128 Return on Avg Common Equity 0.1 0.096 0.105 0.118 0.128 Return on Avg Assets 0.009 0.0086 0.0096 0.0109 0.0126 3Q09 4Q09 1Q10 2Q10 3Q10 Efficiency Ratio 0.475 0.491 0.49 0.524 0.519 Net Interest Margi
Slide 5: Capital Position
Capital Position $ in billions
Slide 6: Loan and Deposit Growth
3Q09 4Q09 1Q10 2Q10 3Q10 Loans 182 191.6 192.9 191.2 192.5 Deposits 166.4 180.9 182.5 183.3 182.7 Loan and Deposit Growth Average Balances Year-Over-Year Growth 3Q10 Acquisition Adjusted Loan Growth = (0.4%) Deposit Growth = 2.7% 8.2% $191.6 3.9% $192.9 4.0% $191.2 5.8% $192.5 9.3% $182.0 25.2% $180
Slide 7: Revenue Growth
Taxable-equivalent basis Revenue Growth Year-Over-Year Growth 25.8% 20.8% 11.3% 8.7% 7.9% $ in millions 3Q09 4Q09 1Q10 2Q10 3Q10 Reported 4250 4376 4321 4519 4587 USB Record Revenue 3Q10
Slide 8: Credit Quality
3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 NPA $ Change 76 49 155 290 357 489 727 626 386 184 91 -261 -171 NPA % Change 0.13 0.08 0.22 0.34 0.31 0.33 0.37 0.23 0.12 0.05 0.02 -0.07 -0.05 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 NCO $ Change 8 26 68 103 1
Slide 9: Credit Quality - Outlook
Credit Quality - Outlook Reached inflection point on credit losses and NPAs driven by declines in delinquencies and criticized assets The Company expects the level of Net Charge-offs and Nonperforming Assets, excluding covered assets, to trend lower during 4Q10 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q0
Slide 10: Credit Quality - Reserves
Credit Quality - Reserves 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Allowance 2260 2243 2448 2648 3004 3575 4105 4571 4986 5264 5511 5540 Provision Exceeding NCO's 0 192 200 250 635 530 466 415 278 175 25 0 Provision/NCO's 1 1.66 1.51 1.5 2 1.67 1.5 1.4 1.25 1.15 1.02 1 Allowance f
Slide 11: Foreclosures
3Q09 4Q09 1Q10 2Q10 3Q10 Foreclosure Starts - Insured/Serviced 6615 7160 7632 7738 7778 Foreclosure Starts - Portfolio 2673 2413 2231 1659 1717 Average per Day 143 154 162 147 148 Foreclosures Number of Foreclosure Starts Investor Owner Mix 15185 10823 Judicial 62% Non Judicial 38% Primary goal is t
Slide 12: Earnings Summary
Earnings Summary $ in millions, except per-share data Taxable-equivalent basis
Slide 13: 3Q10 Results - Key Drivers
3Q10 Results - Key Drivers vs. 3Q09 Net Revenue growth of 7.9% (7.2% excluding significant items) Net interest income growth of 14.8%; net interest margin of 3.91% vs. 3.67% Noninterest income growth of 0.8% (decline of 0.5% excluding significant items) Significant items: net change of $28 million N
Slide 14: Significant Items
Significant Items $ in millions * Not a component of net income, but does impact net income applicable to U.S. Bancorp common shareholders and earnings per diluted common share
Slide 15: Net Interest Income
Net Interest Income 3Q09 4Q09 1Q10 2Q10 3Q10 Net Interest Income 2157 2360 2403 2409 2477 Net Interest Margin 0.0367 0.0383 0.039 0.039 0.0391 Net Interest Income Key Points $ in millions Taxable-equivalent basis vs. 3Q09 Average earning assets grew by $17.8 billion, or 7.6% (2.6% excluding acquisit
Slide 16: Average Loans
Average Loans 3Q09 4Q09 1Q10 2Q10 3Q10 Covered 10.288 18.504 21.415 20.454 19.308 Commercial 51.222 49.979 47.282 46.34 46.784 CRE 33.829 34.044 34.151 34.164 34.19 Res Mtg 24.405 25.621 26.408 26.821 27.89 Retail 62.224 63.5 63.622 63.382 64.369 Average Loans Key Points $ in billions Year-Over-Year
Slide 17: Average Deposits
Average Deposits 3Q09 4Q09 1Q10 2Q10 3Q10 Time 43.951 45.774 45.606 43.607 43.607 Money Market 33.387 38.485 40.902 40.256 38.256 Checking & Savings 52.042 55.64 58.023 59.538 61.316 Noninterest-bearing 36.982 40.99 38 39.917 39.732 Average Deposits Key Points $ in billions Year-Over-Year Growth 24.
Slide 18: Noninterest Income
Noninterest Income 3Q09 4Q09 1Q10 2Q10 3Q10 All Other 379 400 392 492 451 Mortgage 276 218 200 243 310 Service Charges 397 370 344 344 299 Trust & Inv Mgmt 293 277 264 267 267 Payment Services 748 751 718 764 783 Noninterest Income Key Points $ in millions Year-Over-Year Growth 48.2% 37.8% 7.3% 2.7%
Slide 19: Noninterest Expense
Noninterest Expense 3Q09 4Q09 1Q10 2Q10 3Q10 All Other 500 611 491 613 566 Tech & Communications 175 186 185 186 186 Prof Svcs, Marketing and PPS 272 256 192 234 260 Occupancy & Equip 203 214 227 226 229 Compensation & Benefits 903 961 1041 1118 1144 Noninterest Expense Key Points $ in millions Year
Slide 20: Mortgage Repurchase
Mortgage Repurchase Mortgages Repurchased and Make-whole Payments Mortgage Representation and Warranties Reserve $ in millions 3Q10 2Q10 1Q10 4Q09 3Q09 Beginning Reserve $101 $73 $72 $52 $40 Net Realized Losses (24) (20) (22) (6) (3) Additions to Reserve 70 48 23 26 15 Ending Reserve $147 $101 $73 $
Slide 21: Regulatory Environment
Regulatory Environment Existing regulatory oversight actions YTD 4Q10 Annual Actual Estimate Run Rate Overdraft Legislation ^ $140 ^ $110 - $120 ^ $440 - $480 Pricing and Policy Changes Card Act ^ $100 ^ $60 - $80 ^ $250 Net Interest Margin and Fee Income $ in millions, estimated reduction to revenu
Slide 22: Regulatory Environment - Basel III
Regulatory Environment Capital Impact of limits for mortgage servicing rights, deferred tax assets and investments in financial institutions = $0 Impact of pension liability, purchased credit card relationship intangibles and all other = 38 bp Impact of non-core capital elements net of replacement c
Slide 23: Positioned to Win
Positioned to Win USB is well-positioned to produce industry-leading performance with... a strong foundation, including excellent credit and risk management, a diversified business mix and prudent capital management a proven track record initiatives to build relevant, profitable scale in each of our
Slide 24: Appendix
3Q10 Earnings Conference Call LI Appendix (Sbancorp.
Slide 25: Credit Quality - Commercial Loans
Credit Quality - Commercial Loans 3Q09 4Q09 1Q10 2Q10 3Q10 Average Loans 44655 43490 40837 40095 40726 Net Charge-offs Ratio 0.0178 0.0228 0.0241 0.0223 0.0149 Average Loans and Net Charge-offs Ratios Key Statistics Comments Overall delinquencies were stable, but nonperforming loans and net charge-o
Slide 26: Credit Quality - Commercial Leases
EF ST Balance 2347 3711 Credit Quality - Commercial Leases 3Q09 4Q09 1Q10 2Q10 3Q10 Average Loans 6567 6489 6445 6245 6058 Net Charge-offs Ratio 0.0266 0.0202 0.0214 0.0141 0.0118 Average Loans and Net Charge-offs Ratios Key Statistics Comments Overall delinquencies and nonperforming loans continue
Slide 27: Credit Quality - Commercial Real Estate
Multi-Family Retail Res Construction Condo Construction A&D Commercial Office Other balance 1892 1148 1348 451 961 872 1510 Inv Owner balance 15185 10823 Credit Quality - Commercial Real Estate 3Q09 4Q09 1Q10 2Q10 3Q10 Avg Loans 33829 34044 34151 34164 34190 NCO Ratio 0.0222 0.0203 0.0228 0.0267 0.0
Slide 28: Credit Quality - Residential Mortgage
3Q09 4Q09 1Q10 2Q10 3Q10 Restructured 1338 1354 1560 1672 1747 Credit Quality - Residential Mortgage 3Q09 4Q09 1Q10 2Q10 3Q10 Average Loans 24405 25621 26408 26821 27890 Net Charge-offs Ratio 0.021 0.0237 0.0223 0.0206 0.0188 Average Loans and Net Charge-offs Ratios Key Statistics Comments Continued
Slide 29: Credit Quality - Home Equity
Credit Quality - Home Equity 3Q09 4Q09 1Q10 2Q10 3Q10 Average Loans 19368 19444 19402 19332 19289 Net Charge-offs Ratio 0.0182 0.0196 0.0188 0.0164 0.0162 Average Loans and Net Charge-offs Ratios Key Statistics Comments Strong credit quality portfolio (weighted average FICO 746, CLTV 73%) originated
Slide 30: Credit Quality - Credit Card
Traditional Consumer Finance Balance 14988 1522 3Q09 2Q10 3Q10 Average Loans 15,387 16,329 16,510 30-89 Delinquencies 2.58% 1.86% 1.85% 90+ Delinquencies 2.41% 2.38% 2.09% Nonperforming Loans 0.77% 1.04% 1.21% Credit Quality - Credit Card 3Q09 4Q09 1Q10 2Q10 3Q10 Average Loans 15387 16399 16368 1632
Slide 31: Credit Quality - Retail Leasing
Credit Quality - Retail Leasing 3Q09 4Q09 1Q10 2Q10 3Q10 Average Loans 4822 4620 4509 4364 4289 Net Charge-offs Ratio 0.0066 0.0043 0.0045 0.0037 0.0019 Average Loans and Net Charge-offs Ratios Key Statistics Comments Retail leasing net charge-offs continue to improve, reaching pre-recession levels
Slide 32: Credit Quality - Other Retail
Auto Install Studend Revolving Balance 10318 5590 4850 3523 Credit Quality - Other Retail 3Q09 4Q09 1Q10 2Q10 3Q10 Average Loans 22647 23037 23343 23357 24281 Net Charge-offs Ratio 0.0194 0.0191 0.0193 0.017 0.0165 Average Loans and Net Charge-offs Ratios Key Statistics Comments Net charge-offs, del
Slide 33: Non-Regulatory Capital Ratios
Non-Regulatory Capital Ratios $ in millions
Slide 34: U.S. Bancorp 3Q10 Earnings Conference Call
U.S. Bancorp 3Q10 Earnings Conference Call October 20, 2010