U.s. Bancorp · NYSE:USB
U.s. Bancorp — Lehman Brothers Global Financial Services Conference 2008
38 slides from U.s. Bancorp's conference presentation, Sep 9, 2008
Slide 1: Lehman Brothers Global Financial Services Conference
Richard K. Davis Chairman, President and CEO September 9, 2008 Lehman Brothers Global Financial Services Conference
Slide 2: Forward-looking Statements
3 Forward-looking Statements This presentation contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These statements often include the words "may," "could," "w
Slide 3: U.S. Bancorp Businesses
5 U.S. Bancorp Businesses Regional Consumer and Business Banking Wealth Management National Wholesale Banking Trust Services Global Payments
Slide 4: U.S. Bancorp Businesses
U.S. Bancorp Businesses Asset Size $247 billion Deposits $135 billion Loans $166 billion Customers 14.9 million NYSE Traded USB Market Capitalization* $57 billion Founded 1863 Bank Branches 2,542 ATMs 4,895 2Q08 Dimensions Regional Consumer and Business Banking Wealth Management National Wholesale B
Slide 5: U.S. Bancorp - Positioned for Growth
U.S. Bancorp - Positioned for Growth Investing for Growth Deepening Customer Relationships Product Innovation Expanding Product and Distribution Maximize Shareholder Value Strong Core Financial Institution Core Products & Service Distinctive Capabilities Financial Performance Credit Quality and Indu
Slide 6: Performance Metrics 2Q08 YTD vs Peers
Peer USB USB Median Rank Return on Assets 1.71% 0.53% 1 Return on Common Equity 19.6% 6.4% 1 Efficiency Ratio 45.5% 60.6% 1 Net Interest Margin 3.58% 3.22% 3 Performance Metrics 2Q08 YTD Source: company reports Peer Banks: BAC, BBT, CMA, FITB, KEY, NCC, PNC, RF, STI, USB, WB, WFC and WM
Slide 7: Profitability
Profitability 2Q08 YTD Excluding securities gains (losses) net * Core fee income excludes $492 million VISA gain and $62 million net effect of the adoption of SFAS 157 Consumer Wholesale PCTAM Payments Treas & Corp Support Revenue 38 18 12 24 8 2004 2005 2006 2007 2008 YTD Fee Income 0.441 0.465 0.5
Slide 8: Loan and Deposit Growth
2Q07 3Q07 4Q07 1Q08 2Q08 Loans 145.7 147.5 151.5 155.2 163.1 Deposits 119 119.1 125.4 130.9 135.8 Loan and Deposit Growth Average Balances Year-Over-Year Growth $ in billions 12.0% $163.1 4.5% $145.7 4.3% $147.5 5.4% $151.5 7.3% $155.2 14.1% $135.8 (1.9%) $119.0 (0.7%) $119.1 3.7% $125.4 8.4% $130.9
Slide 9: Profitability: Total Revenue
2Q07 3Q07 4Q07 1Q08 2Q08 Net Interest Income 1650 1685 1763 1830 1830 Noninterest Income 1882 1870 1807 1865 1846 Profitability Total Revenue Year-Over-Year Growth 9.4% $3,863 1.6% $3,532 3.1% $3,555 3.7% $3,570 $ in millions Excluding securities gain (losses) net * 1Q08 excludes $492 million VISA g
Slide 10: Profitability: Operating Income
Profitability $ in millions, taxable-equivalent basis * Core basis excludes $492 million VISA gain, $62 million net effect of the adoption of SFAS 157, securities gains (losses) net and $47 million one-time expense Operating Income Year-Over-Year YTD Growth
Slide 11: Industry Leading Capital Generation
USB PNC BBT WFC RF BAC STI CMA FITB KEY WB NCC WM ROE 0.355 0.258 0.252 0.214 0.145 0.131 0.126 0.094 0.067 -0.1 -0.111 -0.161 -0.359 Industry Leading Capital Generation Trailing 4 quarters, Source: SNL Net income adj for tax-affected amortization Return on Tangible Equity
Slide 12: Capital Ratios
2004 2005 2006 2007 2Q08 Tier 1 Capital Ratio 0.086 0.082 0.088 0.083 0.085 Total Risk-Based Capital Ratio 0.131 0.125 0.126 0.122 0.125 Capital Ratios Target = 12.0% Target = 8.5% Source: SNL Peer Banks: BAC, BBT, CMA, FITB, KEY, NCC, PNC, RF, STI, USB, WB, WFC and WM Peer Median = 8.25%
Slide 13: Performance Summary
Performance Summary Industry-leading profitability Advantageous mix of fee-based businesses Accelerating loan and deposit growth Revenue growth driven by increases in both net interest income and fees Solid growth in core operating income Industry-leading capital generation Strong capital position
Slide 14: Credit Quality
Credit Quality Credit quality positively impacted by: Conservative approach to risk management Diversification of portfolio by industry, geography and customer segments Limited amount of leveraged lending: 1.9% of total loans Predominantly prime-based residential mortgage and home equity portfolio P
Slide 15: Credit Quality
Credit Quality Credit quality negatively impacted by: Residential construction: $3.7 billion (represents only 2.2% of total loans) Consumer Finance Division residential and home equity portfolio, including $3.9 billion of sub-prime loans (represents only 2.4% of total loans) Continuing economic slow
Slide 16: Credit Quality
Credit Quality 2003 2004 2005 2006 2007 Charge-off Ratio 0.0107 0.0064 0.0052 0.0039 0.0054 NPA Ratio 0.0098 0.006 0.0047 0.0041 0.0045 2Q07 3Q07 4Q07 1Q08 2Q08 Charge-off Ratio 0.0053 0.0054 0.0059 0.0076 0.0098 NPA Ratio 0.0039 0.0043 0.0045 0.0053 0.0068 Net Charge-off Ratio NPA Ratio NCO Ratio =
Slide 17: Credit Quality - Peer Comparison
Credit Quality - Peer Comparison Source: company reports Peer Banks: BAC, BBT, CMA, FITB, KEY, NCC, PNC, RF, STI, USB, WB, WFC and WM USB Peer Banks USB 1.073 0 Low 0 1.1 Median 0 1.556 High 0 6.231 Growth in Net Charge-offs 2Q08 vs 2Q07 USB Peer Banks USB 1.009 0 Low 0 0.925 Median 0 1.151 High 0 2
Slide 18: Commercial Real Estate
35 Commercial Real Estate By Property Type, $31.2 Billion Balance of the portfolio is well-diversified by property type, with over one third owner occupied Residential Construction portfolio showing stress - $3.7 billion portfolio Limited exposure to condo projects - $0.9 billion Owner Occupied Offi
Slide 19: Residential Mortgage & Home Equity
37 Residential Mortgage & Home Equity Residential Mortgages & Home Equity, $40.8 Billion Credit trends continue to show strong credit quality in the traditional portfolio Stress primarily in the Consumer Finance Division portfolio 2Q 07 3Q 07 4Q 07 1Q 08 2Q08 Total ($17.5B) 0.0041 0.0049 0.0053 0.00
Slide 20: Other Retail Loans
39 Other Retail Loans By Loan Type, $26.7 Billion Retail auto leasing - high quality portfolio (average FICO 752): however, end of term lease valuations are deteriorating Auto loans - high quality portfolio (average FICO 744): both direct (20%) and indirect (80%) originations Automobile Retail Leasi
Slide 21: Restructured Loans
41 Restructured Loans In late 2005 implemented programs to identify and assist retail customers to meet minimum payment requirements In late 2007 began implementing a mortgage loan restructuring program for certain qualifying borrowers Sub-prime borrowers, that are current in their repayment status,
Slide 22: Credit Quality Summary 3Q08 Forecast
43 Credit Quality Summary 3Q08 Forecast Net charge-offs to increase approximately 25% - 28% compared to 2Q08 (35% linked quarter increase 2Q08 vs 1Q08) Nonperforming assets to increase approximately 27% - 32% compared to 2Q08 (34% linked quarter increase 2Q08 vs 1Q08) Allowance for loans adequate as
Slide 23: Reserve Methodology
45 Reserve Methodology Reserve Methodology Wholesale Portfolio - a function of risk ratings and net inherent loss rates Retail / Small Business - a function of a rolling 1 year estimate of losses Impaired loans - specific reserve for non-accrual and restructured loans Reserve methodology also includ
Slide 24: Current Banking Environment
47 Current Banking Environment Industry Issue GSE debt and equity exposure ABCP/SIV exposure Liquidity and Capital Auction-rate securities USB Position Perpetual preferred stock: $97 million book value 3Q08 potential impairment: up to 100% $3.0 billion purchased from affiliated money market funds 4Q
Slide 25: U.S. Bancorp Investing for Growth
49 U.S. Bancorp Investing for Growth Investing for Growth Deepening Customer Relationships Product Innovation Expanding Product and Distribution Maximize Shareholder Value Strong Core Financial Institution Core Products & Services Distinctive Capabilities Corporate-wide Enterprise Revenue Office Emp
Slide 26: Enterprise Revenue Office
Enterprise Revenue Office Building Deeper Relationships Cross-organizational effort to deepen relationships with customers Customer Council 27 Senior Managers representing every major Business Unit and Support Area, primarily focused on identifying new revenue growth opportunities at the customer le
Slide 27: Building Deeper Relationships
53 Building Deeper Relationships Progressing Toward Full Roll-out Integrated Payments Product Delivery Industry Specific Product Solutions Small Business Segmented Delivery Model One-stop Corporate Liquidity Services Simplified Merchant Product Deepen Mortgage Product Penetration Extend Benefits of
Slide 28: Building Deeper Relationships - Pilot Highlights
55 Building Deeper Relationships 3 Initiatives Beginning Full Roll-out Consumer Package Pilot Highlights (exceeding expectations) > 45% of new DDA customers are selecting a Consumer Package ~ 13% improvement in customer attrition Small Business Package Pilot Highlights (exceeding expectations) > 55%
Slide 29: Employee Engagement
57 Employee Engagement Connect employees to a shared purpose, vision and values Create a more loyal, committed, productive and engaged workforce Identify, reward and retain talented employees Provide opportunities for growth and development to all employees Develop strong leaders with the skills to
Slide 30: Employee Engagement
59 Employee Engagement Introduced new incentive compensation program for 2008 Expanded employee development programs All employee meeting January 2008 introduced: Employee assistance fund Five-star volunteer day Year-end 2008 appreciation bonus Conducted all employee survey with 85% response rate
Slide 31: National Media Campaign
61 National Media Campaign Multimedia advertising campaign focused on the core strength and stability of U.S. Bancorp Campaign debuted August 1 with full page ad in The Wall Street Journal Campaign expanded on September 1 to national and local television, radio and print
Slide 32: National Media Campaign
National Media Campaign aN a]
Slide 33: Maximize Shareholder Value
Maximize Shareholder Value Investing for Growth Deepening Customer Relationships Product Innovation Expanding Product and Distribution Maximize Shareholder Value Strong Core Financial Institution Core Products & Service Distinctive Capabilities Financial Performance Credit Quality and Industry Issue
Slide 34: Shareholder Focus
Shareholder Focus Lower risk, lower volatility in earnings stream given current market environment Industry-leading profitability High return of earnings to shareholders - U.S. Bancorp has paid a dividend for 145 consecutive years Strong capital and liquidity positions Excellent cost control Investi
Slide 35: Total Shareholder Return
Total Shareholder Return Source: FactSet Annualized returns 3 Year 5 Year 1 Year As of 9/5/08 U.S. Bancorp 9.1% 8.2% 11.3% S&P 500 Commercial Bank Index (30.7)% (8.0)% (0.2)% S&P 500 Index (13.8)% 2.6% 6.0%
Slide 36: U.S. Bancorp
U.S. Bancorp y N
Slide 37: Consistent Predictable Repeatable
Consistent Predictable Repeatable U.S. Bancorp
Slide 38: Lehman Brothers Global Financial Services Conference
Richard K. Davis Chairman, President and CEO September 9, 2008 Lehman Brothers Global Financial Services Conference
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