U.s. Bancorp · NYSE:USB
U.s. Bancorp — Investor Day (September 2019)
165 slides from U.s. Bancorp's investor day presentation, Sep 12, 2019
Slide 1: U.S. Bancorp Investor Day
U.S. Bancorp Investor Day September 12, 2019 U.S. BANCORP
Slide 2: Agenda
Agenda Investor Day Agenda Speaker Start* End Guest Registration, Breakfast and Tech Experience 7:30 AM 8:30 AM Company Strategy 8:30 AM 9:45 AM Strategic Overview Andy Cecere Brand and Culture Kate Quinn Technology Strategy Jeff von Gillern Growth Through Transformation Derek White Break 9:45 AM 10
Slide 3: 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: Today’s presentation contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including
Slide 4: Strategic Overview
U.S. Bancorp Investor Day Strategic Overview Andy Cecere Chairman, President and CEO September 12, 2019 U.S. BANCORP
Slide 5: A Changing World
A Changing World (Sbancorp
Slide 6: We Are Living in an Evolving World
We Are Living in an Evolving World Changing Industry expectations transformation Economic Regulatory Digital uncertainty environment evolution
Slide 7: Customer Expectations and Behavior in the Digital Age
Customer Expectations and Behavior in the Digital Age From two-day shipping to Amazon Now 67 % of all banking transactions occur on a mobile device • Simplicity • Convenience and speed • Uniqueness • Ubiquity • Privacy U.S. BANCORP 7
Slide 8: Our Competitive Set Has Changed
Our Competitive Set Has Changed Financial services To scale by 2019 market cap / estimated valuation MasterCard American $5B $200B $1T Express Tech platforms Amazon Schwab Visa Global Pay / TSYS Northern Trust Capital One Addepar Betterment Symphony Plaid Apple Acorn Confluent FinTechs Facebook Bank
Slide 9: A Lot Has Changed For U.S. Bank in Three Years
A Lot Has Changed For U.S. Bank in Three Years Growth Technology and innovation • Strategic M&A • Agile Studios • Market expansion • Digital applications • Brand campaign • Instant decisioning • Product introductions and enhancements • Mobile app – Asset backed warehouse lending product • Expense Wi
Slide 10: Where We Are Today
Where We Are Today • We are starting from a position of strength • The core competencies and competitive advantages that made us great in the past remain in place • The world is changing, and we are transforming how we do business and investing for the future U.S. BANCORP | 10
Slide 11: Our Position in the Industry
Our Position in the Industry Assets Deposits Market Value Rank Company $ in billions Rank Company $ in billions Rank Company $ in billions 1 J.P. Morgan $2,727 1 J.P. Morgan $1,524 1 J.P. Morgan $352 2 Bank of America 2,396 2 Bank of America 1,375 2 Bank of America 256 3 Citigroup 1,988 3 Wells Farg
Slide 12: Long History of Industry-leading Returns and Financial Discipline
Long History of Industry-leading Returns and Financial Discipline Average ROE* Average ROA* Average Efficiency Ratio* 2016-1H19 2016-1H19 2016-1H19 14.1% 1.43% 62.2% 62.3% 62.4% 61.0% 61.1% 61.3% 60.2% 1.34% 58.9% 57.4% 12.0% 1.25% 54.6% 1.21% 1.18% 11.3% 11.2% 1.14% 1.14% 1.12% 1.11% 10.4% 10.4% 10
Slide 13: Our Advantages
Our Advantages Best-in-class A diverse mix of A strong reputation A clear strategy financial results businesses and rooted in trust and that we are and risk core financial engagement. executing management. products. Recognized inside effectively. Track record of Balance of and outside the bank Nimbl
Slide 14: We Need to Build on Our Past Success to Grow in the Future
We Need to Build on Our Past Success to Grow in the Future We will keep what made us great … … while enhancing how we do business Our business mix Becoming more agile Our risk and financial discipline Embedding innovation more broadly Our culture Driving digital experiences Customers and employees r
Slide 15: Investing For the Future
Investing For the Future bancorp
Slide 16: Optimizing to Reinvest
Optimizing to Reinvest We manage for the long term, but won’t lose sight of the short term Business Structure Digital Capabilities mix Physical Technology Money New assets and risk movement markets Optimization Investment U.S. BANCORP | 16
Slide 17: We Are Leveraging Our Strategy to Transform Our Business
We Are Leveraging Our Strategy to Transform Our Business Core business model Transform the core Future U.S. Bank Operate current retail Protect and grow revenue Identify and test business and commercial while driving efficiency to models and new sources businesses and fuel transformation; build of c
Slide 18: We Are Enhancing Our Capabilities to Compete in a New World
We Are Enhancing Our Capabilities to Compete in a New World Capitalizing Leveraging Facilitating the Integrating Focusing on digital data, right solutions relentlessly on investments analytics and partnerships seamlessly the customer to accelerate insights to advance across one the future our effort
Slide 19: Focusing on the Things We Can Control
Focusing on the Things We Can Control Beyond the economic, regulatory and interest rate environment, we control our future How we manage expenses We are past our compliance-related buildout We can change our branch mix and be more How we optimize our business thoughtful about automation post-consent
Slide 20: Long-term Profitability Expectations
Long-term Profitability Expectations 2018 Return on Average Common Equity Industry-leading returns 17.5% 14.5% 15.4% 14.5% 13.4% 12.9% 12.1% 11.8% 11.6% 11.5% 11.5% 11.0% USB Exp USB Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Source: Company filings, SNL Financial Peers include:
Slide 21: Positioned to Win
Positioned to Win Position of strength Building from success Investing for the future Our scale, reach, risk We choose our playing fields We are taking a strategic discipline, reputation and and operate with an agile approach to organic growth, track record of execution are mindset and willingness t
Slide 22: What You Will Hear Today
What You Will Hear Today Enabling the Growth through Business line Leveraging risk future transformation updates and financial • Brand and culture • Vision for digital • Size, scale discipline • Investing in • Differentiation • Proven track record technology and • What’s next • Our proactive and inn
Slide 23: Brand and Culture
U.S. Bancorp Investor Day Brand and Culture Kate Quinn Vice Chair, Chief Administrative Officer September 12, 2019 U.S. BANCORP
Slide 24: We invest our hearts and minds to power human potential
We invest our hearts and minds Not buying what to power human you do, but why potential. U.S. BANCORP | 24
Slide 25: Brand and Culture: Source of Competitive Advantage
Brand and Culture: Source of Competitive Advantage BRAND CULTURE U.S. BANCORP | 25
Slide 26: Brand Directly Impacts Every Major Constituency
Brand Directly Impacts Every Major Constituency We bring our story to life in relevant ways across each group Employees Customers Communities Shareholders Experience, purpose, Ethics, experience, Investment, Consistent results, rewards and products and services, partnerships, best-in-class returns e
Slide 27: Maturing Our Brand in the Face of a New Reality
Maturing Our Brand in the Face of a New Reality Stakeholders have heightened 92% expectations for companies to address social issues of millennials believe that working for an environmentally and socially responsible company is important (Gallup) U.S. BANCORP 27
Slide 28: Our Social Responsibility Focus
Our Social Responsibility Focus Social impact Diversity, equity and Environmental strategy inclusion strategy strategy . • Financial inclusion • Workforce diversity • Products and services • Access to capital • Workplace inclusion • Partnerships • Place-based investment • Marketplace • Accountabilit
Slide 29: Early Wins From Our Brand Launch
Early Wins From Our Brand Launch % 55 (Brand Finance) Growth in brand value since 2016 • Increased awareness • Strengthened Most Trusted Choice positioning • Increased revenue vs. non-campaign markets • Drove higher rates of new “central” customers • Increased deposit share • Deepened relationships
Slide 30: Strong Reputation, Especially Among Community Partners
Strong Reputation, Especially Among Community Partners We maintain an “Excellent Reputation” score as defined by our community partners Statistically Trailing Statistically Leading 46 48 58 61 61 65 70 71 72 91 Source: Reputation Institute – Community Partner Reputation Study – March 2019 U.S. BANCO
Slide 31: Culture, Engagement and Shareholder Value
Culture, Engagement and Shareholder Value U.S. Bancorp employee engagement scores*: Companies with highly engaged workforces top quartile of all industries outperform their peers by U.S. Bancorp Best-in-class all industries 147% in earnings per share (Gallup, 2016) Source: internal engagement metric
Slide 32: Translating Our Brand to Growth
Translating Our Brand to Growth Growth Employee experience Employee to customer value cycle We believe in branding from the inside out, investing in the employee experience to drive Customer Employee higher engagement, which leads to better retention engagement customer experiences, greater customer
Slide 33: Our Goals for Employees and Customers Are Similar
Our Goals for Employees and Customers Are Similar EMPLOYEES CUSTOMERS ATTRACT RETAIN DEVELOP Establishing Leveraging Creating compelling Enhancing their meaningful data and insights journeys digital experiences relationships U.S. BANCORP | 33
Slide 34: Trust and Reputation Are Foundational to All Constituencies
Trust and Reputation Are Foundational to All Constituencies Earning the right to be integral to their lives Staying relevant with our brand Prioritizing and building “trust” at moments that matter most Driving social impact through our community and Diversity, Equity and Inclusion focus to create ec
Slide 35: U.S. BANCORP | 35
U.S. BANCORP | 35
Slide 36: Technology Strategy
U.S. Bancorp Investor Day Technology Strategy Jeff von Gillern Vice Chair, Technology and Operations Services September 12, 2019 U.S. BANCORP
Slide 37: Technology: Enabling Efficiency, Productivity and Growth
Technology: Enabling Efficiency, Productivity and Growth We strategically deploy technology in service to our customers, our employees, and the growth and efficiency of the organization. Artificial intelligence and machine learning Robotic process automation and orchestration Data processing, aggreg
Slide 38: Technology at Work “Above and Below the Glass”
Technology at Work “Above and Below the Glass” Above the glass: seamless customer experiences Delivering simple-to-navigate, consistent user experiences along with information, insights and product offers that are timely and relevant Below the glass: core and enabling technology Deploying resources
Slide 39: Above the Glass: Delivering an Exceptional Customer Experience
Above the Glass: Delivering an Exceptional Customer Experience user interface experience APIs……. application launch, dashboards, accounts domain APIs……. customer profiles, money transfers, payments UI consistency across channels is enabled by technology, data and such as layers of APIs system APIs……
Slide 40: Below the Glass: Our Ongoing Initiatives
Below the Glass: Our Ongoing Initiatives Continuing to modernize our architecture Stability Agility Speed to market Further scaling our data, analytics and artificial intelligence infrastructure Cost effectiveness Security Accelerating improvements in productivity and cost-efficient delivery U.S. BA
Slide 41: Continued Modernization of Our Architecture
Continued Modernization of Our Architecture We are continuing to modernize our architecture, with an increased focus on reusable shared services. banking channels By rebuilding more-frequently changing functionalities that had resided in our core applications and data structures as modular micro-ser
Slide 42: The Impact of Modernization
The Impact of Modernization During the build-out of our new mobile app, we upgraded key components of our tech stack to support faster rollouts, easier upgrades and more robust future compatibility. custom web applications Rapid deployment of APIs and microservices… third party web applications web
Slide 43: Further Scaling Our Data, Analytics and AI
Further Scaling Our Data, Analytics and AI We are further scaling our data, analytics and artificial intelligence capabilities to maximize the accessibility and utility of our data. comprehensive ingestion of unified real-time data predictive insights information-rich data infrastructure and and int
Slide 44: The Impact of Robust Data, Analytics and AI
The Impact of Robust Data, Analytics and AI Responsibly leveraging data across all products and at every touchpoint allows us to build more personalized and high value relationships with our customers. Would you like to try a simpler We see you’ve been traveling lately. authentication method? A trav
Slide 45: Accelerating Productivity and Cost-efficient Delivery
Accelerating Productivity and Cost-efficient Delivery We are accelerating advancements in productivity and cost-efficient delivery via process enhancements, workforce and tools, such as the Cloud. Accelerating the pace of product Using advanced development Working in Experience Studios and experienc
Slide 46: The Role of the Cloud
The Role of the Cloud Why Cloud? Our approach: • Speed to market • Build new applications in the Cloud wherever possible; deliberately migrate existing apps • Development productivity • Leverage the public Cloud’s extensive tool set, scalable • Cost optimization infrastructure and operating cost ben
Slide 47: Cybersecurity
Cybersecurity We continue to innovate in the cybersecurity space, leveraging our investments in intelligence-driven, machine-speed information security techniques to securely enable our digital-first strategy. 5 billion data-level events processed daily Use of deep machine learning, analytics and AI
Slide 48: The Impact of Changing the Way We Work
The Impact of Changing the Way We Work Increasing the pace of innovation and accelerating our response to Flexibility & Speed changing customer expectations Anticipating new and emerging customer needs Customer Obsession & Business Partnership Improving cost efficiency using smaller teams of highly
Slide 49: Growth Through Transformation
U.S. Bancorp Investor Day Growth Through Transformation Derek White Chief Digital Officer September 12, 2019 U.S. BANCORP
Slide 50: Positioning Ourselves For The Future
Positioning Ourselves For The Future We have aligned key functions, promoting a holistic approach to investing in and executing on our digital-first strategy. chief digital officer omnichannel…. agile…. innovation…. U.S. BANCORP | 50
Slide 51: Building Customer Relationships in a Digital-First World
Building Customer Relationships in a Digital-First World In order to attract, retain, better serve and drive centrality with our customers, we must: deliver be nimble, be digital-first exceptional experiences adapting and evolving quickly U.S. BANCORP | 51
Slide 52: Interactions Are the New “Eyeballs”
Interactions Are the New “Eyeballs” • Interactions are coveted as a means to reach current and potential customers and influence behaviors • Interactions are a leading indicator and an important measure of future success • Traffic is moving rapidly to digital channels, and digital interactions now o
Slide 53: Our Vision for Digital: 4-2-3-1
Vision Our Vision for Digital: For Digital: 4–2–3–1 4-2-3-1 interaction phases of 4 humans 2 models 3 digital maturity 1 amazing experience 4 Humans consumer DIY available corporate small business smart executive owner shared autonomous employee U.S. BANCORP | 53
Slide 54: Approaching Digital Above and Below the Glass
Approaching Digital Above and Below the Glass DIY for all four humans smart and personalized interactions digitize and automate empower decisions with data and advanced 100% where possible analytics Create amazing @speed and @scale Reusable technology Human 360 activate full Agile development in bui
Slide 55: Embracing New and Better Ways of Working
Embracing New and Better Ways of Working We’re implementing Agile product development throughout the organization to deliver better products, faster. • 18 months in, we are rapidly scaling our Agile practice and accelerating the pace of implementation • Over 6,000 agile creators across the company,
Slide 56: What We’re Delivering
What We’re Delivering DIY: Payee Choice Smart: Pivot • Facilitates B2C payments • Custom portal • Consumer chooses payment • Built for Corporate Trust and method Fund Services clients • Addressable spend estimated • Streamlines operations at over $1 trillion in the business-to-consumer and • Support
Slide 57: In Summary…
In Summary… • Our digital initiatives span across the organization, are both customer- and employee-facing, and address digital above and below the glass • We’re moving @speed and @scale to become an Agile organization • We’re realizing benefits in both revenue growth and expense control • Digital i
Slide 58: Wealth Management and Investment Services
U.S. Bancorp Investor Day Wealth Management and Investment Services Gunjan Kedia Vice Chair, Wealth Management and Investment Services September 12, 2019 U.S. BANCORP
Slide 59: Wealth Management and Investment Services
Wealth Management and Investment Services Wealth Management and Investment Contribution to USB: Services total net revenue breakdown: 1H19 highlights: 13% of USB’s total net revenue Wealth Management – 34% Investment Services – 66% 21% of • Corporate Trust USB’s • Fund Services total fees * 39% NII
Slide 60: Financial Highlights
Financial Highlights Total Net Revenue Average Loans Average Deposits 2016-2018 CAGR: 7.3% 2016-2018 CAGR: 12.7% 2016-2018 CAGR: 4.8% $2,870 $9,867 $2,650 $9,372 $72,561 $70,021 $71,281 $2,491 $8,533 $63,809 $7,381 2016 2017 2018 2016 2017 2018 1H19 2016 2017 2018 1H19 $ in millions U.S. BANCORP | 6
Slide 61: Financial Highlights
Financial Highlights Total Assets Under Management ($bn) Total Assets Under Administration ($tn) 2016-2018 CAGR: 9.3% 2Q19 YoY Growth: 13.8% 2016-2018 CAGR: 7.9% 2Q19 YoY Growth: 7.3% $156.7 $6.8 $147.0 $6.6 $134.0 $6.2 $123.1 $5.7 2016 2017 2018 2Q19 2016 2017 2018 2Q19 Period end balances U.S. BAN
Slide 62: Wealth Management: Tailored Services Across Segments
Wealth Management: Tailored Services Across Segments Emerging Wealth Affluent High Net Worth Ultra High Net Worth <$250K net worth >$250K net worth >$3MM net worth >$75MM net worth Dedicated advisor-banker teams Complex financial needs Family office Clients start to invest Dedicated team of speciali
Slide 63: We Are Transforming Our Digital Wealth Customer Experience
We Are Transforming Our Digital Wealth Customer Experience 2015 2016 2017 2018 2019 CRM Self-service and Planning Data analytics Data aggregation Robo-advising self-directed made simple capabilities and reporting Digital relationship management is evolving as an advantage. 300,000 Wealth Management
Slide 64: Expanding and Deepening Relationships
Expanding and Deepening Relationships We serve clients through their lifecycle with a comprehensive set of products and capabilities. Financial planning Credit card Private Revenue per Advisor solutions banking 13.7% CAGR $2,000 Insurance Investment solutions management $1,500 Business Automated adv
Slide 65: Investment Services
Investment Services Offering trust and administration services to asset managers, corporations and municipalities Corporate Trust Fund Services corporations, municipalities, asset managers and credit managers registered investment advisors structured corporate #1 trustee1 #2 trustee2 U.S.: concentra
Slide 66: Strong Foundation Built From Acquisitions and Organic Growth
Strong Foundation Built From Acquisitions and Organic Growth Assets Under Custody and Administration ($bn) Investment Services today 2005-2018 CAGR: 8.0% $7,000 First Citizens Ally Bank Clients: 22,000+ Bank Document Municipal Custody Trustee Bank of AIS Fund Admin AmeriServ America Quintillion Offi
Slide 67: The Power of the U.S. Bank Franchise
The Power of the U.S. Bank Franchise Our differentiated business model gives us a powerful advantage. U.S. Bank balance sheet 1. strengthens value of deposits Deposit Growth 2016 - 2018 6.0% Net Interest Margin 2018 3.14% Corporate & Commercial franchise 2. provides a powerful source for business re
Slide 68: Creating Valuable Client Relationships as One U.S. Bank
Creating Valuable Client Relationships as One U.S. Bank Client 1: Registered Investment Advisor Client 2: Global Asset Manager 13x 23x v v revenue growth revenue growth USB Wealth $11.8 selected Corporate USB selected $11.5 Management to provide Trust inherits provides loans to custody trustee relat
Slide 69: Focused on Expanding Our Reach and Our Product Set
Focused on Expanding Our Reach and Our Product Set Technology and digital capabilities Global expansion Delivering One U.S. Bank Real-time insightful data through European depositary and custody Leverage institutional relationships online portals across U.S. Bank Digitization with machine learning G
Slide 70: In Summary…
In Summary… Wealth Management – Strong foundation at the higher end of wealth management – Successful team-based model provides significant growth in Affluent segment – Strong digital capabilities to transform our service model Investment Services – We are at scale in a capital intensive, efficient,
Slide 71: Consumer and Business Banking
U.S. Bancorp Investor Day Consumer and Business Banking Tim Welsh Vice Chair, Consumer and Business Banking September 12, 2019 U.S. BANCORP
Slide 72: Consumer and Business Banking
Consumer and Business Banking Consumer and Business Banking Contribution to USB: total net revenue breakdown: 1H19 highlights: $ in millions 1H19 change vs. 1H18 40% of Net interest income $3,148 3.9 % USB’s total net revenue Noninterest income 1,102 (5.9) Net revenue 4,250 1.1 Noninterest expense 2
Slide 73: Financial Highlights
Financial Highlights Average Loans Average Deposits 2016-2018 CAGR: 2.3% 2016-2018 CAGR: 3.4% $152,466 $154,891 $148,301 $140,835 $142,740 $142,532 $134,465 $139,265 2016 2017 2018 1H19 2016 2017 2018 1H19 $ in millions U.S. BANCORP | 73
Slide 74: Digital Engagement Trends
Digital Engagement Trends Transactions (% of Total) 64% 67% 62% Digital Active Customers (% of Total Active Customers)* 38% 36% 33% 72% 70% 66% Three months ended 52% 53% 52% 50% 6/30/17 6/30/18 6/30/19 45% Total Digital Branch, ATM, Phone and IVR 41% Loan Sales (% of Total) 78% 74% 65% 35% 22% 26%
Slide 75: A Scale Player Across Our Businesses
A Scale Player Across Our Businesses #4 #4 #4 deposit share bank mortgage lender bank mortgage servicer2 among peer banks, ranked by dollar volume2 within 25-state footprint1 #4 SBA lender #5 bank new #1 in-store and on-site ranked by unit volume5 auto financing4 branch network within 25-state footp
Slide 76: Our Strategy and Key Initiatives
Our Strategy and Key Initiatives We put our customers in the center of everything we do, staying ahead of their needs, desires and expectations to deliver exceptional experiences and create deeper, more valuable relationships. We are digital first, while maintaining We are transforming a strong huma
Slide 77: Becoming Central to the Lives of Our Customers
Becoming Central to the Lives of Our Customers We have organized around the customer to design and deliver exceptional experiences, focusing on three key areas: mortgage, small business and mobile banking. home buyer / homeowner small business owner digitally active consumer U.S. BANCORP | 77
Slide 78: Digital First: Mortgage Banking
Digital First: Mortgage Banking We reimagined the home buying experience, simplifying and streamlining our mortgage application process to make meaningful improvements in customer experience and efficiency while driving market share gains. 2017 2018 2019 what’s next: launched rolled out introduced a
Slide 79: Digital First: Small Business Lending
Digital First: Small Business Lending We implemented process and technology enhancements to simplify and transform the way our customers fund their small businesses. • Reduced the number of application fields The entire lending process can Process by >70% now be completed same day, change often with
Slide 80: Digital First: Mobile Banking
Digital First: Mobile Banking Our completely redesigned mobile app features a competitive set of service and sales functionalities, making mobile banking simpler than ever. over 50% growth in Our new app: mobile interactions • Features a comprehensive suite of consumer and small per customer per day
Slide 81: Delivering a Personalized and Integrated Mobile Experience
Delivering a Personalized and Integrated Mobile Experience Personalization Integration We are leveraging data and analytics to better We are building deeper relationships via digital channels understand and anticipate our customers’ needs. through the integration of products from across the bank and
Slide 82: Optimizing Our Existing Branch Network
Optimizing Our Existing Branch Network As we accelerate the transformation of our distribution network, we are delivering the branch model that best serves our customers’ evolving preferences. 2019 branch closures to date*: 140 near-term expectation: approximately 10-15 percent net branch closures c
Slide 83: Expanding Our Physical Presence
Expanding Our Physical Presence We are selectively expanding to bring the best of U.S. Bank into new markets. We’re leveraging: • Single-product customer relationships outside our existing branch footprint • Enhanced digital capabilities • Branch-lite physical presence • The strengths and capabiliti
Slide 84: Optimizing to Reinvest
Optimizing to Reinvest Remodels and de novo in Charlotte: branches built in 2019 • more than 800 employees 2019 expansion market • ~40k customers Potential expansion states U.S. BANCORP | 84
Slide 85: In Summary…
In Summary… We are transforming Consumer and Business Banking to be: – More agile and digital and able to serve customers better, faster and where and how they choose – More personal, with the advice and information customers want – More available, in new markets – More optimized and efficient We ex
Slide 86: Corporate and Commercial Banking
U.S. Bancorp Investor Day Corporate and Commercial Banking Leslie Godridge & Jim Kelligrew Vice Chairs and Co-Heads, Corporate and Commercial Banking September 12, 2019 U.S. BANCORP
Slide 87: Corporate and Commercial Banking
Corporate and Commercial Banking Corporate and Commercial Banking Contribution to USB: total net revenue breakdown: 1H19 highlights: $ in millions 1H19 change vs. 1H18 18% of USB’s total Net interest income $1,444 (0.3) % net revenue Noninterest income 454 5.6 Net revenue 1,898 1.1 Noninterest expen
Slide 88: Financial Highlights
Financial Highlights Average Loans by Segment 2Q19 Large Corporate – 36% Commercial Real Estate – 28% Specialized Finance – 20% Middle Market – 16% Average Loans Average Deposits 2016-2018 CAGR: 1.0% 2016-2018 CAGR: 1.0% $107,880 $102,975 $96,500 $100,854 $100,316 $91,979 $93,941 $93,886 2016 2017 2
Slide 89: Our Competitive Advantages
Our Competitive Advantages Highest debt ratings counterparty of choice Best-in-class risk discipline safety and dependability Differentiated payments and trust solutions, holistic set of products and with a One U.S. Bank approach to creating value solutions Culture of innovation underpinning B2B opp
Slide 90: Our Strategy and Key Initiatives
Our Strategy and Key Initiatives Digitization of Expanding Reach Deepening Relationships Business Payments We are selectively entering new We are growing our lead We are investing in our markets, expanding our presence relationships in our lending and payments and digital in current markets and enha
Slide 91: Expanding Our Reach
Expanding Our Reach We are extending our distribution. We are enhancing and deepening our product set with new and complementary solutions as well as digital • Selectively expanding our middle market presence and tech-driven improvements to our existing solutions. • Driving deeper penetration in the
Slide 92: Deepening Relationships: Uptiering Credit
Deepening Relationships: Uptiering Credit Our competitive advantages, industry specialization and breadth of product offerings provide up-tiering opportunities throughout the cycle. Solid growth in our Our best-in-class debt ratings lead loan relationships and consistency help us win lead roles as c
Slide 93: Deepening Relationships With Our Broad Product Set
Deepening Relationships With Our Broad Product Set Our credit relationships provide an important gateway to deeper product penetration as well as customer relationships that extend across business lines. Non-credit product penetration Domestic investment grade bond rankings Lead & Co-managed Busines
Slide 94: Leveraging the Strength of One U.S. Bank
Leveraging the Strength of One U.S. Bank We are partnering across U.S. Bank to integrate our holistic array of products and solutions. Present-state: full set of point solutions Future-state: integration of solutions to create client experiences that are… Bonds Treasury Corporate management payments
Slide 95: Deepening Relationships as One U.S. Bank
Deepening Relationships as One U.S. Bank Client 1: auto manufacturer Client 2: consumer beverage 2x 9x v v revenue growth revenue growth Enter Introduce Become Provide credit facility, $6.5 store trustee for $8.5 Corporate play role in optimization to future public Trust services public debt reach t
Slide 96: Digitization of Business Payments: the B2B Opportunity
Digitization of Business Payments: the B2B Opportunity $23T 60% estimated size of paper-based B2B payments U.S. B2B market in North America Source: Deloitte U.S. BANCORP | 96
Slide 97: Pivoting Toward the Future: Digitization of Business Payments
Pivoting Toward the Future: Digitization of Business Payments As the pace of digital adoption accelerates, we see tremendous opportunity to add value for our customers throughout the working capital lifecycle. our clients’ priorities simplify operations optimize cash flow manage risk utilize data to
Slide 98: In Summary…
In Summary… We are: – Leveraging our competitive advantages – Building on the success of past investments – Expanding our reach through increased distribution and enhanced product capabilities – Investing in the digitization of business payments We expect to: – Deepen client relationships – Continue
Slide 99: Payment Services
U.S. Bancorp Investor Day Payment Services Shailesh Kotwal Vice Chair, Payment Services September 12, 2019 U.S. BANCORP
Slide 100: Payment Services
Payment Services Contribution to USB: 1H19 highlights: $ in millions 1H19 change vs. 1H18 29% of Net interest income $1,215 1.1 % USB’s total Noninterest income 1,801 2.9 net revenue Net revenue 3,016 2.2 Noninterest expense 1,522 4.0 Net Income 684 (2.4) 11% of 1H19 change vs. 1H18 USB’s total Net
Slide 101: Financial Highlights
Financial Highlights Total net revenue Retail payment solutions – 65% 40% NII breakdown: Global merchant acquiring – 26% 60% fee income Corporate payment systems – 9% Fee Credit and Debit Card Merchant Processing Corporate Payment Products Revenue Services Revenue revenue: 2016-2018 CAGR: 7.8% 2016-
Slide 102: A Scale Player Across Payments
A Scale Player Across Payments #1 agent financial institution issuer #1 payments provider to the U.S. Federal Government ranked by average net receivables2 Card, Freight and Fleet1 #2 #3 #3 freight payment provider U.S. commercial card issuer U.S. fleet card issuer ranked by purchase volume2 ranked
Slide 103: Retail Payment Solutions
Retail Payment Solutions Differentiated issuing platform • Scalable operating platform enables us to provide a competitive, comprehensive and turn-key suite of card issuing services and capabilities Unique distribution • Largest U.S. provider of agent financial institution (FI) issuing • Nearly 1,40
Slide 104: Global Merchant Acquiring
Global Merchant Acquiring International processing platform • Pan-European acquirer processing 100+ currencies in 25+ countries Integration with software vendors • Continuing to build, buy and collaborate on solutions that drive growth in our ISV distribution channel and enhance our offerings in sel
Slide 105: Corporate Payment Systems
Corporate Payment Systems Leading provider in corporate B2B payables • Serving nearly 200 of Fortune 500 companies with estimated size of commercial purchasing and T&E cards $23T U.S. B2B market1 • Fast-growing virtual pay offerings • Largest payments provider to the U.S. government Proprietary, clo
Slide 106: The Competitive Environment
The Competitive Environment As the lines between traditional banking and payments capabilities blur, there is opportunity for integrated banking and payments solutions. Competition Competition Banking & payments integration Payments Loans & & money deposits movement Capture new customers and deepen
Slide 107: We’re Already Positioned to Digitize the B2B Payments Process
We’re Already Positioned to Digitize the B2B Payments Process We are collaborating across U.S. Bank to enable simple, seamless, and integrated business payment solutions that add value for both buyers and suppliers. Typical disconnected, paper-based supply chain: Buyer ERP Create Process Supplier ER
Slide 108: Our Strategy and Key Initiatives
Our Strategy and Key Initiatives Driving digitization Expanding our reach Integrating business and leveraging data via added and enhanced payments with a broader set of Ubiquity across both consumer capabilities and distribution banking solutions to serve our and business payments customers’ needs h
Slide 109: Digitization With Analytics and Insights
Digitization With Analytics and Insights Investing in digital-first payments capabilities leveraging data and insights to bring our customers choice, convenience and control. Enabling customer DIY: • Accelerate new account growth • Increase customer engagement • Drive efficiency and customer satisfa
Slide 110: Expanding Our Distribution and Capabilities
Expanding Our Distribution and Capabilities Expanding our distribution Innovative products capturing new spend Buying • Artificial intelligence-driven • Over $3B in card portfolio acquisitions • 60+ deals in the financial services sector via Elan • Chrome River collaboration • Six merchant and B2B c
Slide 111: Integrating Payments With Our Full Set of Banking Solutions
Integrating Payments With Our Full Set of Banking Solutions We are partnering across U.S. Bank to provide our customers a holistic array of “money in, money out” solutions. Deposits Card issuing Lending Merchant processing Banking Payments Capital solutions U.S. Bank Omni-commerce products products
Slide 112: In Summary…
In Summary… ‒ Strong, at-scale franchises in issuing, acquiring and corporate B2B payments ‒ Extensive network of distribution points, innovative products and capabilities ‒ Unique, proprietary platforms at scale ‒ Expanding reach with integrated software vendors delivering omni-commerce solutions ‒
Slide 113: Risk Management
U.S. Bancorp Investor Day Risk Management Jodi Richard Vice Chair, Chief Risk Officer Mark Runkel Executive Vice President, Chief Credit Officer September 12, 2019 U.S. BANCORP
Slide 114: Key Risk Management Strategies
Key Risk Management Strategies A strong risk culture is embedded in our corporate strategy and will continue to be foundational to our long-term success. Our focus: Aligned with our risk appetite: • Ensuring sustainability of programs • Undertaking risk prudently • Staying ahead of emerging risks •
Slide 115: Ensuring Sustainability of Risk and Compliance Programs
Ensuring Sustainability of Risk and Compliance Programs We invest in people, processes and technology to mature our risk programs. Experienced staff and sufficient resources Consistent tone and messaging throughout every layer of the organization Keys to Speak up culture and rapid escalation of issu
Slide 116: Key and Emerging Risks
Key and Emerging Risks Our programs continually evolve to address the current environment. Key risks Emerging risks Regulatory and geopolitical risks • Cybersecurity • Competitive environment • Capital tailoring • Real-time payments • Digital interactions • LIBOR replacement • Model management • Eme
Slide 117: Key Risk: Cybersecurity
Key Risk: Cybersecurity Cyber adversaries are becoming more sophisticated all the time, but we are evolving. We continue to invest in and enhance our Cybersecurity program: • Executive Cyber Dashboard monitors current threats, defense effectiveness and status of our overall Cyber program • 3rd Party
Slide 118: Key Risk: Real-time Payments
Key Risk: Real-time Payments The changing risk landscape is creating new challenges. Real-time Fraud Transaction Operational Detection Processing Resiliency Invested in Fraud Foundational Ensured our Behavior Analytics change moving operational platform and other from batch resiliency front-end frau
Slide 119: Optimization of Processes
Optimization of Processes We are adapting quickly in today’s changing environment in ways that add value. Supporting business growth Innovating Ensuring adherence to all existing risk programs Simplifying and optimizing “Risk Studio” focused on improving, streamlining Integrated into every Agile Stu
Slide 120: Leveraging Data and Analytics
Leveraging Data and Analytics Data and analytics enhance our ability to manage risk while driving simplification. U.S. Bank is applying advanced analytics in a variety of areas: New tools and data (e.g., device reputation, bot detection, Synthetic ID Scores Account originations and Rapid Default Mod
Slide 121: Credit Risk Management
Credit Risk Management U.S. BANCORP | 121
Slide 122: Credit Risk Management is a Core Competency
Credit Risk Management is a Core Competency A strong credit culture is key to our long-term, consistent performance. Supports and enables prudent long-term growth Enhances our position as the most trusted choice Proactive Portfolio Relationship Cash flow Consistent portfolio diversification based le
Slide 123: Lower Volatility
Lower Volatility During periods of stress, our results are less volatile than the industry due to our disciplined credit culture. Net Charge-off Rates 4.0% 3.5% 3.0% 2.5% NCO Rate 2.0% 1.5% USB normalized 1.0% Estimate 0.95% to 1.00% 0.5% 0.0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2
Slide 124: Credit Risk Management Begins With Consistent Underwriting
Credit Risk Management Begins With Consistent Underwriting 2Q19 Wtd Avg FICO/Bond rating • Prime-based lender for Portfolio equivalent 2Q19 Avg LTV retail portfolios Residential mortgage 763 73% • Principally investment Home equity 782 68% grade equivalent in commercial portfolios Auto loan 782 99%
Slide 125: Early Warning Indicators Enable Proactive Portfolio Management
Early Warning Indicators Enable Proactive Portfolio Management Unemployment claims/rate (1) Housing Price Index (2) BBB bond spread (3) 1,000,000 12% 280 8% 10% 750,000 210 6% 8% 500,000 6% 140 4% 4% 250,000 70 2% 2% 0 0% 0 0% Unemployment Claims (LHS) Unemployment Rate (RHS) Sources: (1) Moody’s an
Slide 126: Risk Management Supports Consistency Through the Cycle
Risk Management Supports Consistency Through the Cycle Through the cycle remains at 95-100 bps Through the Cycle Expected Loss Rates Normalized Loan Portfolio NCO% Commercial 0.40% Commercial Real Estate 0.65% Small Business 2.35% Residential Mortgages 0.35% Credit Cards 4.65% 1 Other Retail 0.90% T
Slide 127: In Summary: Prudent Risk Management is a Core Competency
In Summary: Prudent Risk Management is a Core Competency Strong risk management supports best-in-class growth and returns through the cycle. Proactively Focus on Proven track Strong governance Agile risk addressing through-the-cycle record and culture mindset emerging risks performance U.S. BANCORP
Slide 128: Financial Management
U.S. Bancorp Investor Day Financial Management Terry Dolan Vice Chair, Chief Financial Officer September 12, 2019 U.S. BANCORP
Slide 129: Agenda
Agenda • What we have achieved Growth Efficiency Returns Sustainability • Review of U.S. Bank’s performance and positioning • Long-term strategic expectations U.S. BANCORP | 129
Slide 130: What We Have Achieved — Growth
What We Have Achieved — Growth Net Income ($bn) Observations $7.1 • Rising rates since 2016 $5.9 $5.9 $6.2 • Elevated compliance costs through 2017 • Regulatory environment moderating • 2017 Tax Reform legislation 2015 2016 2017 2018 • Reliable capital generation/payout Earnings Per Share (diluted)
Slide 131: Growing Balance Sheet
Growing Balance Sheet 2016 Average Loans 2Q19 Average Loans $268 billion $289 billion Growth Commercial – 34% Commercial – 36% 8.0% USB Average Commercial Real Estate – 16% Commercial Real Estate – 14% Loans Res Mtg and Home Equity – 27% Res Mtg and Home Equity – 28% Growth Credit Card – 8% Credit C
Slide 132: Growing Balance Sheet
Growing Balance Sheet 2016 Average Deposits 2Q19 Average Deposits $313 billion $345 billion Growth 10.4% USB Average Noninterest-bearing – 26% Noninterest-bearing – 21% Deposits Checking and Savings – 63% Checking and Savings – 65% Growth Time – 11% Time – 14% Peer 8.8% Median 8.9% 6.6% 0.0% 3.1% $3
Slide 133: Revenue Growth
Revenue Growth Net Interest Income ($bn) CAGR: 5.0% $ in billions Average Earning Assets and NIM $12.9 3.14% 3.13% $12.4 $480.0 3.04% 3.10% 3.00% $11.7 $440.0 $426.9 $11.2 $406.4 $415.1 $389.9 $400.0 2.00% $360.0 1.00% $320.0 $280.0 0.00% 2015 2016 2017 2018 2016 2017 2018 2Q19 Fee Income ($bn) CAGR
Slide 134: Efficiency
Efficiency Strategic business investments • Digital-first strategies • Physical asset optimization • Personalization • Agile studios Efficiency Trend 58.5% • Payments capabilities • IT and operations rationalization 54.5% 55.1% 54.8% 54.8% 54.5% 54.8% • B2B capabilities • Cybersecurity 54.3% 52.0% 5
Slide 135: Returns
Returns ROE Trend Industry leading Changing regulatory 15.4% profitability environment 14.7% 13.4% 13.8% • Capital efficient business mix • Tax reform legislation in 2017 • Disciplined capital deployment • Regulatory capital requirements • Efficient platform • Moderating regulatory regime 2016 2017
Slide 136: Sustainability — Earnings and Capital
Sustainability — Earnings and Capital Net Income before Taxes as Percent of Average Assets (CCAR Cycles 2017-19, 3-year Average) Ability to Perform through the Cycle 0.3% 0.2% 0.2% Diversified business mix -1.0% -1.0% Lower earning volatility through cycle Peer 1 USB Peer 2 Peer 3 Peer 4 Flight to q
Slide 137: Growth in Dividends
Growth in Dividends Dividend Growth Capacity for dividend growth $1.58 $1.34 $1.16 $1.07 $1.01 Quarterly dividend raised to $0.42 per share in 3Q19 13.5% increase in 2019 2015 2016 2017 2018 2019* *2019 dividend based on CCAR planned distributions U.S. BANCORP | 137
Slide 138: Agenda
Agenda • What we have achieved • Review of U.S. Bank’s performance and positioning Diversified Efficiency as Funding as a revenues a competitive competitive advantage advantage Preferred mix Asset sensitivity Capital flexibility of businesses and liquidity • Long-term strategic expectations U.S. BAN
Slide 139: Diversified Revenues
Diversified Revenues Revenue Mix by Business Differentiators • Corporate trust business • Payments business capabilities • Leveraging payments for B2B opportunity • Fee businesses with higher growth opportunities Fee Income/Total Revenue 55% 50% 45% 44% 43% 42% 42% Consumer and Business Banking – 40
Slide 140: Preferred Mix of Businesses
Preferred Mix of Businesses U.S. Bancorp Revenue Mix Peer Bank Average Revenue Mix Interest Income – 58% Interest Income – 59% Payments Revenue – 16% Payments Revenue – 5% Fiduciary Activities – 6% Fiduciary Activities – 4% Service Charges – 6% Service Charges – 7% Mortgage Fees – 3% Mortgage Fees –
Slide 141: Credit Ratings
Credit Ratings Best-in-Class Debt Ratings Moody’s S&P Fitch DBRS Competitive Advantages Rating Outlook Rating Outlook Rating Outlook Rating Outlook USB A1 s A+ s AA- s AA s JPM A2 s A- s AA- s AA (Low) s WFC A2 on A- on A+ s AA (Low) s BBT A2 wn A- s A+ s A (High) op Lower cost of funding BAC A2 s A
Slide 142: Asset Sensitivity and Liquidity
Asset Sensitivity and Liquidity Interest Rate Sensitivity Position Liquidity Position • Relatively neutral asset sensitivity • Reliable source of core deposits • Balanced short-term / long-term position • Strong liquidity position • Industry-wide challenge for near-term • Diversified sources of liqu
Slide 143: Cost Structure
Cost Structure Efficiency Ratio – 2016 to 1H19 Primary Drivers Average* 62.2% 62.3% 62.4% • Single processing platforms • Full integration of deals 61.0% 61.1% 61.3% Efficient 58.9% 60.2% platform 57.4% • Operating scale in all • Business line reviews 54.6% significant businesses USB Peer 1 Peer 2 P
Slide 144: Agenda
Agenda • What we have achieved • Review of U.S. Bank’s performance and positioning • Long-term strategic expectations U.S. BANCORP | 144
Slide 145: Our Changing Environment
Our Changing Environment Advantages will drive strong relative performance Recent competitive challenges Become opportunities Lower asset sensitivity Stronger relative NIM as rates decline Risk and compliance costs have Elevated risk and compliance costs moderated Optimization of physical assets and
Slide 146: Key Considerations
Key Considerations Macro-economic factors • Modest GDP growth of 1.5% to 2.0% • Unemployment stable around 3.5% to 4.0% • Low inflation in foreseeable future • Stable consumer confidence • Fed cuts rates to 1.50% target by early 2020 • Long-end rates: • Flat to Aug month end rates in 2019 • Steepeni
Slide 147: Optimization and Business Investment
Optimization and Business Investment Portfolio management of businesses Physical asset optimization accelerating • Holistic business review • Digital focus • Market attractiveness • Redesigning employee roles • Business performance • Rethinking branch format • Growth opportunity/returns • Reinvestin
Slide 148: Optimization and Business Investment
Optimization and Business Investment Focusing on sustainable cost structures Disciplined investment for growth 2019 Capital Key initiatives Revenue generating Infrastructure initiatives Business • Digital transformation growth • Small business 36% • Payments capabilities 53% • Agile Studios • Agile
Slide 149: Current Expected Credit Losses Standard (“CECL”)
Current Expected Credit Losses Standard (“CECL”) Cumulative Adjustment ($bn) Cumulative Effect – Day 1 Implementation 2Q19 Estimated Change • Estimated $1.2 to $1.6 billion impact Credit card 55-70% 1 Year to Expected Life • Driven by card, mortgage and retail lending Residential/ Home Equity 20-50%
Slide 150: Capital Management
Capital Management Capital Objectives: 9.6% 9.6% 9.5% 30 bps 40bps 40 bps • Well-capitalized company 9.2% • Maintain top quartile credit ratings 8.5% • Sustainability through business cycles Capital Flexibility: • Manage capital levels to 8.5% to 9.0% • Buyback opportunity Target Capital 2Q19 CECL T
Slide 151: Long-term Growth Expectations
Long-term Growth Expectations Key Considerations Revised 2016 Growth Long-term Growth • Modest GDP growth of 1.5% to 2.0% Expectations Expectations • Unemployment stable around 3.5% to 4.0% Revenue 6-8% 5-7% • Low inflation in foreseeable future Expense 3-5% 2-4% • Stable consumer confidence • Fed c
Slide 152: Long-term Profitability Expectations
Long-term Profitability Expectations 2016 Long-term Revised Long-term 2018 Return on Equity Expectations Expectations Industry Leading Returns 17.5% Return on Assets 1.35-1.65% 1.35-1.65% 15.4% 14.5% 13.4% 14.5% 12.9% 12.1% 11.8% Return on Equity 13.5-16.5% 14.5-17.5% 11.6% 11.5% 11.5% 11.0% Return
Slide 153: Capital Management
Capital Management Payout Ratio Earnings Distribution Target 79% 77% 78% 74% 43% 46% 44% 42% 15–35% 35–45% 30–40% 33% 33% 32% 35% Reinvest and Dividends Share Acquisitions Repurchases 2016 2017 2018 1H19 Dividends Share Repurchases Hypothetical Earning Distribution Example Dividends 40% Reinvestment
Slide 154: Long History of Industry-leading Returns and Financial Discipline
Long History of Industry-leading Returns and Financial Discipline Source: Company filings, SNL Financial Peers include: BAC, BBT, FITB, JPM, KEY, PNC, RF, STI, and WFC U.S. BANCORP | 154
Slide 155: 3Q19 Guidance Update
3Q19 Guidance Update • Net interest income • Noninterest income • Operating leverage • Tax rate • Credit Quality U.S. BANCORP | 155
Slide 156: Closing Remarks
U.S. Bancorp Investor Day Closing Remarks Andy Cecere Chairman, President and CEO September 12, 2019 U.S. BANCORP
Slide 157: U.S. Bancorp Investor Day 2019 – Summary
U.S. Bancorp Investor Day 2019 – Summary Enabling the future, transforming for growth Executing on our strategy Wealth Management Corporate & & Investment Services Commercial Banking Starting from Leveraging Investing a position competitive for the future of strength advantages Consumer & Business P
Slide 158: We are managing for the long-term while delivering near-term results that support
We are managing for the long-term while delivering near-term results that support a pathway to the future. U.S. BANCORP | 158
Slide 159: Appendix
Appendix U.S. BANCORP 159
Slide 160: Non-GAAP Financial Measures
Non-GAAP Financial Measures Net Average Average $ in millions Revenue Fees Loans Deposits Line of Business Financial Performance 2018 2018 2018 2018 Corporate and Commercial Banking $3,782 $844 $93,886 $102,975 Consumer and Business Banking 8,466 2,302 140,835 152,466 Wealth Management and Investmen
Slide 161: Non-GAAP Financial Measures
Non-GAAP Financial Measures $ in millions 2016 2017 2018 1H19 2016 - 1H19 Average Net income applicable to U.S. Bancorp common shareholders $5,589 $5,913 $6,784 $3,354 Intangibles amortization (net-of-tax) 116 114 127 65 Less: Notable items (1) 19 150 45 -- Net income applicable to U.S. Bancorp comm
Slide 162: Non-GAAP Financial Measures
Non-GAAP Financial Measures $ in millions 2016 2017 2018 1H19 2016 - 1H19 Average Net interest income $11,666 $12,380 $12,919 $6,564 Taxable-equivalent adjustment (1) 203 205 116 54 Net interest income, on a taxable-equivalent basis 11,869 12,585 13,035 6,618 Net interest income, on a taxable-equiva
Slide 163: Non-GAAP Financial Measures
Non-GAAP Financial Measures $ in millions 2016 2017 2018 1H19 2016 - 1H19 Average Net income attributable to U.S. Bancorp $5,888 $6,218 $7,096 $3,520 Less: Notable items (1) 19 150 45 -- Net income attributable to U.S. Bancorp, excluding notable items 5,869 6,068 7,051 3,520 Annualized net income at
Slide 164: Non-GAAP Financial Measures
Non-GAAP Financial Measures Corporate and Consumer and Wealth Mgmt Commercial Business and Investment Payment Banking Banking Services Services $ in millions 1H19 1H19 1H19 1H19 Net interest income, on a taxable-equivalent basis $1,444 $3,148 $587 $1,215 Noninterest income 454 1,102 875 1,801 Total
Slide 165: U.S. Bancorp Investor Day
U.S. Bancorp Investor Day September 12, 2019 U.S. BANCORP