U.s. Bancorp · NYSE:USB
U.s. Bancorp — Q2 2023 Earnings Presentation
31 slides from U.s. Bancorp's earnings presentation, Jul 19, 2023
Slide 1: U.S. Bancorp 2Q23 Earnings Conference Call
July 19, 2023 U.S. Bancorp 2Q23 Earnings Conference Call U.S. Bank | Confidential 1
Slide 2: Forward-looking Statements and Additional Information
Forward-looking Statements and Additional Information The follow ing 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 s
Slide 3: 2Q23 Highlights
2Q23 Highlights Reported Adjusted 1,2 • Successful conversion of Union Bank $0.84 | $1.12 • Accelerated accretion of CET1 capital Earnings per share › Enhanced capital build driven by solid earnings generation and RWA initiatives 9.1% 60bps vs. 1Q23 • Well maintained, strong balance sheet CET1 Ratio
Slide 4: 2Q23 Highlights
2Q23 Highlights Income Statement Credit Quality Adjusted Reported Adjusted 1,2 change vs. Change vs. 1,2 $ in millions, except EPS 2Q23 2Q23 1Q23 2Q22 $ in millions 2Q23 1Q23 2Q22 Net interest income3 $4,449 $4,449 (4.7) % 28.4 % Nonperforming assets $1,085 (8.1) % 40.9 % Noninterest income 2,726 2,
Slide 5: Performance Ratios
Performance Ratios Return on Return on Return on Efficiency Ratio1 & Average Assets Average Common Equity Tangible Common Equity1 Net Interest Margin2 24.3%3 1.16% 3 15.7% 3 63.2% 63.7% 1.15%3 15.3%3 22.3%3 62.1% 1.07%3 14.6%3 20.5%3 58.9%3 22.0% 59.8%3 59.2%3 1.06% 1.03% 14.1% 13.9% 18.6% 17.1% 0.8
Slide 6: Successful Conversion of Union Bank
Successful Conversion of Union Bank We are now one company with one purpose and shared goals Conversion & integration complete • Union Bank deposit accounts transition to U.S. Bank • Enrollment in U.S. Bank mobile and online banking • Conversion of Trust and Investment Management Expected Cost and
Slide 7: Deposit Summary
Deposit Summary Our robust deposit base remains a granular and stable source of funding Average Deposits by Business Line1 Total Average Deposits ($B) Cha nge vs . Our National footprint 2Q23 Average Balance 1Q23 2Q22 14% allows us the ability to Noninterest-bearing deposits $114 (12.3) % (5.9) % di
Slide 8: Prudent Loan Growth
Prudent Loan Growth Disciplined loan growth focused on high margin / high return business; Commercial Real Estate (CRE) Office exposure remains manageable Total Loan Portfolio Mix ($B) CRE Exposure Average % of Average Change vs. Consumer 2Q23 Balance Total 1Q23 2Q22 50% Multi Family 32% Commercial
Slide 9: 2Q23 Earnings Summary – Notables
2Q23 Earnings Summary – Notables Notable Item Impacts: 2Q23 Notable Items: Balance sheet optimization Income Net income – 2Q23 impacted by balance sheet repositioning before attributable to Diluted and capital management actions $ in millions, except EPS taxes U.S. Bancorp EPS Merger & integrati
Slide 10: 2Q23 Earnings Summary - Detail
2Q23 Earnings Summary - Detail Excluding Notable Items1 2Q23 % Change 2Q22 1Q23 Notable vs. 1Q23 vs. 2Q22 $ in millions, except EPS Reported Reported Reported Items1 Adjusted Adjusted Adjusted Net Interest Income $3,435 $4,634 $4,415 $4,415 (4.7) % 28.5 % Taxable-equivalent Adjustment 29 34 34 - 34
Slide 11: Net Interest Income
Net Interest Income 2Q23 1Q23 2Q22 Loans $5,605 $5,277 $2,869 Loans held for sale 38 31 54 Investment securities 1,077 1,074 806 Other interest income 806 582 96 Total interest income $7,526 $6,964 $3,825 Deposits $1,939 $1,505 $177 Short-term borrowings 740 449 57 Long-term debt 432 376 156 Total i
Slide 12: Noninterest Income
Noninterest Income 2Q23 1Q23 2Q22 Payments $1,048 $936 $996 Service Charges 324 324 334 Mortgage 161 128 142 Trust & Inv Mgmt 621 590 566 Other 594 529 510 Noninterest Income, Adjusted1 $2,748 $2,507 $2,548 2 Notable Items ($22) $0 $0 Noninterest Income, Reported $2,726 $2,507 $2,548 Reported • Noni
Slide 13: Noninterest Expense
Noninterest Expense 2Q23 1Q23 2Q22 Compensation & Benefits $2,646 $2,646 $2,246 Technology & Communications 522 503 419 Occupancy & Equipment 316 321 265 Professional Services, Marketing/Business Development 263 256 217 All Other 512 585 380 1 Total Noninterest Expense, Adjusted $4,259 $4,311 $3,527
Slide 14: Credit Quality
Credit Quality Credit quality remains strong as we move toward normalized levels Net Charge-off and Nonperforming Assets Allowance for Credit Losses by Loan Category, 2Q23 Change vs. Adjusted1 Reported Adjusted1 Amount Loans and Leases Outstanding 2Q23 2Q23 1Q23 2Q22 ($B) (%) Non-performing Assets C
Slide 15: Accelerated Capital Accretion
Accelerated Capital Accretion 60 basis points of CET1 capital accretion this quarter 60 bps 2nd Quarter Highlights • Solid earnings accretion of ~20bps, net of distribution, reflecting our diversified business mix, resilient deposit base, and strong financial discipline • Executed ~40bps of RWA / Ba
Slide 16: Third Quarter / Full Year 2023 Outlook
Third Quarter / Full Year 2023 Outlook1 Upd at e d Gu id an c e 2Q 23 3Q 23 FY 2 0 2 3 Net interest income2 $4.4B $4.2B - $4.4B $17.5B - $18.0B Total Revenue, adjusted3 $7.2B $6.9B - $7.1B $28.0B - $29.0B Includes purchase accounting $85M ~$75M ~$330M accretion Total Noninterest expense, adjusted3 $
Slide 17: Enhanced Strength and Stability
Enhanced Strength and Stability A stronger capital base enhances the strength and stability of U.S. Bancorp, which maintains a highly diverse mix of businesses, strong risk management capabilities, and “through-the-cycle” earnings power Strong Capital Proven Credit Diversified Robust Liquidity Base
Slide 18: Appendix
Appendix U.S. Bancorp 18
Slide 19: Payment Services Fee Revenue Growth
Payment Services Fee Revenue Growth 2Q23 vs. Prior Year Card Revenue1 20.0% 18.0% 17.2% Card revenue improved 5.8% YoY driven by sales 15.0% growth and the Union Bank acquisition 10.0% 6.5% 5.8% Merchant processing fee revenue increased 2.6% 5.0% YoY driven by sales growth. 2Q YoY growth is lowe
Slide 20: 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 (2Q23) Trends for Payment Fees Revenue2 Revenue Growth Se gme nt 1Q 2Q 3Q 4Q 71% 5.9% Card1 Sta
Slide 21: Credit Quality – Commercial
Credit Quality – Commercial Average Loans ($M) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth(a) $ in millions 2Q22 1Q23 2Q23 Average Loans $120,657 $135,683 $138,085 6.9% 6.5% 3.4% 2.1% 1.8% 30-89 Delinquencies 0.20% 0.33% 0.25% $135,683 $138,085 90+ Delinquencies 0.07% 0.05% 0.04%
Slide 22: Credit Quality – Commercial Real Estate
Credit Quality – Commercial Real Estate Average Loans ($M) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth (a) $ in millions 2Q22 1Q23 2Q23 Average Loans $39,517 $ 55,595 $54,934 1.1% 1.2% 14.3% 21.6% (1.2%) 30-89 Delinquencies 0.06% 0.13% 0.13% 90+ Delinquencies 0.01% 0.01% 0.00% $55
Slide 23: Credit Quality – Residential Mortgage
Credit Quality – Residential Mortgage Average Loans ($M) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth (a) $ in millions 2Q22 1Q23 2Q23 Average Loans $80,228 $116,287 $117,606 3.6% 4.7% 15.6% 19.8% 1.1% 30-89 Delinquencies 0.12% 0.13% 0.11% $116,287 $117,606 90+ Delinquencies 0.12%
Slide 24: Credit Quality – Credit Card
Credit Quality – Credit Card Average Loans ($M) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth (a) $ in millions 2Q22 1Q23 2Q23 Average Loans $22,748 $25,569 $26,046 4.1% 6.0% 4.4% 1.6% 1.9% 30-89 Delinquencies 0.84% 1.10% 1.15% 90+ Delinquencies 0.69% 1.00% 1.02% $25,173 $25,569 $26
Slide 25: Credit Quality – Other Retail
Credit Quality – Other Retail Average Loans ($M) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth (a) $ in millions 2Q22 1Q23 2Q23 (1.2%) (1.5%) (2.0%) (9.0%) (2.7%) Average Loans $61,037 $53,316 $52,146 30-89 Delinquencies 0.39% 0.48% 0.50% 90+ Delinquencies 0.10% 0.12% 0.12% $61,037
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures (Dollars in Millions, Unaudited) Three Months Ended June 30, March 31, June 30, 2023 2023 2022 Net interest income $4,415 $4,634 $3,435 Taxable-equivalent adjustment (1) 34 34 29 Net interest income, on a taxable-equivalent basis 4,449 4,668 3,464 Net interest income, on
Slide 27: Non-GAAP Financial Measures
Non-GAAP Financial Measures Three Months Ended June 30, March 31, June 30, (Dollars in Millions, Unaudited) 2023 2023 2022 Net income applicable to U.S. Bancorp common shareholders $1,281 $1,592 $1,464 Intangibles amortization (net-of-tax) 126 126 32 Net income applicable to U.S. Bancorp common shar
Slide 28: Non-GAAP Financial Measures
Non-GAAP Financial Measures Three Months Ended June 30, March 31, December 31, (Dollars in Millions, Unaudited) 2023 2023 2022 Net charge-offs $649 $373 $578 Less: Notable items (2) 309 91 368 Net charge-offs, excluding notable items 340 282 210 Annualized net charge-offs, excluding notable items (a
Slide 29: Non-GAAP Financial Measures
Non-GAAP Financial Measures June 30, (Dollars and Shares in Millions Except Per Share Data, Unaudited) 2023 Income before taxes $1,751 Taxable-equivalent adjustment (1) 34 Less: Notable items (2) (575) Income before taxes (taxable-equivalent basis), excluding notable items (a) 2,360 Income taxes $38
Slide 30: 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 June 30, 2023 included $(22) million of noninterest income related to balance sheet reposi
Slide 31: U.S. Bancorp
U.S. Bancorp 31