U.s. Bancorp · NYSE:USB
U.s. Bancorp — Q2 2022 Earnings Presentation
32 slides from U.s. Bancorp's earnings presentation, Jul 15, 2022
Slide 1: U.S. Bancorp 2Q22 Earnings Conference Call
July 15, 2022 U.S. Bancorp 2Q22 Earnings Conference Call U.S. Bank U.S. Bank 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: 2Q22 Highlights
2Q22 Highlights Income Statement change vs. Credit Quality change vs. $ in millions, except EPS 2Q22 1Q22 2Q21 $ in millions 2Q22 1Q22 2Q21 1 Net interest income $3,464 8.3 % 9.5 % Nonperforming assets $770 (5.1) % (27.3) % Noninterest income 2,548 6.3 (2.7) NPA ratio 0.23 % (2 bps) (13 bps) Reporte
Slide 4: Performance Ratios
Performance Ratios Return on Return on Return on Efficiency Ratio1 & Average Assets Average Common Equity Tangible Common Equity1 Net Interest Margin2 20.9% 20.5%3 62.8% 62.1% 59.0% 1.44% 16.3% 15.3%3 16.6% 18.6% 58.9%3 1.09% 1.16%3 12.7% 13.9% 1.06% 2.53% 2.59% 2.44% 2Q21 1Q22 2Q22 2Q21 1Q22 2Q22 2
Slide 5: Digital Engagement Trends
Digital Engagement Trends Digital Active Customers Transactions (% of Total) (% of Total Active Customers)1 79% 82% 82% 76% 80% 80% 76% 80% 64% 60% 60% 55% 54% 60% 48% 41% 40% 40% 24% 20% 18% 20% 20% 0% 0% 5/31/20 5/31/21 5/31/22 5/31/20 5/31/21 5/31/22 Mobile Online Total Digital Total Digital Bran
Slide 6: Digital and payments initiatives across our businesses
Digital and payments initiatives across our businesses Commercial and Large Consumer Banking Business Banking Corporate #1 First in market to send + RTP4 Transaction New talech Customers Multiple ways to Credit Card production is integrate RTP products equivalent to four large MSAs1 ~3.4x Deposit gr
Slide 7: Business Banking and Payments Trends
Business Banking and Payments Trends With 1.1 million business1 banking relationships, there is a significant opportunity for us to deepen current relationships and acquire new customers. Banking and Payments2 Relationships Relationship Growth4 Business Banking3 Payments3 106 105 104 103 71.2% 28.8%
Slide 8: Average Loans
Average Loans Change vs. (Three months ended 6/30/22) Avg. Balances 1Q22 2Q21 $313.0 $324.2 Commercial $120.7 6.9 % 17.2 % $294.3 Commercial Real Estate 39.5 1.1 2.5 Residential Mortgages 80.2 3.6 9.4 Credit Card 22.8 4.1 7.7 Other Retail 61.0 (1.2) 4.7 Total loans $324.2 3.6 % 10.2 % • On a linked
Slide 9: Average Deposits
Average Deposits Interest-bearing Deposits $454.2 $456.5 Average Change vs. Change $429.2 (Three months ended 6/30/22) Balances 1Q22 2Q21 Rates vs. 1Q22 Money market savings $123.8 3.5 % 8.9 % 0.39 % 0.21 % Interest checking 116.9 1.6 13.1 0.07 0.04 Savings accounts 68.1 1.7 9.7 0.01 - Time deposits
Slide 10: Credit Quality
Credit Quality Net Charge-offs Nonperforming Assets $1,059 $180 NCO Ratio NPAs $162 $161 -1 bps QoQ $811 -5.1% QoQ 0.36% $770 0.25% -5 bps YoY 0.25% -27.3% YoY 0.21% 0.20% 0.23% 2Q21 1Q22 2Q22 2Q21 1Q22 2Q22 NCOs NCOs/Avg Loans NPAs NPAs/Period-end Loans plus OREO Provision for Credit Losses Allowan
Slide 11: Earnings Summary
Earnings Summary Excluding Excluding Notable Notable Items Notable Items $ and shares in millions, except EPS Reported % Change Items % Change % Change 2Q22 1Q22 2Q21 vs. 1Q22 vs. 2Q21 2Q22 vs. 1Q22 vs. 2Q21 Net Interest Income $3,435 $3,173 $3,137 8.3 9.5 $- 8.3 9.5 Taxable-equivalent Adjustment 29
Slide 12: Net Interest Income
Net Interest Income 6.50% Linked Quarter $3,600 $3,464 • Net interest income increased, primarily due to higher loan balances, $3,400 $12 5.50% the impact of rising interest rates in the loan and investment portfolios and one more day in the quarter, partially offset by deposit $3,164 $3,200 $3,200
Slide 13: Noninterest Income
Noninterest Income $2,619 Linked Quarter $2,548 $2,396 • Payment services revenue increased, as credit card revenue increased due to $346 $142 seasonally higher sales volume and rate. Merchant processing services revenue $200 increased due to higher sales volumes and merchant fees. $446 $566 $500 •
Slide 14: Payment Services Fee Revenue Growth
Payment Services Fee Revenue Growth Credit and Debit Card Fee Revenue1 50.0% 39.4% 40.0% 30.0% Prepaid Card Fee Revenue 17.9% 18.0% 20.0% 2Q21 3Q21 4Q21 1Q22 2Q22 5.5% 10.0% 1.3% 0.6% 0.8% $68 $55 $47 $41 $38 0.0% -10.0% -0.8%-2.8% -20.0% -11.5% Linked Quarter Year-over-Year 2Q21 3Q21 4Q21 1Q22 2Q22
Slide 15: Payment Services
Payment Services Payments Revenue Breakdown Seasonal Considerations A Shift to Tech-led3 Revenue Payment Fees as a % of Historical Linked Quarter Seasonal Net Revenue (2Q22) Trends for Payment Fees Revenue2 Our multiyear investments in e-commerce and tech-led will continue to drive growth 7.1% Segme
Slide 16: Noninterest Expense
Noninterest Expense Linked Quarter $3,724 $3,502 • $3,387 $350 Compensation expense increased, due to seasonal merit increases, $349 one additional day in the second quarter, and higher variable $362 $265 $269 compensation, partially offset by the impact of seasonally higher $258 $286 $266 stock-bas
Slide 17: Capital Position
Capital Position $ in billions 2Q22 1Q22 4Q21 3Q21 2Q21 Total U.S. Bancorp shareholders' equity $48.6 $51.2 $54.9 $53.7 $53.0 1 Basel III Standardized Approach Common equity tier 1 capital ratio 9.7% 9.8% 10.0% 10.2% 9.9% Tier 1 capital ratio 11.4% 11.5% 11.6% 11.7% 11.5% Total risk-based capital ra
Slide 18: Outlook
Outlook1 3Q 2022 Guidance Full Year 2022 Guidance Revenue Up 3 – 5% Revenue Up 5 – 6% Compared to 2Q 2022 of $6,012 Compared to FY 2021 of $22,827 Core2 Core2 Up 2 – 3% Positive operating leverage Operating Expenses Compared to 2Q 2022 of $3,5273 of at least 200 basis points Leverage ($ in millions)
Slide 19: Union Bank Acquisition Update
Union Bank Acquisition Update Progress What’s Next • Integration planning including technology and • Targeting transaction closing in 2H’22, subject to business line operations largely complete regulatory approval • $100 billion community benefits plan • Finalizing integration and conversion plans a
Slide 20: Appendix
Appendix U.S. Bank 20
Slide 21: Average Loans
Average Loans Average Loans ($bn) Key Points Year-over-Year Growth Linked Quarter • Average total loans increased by $11.2 billion, or 3.6% (7.5%) (4.6%) 0.1% 6.5% 10.2% • Average commercial loans increased by $7.8 billion, $324.2 or 6.9% $313.0 $294.3 $296.7 $302.8 • Average residential mortgage lo
Slide 22: Average Deposits
Average Deposits Average Deposits ($bn) Key Points Year-over-Year Growth Linked Quarter 6.4% 6.4% 6.5% 6.5% 6.4% • Average total deposits increased by $2.3 billion, or 0.5% $449.8 $454.2 $456.5 $429.2 $431.5 • Average low-cost deposits (NIB, interest checking, savings and money market) remained flat
Slide 23: Credit Quality – Commercial
Credit Quality – Commercial Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth $mm 2Q21 1Q22 2Q22 Average Loans $102,974 $112,822 $120,657 0.9% (1.1%) 2.6% 8.0% 6.9% 30-89 Delinquencies 0.17% 0.20% 0.20% $120,657 90+ Delinquencies 0.04% 0.06% 0.07% $112,822 $102,974 $
Slide 24: Credit Quality – Commercial Real Estate
Credit Quality – Commercial Real Estate Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth $mm 2Q21 1Q22 2Q22 Average Loans $38,564 $39,084 $39,517 (0.6%) 0.9% (0.2%) 0.6% 1.1% 30-89 Delinquencies 0.08% 0.22% 0.06% 90+ Delinquencies 0.01% -% 0.01% $38,564 $38,921 $38,
Slide 25: Credit Quality – Residential Mortgage
Credit Quality – Residential Mortgage Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth $mm 2Q21 1Q22 2Q22 Average Loans $73,351 $77,449 $80,228 (2.5%) 1.0% 2.4% 2.1% 3.6% 30-89 Delinquencies 0.24% 0.13% 0.12% $77,449 $80,228 90+ Delinquencies 0.16% 0.18% 0.12% $73,3
Slide 26: Credit Quality – Credit Card
Credit Quality – Credit Card Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth $mm 2Q21 1Q22 2Q22 Average Loans $21,116 $21,842 $22,748 (0.1%) 3.7% 2.3% (2.5%) 4.1% 30-89 Delinquencies 0.72% 0.88% 0.84% 90+ Delinquencies 0.70% 0.74% 0.69% $21,905 $22,399 $21,842 $22,
Slide 27: Credit Quality – Other Retail
Credit Quality – Other Retail Average Loans ($mm) and Net Charge-offs Ratio Key Statistics Linked Quarter Growth $mm 2Q21 1Q22 2Q22 Average Loans $58,279 $61,769 $61,037 2.7% 2.9% 1.9% 1.0% (1.2%) 30-89 Delinquencies 0.34% 0.38% 0.39% 90+ Delinquencies 0.10% 0.11% 0.10% Nonperforming Loans 0.29% 0.2
Slide 28: Non-GAAP Financial Measures
Non-GAAP Financial Measures (Dollars in Millions, Unaudited) Three Months Ended June 30, March 31, June 30, 2022 2022 2021 Net interest income $3,435 $3,173 $3,137 Taxable-equivalent adjustment (1) 29 27 27 Net interest income, on a taxable-equivalent basis 3,464 3,200 3,164 Net interest income, on
Slide 29: Non-GAAP Financial Measures
Non-GAAP Financial Measures Three Months Ended June 30, March 31, June 30, (Dollars in Millions, Unaudited) 2022 2022 2021 Net income applicable to U.S. Bancorp common shareholders $1,464 $1,466 $1,914 Intangibles amortization (net-of-tax) 32 37 32 Net income applicable to U.S. Bancorp common shareh
Slide 30: Non-GAAP Financial Measures
Non-GAAP Financial Measures June 30, March 31, December 31, September 30, June 30, (Dollars in Millions, Unaudited) 2022 2022 2021 2021 2021 Total equity $49,069 $51,668 $55,387 $54,378 $53,674 Preferred stock (6,808) (6,808) (6,371) (5,968) (5,968) Noncontrolling interests (464) (468) (469) (635) (
Slide 31: 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, 2022 include $197 million ($153 million after-tax) of merger and integration char
Slide 32: U.S. Bank
U.S. Bank 32