On Wednesday, 05 March 2025, U.S. Bancorp (NYSE: USB) presented at the RBC Capital Markets Global Financial Institutions Conference 2025. The bank’s leadership, including CFO John Stern and Senior Executive Vice President Arjit Roy, shared a positive outlook despite economic uncertainties. They emphasized strategic growth, digital expansion, and shareholder value, while acknowledging competitive pressures and regulatory challenges.
Key Takeaways
- U.S. Bancorp maintains a positive outlook, driven by a strong U.S. economy and resilient consumers.
- The bank expects revenue growth of 3% to 5% year-over-year, with positive operating leverage.
- Strategic investments focus on digital capabilities and high-growth market expansion.
- The integration of Union Bank is progressing well, enhancing card penetration and business banking.
- Share repurchases of $100 million are planned, with potential for growth in future quarters.
Financial Results
- First Quarter and Full Year Guidance: U.S. Bancorp expects positive operating leverage of 200 basis points or more, both for the first quarter and the full year.
- Revenue Growth: Projected at 3% to 5% year-over-year, with mid-single-digit growth in fee revenues.
- Net Interest Income (NII): Growth driven by fixed asset repricing, with $5 billion to $7 billion of fixed assets on the loan side repricing.
- Deposit Trends: Deposits are expected to grow in line with loans, with a stable non-interest-bearing to total deposit ratio of approximately 16%.
- Capital Position: Generating 20 to 25 basis points of capital per quarter, with ongoing share repurchases.
Operational Updates
- Consumer and Business Banking: The BankSmartly suite is enhancing customer relationships, while a business essentials value proposition is in development.
- Branches and Digital Capabilities: Continued investment of $200 million annually in branch renovations and expansions in high-growth markets.
- Payments Business: Focus on tech-led transformation, targeting small business, retail, travel, hospitality, and healthcare sectors.
- Global Transaction Services (GTS): Enhanced capabilities in capital markets and global trade, with cross-border payment and FX solutions.
- Union Bank Integration: Progressing well, with opportunities to cross-sell and leverage best practices.
Future Outlook
- Loan and Deposit Growth: Expected to materialize in the second half of the year, aligned with economic conditions.
- Payments Growth: Driven by digital capabilities and strategic partnerships.
- Basel III Endgame: Anticipation of less stringent final rules, aiding capital planning.
- Capital Return: Continued growth in share repurchases, subject to economic and regulatory conditions.
Q&A Highlights
- Consumer Deposits: Stable and resilient, with average deposits around pre-COVID levels.
- Loan Growth: Sporadic in commercial and industrial sectors, with growth in select geographies.
- Competition: Strong brand and new product offerings position U.S. Bancorp to outperform in the competitive deposit space.
- Credit Quality: Stable, except for challenges in the office sector within commercial real estate.
For further details, please refer to the full transcript below.
Full transcript - RBC Capital Markets Global Financial Institutions Conference 2025:
Gerard, Analyst: Fireside chat with US Bancorp. As many of you know, US Bancorp is the fifth largest bank in The United States with assets of around $678,000,000,000 as about 2,100 or 2,159 in terms of the number of branches throughout The United States. The market cap, well, when we price this, the market cap is $73,000,000,000 It’s been a little volatile this week. So, the market cap has come down a bit. But with us today, we have U.
S. Bancorp’s CFO, John Stern. And John took over the CFO role of
Gerard, Analyst: two years?
John Stern, CFO, U. S. Bancorp: Less than two years.
Arjit Roy, Senior Executive Vice President and Head of Consumer and Business Banking Products, U. S. Bancorp: Less than two years ago.
Gerard, Analyst: Two years ago. And he’s been with the bank a number of years in different capacities. And again, currently is the CFO. Also with us is, I’m going to mispronounce your first name, I apologize, Arjit? Arjit Roy, Senior Executive Vice President and Head of Consumer and Business Banking Products, and he took over this position last summer, June 2024.
So gentlemen, thank you very much for joining us.
John Stern, CFO, U. S. Bancorp: Absolutely.
Gerard, Analyst: Maybe we’ll start off with a question that both of you may want to address. But obviously, we’re two months into the year. There’s been a lot of activity this week in the political scene. But how is the economy from your guys’ view going? And how are you positioned to navigate through these kind of volatile times?
John Stern, CFO, U. S. Bancorp: Sure. Maybe I’ll start and can pass along. Good morning, everyone. So from our seat, if we look at what we talked about at earnings call back in January, really no change fundamentally despite policy uncertainty. And we still see U.
S. Activity as being strong. We see the labor market being robust. We see our consumers particularly being resilient. And so there’s a lot of things that are really good.
We are watching, like all, things like tariffs and what that’s going to do, the impact that will have. Obviously, that situation is fluid, so it’s uncertain how that ends up. But and confidence and things like that, we’re we’re watching to see if this is temporary measures or not. But overall, our thesis is once you get through kind of the period of uncertainty with this environment, then your back half of the year, the enthusiasm that we have that clients have for the business environment, etcetera, is going to be strong and favorable. And so we think that’s helpful from a loan growth standpoint in the second half of the year.
And so that’s our continued thesis on the economy. From a rate perspective, we continue to expect two rate cuts from the Fed throughout the course of the year, the ten year treasury kind of zip code of where it’s at today, where interest rates go isn’t gonna be a material driver to our trajectory of net interest income. But, you know, obviously, we just wanna state kind of where our positions are. Arjun, maybe comments on the consumer from your seat.
Arjit Roy, Senior Executive Vice President and Head of Consumer and Business Banking Products, U. S. Bancorp: Yeah. There’s been a fair amount of oscillation in consumer sentiment, but one of the bedrocks, we look at is what’s happening with consumer deposits. We’ve seen a pretty resilient consumer deposit base. Our average deposits are somewhat back to around the COVID, pre COVID levels. Checking and savings balances are robust.
We’re also seeing consumers actually take advantage of a broad range of products. And so they’re using money market accounts. They’re using CDs a lot more. And, we’ve seen internally within the bank a slight uptick in more recent times because of a launch of new products. So from the standpoint of everyday
John Stern, CFO, U. S. Bancorp: X days, which is about $40,000,000 or so impact.
John Stern, CFO, U. S. Bancorp: We expect positive operating leverage of 200 basis points or more for the first quarter. So that kind of rounds out our first quarter. For full year, again, no change to that either. We expect revenues to be 3% to 5% year over year growth, mid single digit growth in terms of our fee revenues and then positive operating leverage again 200 basis points or more for the full year. So no change and consistent with guidance from that we gave in January.
Gerard, Analyst: We’ve seen in the interest rate environment today, the front end of the curve around 4%, of course, and up until this week, we had a positive slope. And you’re really going to go back twenty years to a period where you had the front end of the curve over 3% and a positive slope. So if we do get back to that this year where you do have that positive slope with the front end hovering around three and three quarters, four, tying into your Fed fund rate cuts. What kind of impact could that have on net interest income for you folks?
John Stern, CFO, U. S. Bancorp: Yeah. I mean, it’s favorable. The more steep the curve, the better. I mean, I look at SOFR versus five year treasury. Just, you know, that’s pretty flat right now, a little inverted.
But if you get the forecast that we’re talking about or even more than that, which is what the futures are talking about right now, more like three cuts this year, it’s more favorable. The steeper the curve, the more favorable. It’s very simple and straightforward. The majority of our NII growth is going to be on fixed asset repricing this year. And so we have $3,000,000,000 of investment portfolio securities rolling off a quarter, $5,000,000,000 to $7,000,000,000 of fixed asset on the loan side of things.
That all re prices at anywhere from 150 to 200 basis points depending on where we are on the curve that day of benefit. And you create that over time. So that’s a big driver. Couple that with cuts and that puts less pressure on funding costs, whether it’s you have short term or long term debt that’s swapped to floating, that all will come down with the rates and deposit costs also come down in that sense. So the curve steepness is something we watch very closely.
Gerard, Analyst: Yes. Maybe moving over to the balance sheet. When we talked about or when you guys look at loan growth for the year, can you share with us some of the puts and takes that you’re seeing in the loan portfolio, both in the commercial and consumer side?
John Stern, CFO, U. S. Bancorp: Sure. So on the consumer side, really seeing growth on the card side of things that continues to grow nicely. On the C and I side, more on the corporate and middle market side, we see pockets of growth, right? So it’s there’s some utilization here, but not in other areas. And it’s kind of hit and miss and it’s sporadic.
Overall, loan growth has not been completely robust in the market. And our loan growth trajectory is in line with kind of where you see the industry data come into play for this quarter. But as we look forward, again, I kind of think about as we get through the uncertainty and people have a sense of where things are going, we think that can be a driver. Certainly, that may be lower interest rates, confidence, all that helps toward driving of growth of C and I type loans, which we think is going to need to be happening in order for that loan growth to materialize in the second half of the year.
Gerard, Analyst: Have you seen any evidence? Some of your peers have said at the conference that the C and I loan growth has picked up a little bit, maybe due to some inventory building in anticipation of tariffs. Have you seen any of that or your customers
John Stern, CFO, U. S. Bancorp: Again, I’d say pockets. I’d say that in some geographies, you do see certain areas, but it’s sporadic. Sometimes you will get a pop in utilization and in other areas, it doesn’t materialize. And so I think overall, you get kind of this, the movements aren’t as smooth in every area. And so that’s why I think you’re at a place where we are, which is pretty low loan growth for the industry.
Gerard, Analyst: Right. We move over to the right side of the balance sheet deposits. Maybe you can share with us the trends you’re seeing in deposits, also deposit betas. What are you seeing from the consumers and the small business folks?
Arjit Roy, Senior Executive Vice President and Head of Consumer and Business Banking Products, U. S. Bancorp: Sure. I’ll start. And, John, top of house would be helpful. Gerard, it’s a very, very competitive space out there. As rates stay higher, there are a whole host of players that are continuing to fight for deposits.
And here, we expect to continue to outperform the industry. In the consumer space alone, the bank has done a phenomenal job in trying to maintain rate and price discipline while growing in the consumer space. And we expect that with the launch of our new Bank Smartly suite, it’s a checking savings credit card program. We will use that as a lever to drive new clients into the franchise, acquire new clients, acquire new to bank balances. And on the back end, maintain rate and price discipline to make sure that we’re delivering to the franchise.
You’ve mentioned this before. Our name actually carries a lot of weight even outside of footprint. U. S. Bank is a name that is recognized when we’re out there competing for deposits is actually something that helps us quite a bit.
We long term, just as a reminder, we’re fiftyfifty retail wholesale on funding. Long term, our expectation is to get to even more of a favorable split. We expect to see less term, more variable, more of an operating balance based relationship that we expect with our clients. And we’re seeing that in the consumer side for sure. Expect to do some more of that in the business banking space as well.
John Stern, CFO, U. S. Bancorp: And I would just add, from a deposit macro standpoint, we do expect deposits to grow in line likely with loan growth over the course of the year. For us specifically, we have seasonally lower deposits in the first quarter than but that’s as expected and we see that very much so. And so I think that the in terms of the mix and everything that’s kind of coming in as expected, we have a non interest bearing to total deposit ratio of about 16% or so. That seems pretty stable. We also see our deposit beta was kind of in the high 30s last quarter cumulatively.
We’d expect that to get into the mid 40s going forward for this quarter and then getting into that 50 and above as assuming that rate cuts do occur. So those are kind of the big picture items that we’d say on the deposit side.
Gerard, Analyst: Maybe coming back again to the consumer side of the business. When you look at how you’re growing consumer and business banking, you mentioned the sweet product. What’s the anchor product for the consumer and how do you build upon that to grow the business?
Arjit Roy, Senior Executive Vice President and Head of Consumer and Business Banking Products, U. S. Bancorp: Terrific question, Gerard. We are focused in driving our consumer strategy along three pillars. You’ve heard us talk about increasing interconnectedness across our different elements of the franchise. That is a muscle that we want to keep exercising, and there’s a significant amount of upside. We want to take advantage of our digital assets that are really best in class and continue to maintain price discipline.
So those are sort of the three pronged approach on how we think about the space. You mentioned BankSmartly and we think of that as our anchor product. Really, it’s an everyday banking product with a checking, credit, savings solution, almost serves as a platform. It is doing incredibly well in early days. We’re seeing significantly higher, day zero multi serve deepening as an example.
That has doubled since the launch of the product. Our checking cost of acquisition has reduced significantly because we’re seeing clients flock to the franchise. And so this notion of having these interconnected products in the consumer space are the way that we anticipate driving change in the future. Even in the business banking space, we are excited and are working on a value proposition that we’re calling business essentials. It is the ability for a small business owner to be able to open a checking account, an operating account, have a payment solution and a POS solution.
There’s only one other bank in the country that offers a solution like this. And if you think about the simplicity, having a business owner open a relationship with us and day zero have the ability to accept credit card payments, that’s a pretty differentiated value proposition. And so this notion of driving interconnectedness with the assets that we have with digital and other capabilities is how we expect to continue to execute and drive growth.
Gerard, Analyst: This interconnectedness is so important because it deepens the relationship with your customers. We know that heightens profitability. How do you measure it or how do you incentivize your people to really you know, move this forward because it’s so critical?
Arjit Roy, Senior Executive Vice President and Head of Consumer and Business Banking Products, U. S. Bancorp: It’s, again, a great question. Look, I mean, you you you said it. It’s, higher average revenue per user, longer weighted average life, and so, lower cost of acquisition. And so, if you couple all of this with the familiarity of the brand, it really makes it a cornerstone and the ability for us to be able to build within our own franchise. We have a pretty significant opportunity with single serve relationships in consumer and in business banking and we’re just getting started and we think there’s a lot of upside.
The way we measure this on a pretty regular basis is we’ve started looking at a set of key metrics. We’re looking at a percentage multi serve rate. So where in the past metrics would look just at revenue, just at counts, we’re actually looking at how successful have we been in our deepening strategies. We’re looking at total net balances, as a way to measure profitability. And these are changes that actually can galvanize the front line in how we measure success.
Gerard, Analyst: Some of your peers have used expansion of their branches as a way of driving their consumer business and small business. How do you see that part playing out with your guys’ strategy?
Arjit Roy, Senior Executive Vice President and Head of Consumer and Business Banking Products, U. S. Bancorp: It’s a very topical, discussion today, isn’t it? Yeah. We take a very multi pronged strategy to this, Gerard. So, you know, just as a reminder, we expect to continue to invest about 200,000,000 in that. I was very impressed with your 2,159 branch count.
We sort of round up or down. But look, that is the cornerstone of how we think about our retail relationships. And so we will continue to invest that $200,000,000 on an annual basis, not just on renovations, but also thinking at being targeted in high growth markets. We’re interested in looking at areas that actually are flagship markets for us, highly competitive markets, and we want to invest in those. So branches will continue to be a really important factor.
The second component though is people sort of forget the digital capabilities that we’ve invested in. If you’ll recall during the midst of the regional banking crises, our ability to generate deposits, deposit gathering in all 50 states because of our digital assets was a competitive advantage. We just got our rankings on KeyNova. We were rated number one again. And so the fact that we’ve made these investments with these digital assets will be another lever in that multi pronged approach.
You’ve heard us talk about our commercial centers. So in a handful of centers in a handful of cities, Dallas, Houston, Boston, Atlanta, we are looking at our corporate centers that will serve as nodes, if you will, for mortgage products, corporate products and wealth. And so we’re being very, very selective in how we think about those client centers. The last element I’ll tell you, it really excites us is this notion of these capital light partnerships. You’ve heard us talk about our State Farm relationship.
This was a massive boost and a tail
Arjit Roy, Senior Executive Vice President and Head of Consumer and Business Banking Products, U. S. Bancorp: able to have a conversation in an investment analog product when it comes to high yield. It has also been a massive driver of credit card growth for us. And we’re very excited with what we’re seeing with Edward Jones. There’s a McKinsey study that looked at the size of the prize and it was about a $1,500,000,000,000 sitting in operating accounts attached to investment accounts. And so if you think about the notion of an Edward Jones advisor working with you and being able to open a U.
S. Bank operating balance account in five minutes or less because of the digital capability, that’s a pretty massive differentiator for us. I don’t want to tease, but we’ve got household name companies that have reached out to us because of that capability. So all those investments we’ve made with our digital assets are actually turning out to be a differentiator where you’ve got household name companies interested in striking these capitalized partnerships. And that’s what excites us.
And that’s how we think about it instead of just being a branch only
Gerard, Analyst: for the market. Sure. Yes. One of the things that has always differentiated U. S.
Bancorp from many of your peers is your payments business. And maybe John, if you could talk about the growth opportunities in the payments business and then also the challenges. Obviously, it’s a very competitive business. So what are you seeing for challenges?
John Stern, CFO, U. S. Bancorp: Yes. And before I get into that, Gerard, I just got to note that our audio cut out when online when we were talking about guidance. I just want to reiterate. Okay. Most important question, no change to guidance for the first quarter or for the full year and consistent with the supply that we provided there.
Okay. Got it. Got that out of the way. Okay. Great.
On the payments question that you asked, Important question because payments is such a differentiating business for us and it is competitive. But when we look at the products that we have, we’re really excited about it because it’s a competitive, it’s attractive. We run our operations very well. We have great credit underwriting capabilities as you are very familiar with us on that side. So for us, it’s really about execution.
So if I look at card, both on the retail and corporate side, it’s really about how do we execute best and align ourselves with that. And it’s about multi serve clients, you just mentioned that Arjat. It’s also about our union opportunity that we have in both of those segments. So that’s really what that’s about. On the merchant side, it’s a little bit more nuanced, but again, we have great products that we have, this group is really going through transformation in terms of moving into more of a tech led, kind of more of the legacy businesses that we’ve had over that time, that’s stickier client base and things that are more embedded.
We’re really focused on five verticals there. We’re focused on small business, retail, travel, hospitality and healthcare. Witness Saluco, we just purchased that entity to help us boost that sort of capability. So we’re really going through that now it’s really about again execution and Vincen has taken a lot of action over the course of the last several months and has aligned our business line leaders in the right areas. And so I think that’s where we get a lot of traction for Arjut’s book of business, right, getting Courtney Kelso in line to help with that and being a partner to an alignment on those sort of initiatives as you were talking about Arjut.
It’s also on the institutional side having Mark Runkel lead on the merchant acquiring treasury management corporate payments. All that is really good and that alignment along with business development capabilities that we need to build on house are things that we’re really focused on. The last thing I would just say on payments, there was some discussion on Doge and what that impact would be. There was some discussion on that. Just to be clear, we have about $140,000,000 of revenue tied in the CPS business line on government payments.
The vast majority of that is related to non discretionary purchase orders, freight, fleet, movement of equipment for the Department of Defense, fuel, repairs, things of that great nature. And under 10% is really nondiscretionary T and E. So it’s a de minimis impact to us, whatever happens.
Gerard, Analyst: Yes, got it. Thank you. Coming back to the competition, we hear from many of your peers at this conference and other conference. Everybody seems to be highlighting payments as an avenue of growth. Are you seeing more competition or how has it evolved over the last five or so years?
John Stern, CFO, U. S. Bancorp: Well, I think a lot of banks would like to have our capabilities. I think they would absolutely in a world where everything has gone more digital and this is why we’ve made investments across the board in all of our different products. Arjun just talked about that. We have a number of different things on the wholesale side, whether it’s global transaction services or foreign exchange. Payments is at the core of a lot of this thing.
And so we have the chassis, the engine, all the different parts I just mentioned operationally how we flow. For us it’s about organization execution and things like that. So we’re starting in a much better place and we’re delivering on that scale and that’s something we’re really excited about.
Arjit Roy, Senior Executive Vice President and Head of Consumer and Business Banking Products, U. S. Bancorp: And Gerard, we think of our business as being able to bring both sides or all capabilities. So we think about what the balance sheet can do for the clients and what this notion of being embedded, this notion of being a day to day money movement provider and what that means. John mentioned Solucro. I’d be remiss if I didn’t talk a little bit about Talic. That’s another acquisition that we made.
It’s again in the right sweet spot with respect to verticals that we’re interested in services, restaurants that sort of thing. But the ability for us to relatively quickly take a capability and show up with a form factor that’s either in mobile or a tablet or a POS and use that as a mechanism to try to drive a set of solutions allows us the ability to offer everyday solutions combining both our payments business and our balance sheet businesses which is a differentiator.
Gerard, Analyst: Yes, very good. One of the other areas that is unique to a regional bank is your global transaction services business. And so maybe can you tell us how you differentiate yourselves versus some of the bigger players, the trust banks or the GSIBs that are in that business?
John Stern, CFO, U. S. Bancorp: Yes, absolutely. Again, where we’ve made a lot of strides of an investment, we’ve talked about that because at Investor Day we mentioned how much we’ve gone from defensive to offensive and this is part of that offensive play where we really ramped up our capabilities in the capital markets and global trade type of set of businesses. This global transaction services is not something we could have done two or three years ago. We’ve built out the engine within our foreign exchange group, the connection points between treasury management and payments and things of that variety. And so now we have that plus we just announced a leader in Turek Aliafi that’s going to lead, who’s got great global bank experience in a couple of different places.
So he’s done this a couple of times. So we have high confidence that he can bring this sort of thing. And now it’s just about executing with our customers and making sure they’re aware of what sort of capabilities. In its simplest form, I’ll give you a very simple example how this works is if payments are made cross border from in U. S.
Dollars to Polish lottie or to euro or to whatever currency that FX transaction is happening outside of our walls. Now we’re doing that transaction in house gaining that revenue along with the other ancillary business that
Gerard, Analyst: comes along with it. So packaging that altogether for clients is really what it’s all about. Is there a targeted market or targeted client base for this product that you’re zeroing in on? Anyone that has global
John Stern, CFO, U. S. Bancorp: and which is payments and global reach or global supply chains and that sort of thing. So it can be middle market, it can be corporate, it can be institutional. It’s going to be that variety of clients.
Gerard, Analyst: Got it. Maybe sticking with these payments, the fund servicing and corporate trust business, again unique to you folks. How is that growing and what do you see for the opportunities there?
John Stern, CFO, U. S. Bancorp: Dan, a great business. We made a lot of investments over the years and I’m really excited because we’ve the business in corporate trust has been a number one player for and is continuing to grow share. Number one in corporate trust, municipal trust, asset backed and CLO. So we do all that administrative work for corporate clients as well as institutional or private credit type of clients. So we range we have a lot of range in that product set.
It brings us deposits and we’re really excited about the growth that they’ve had there. It’s been as you’ve seen in our trusted investment management line that has continued to be high single digit for some time now. Embedded in that as well as fund services, we’ve been stepping up our capabilities there. We have a lot of growth in alternative funds for the players, but that has been a big area of growth for us. And then our institutional trust and custody and asset management groups continue to grow.
We now have over $500,000,000,000 of assets under management. We have $11,000,000,000,000 of assets under custody. That was $7,000,000,000,000 just a few years ago. I mean, so we made a lot of big strides. And so this is a very big area for us.
And all these things I’m talking about just demonstrate the diversity of businesses that we have and why we skew so much on the fee of the revenue side of
Gerard, Analyst: the house versus NII. Yes. At Investor Day, as you guys referenced, you’re going from defense to offense. And maybe, Arjay, you could talk to us about the legacy Union Bank
Arjit Roy, Senior Executive Vice President and Head of Consumer and Business Banking Products, U. S. Bancorp: customers in California and an update on what you guys are doing to grow that business? Yes. We’re so excited. There’s been benefit on both sides of the house. As you know, in California post acquisition we went from being number 10 in deposit share to number four.
You’ve heard us talk about the sheer amount of potential in Courtney and Mark’s businesses. And so this is the ability so the legacy U. S. Bank card penetration is about 40%. We have a tremendous opportunity in being able to offer cards to high value clients in the Union franchise and that’s been a really terrific outcome.
Similarly in the corporate space, our high watermark or U. S. Bank expectations about 25%. We’ve got tremendous momentum in being able to do more of that. We’ve also seen the we’ve seen benefit from what we’ve learned out of Union back to the U.
S. Bank franchise. So as an example, John mentioned foreign exchange. The Union franchise actually was quite surgical in being able to offer FX as a service in union branches. We’re now exploring the capability of taking that to some select number of those 2,000 branches which adds an ability, it creates some differentiation.
We’re seeing some really fantastic outcomes in our business banking loan growth, specifically SBA and healthcare. Based on what we’ve seen out of Union, we’re seeing not only higher SBA total loan growth, but higher ticket sizes. And so overall, we’ve seen the integration go really well. The last thing I’ll leave you with Gerard is our largest number of organic clients, the base is California. That’s where we’re seeing the highest amount of growth
Gerard, Analyst: and so it’s been really terrific. Shifting over the capital obviously the Basel III endgame is changing from what it was originally proposed in December of twenty twenty three. Assuming it’s a watered down or softer version, can you share with us what that might mean for U. S. Bancorp and the opportunity to return more capital to shareholders?
Sure. Yes, I would agree
John Stern, CFO, U. S. Bancorp: with the premise that the regulation will come down from its peak where we saw the proposal. That’s all good for us and all banks, I would say, and it provides some level of certainty on capital planning. For us, it’s about the capital levels that we’re at and where we need to be from a CAT II perspective. So again, as a reminder, we don’t think we’ll be a CAT II bank no earlier than ’27. We generate 20 to 25 basis points of capital per quarter.
We went from 8.4 to 10.6 in a couple of years, so we can generate it really quickly and get to where we need to be. And now we’re starting to do distributions along with that. So we started with $100,000,000 of share buyback and we’ll probably do a similar amount this quarter. And then from there, it depends on loan growth, it depends on the economy, all those sorts of things. So we’ll keep monitoring that.
But our intention and aspiration is to continue to grow our share repurchases over time.
Gerard, Analyst: One of the identifying factors for you as Bancorp over the years has been underwriting strength and credits always been something that is a hallmark here. Can you share with us what you’re seeing on the credit side? What trends might be developing or any areas that you’re aside from commercial real estate office, which we’re all familiar with?
John Stern, CFO, U. S. Bancorp: That’s what I was going to leave with. I mean, it’s really the credit underwriting that we have is really the hallmark instead of what we do. And so we do we have an understanding very deeply of where our credit tolerances are and appetite is. And we can adjust those things around the edges from time to time. But I would say at this point, Gerard, it’s just it is other than office, which is obviously we’ve got our arms around that.
We understand that there can be lumpy losses along the way. The rest of it is very much cyclical. It’s normal and it’s very stable at this point. So that’s kind of that’s how we see it.
Gerard, Analyst: And we’re running out of time. In fact, we’re going into the red zone, but I’ll squeeze in one last question about driving shareholder value. Positive operating leverage, of course, is important. What are some of the levers that you can use to drive operating leverage even high, positive operating leverage? And then how do you measure whether you’re increasing long term shareholders value?
John Stern, CFO, U. S. Bancorp: That’s a great question. It’s something we are very much focused on. So if you look at what Gunjan is bringing to the table, she comes into the role. It’s a new energy, it’s a new focus and her main goals are really around organic execution and how we get there as well as restoring investor and shareholder mentality of perception of us and things like that. So restoring that confidence.
It’s got three very specific priorities. One is organic growth and the execution of it. There’s a Argus names on a few of those things, names and dates, we’re very focused on those sorts of things. The second is really on the payments transformation. I kind of mentioned that a little bit.
We’ll go into more depth of that over time. And the third is around productivity and so expense management. And I think what is important for folks to know is that as we step back and look at when we focus on something, we do it. Where for example, when the union acquisition occurred, we got through that very quickly. We took got the cost saves.
We did we executed upon that very cleanly, got rid of their regulatory issues. Second was really the capital build I mentioned 8.4% to the 10.6% in the short order. And third, our expenses have been very flat over the last. So we’ve been very focused on all these things and now it’s on revenue. And so that’s what’s going to drive our positive operating leverage.
We’re going to focus on that revenue growth, maintaining our managing our expenses very well and that should drive a positive operating leverage, hit our medium term targets in the financial in the Investor Day that we talked about and ultimately maintain our high industry leading return on tangible common equity. Great. We’ve run out
Gerard, Analyst: of time, but I want to thank you guys for participating. Please join me in a round of applause. Thank you, management. And the ballroom for folks that are interested in the alternative asset space. Thank you.
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