Summary of U.S. Bancorp Conference Call (December 10, 2025) Company Overview - **Company**: U.S. Bancorp (NYSE: USB) - **Key Speakers**: Gunjan Kedia (President and CEO), John Stern (CFO) Strategic Priorities - **Focus Areas**: - Expenses management - Organic growth - Payments transformation - **Progress**: - Expenses have remained flat for eight quarters, contributing positively to operating leverage and efficiency ratios [3][4] - Achieved mid-single-digit fee growth targets, with strong performance in fees [3][4] - Mixed results in net interest income (NII) with a focus on consumer and operational deposits [3][4] Economic Insights - **Consumer Trends**: - Strong delinquencies and healthy spending observed, despite bleak sentiment [6][7] - **Corporate Sentiment**: - Improved sentiment compared to earlier in the year, with cautious optimism in M&A-driven loan appetite [6][7] - **Impact of Tariffs**: - Clients report tariffs are not significantly impacting their operations [8] Financial Performance - **Fourth Quarter Expectations**: - NII expected to remain stable with potential upside; fees projected around $3 billion [10][11] - Continued growth in capital markets and impact finance areas [10][11] - **Fee Income**: - Strong growth in trust and investment fees, capital markets, and payments expected to drive revenue [12][14] - Consumer fees anticipated to be a smaller part of revenue due to regulatory pressures [15] Payments Business - **Strategic Importance**: - Payments transformation is a key focus, with initiatives in embedded payments and differentiated distribution [17][18] - **Growth Expectations**: - Anticipated steady growth in the payments sector, with inflection points expected in 2027 and beyond [22][23] Loan Growth and Balance Sheet - **Loan Demand**: - Strong growth in commercial and card loans; slight growth expected in commercial real estate [25][26] - **Balance Sheet Repositioning**: - Focus on operational deposits and strategic portfolio sales to enhance NII growth [31][33] - **Net Interest Margin Target**: - Aiming for a 3% net interest margin by 2027, with ongoing adjustments to the balance sheet [31][33] Competitive Environment - **Deposit Competition**: - Competitive landscape remains challenging, with a focus on unique value propositions to attract deposits [36][38] - **Investment in Technology**: - Maintaining a $2.5 billion investment budget for technology to enhance operational efficiency [40][42] Cryptocurrency and Digital Assets - **Emerging Opportunities**: - Establishing a unit for Digital Assets and Money Movement to explore cryptocurrency and tokenization [46][47] - **Client Interest**: - Growing curiosity among clients regarding cryptocurrency, with ongoing pilots and experiments [48][50] Credit Quality - **Delinquency Trends**: - Credit quality remains stable, with expected seasonal patterns in consumer credit [52] - **NDFI Monitoring**: - No significant stress observed in C&I portfolios; strong credit underwriting practices in place [52][54] Capital Management - **CET1 Ratio**: - Current CET1 ratio at 10.9%, with a target of approximately 10% [54][56] - **Buyback Strategy**: - Plans to increase buybacks as capital levels improve [56] M&A Strategy - **Acquisition Focus**: - Interest in bolt-on acquisitions primarily in payments and institutional sectors [58][59] Medium-Term Targets - **Performance Goals**: - Aiming for high teens return on tangible common equity (ROTCE) and efficiency ratio in the high 50s [60][61] - **Execution Confidence**: - Confidence in achieving targets through consistent execution of strategic priorities [62]