Contact: John R. Danielson Judy T. Murphy Wendy L. Raway
Investor Relations Investor Relations Media Relations
(612) 973-2261 (612) 973-2264 (612) 973-2429
U.S. BANCORP RESETS STRATEGY AND FOURTH QUARTER AND 2000 EARNINGS OUTLOOK
MINNEAPOLIS (December 6, 1999) - U.S. Bancorp (NYSE: USB) today announced that
strategic investments combined with lower-than-expected fourth quarter revenue
would result in reduced earnings growth for the quarter and 2000. The company
estimated that fourth quarter earnings per share would be between $0.52 and
$0.54. Consensus estimates are currently $0.58 to $0.59 per share. Estimated
earnings per share for 2000 are expected to be in the $2.30 to $2.35 range,
versus the current consensus estimate of $2.45. All are on a diluted basis
before merger-related charges.
The company said revenue growth for the fourth quarter of 1999 would
increase less than expected due to flat net interest income, as a result of
higher funding costs and lower than expected growth in higher-spread consumer
loans. Additionally, the fourth quarter will be affected by higher expenses,
reflecting investments in the areas of sales and service, technology, and
marketing.
"Investments to accelerate growth have also tempered our year 2000
expectations," said John F. Grundhofer, U.S. Bancorp chairman and chief
executive officer. "However, taking these actions should result in our ability
to achieve our previously stated long-term objective of 12% to 15%
earnings-per-share growth. U.S. Bancorp is at a new stage in its
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evolution as a leader in the financial services industry. In the early 1990s, we
reinvented our business model, gaining critical efficiency advantages that have
served us well in a consolidating industry. This past August we named a new
management team drawn from an internal pool of talented executives who have the
charter to make us an increasingly customer-centered company. Our first priority
was to reset our strategic course. We are now taking the steps and making the
investments necessary to accelerate our growth."
"Consumer banking growth is our biggest current challenge," Grundhofer
said. "We will grow this business through a series of focused initiatives,
investing in people, technology and processes to improve customer satisfaction."
In 2000 alone, U.S. Bancorp intends to spend an incremental $50 million on these
initiatives that will result in additional tellers, telephone banking
representatives, and small business bankers as well as more branches and sales
offices and new lobby technology. These investments are in addition to
previously announced accelerated investments in internet development.
In addition, the company said that it was taking deliberate steps to change
its business mix to achieve higher-growth revenue streams. Over the next five
years, investments in the higher-growth Payment Systems and Wealth Management
businesses are expected to increase their contribution to 45% of company
earnings from 30% today.
"We firmly believe that resetting the strategic course for the next five
years was necessary and that we will deliver against the objectives we have
outlined," Grundhofer said.
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Minneapolis-based U.S. Bancorp, with $79.5 billion in assets, is the 12th
largest bank holding company in the nation and operates over 1,000 banking
offices in Midwestern and Western States. The company provides commercial and
retail banking, investment banking, trust, investment, and payment systems
products to consumers, businesses and institutions. It operates a network of
5,300 ATMs and provides 24-hour, seven-days-a-week telephone customer service.
The company offers full service brokerage services at approximately 100 offices
through U.S. Bancorp Piper Jaffray. The company is the largest provider of Visa
corporate and purchasing cards in the world, and is one of the largest providers
of corporate trust services in the nation.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements. Statements that are not
historical or current facts, including statements about beliefs and
expectations, are forward-looking statements. These forward-looking statements
cover, among other things, earnings per share estimates and projected earnings
growth rates, anticipated future expenses and revenues, the future prospects of
the Company's consumer banking business, estimated spending on growth
initiatives, expected changes in the Company's business mix, and projections of
business line contributions to future earnings. Forward-looking statements
involve inherent risks and uncertainties, and important factors could cause
actual results to differ materially from those anticipated, including the
following: (i) the Company's investments in its consumer banking, payment
systems and wealth management businesses and in its internet development could
require additional incremental spending, and might not produce expected growth
and anticipated contributions to Company earnings; (ii) general economic or
industry conditions could be less favorable than expected, resulting in a
deterioration in credit quality or a reduced demand for credit or fee-based
products and services; (iii) changes in the domestic interest rate environment
could reduce net interest income; (iv) the conditions of the securities markets
could change, adversely affecting revenues from capital markets businesses or
the availability and terms of funding necessary to meet the Company's liquidity
needs; (v) changes in the extensive laws, regulations and policies governing
financial services companies could alter the Company's business environment or
affect operations; (vi) the potential need to adapt to industry changes in
information technology systems, on which the Company is highly dependent, could
present operational issues or require significant capital spending; (vii)
competitive pressures could intensify and affect the Company's profitability,
including as a result of continued industry consolidation, the increased
availability of financial services from non-banks, technological developments
such as the internet, or bank regulatory reform; (viii) acquisitions may not
produce revenue enhancements or cost savings at levels or within time frames
originally anticipated, or may result in unforeseen integration difficulties;
and (ix) third parties with which the Company does business may fail to remedy
their Year 2000 issues and other unforeseen Year 2000 complications may arise,
affecting the Company's operations. Forward-looking statements speak only as of
the date they are made and the Company undertakes no obligation to update them
in light of new information or future events.