USB - Earnings call transcript Q1 2001

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Operator

Welcome to U.S. Bancorp’s First Quarter 2018 Earnings conference call.

Following a review of the results by Andy Cecere, Chairman, President and Chief Executive Officer, and Terry Dolan, U.S. Bancorp’s Vice Chairman and Chief Financial Officer, there will be a formal question and answer session.

If you would like to ask a question, please press star, one on your touchtone phone, and press the pound key to withdraw. time. recorded Eastern for April Daylight XX:XX Eastern be at beginning XX will midnight noon approximately time Daylight call and replay available today at This through Wednesday, over I to Relations will U.S. the now conference for Jenn Director of turn Thompson, Investor call Bancorp.

Jenn Thompson

to a of and you, with file made to XX-K in who me over on and our forward-looking quarter review our Andy presentation, that on slide our Bancorp’s our our A remind schedules materially questions. good answer that described today’s website to you today and and the during prepared slide has to and be risks referencing Bill results Andy. SEC. call at morning release, supplemental Terry during first Andy statements with are to Terry uncertainties. subsequent remarks. Cecere, Dolan, and presentation and your subject Factors copy forward-looking assumptions Page Parker presentation, change will their and James, turn as earnings I could will joined like analyst any press the the of Thank everyone available call. are to well here U.S. are as are current now Form usbank.com. today’s would call X reports our in I on release

Andy Cecere

call. and our Good joining everyone, for morning you thank

Terry Slide remarks, will XXXX. with for of we open the reported compares I first prepared share and the X. earnings In quarter $X.XX on our first I’ll which Following $X.XX, our per start reported call questions. of in quarter,

stock-based by penny. increased basis, quarter in transitional offset rate earnings On a tax to per vesting revenue share expected a one than lower a increased quarter, net X.X% provisions billion. our within program the $X.X change year-over-year by first compensation During by

growth been disciplined in this headwind business year. reform quarter quarters net in downs our have due estate to in seasonally been would growth commercial have activities tax income, a by X.X%. stage Pay impact first underwriting of our real the interest every and the revenue capital is cycle. markets of Loan of lowest Excluding on the recent customers at

In funding. commercial into bond the and level trends in Combined on of year, timing investment in commercial we uncertain. share as products. focused in retail our although period. growth demand our We Tax believe and in of market not a first portfolios These this prove revenue lower and underlying been solid the more issuance move our new market only robust in factors a industry. growth further pipelines, it quarter influenced share resurgence the remains the be In improve loan meantime, portfolios. loan transition products confidence the growth impacted offset loan will gives quarter are our capex across this business gaining we customers addition, part reform strength has to us early timing in growth that corporate across also tied deal with to commercial of the as will but with [indiscernible] conversations gains strong year loan and the lending

management we sales accounts customer credit in sales client merchant growth quarter, and in This card and higher in balances payment growth new and saw businesses. volume our processing, improved strong investment services, growth commercial wealth services in and

We into the year. expect this to momentum continue

was a quality value from X.X% X, share increased our quarter Slide of side per right you ago. see and stable first in the book the will On that credit year by

average on buybacks. XX.X%. X.X% dividends tangible During return on highlights and best-in-class we to was and performance average earnings common including Slide share shareholders our a common quarter, through returned assets, our metrics, return XX% return the a on X our of XX.X% equity equity,

certain and related in investment year ratio XX.X%, from and moment. modestly will spending a efficiency ago to increased innovation compensation reflecting that to matters rose on transitional in address stock-based Terry a Our technology

up discussed we initiatives and revenue digital-first in investment business enhancing previously, automation. capabilities, stepping our business we are As

We expect the year. XX.X% efficiency ratio to high for be the the

who to turn will more provide as me call well forward-looking Terry, guidance. quarter detail let as Now the on the over

Terry Dolan

Andy. Thanks

to of a turn of up you Slide basis. If I’ll trends. X, grew linked discussion quarter on loans decline with the average balance review a by the compared sheet quarter, earnings with a first with start follow and a X.X% In first X.X% quarter XXXX,

the quarter, billion for federal we loans sale. held the loan During to $X.X student of program under reclassified originated

know, origination in reclassification balance the to loan XXXX did affect future you The important growth. however, balance the is average quarter; did and strategically businesses. not runoff we materially for it As affect business loan our now our exited the ending student portfolio sheet

trends, quarter loan year, core and the is Turning auto mortgage credit reflecting particular. average slowest first affecting seasonality in each in for growth card, lending, to banking

market seasonality loan pay growth where credit were up loans a quarter retail this Retail by mortgage increased quarter Adding growth the retail to to card factors. few second on stronger to continued quarter, downs. seasonally X.X% X.X% This be impacted year we balances. about elevated share, real in lending levels loans and portfolios the loan gain leasing, continue but and Similarly, and year-over-year. estate Commercial X.X% we of increased and core of commercial mortgage impacts of auto feel X.X% year-over-year. but sequentially is each were sequentially good in and declined trends

X.X% on with increased commitments, at lows clients we and to of remains X.X% While tax and this continuing loans and Pipelines developed balance from utilization the down heels a deleverage as their average however, pay year continue to by quarter exacerbated reform activity ago, cash historical the corporate sheets. average commercial sequentially. flush improved line grow was balances quarter declined

by down accessing of a commercial loans unfavorable linked estate, not terms in X.X% year-over-year extend elevated influencing driven and particularly The customers and to secondary on the commercial dynamics average quarter That remain pressures credit market. on lending. discipline certain view, areas to is mortgage Turning decisions unfavorable the X.X% adding commercial declined pay our to in multi-family estate real in and basis. risk-reward real

real point average year-over-year This contributed intend XX in quarter, loan loan a remain the to estate growth. drag commercial a In linked we to basis average point quarter lending. drag to estate XXX near disciplined our term, growth and commercial real basis

Slide linked a balances. we to corporate quarter total average in X.X% our decline and in issuances but corporate seasonally deal partly reflects on commercial closings see impacting quarter quarter, business, that the and The deposits services. be basis. increased first linked seasonality investment to X.X% year-over-year first CLO X, tend lower banking and declined Turning trust typical Within and wealth management quarter

quarter In include the favorable to first conditions by revenue of in periods funds X and how the compared shows taxable in the other growth market lines. of compared quarter results. and tax quarter. down the X. income, margin quarter up first line down the our and quarter managers tax interest with down versus corporate strengthened Slide interest deployed of billion loan with growth advantage that first part as Recently, business higher that and on began fourth the was stable, This flat and Adjusting of asset fully was quarter the charge-offs early year-over-year, $X.X On point X.X% revenue fourth indicates on the during X.XX%. which was up recognition loans compared quarter, year-over-year increased with impacted two revenue recast basis, the the addition, impact the was the The the XXXX. basis basis interest first supported net to to taxable investment growth certain related on had can flat on and business quarter, Slide X.XX%. as our basis. income accounting In higher net Linked Slide $X.X fewer for is billion Slide quarter of net were standard. while of year-over-year essentially been reform first first essentially first no guidance. highlights of quarter, was net material the seasonally in revenue than you the provides assets In X.X% were ending of see categories revenue points deal two related X.X% Slide points the equivalent by fourth XX, first quarter X compared deposits interest a the change X.X% trust net the pipeline Both first with Non-performing of purchases, yields. XX.X% recognition credit XXXX. on a quarter percentage our and also first taking margin impact impacted X the of earnings operating debt related and equivalent to a increase standards. basis our relatively net three the the growth quality a quarter was loan one increased reform XXXX. revenue in Please reclassifications with quarter income the linked average net was in note across standards accounting adoption from of fourth quarter adopted loans basis reflect rates. on and and quarter, have expense company interest income, impact within the for days

by Excluding the points partly by linked assets, due impact yields steeper margin funding offset earning by driven and on four earning a quarter costs. The assets exempt a yield to of tax the rates basis. higher higher basis was reform net on increase interest on increased tax curve, higher

our betas expectation deposit bearing the in line continued perform and after interest December rate past experience with Our hike. to

deposit We be expect rate bearing XX%. interest total beta hike following the most about will recent the

highlights to mortgage quarter by the volume occur, be within XXXX. year-over-year basis toward volume. basis. card basis, sales decreased credit results we and processing hikes Slide card, X.X% XX joint on our quarter higher credit processing, revenue year-over-year to expect a income, our by debit revenue services payments increased gradually Linked trends debit of On ventures revenue XX% saw X.X%, affected supported due on growth. impacted growth in a rate processing seasonality and merchant and in will by beta Merchant and by are revenue continue in banking two Merchant increased non-interest continues second linked level. strong to future quarter businesses. trend exiting which our we corporate a and X.X% As deposit

in banking revenue. behavior was fees Client a We net deposit conditions. and market market and acquiring revenue investment bond refinancing of environment. credit, conditions in sale was underwriting lower Meaningful product driven reflecting margins, significant to revenue, improved fees reduced XXXX. due reduction which in corporate second management is return a our related tax typical a revenue, quarter increased the revenue Treasury in more to led activity X.X% management weeks fees M&A which XX.X% a affected issuance municipal by forward rate growth, and pull Strong was Trust deleveraging into commercial gain earnings Corporate on of early with lower trend quarter to continues and impact cash XXXX the of XX.X% by also announced investment of changes the offset activity year-over-year, investment-grade related the partially decrease continue this market to activity. to management flush fourth issuance reform. pick quarter clients There digit have an a in the payments to to X%, revenue, bond products commercial headwind tax and a quarter. reform was in third activity favorable rising expect to and trust declined of a by and services in up. business decrease that will mortgage and merchant inflows asset growth by mid-single pace by normalized

expenses XX, X.X% to expenses biggest included our expense non-personnel in quarter. on for in business line from while the driver principally quarter. Turning excluding with quarter expectation the of the were non-interest the impact hiring a X.X% a to items ago. decreased Personnel vesting to growth and This changes variable impact by declined On basis, due year was notable of higher merit fourth to stock-based expenses basis, the costs programs. to compliance Compensation employment linked production, X.X% support grew and compensation ensure increased X.X%, year-over-year a in vesting Slide programs the compensation business XXX market. and related The in programs shareholder changes in change growth to programs, basis of change compensation to expense [indiscernible] by response increases, negatively competitive impacted vesting year-over-year to and feedback our within related related points. expense provisions

year Notably Excluding have ago, ago. expenses, expense increased fewer programs declined XX.X% impact, have X.X% to a and a non-interest near maturity. expense increased expense compensation year X.X% professional this would by as from services non-personnel service due would compliance consulting within total primarily from

the in programs costs to hit consent out year. discussed of will through in we inflection the related As half related order the build of to we’ll previously, Compliance growth an related second point the our moderate to continue XXXX. rate costs of

of and increased projects, will investment and impact started be within several upon multi-cultural next to Including digital of investments innovation opportunities. of the impact range the the investments, will the expense over capabilities to will and quarters The think have of initiatives these the dollars these we as towards timing X% normalized. occur growth expect we deploy We magnitude full-year depend still investment our business XXXX brand. X

This rate equivalent of of a impact of our position. Slide rate a improved highlights guidance. the and productivity, the items, result tax tax our taxes, forward-looking tax our was efficiencies This our XX, compensation we standardized March target stronger of XX% Basel With during from At first compares in declined matters excluding the of X on investments, will III rate a expect XX.X% basis lower using in XXXX, provide accounting some stock-based capital ratio approximately the respect revenue growth, Tier quarter equivalent XXXX. a I certain income the and was future. expected slightly to As now X.X%. capital taxable expense tax basis to quarter. in due taxable resolution approach common to equity our capital notable than of estimated the to XX on X.X%.

net range to increase year-over-year the For expect mid-single basis. the quarter, digit income interest on second we in a

to digit increase low revenue year-over-year. range fee the expect We in single

in reminder, quarter. higher fees second seasonally a As are the

digit to be growth our We expect in expense X%. within long-term X mid-single year-over-year, of to target the growth range

deliver operating to positive the leverage for XXXX. full year expect We

We hand to first Andy a to I’ll full-year remain rate the and with closing quality is compared expect it quarter, basis for on stable tax estimated to credit equivalent relatively about our remarks. taxable back XX%. be

Andy Cecere

strong. as would. solid The Terry. part on Thanks thought The it economy and is consumer shaping is is business and early of we XXXX footing up confidence

strong the confidence in technology lending wages our fee spending that in lending supported Business infrastructure, is and taxes having higher consumer robust should While positioned translated and I business that the lower optimism pipelines. for feel yet, terms by it. we with and to into comes of job not with clients bankers conversations has investment the we are activity increased good are seeing outlook we business more our believe increased a business the Strong will. business activity it win commitments in and our businesses. more drive and well evident are about market, and very

share reaching mortgages our are revenue point in an We us inflection processing merchant capture enabling is and focus mortgage banking. on market purchase to in retail-driven

positive into are services, sales payments good return seeing heading which quarter businesses we and excited to headwinds reduced some While in and fuel I am our investment a most already are like development, fee and momentum higher volume and trends an the about of second beyond. provides the trust

particular our term on with the confident term business the longer that our work, improved with initiatives years. our integrity on without deliver entire Bill on a us near model focus we previously, risk to several and will our in and your will be discussed concludes banking, enable U.S. banking positioning and investments have our shareholders forefront to and us formal for enhancing experience happy closing, and digital will hard spent and These answer In That Terry, improving questions. investments the customer leverage equity the dedication over Bank profile. mobile returns of the and now I innovation position team combined compromising remarks. leveraging I’m capabilities. we technology the As at aimed in BXB next drive operating are competitive over accelerating and at payments,

Operator

Bank. O’Connor with line Deutsche open. from [Operator comes instructions] your the first ahead, please, is line of Your Go Matt question

Ricky Dodds

team. Dodds is this actually Matt’s guys, Hey Ricky from

Just you a on the expenses. quick question color Appreciate gave.

Just expense you as wondering XXXX. if growth exit could talk we about

range or and You’ve Thanks. was an this of growth had your we wondering see and of lower year that. in uptick below in the long-term expense could I XXXX, end years, even costs sort at maybe recent if

Terry Dolan

and of expenses, as end we higher respect expect question, of Yes, in for Terry, range, kind them the that thanks XXXX Ricky. the said. With to we’ve this to in is be certainly

As see would things we start the one we’re investments we from the important is and and the some that expect think we revenue of automation activities other some to of XXXX, we that get are of accelerate as making, in. because efficiencies that that is well into of that we expect would as business investing we

in start to come will range of during I we’ll So lower where end know to think will in that it I down but whether start the XXXX. inflection come see range don’t to it an down XXXX, point the

Ricky Dodds

you. gears, read-throughs had on thoughts for Maybe XXXX. the thank expected switching we weaker a any of thoughts just just if than follow-up, banking bit then it, wondering quarter, year. there’s a overall Got in move and first the there; mortgage It and sort was just we as throughout

Terry Dolan

me I One the let again terms very over XX% the year-over-year it’s banking. that’s On a on seen basis, increase had in enhancing a in mortgage actually mortgages so principally coming the on seeing, couple by a things. strong is seeing the Yes, are we’ve correspondent different because year-over-year sale seeing last retail of is margins on and think of a revenue industry the focus we and kind we’ve is focusing basis of our about that but on that down the of that seeing very the couple What competitive we’re applications particular that gain in take in industry, particularly and years. banking, question. purchased business are we channel on

competitors. our I lot that pressure is progresses margin as year the compression a on think of that placing

is the to margins, we see the capture should to improving but that capacity share to to starts know. industry go in down, timing and of start hard market continuing We’re as

Andy Cecere

in [indiscernible] digital specifically add capabilities the well the in that for side. And that our our front, positions Terry, I’d retail on us gain loan share

Ricky Dodds

guys. Thanks

Andy Cecere

You’re welcome.

Operator

of from line ahead, next please, is your John Your question Go open Evercore. line from comes the Pancari

John Pancari

Good morning.

Andy Cecere

Morning John.

John Pancari

To down so. that’s bearing the about betas but on to picking more Is this balance of that, of deposit else rates want about the topic, there? on on and get thanks. deposits, down something higher X.X% up? is or the year-over-year Just you color non-interest Is mentioned seasonality, X%, I the some know impact there still going deposit

Terry Dolan

seasonal end in banking fact, we first within was to year-over-year, deposits the about that the consumer we to it’s look typically really the kind a to basis, decrease see retail from seasonally and tends and us Yes always trust to didn’t John, were deposit the of When and that’s run-off. tied down see quarter deal in saw factors. corporate the because up at If fourth the first in were our trends, first most this quarter outflows quarter. The We corporate that’s mix they lower trust deposits is in think but pretty again. higher same. at saw side being we first in within significant and deposits. look our business, a Terry quarter, or if important kind The corporate see significant looking the all; or we of that flow be business it’s commercial wholesale quarter, fourth so then for at three quarter stable at in you anything the we our down, really look the of deposit we on we

tax forward first the and the was of of so the quarter. it think balances because into but fourth first to higher, first the quarter, pronounced trust, those started natural, CLO forward the the of managers that balances got in investment quarter reform more were the pretty deposit I CLO quarter a in because that’s out of pulled The deploy fact deals so fourth pull is lot

of timing is Second activity. just M&A

have to tied balances an we of which M&A escrow escrow outflow deals. balances, We and saw is really

different the tied really that stronger. of so pipeline to the strengthening, normal in not factors we of seasonality, happening corporate kind get With just much expect are pricing. M&A it’s as would trust to business, then, three that deposit And

Andy Cecere

middle still We add and expectations, XX assumptions I’d beta them approaching part XX. with deposit XXXX. consistent to our expect of our hit Terry, last towards were the

I’d here deposits make saw second the point that in is other in acceleration The we actually early quarter.

Terry Dolan

Yes, yes.

John Pancari

it, your trends loan front, this on Got it of growth loan just the terms of given quarter? with loan still around weaker of or GDP-plus look thank be expectation saw you. trajectory as comfortable you growth, could the at you Thanks. in a we are the XXXX, Separately

Andy Cecere

ending still up to first pick going appear think be does up. starting did were the in second of than quarter, the the signals see higher the at quarter, quarter the stronger a it for to in C&I year. it’s example, probably we Well, second little side, the in there of balances half the mostly are it’s our but pick end to We that so

John Pancari

range the the with Okay, full you’ll so GDP-plus year? still go for

Terry Dolan

going we Yes, our about know, more tied many I growth, see categories, is mean, we’ll that’s example, be GDP for loan retail something in of to that’s etc. talked what last--you doing, and to

think number would signs of make point. I this still see comfortable us that a we at feel

John Pancari

thank Okay, you.

Andy Cecere

Thanks.

Operator

McDonald comes from open. of line John is Your next from Go question ahead, your please, line Bernstein. the

John McDonald

I up guys. bit little on expenses. a follow the to Hi wanted

bigger a X% picture, XXXX. times, it’s X day expense something investor mentioned targeted and normalized few that the maybe you at Andy, you the Just growth, to in

is you seem in doing get and self-fund when and this the tech what investments you and terms reason other the an foundational assumptions elevated Bank you’re I’m us, their maybe to the X over next others why of different regional remind X are in you’re keep investments cycle about at at pretty are X, What’s flattish? of next. year U.S. in time, flattish banks year target that X and and are question, this X is to year what we able Just maybe the asking year where to

Andy Cecere

we’re periods make below we our positive growth operating on of start and we’re Well describing. in that banks balanced revenue ratio making other I focus of for into going term. to to, will sure. an same the investments X%, do to factoring all with are think expense for going growth, lower sure number we’re longer the want we at about but efficiency than and term sure there making that low starting those end of in range is that are be bit things we’re only the a we’re think the it want I do to in will but term. leverage there fact at in the terms short time If long thinking you’re do to our I’ll we from make our X the not sure things those but range, I the John, it that think

Terry Dolan

John, the other thing relative regional banks that against. our I would just remember add we to up that lot business our of that is a end it’s important mix to competing to

and business up same are as the With the bit. the impacting little management of level, a business but--so grows, particular, more that, that business ends expenses the investment and nature in to those with expenses grow will payments revenue business not the variable in in lot a payments mix so

John McDonald

Okay, that’s helpful.

the Just two, next guys you as a say medium reminder, appropriate what think years? efficiency target over one, for guys, three do you term an is

Andy Cecere

that to as Well, migrate leverage. in is the this expect to I year, expect in be the said principally efficiency terms we to quarter it of expect it and going continue to prepared first our in the the ratio, operating so down mid positive I we’re I because will John, remarks, have do for XXs low point high

John McDonald

the and long you Has where end and stand you sensitivity? just short Then split a Terry, between remind reminder, anything there, can interest rate changed sensitivity. of us Okay, on the great.

Terry Dolan

Yes.

From well that’s as of betas, would point sensitivity more betas closer we movements probably competitors, from side. of rate our XX% you end up out, corporate one and interest XX% the assets end beta end maybe the balance our be relative the in if on kind that mix into long movements, business maybe it being the to in the curve. think our has the short about That’s overall. way movement of as I think on liability our rates, things level, and of The terms of about of looking that’s about we’re I bit benefits Andy of deposit baked think benefit you I starting to of it. trust little deposit the and for If what a our asset what wholesale of our about by, at perspective, about been terminal of so some curve really getting up but would an and talked kind us, call our impacted I to think will business, sheet,

Andy Cecere

for the about highest half already balances, our Because at it’s of level.

Terry Dolan

Yes.

John McDonald

Great, just one and then follow-up.

You overall the terminal would assumptions to, the on that than you go so first the beta for the think mentioned later part the been is low and beta the there, Could retail XX since beta, retail expect about said year. or the talk the over terminal of I just in you retail getting or you assumption to it’s time cycle? higher the

Terry Dolan

are the upward betas. going rate retail recent most very movement to of be cycle to be an Through the assumption very, hike, the deposits are and so move pricing. going pricing to in year, seen to deposit deposit going rate I into that Yes, with get the see we little competition probably start more movement of as that from meet terms have competition. XX we of is retail going we more respect so XX deposits just to or hike to with in March that do and rest the think to to we’re rate terms

John McDonald

thanks Okay, guys.

Andy Cecere

John. Thanks

Operator

line of Morgan the Graseck from your Stanley. comes line ahead, is question Betsy open. please, next from Your Go

Betsy Graseck

pretty - ratio on hold good deposit last be the XXs. think appears your strategically Thanks, in the back use low just A continue if deposit to One, low to questions. beta I that’s I can to conversation, at wonder it’s morning. to loan couple all. you something

Terry Dolan

that it, about way would think I is opportunity. there do Yes, I that think the Betsy, I think that

XXX look at and we little deposits. rates, where more think markets a different move particular is have about in be the focused targeted so how We we those then can surgically price to I moving with in more we respect really competition bit and think retail markets. only to and we

a betas be can is bit sense changing. with your respect point deposit that little targeted to in more up the correct we think end they can we be as I more focused and

lot haven’t I something expecting. again that’s think movement we yet, a of we’re that but seen that

Betsy Graseck

Fed return, your separately the little capital you obviously have Then the talk below payout minimum conversation, ratios been the you recently. and Okay. you kind proposal your bit out well so obviously see Maybe about of that bit SCB as that put well SCB given below how on targeting, out putting be ratios, believe, as is think a removed. about well dividend there. capital ratios over The that impacting that how you that to Fed because SCB little you could soft you’re X.X%, the couple here, the is next the payout the that maybe I been that, about cap has you of years a likely dividend ratio talk could proposal

Andy Cecere

Andy. this is Betsy,

We base bound by the not case, stress continue case. to the be

X.X% in we’re Our base common Tier we’re equity the is so case target X%, range. X; at

capital as is to dividend the an think has you increasing change to to of see this XX share so distribution XX. the been opportunity I rule the offer the long-term increase that may us this do Our clear. buyback, that range targets will becomes piece that the more of dividend our component in of versus do one might--you

Betsy Graseck

you time? how wondering over payout I’m can’t for that the a handle, pre-crisis, ago, for been payout given XX XXs kind move you’ve how if that, about low did then think you time business can years expectation so in Any asking much but higher specific of Okay. ratio your low you just about know I much the run volatility CCAR look could with because not ratio, I the over dividend typically have. talk that earnings what but you

Andy Cecere

Sure.

XX that on to we dividends towards XX So our XX XX the about Betsy, and I see on XX. dividend migrating component think could to buybacks, as

Betsy Graseck

much. Okay. so thanks All right,

Andy Cecere

bet. You

Operator

line question Najarian Your of next comes Bank ahead, line from Go from is of the Erika America. your open. please,

Erika Najarian

of good morning. of what was reminding XXs. appreciate, to John Hi, low is us that first to mid a medium and asking, My question the follow-up efficiency target term you’re Andy,

the and reap wondering to investment is asking that about of you think investment I’m question that of change going the of XXXX. I’m ratio look beyond As we could you that lower, think migrating about is revenue efficiency we the us like sense relative really sort rate year XXXX, timing over spend would a as if to time spend, the what the guess initial I from of give in

Andy Cecere

on about. we a about the rest rate investments BXB, now think particular to see all run you’ll year. those talked into you’re and I that for we’re the making focus of first things continue I’ve experience quarter are talked the customer and in the be to baked these seeing digital, Erika, starting with expenses that Those

X growth would that and ratio the efficiency If expected, a and extent X are, We’re the below work the as revenue talked revenue be that to positive manage consistent opportunities growth revenue revenue expense to I lower so expense going to the to to assumptions, is what above I range X% again our to growth our that, growth the is be is robust, assumption expenses down objective in operating under revenue would time. we’ve our the X%. leverage expect to on of with that, over about we’ll growth deliver our with continuing expect--and

Erika Najarian

commercial ask little the to about a dynamics. wanted just bit estate real I Okay.

detail refinancing. typically credit and some You’re trends, for the could in more little terms of bit you these that as a wondering up inflection loans seeing the unfavorable of you’re terms of give us if on bellwether some I’m come

of think has and ultra-low refinance developers part decision to that Bank, continued U.S. low loans underwrite have is refusing market banking had that industry the of outside lot the to market that you’re industry a under it not whether options rates rate. and estate the the for outside or of other or your I’m the commercial been wondering not struck real and is of at rates, worry I

Bill Parker

side. often part what insurance is where side, It’s of offering, the securities and Bill. companies we’ve loan and lack so of tenure That’s either runoff rate, on it’s it. standing structure This or certainly are it’s whether in these the markets long-tenured seen we mortgage loan deals, the the that’s recourse just or call

first value. still side, actually ending very, little That’s we can in that the add - construction where loans up we see we very where was encouraging. focus, bit most construction the quarter, our active On we’re the that’s so did a

Erika Najarian

Got thank it, you.

Andy Cecere

Thanks Erika.

Operator

from your line comes Jefferies. Usdin Go line please, is ahead, of the from Ken question next open. Your

Ken Usdin

and the of in, in that follow Can revenue back that that seem what everyone. I was out Is the that the would that’s for payments on morning restatement It good rewards taking short expense Thanks, term and payment out you’re and changed up also recognition? side. borrowings that putting and to NII the right say?

Terry Dolan

correct. That’s

Ken Usdin

go-forward that netted payments restated and either lines, the us as So understand inside be seasonality how the look that a Terry, this basis? does help then, the payments we revenues to you from change that’s variability of ahead as now can then going that

Terry Dolan

seasonality, of be of then just In expectations and I match corporate that related I up our the you to it to the line rebates end I the end at item. going to those up that first reset think the it’s impacting same, just a your will you think you’re seasonality are quarter businesses, talking against when have seasonality payments kind will how and it, lot. terms up looking principally about of regarding the don’t mean, rebates the

Ken Usdin

More the payments, rise to the to and up debit those growth to coincidental and midyear, in second we Corporate was overall continue to is How in overall aggregate the growth is Okay. XX. historical talked already rates improving those doing on also into of by it of this get move corporate’s as basis like business? each is back the Can for single broadly post of you half rates on and them? about Can you’ve getting back a also payments back mid looks it X, processing corporate--credit positive. comping merchant up and debit know then I X, and restated year?

Bill Parker

Terry I’m payments. payments retail talk going to corporate hit and will about

an to investments having very so the the double-digit they’re the by you’re basis, well year low had lot side, high in to year We payments is strong corporate strong range. an of the continue continue year-over-year talked really in one single-digit sector. last growth corporate at of that of quarter. the up growth and seeing those some of we’ve I that that exceptional--they end technology the XX%, about, both driven first of XX% A and corporate in is would On which growth which had as categories of on is see as or government payments a revenue see in exceptional sales XX%, about pay, virtual growth

Terry Dolan

in card, little the and business Then important quarters little think of so we’ve about growth, higher terms a in be year. credit when the revenue talking seasonal we’re that course consumer tend extent about to the to spend that that we--I really To the tied that have believe and be based retail will it seeing, that particular year. you been for retail a bit that to keep fourth mid-single we continue been space, respect spend mind. in that the tends customer the with digit but I everything that it’s think can mean, seeing first that bit upon to That growth strengthening like of sense we what look revenue over I the be to in think does

Ken Usdin

thanks guys. Okay,

Andy Cecere

Ken. Thanks

Operator

ahead, Your line the open. your is Go please, of Mayo Mike comes Securities. Fargo from next line question from Wells

Mike Mayo

hear Hi, can me? you

Andy Cecere

you. hear can we Mike, Yes

Mike Mayo

$X saying if if to you’re tech the of wrong, gone than thinking to why? Is were a I old me investing when your $X.X investing step this before, a tech is information it’s $X.X year each new are more and thought, and budget little you so, you’re billion, I’m this so Okay. accelerating up change you innovation? there, is billion and information in and accelerating billion or reiterating about correct

Andy Cecere

fourth talked the not No we reiteration new information. Mike, it’s about in what quarter. It’s of

Mike Mayo

give revenues If little meat that the playing expenses in a you’re a terms what more little game. grow the expect? the investing, could are that more get clearly granularity, us fast just could and and said you’re You time, to if long we on where bones, of Okay. bit the just you over want areas outcomes you you

terms In banks that, your others on other to that, online some for look should metrics outside mobile don’t. of we monitor or What disclose users and like progress? the

Andy Cecere

Thanks Mike.

Let it’s payments be categories. in and providers. a start me ecommerce there I’ll our categories, break capabilities into and around integrated to with software the three focus on increasing the going

to want where those better that’s We is. even the categories, in growth there good are be and because

all side to the capabilities about The Today and increasing would digital-first of capabilities world. BXB On to a device equation, our those rails, is XX% outcome the XX% sales. the occur that enhance increased built for our the capabilities. retail those but those under new three it’s of business consumer side and three ability about our are on consumers focused digital particularly side want to the the all of those customers central relationship consumer and around being focus. of our of rails XX on think on to as acquisition sales of offering Then and areas be convenience and are we footprint on customer on equation so and with customers. equation, the speed the transactions around the continue more activity beyond with sales their of expand a our fronts, We mobile front

Terry Dolan

in Mike, acquire a A retail we online loan and capabilities to things. to business forward. focus then a focus, online within for on to mortgage deposits of of really areas significant Bringing get we just the people us things. that, I minutes there able terms in lot Obviously lending with able maybe oriented, of an and our add of today the service autos started digital couple might in are sales the because important as the side, we portal. and capabilities so be those the go have checking the more industry very sorts essentially is for though, on side associated of and be

Andy Cecere

Right.

Mike Mayo

All right, that’s helpful.

you are the How with this up about think catch reduction you of it? money have So the tax the just industry? because you to doing get do or to big picture, ahead

Andy Cecere

because this industry want is headed to the be doing and this think I I’m forefront. is I at where Mike, the

Mike Mayo

Got it. All you. right, thank

Operator

is from of open. Research. Go next Foran please, comes the Autonomous Brian from line line question Your your ahead,

Brian Foran

questions but numbers, was two asked, my the the year-over-year guidance. the All referencing newly on you’re maybe are what quick have of the reported most not just been Hi, based first comparisons right? in XQ release, on ones,

Terry Dolan

right, upon numbers. That’s all the based recasted

Brian Foran

on any broader I Then elsewhere, what in C&I. was it just by improvement credit jump the there and color was drove wholly a but that views. a schedules, C&I bit NPL offset little of appreciate in

Andy Cecere

consumer are very, credit account, But was stable. non-performing, the have so products very one is very that Well, it’s yes, credit incident. did we go it an account, isolated but commercial overall, a metrics just stable, did

Brian Foran

Perfect, thank you.

Operator

comes Your next the from from ahead, question please, your is Vivek line Morgan. open. Go line Juneja of JP

Vivek Juneja

translation. quick of processing, merchant couple the A you’ve thanks. you impact, Number when questions. highlighted past an the a Hi, in from one, negative was that strengthening FX had impact dollar

got benefit dollar can color you been has the of a FX much us that on give Given now? how from you weakening, some translation

Terry Dolan

on if and have so single basis, the been for a acquiring essentially on the the guiding basis merchant a merchant is that on in end flat we a Saying you again it’s and is terms acquiring would things Yes, that FX. sales be the mid at in year-over-year up half what in that, relatively we really of to so to we up think the continue sales volumes core of year That’s the first X.X%, revenue what when year-over-year is particular about end two, it difference looking basis. that is between looking half strengthen business, business looking up we think at and and year activity the within strengthen new business the we that second in well. of do to growth core that about digits, the continue about we the at end as up and expect volumes,

Vivek Juneja

Great.

where whole on color What obviously the that’s Second Any management is those business. one, that, running now? different level on is it betas because wealth are deposit XX%? the a side, that,

Terry Dolan

institutional within of other deposit they’re see betas in well what experiencing. you wholesale wealth in increasing management the literally cycle, rate see we’ve the to business, That’s rate XX%, no so there movement where we what Yes, side was to the started on and started in we the XX but or side. been earlier below last kind hikes, our betas

Vivek Juneja

I the wealth of side whole wealth referring management, institutional, When you’re trust, was referring you to I the so-- corporate say talking--when and was to

Terry Dolan

Ah, okay.

Vivek Juneja

I sorry. definitions, Yes, language. different realize

Terry Dolan

Yes.

on of what you equation. we end would baked about at in. it’s believe side of from more kind XX%. and as we there is that’s think our corporate looking to asset to XX% of So liability if the future, core get much a beta XX in sensitivity pretty the we’re Then standpoint, sort much to deposit terminal already, pretty closer when we corporate the on of that side I up that management wealth the trust range, That’s trust, say why that’s

Vivek Juneja

Okay, thanks.

Operator

Your next line UBS. from question ahead, Martinez Saul of please, your line comes from the open. Go is

Saul Martinez

morning guys. good Hi,

reinvestment highlighted of you guidance to at the windfall. I X% sort a X of think end of because last that you the expense be in high the expected quarter, to of the portion profit the of

if expectation is is revenue Sorry the it I more for or that it, but still dependent? XXXX, missed

Terry Dolan

No, that is still our expectation.

Saul Martinez

other a of but on was to relative help line Okay, a Can lower what more restated on it thanks. non-interest normalized know to Could the this question, quarter mentioned it’s a level was difficult going you us I up? equity basis, help light year, just basis. understand bit little more a forward? sense last I of detail be should even us guess that off line, a quarter this because item or income a gauge you size to quarter investment. a give you quarter

Terry Dolan

not would different you It on that that, residuals, really Yes, way quarter within suggest that income. so as range end I on other range, over up I investments a and those the way see of time of but a all from next, look a some kind would of that I of kind and what interacting period can categories just sense is getting to one just of specifics term other of in will example I equity of provided of specific losses tends categories of part giving including lumpy for of revenue, revenues to regarding terms is are we’ve of never so equity type types only gains guidance. say the investments, in there because many look think that different the be end and etc.

Saul Martinez

quarter average the bit Got to just than just this It’s is it. make of understood little the year, a so last better. sure I wanted about $XX number that lower million

Terry Dolan

lumpy. Yes, to it be tends

Saul Martinez

it. Got

progressing, that? can one, one final in a terms on there the of just and update Any order. share on that’s how quick Just consent anything you

Terry Dolan

Nothing different.

sustainability We things going our expected. in are phase, as are

of the are what continue timing part our and track with done be with XX, and will uncertain. regulators to But what doing, June right midyear, then on we they’re the that expect expect. is We equation we

Saul Martinez

a thanks Great, lot.

Operator

line Your Barker of please, Piper Jaffray. from Go open. your the is next question Kevin from comes ahead, line

Kevin Barker

Thanks.

rate on of you give follow-up deposit terminal where previous expect deposit beta was beta. where a and Can quarter the and you us the your an where stood that quarter, side this to idea be? Just wholesale on it

Terry Dolan

to that Yes, Kevin. in pretty and past. getting that side, close where That’s the have level the are is we terminal XX% that’s experienced to XX betas on in the range, the kind of today, it wholesale

Kevin Barker

to combined getting So overall, side-- terminal management wealth the close the your with are wholesale pretty

Terry Dolan

Yes.

Kevin Barker

--and the then basically retail? just on catch-up it’s

Terry Dolan

right. exactly That’s

Kevin Barker

a Then the Okay. follow-up mortgage some on of questions.

competition. Could heavy us where idea on are your basis expectations least XQ sale dropped from you mentioned at You couple has the margins correspondent correspondent to XQ, and for give seen of of gain on next your an what a the quarters?

Terry Dolan

we end margins in XX you to the to Yes, than probably looking up the if and side, range, that’s they’re would see. XX basis at lower normally correspondent what double-digit high single low on points

expectation deal improve, to of is just because rebound, probably it the is our at, capacity the there’s the kind But start low. players able that to the year that margins where expectation of have latter of timing. don’t a more with will to and as the half start so lot just a they fourth into that and they’re on of into we Our quarter and it’s matter players be pressure get the to smaller that that’s will

Kevin Barker

Okay, taking Thank questions. for my you all right.

Andy Cecere

Thank you.

Operator

from Capital ahead, line is Go please, question your line Your Cassidy Markets. Gerard of the comes RBC next with open.

Gerard Cassidy

Thank you. Terry. Andy, morning, good morning, Good

Terry Dolan

Hey Gerard.

Gerard Cassidy

the betas talking Is correct terminal sounds a range. higher? is call, it have like the fair, lower, it is if little level, a the XX% on around that or terminal I’m On me that wrong, and please the about little been guys you

Terry Dolan

wholesale ballpark. in bit would it’s probably lower, that but side, be--on it a Well, just the of kind

T-bills, in corporate have so to higher market closer to fund side, the you to area of investment up that, or be a trust little XX tends end On kind to for track tends to funds, that bit XX%. government the example we it but be is money substitute to the because having--the

Gerard Cassidy

thank ever low, get see a these we’re Okay, mean, Could because so rate not in you. we seen betas experience, terminal get could your to environment ever obviously them have before, being we in XXX%? to XXX%? I

Terry Dolan

isn’t the bank, don’t to the terms to Yes, high. I having in that are they’re There expectation that a with a so flow, operating our from that based also go experience perspective of certain both think to the those from be standpoint. upon so we of in deposits having client our in certainly competitive there’s benefit have what cash accomplishing needs and business

we’re to close or to at think very what we where I be. need

Gerard Cassidy

I your apologize, prior that in impact natural Terry, addressed - if on you processing hurricanes merchant you and the this calls good. businesses. disasters about had Very had the talked and acquiring

would in spring I to of this think get thought back you out you pointed the normal. year, that

where haven’t it, addressed we are you that timeline? If on

Terry Dolan

good Yes, follow-up.

to dissipated, that pretty early so much Harvey, has will and the time of much really isn’t pretty worked Irma first us, way has its take In associated it recover. smaller effect for Rico Puerto much it but in significant, any that certainly terms of with impact the that more in. is quarter that for

Gerard Cassidy

it’s doing? your real makes areas, underwriting Great, competitors you retail there estate than standards. the evidence obviously or conservative What seeing underwriting of in getting just you lastly, from whether guys what any commercial? you aggressive you that standards a addressed how the wonder too have little other Is have commercial lending, are those they’re guys

Bill Parker

our of the other fixed lot long-term we affected pretty full much book; but steady stages not other which Bill. period. mean, and been--I table. just it’s goes. and This pricing our have say rate she side, activity economic but the necessarily. would about We the a basically and credit to try throughout commercial consistent compete that lot to of obviously of keep estate in real is There expansion in a products pricing, to late I’ve has the pressure, have underwriting mortgage relationship on I I the a talked mean, as bring cycle. There’s we’re

Gerard Cassidy

Great, so thank much. you

Andy Cecere

Thanks Gerard.

Operator

question please, from line Bank. the line from Matt Deutsche comes your of next O’Connor open. is Go ahead, Your

Matt O’Connor

high, which jumped like little late so Thanks it this little sounds year. increase was bit for but the increase you not a but you nice the if I to things expense having could operating sounds that of a guess like and it’s expect kind out, is hoping committing all of But clear. continuing a of surprising expense the think a be I revenues, year in percent frame you’re to leverage investment according lower year, the growth I I it in revenue expectations, I focused terms in quite context plan. here, on also on given without growth next it follow-up. appreciate it’s the you’re we’re to targeting a spend little--not go totally

Andy Cecere

is Andy, let clarify Sure a Matt. little This me bit.

there’s in high of about this increased that the will X% So run increased year. rate. some investment end to we of talked be about, At that the investment because X talked we the range,

We expect expect I that. would positive next to going year, year operating into and leverage this continue

run will will X next the spend range. X% our down to that again next increase to into I expect rates tech migrate growth so to going baked would year, that start within not that rate, year We’re be and

Matt O’Connor

of targeting, Okay, this I and that modest you of on terms the amount because to the guidance, much how next are hopeful in likely it’ll be year? think, you’re and achieve positive based leverage operating year,

Andy Cecere

investments increase beyond, it and continue revenue XXXX into this modest that’s doing we these we’re It will to looking for, that go the our because and be and it. will produce we’re is will year why as expectation

Matt O’Connor

how you was a achieve that growth and of much these Year that hope growth targets, think put I revenue I ago, remind medium and revenue was? that’s year. X, years out next which something still that some term Is in Okay. that the is possible, would couple you I us know think

Andy Cecere

range we’ll we ranges. rates you in that to the up our in X But situation Our on do we I the that range. increase new saw, were return that. Matt, given intend mention, already, the as and revenue to returns to in the our will thing expense, that we’re X% and range our numbers be in tax to our we’re range. middle expense in communicate revenue, We growth were more the is of expect One that growth X and rates, on about ranges on already X% in,

Matt O’Connor

X% to of next summarize, X are X% Okay, hopeful so revenue the just the growth high hopefully range? to of end year, expense to you below to X X growth, X% that drifting but

Andy Cecere

target. our That’s

Matt O’Connor

thank for clarifying. Okay. All you right,

Operator

Bruyette line line the ahead, from Go Brian Klock comes Woods. of question from is please, next your Your open. Keith

Brian Klock

morning, Good everyone.

Andy Cecere

Morning.

Terry Dolan

Hey Brian.

Brian Klock

is if showing sure average Maybe slightly other issue little you actually--you X.X% or versus wasn’t it’s about almost like the just period balances banking large I but a segment downs of a were some corporate side. the mentioned I and just actually interesting I your we on period, the or up looking peers. you period, March at segment, on this still though, at just look your a on end down, versus that corporate commercial in up market corporate When and end your a issue of and loan wanted so peers Page supplement. this average. same that the the I banking bit an your your is know pay bit talked XX trend--that’s and of but up have of if and about averages guys different some difference different commercial there’s know of at than to of that corporate maybe - know, average, there’s can lot were from it follow deleveraging, talk balances end the middle data. in was of trend it thought little earlier your call, a on the some seemed was I growth year-over-year,

Terry Dolan

expect averages, on we higher than balances, basis, see the think some a do bit ending about the little think they spot I momentum when quarter. about Well, as Yes. second are so a to we Brian,

market, ends If some you up the middle M&A one the just we’re to M&A end of that things the commitment of up and side, a is thinking the about the negatively pay-offs, continuing market, pay market driver is on us grow bit impacting to for that we middle see little from have market. seen of middle we market, activity and or principal behind that some activity downs impact but

stronger market them, from If in market kind of you’re looking to least a growth of at half that, seeing flat it changes we’re nice little too. quarter, across others, it all growth of our seeing the depends than markets, bit in so and and to we’re quarter

Brian Klock

Got it, thank you for that, Terry.

So I on to deposit is side on guess focused talked and deposits closer the on side. larger the the you Everyone funding been wholesale my terminal expectations. getting betas, just the trust your about other follow-up has

swapped the are can refinancing on much or borrowing how out you what borrowing of borrowing the work LIBOR, the the us and funding cost to is with at On side, your this, that of either [indiscernible]? side wholesale expectations on side remind three-month Terry, borrowing piece your

Terry Dolan

lot a risk, on I conversation Yes, some etc. other the there’s basis know the of LIBOR around calls. been of

us, the an For don’t increase quarter basis at same the so to point. LIBOR have first three-month rate of example, end on we as this risk of is LIBOR, have at the three-month floating sort we that very little

Brian Klock

fixed is it’s base? anything on for you’re or overall swapped saying there so that more that, borrowing Okay, out just

Terry Dolan

about Yes, and out or fixed XX% well tied that go into point. substantially of the we three-month, have marketplace to fixed, normal in the to swapped but have we typically XX% cycle, floating, kind LIBOR gone when at we a this

Brian Klock

time. great. Thanks it, your for Got

Andy Cecere

Thanks Brian.

Operator

call back With for like that, over the Thompson closing to to turn I’d remarks. Jenn

Jenn Thompson

listening us follow-up or to our call Please comments if quarter. any have questions. for call you this Thank you

Operator

This concludes today’s conference.

may You disconnect. now

U.S. Bancorp (USB) 18 Apr 182001 Q1 Earnings call transcript