USB - Earnings call transcript Q1 2019

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Operator

Welcome to U.S. Bancorp’s First Quarter 2019 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. [Operator Instructions] This call will be recorded and available for replay, beginning today at approximately noon, Eastern Standard Time, through Wednesday April 24 at 12:00 midnight, Eastern Standard Time. conference for to U.S. the of Thompson, turn Relations Investor now call Jenn over Director I’ll Bancorp.

Jenn Thompson

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

Andy Cecere

good and our and thank morning, you call. for joining everyone, Jenn, Thanks,

high a positive with interest net delivered in but income revenues growth your prepared reported and metrics, the and will credit our expectations, our line level, a questions. per quality highlights were X. leverage. number of I Following share. fee Slide I’ll financial in at was $X first be of Terry operating on earnings taking we begin we and remarks, In quarter, The slide stable,

businesses, see across good growing market and strong momentum we which account fee is volume and gains. driving is to continue share our sheet balance Our and

from increased management; our capital year ago. to value by Turning X.X% book a

an XX% average Slide provides delivered returned we dividends first return share equity, and return to performance and our on on assets. buybacks. X.XX% through a quarter, common key metrics. X we the XX.X% tangible of quarter, earnings In shareholders the During

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

Terry Dolan

Andy. Thanks,

start and to balance trends. Slide linked-quarter first with turn X.X% impact review second quarter the X.X% federally with our the X, sheet grew the increased If and guaranteed loans year-over-year, up a you sale of on of loan had fourth end Average sale I’ll basis discussion of earnings XXXX our and of quarter covered the the period. XXXX excluding coverage the loans quarter of loss reached portfolio student FDIC follow the that

across Digital side, pay good mortgage, slower our customer of the accounts accelerated we to by driven be in leasing robust. loan Commercial acquisition saw in growth platforms residential loan installment partly due lending, retail to first timing. On M&A-related continues portfolio. consumer and activity, quarter, the down growth

pipelines in are remain although, term. healthy, activity likely New near and is to pay business chop elevated down

year-over-year real decreased commercial expected, As and sequential on estate a basis. loans

This real to contributed and growth XX an point quarter, XX drag growth. estate linked-quarter basis loan point average commercial loan a year-over-year average drag basis to

moderated certain to will from real but consider to – in of we expect has down pressure, estate this still be restrict risk pay lending, what peak areas in but we dynamic reward Given growth commercial portfolio. continue which unfavorable a levels, continue

to basis Turning linked-quarter year-over-year. deposits a increased X.X% on X, and Slide X.X%

of $X compared a of to lower the were earnings. the client quarter by first continue quality ago. per credit $X.XX share generated This assets migration of balance We business to basis. Slide on XXXX increased but fourth of year-over-year to X growth that discussed, indicates merger was a impact will in stable first relatively quarter. in Slide modestly first financial related previously XX.X% quarter, XXXX. quarter Nonperforming quarter the by X earnings highlights year to mid-year. As moderate migration deposit a through the large versus to on compared first impact share per the continues earnings deposits

Turning fourth linked-quarter hikes. basis equivalent expectations. X.X% to growth and but was Slide interest by lower benefited comparisons year-over-year, interest increased income rate X.X% and the X, year-over-year loan compared our taxable line to quarter, Both with from fully a which on net was in

growth typical impacted is in As by days. first the quarter, fewer was linked-quarter negatively two

a approximate of by to basis fourth the quarter debit The Also created of points point first a in growth. basis, from growth our credit In servicing account negatively favorable XXX on in a days debit by quarter our and impact interest first noninterest of average of debit simply a in full issue recoveries billing than accounting headwind year timing XXXX card products corporate quarter items revenue experienced impacted lower The XXXX, change in prepaid business. a of an year-over-year and Both idiosyncratic basis than for first the Credit quarter basis. also is despite this XXXX payments year are fewer fourth rate saw volumes. the third-party XX card revenue. revenue business. XXX and sales the credit in these card income. quarter year-over-year growth processing cycle quarter. in revenue declined first strong of processing ago ATM of the growth X.X% On XXXX card approximately each the higher mid-single-digit which within merchant of highlights XXXX. XXXX sold Slide revenue revenue, were and we both by the revenue There year-over-year XXXX, quarter trends driven we

services provide conversion to However, we a continue transitional period. during operational

income. included – combined we purposes. debit with in sale, have transition associated deposit with The charges the processing service other business services revenue recording for revenue Given ATM ATM is

credits in Lower revenue, quarter time well revenue investment indications which banking the transition decline and As the primarily tax relative by The services first and will by over income driven sale a was in equity of increase changes MSR in as valuations. other the of revenue. driven as quarter mortgage inclusion impact was the the higher deposit of our driven the first by result, business. ATM was the in service charges for decrease

application in a and from quarter grew However, volume first mortgage XX% up ago. was origination year revenue the

fees We net banking to in in continues beneficial continue The for environment. rising revenue in of to management impact the in more income, treasury a typical rate growth impact revenue which of balances, credits, is reflected in reflect of offset full is in expect decline year earnings and management XXXX. mortgage which the interest treasury compensating changes Decline the than revenue.

support now in to costs higher tax partially Turning Slide other increase This the the in to offset growth. March assessment advantage X capital hirings year-over-year to due Tier was by business XX, Standardized to a capital estimated compensation expense, impact common higher At X.X%. some related guidance. lower reflecting projects of equity X.X%. compares This expense and using FDIC XX, our primarily our costs. XX noninterest target Slide Basel to forward-looking lower ratio X – the highlights of decrease was primarily expense, provide I’ll our reflected position. approach

interest we taxable equivalent net the to single expect quarter, a second in the fully low For on income digits basis. increase year-over-year

expect the in year-over-year, impact ATM fee negative of We single the increase of the sale low to revenue business. the including digits

We with expect XXXX, to to in XXX the deliver year guidance. positive previous for operating leverage line full points XXX our of of basis

Credit loan our approximately growth. reflective to quality XX% remain will closing back compared We taxable expense growth be with equivalent basis. hand a to first rate year relatively Andy to full on Loan continue continue expected quarter to of tax I’ll loss the stable be is quarter. in it expect the for second provision to remarks.

Andy Cecere

aside, The environment Thanks, credit lending cash expected. and is economy U.S. to Macro of our our year healthy our we in environment ability adapt banking and stable. of to scale, is increasingly businesses, the market growth we to saving a our start and evolving and discipline. fee of confident by our on Terry. of will our depend seamless quality We for from The has execute we’ve enough launched customers. capabilities. functionality supportive and our in digital our the of the across determination attention win is risk and a skill management share and which ability well demands a supported Success investments will industry sales are lot play in acquisition long-term our success. been retention experience improves will Early, customer recently One newly feedback or customers. been area efficiency. a payoff we’re incorporates The the users be technology in and enables visible in mobile positive. developed our very more form as placing making And is role app, increasingly the our as critical operational innovation of

to XX, metrics If you digital a track. turn Slide I to few want share we

of are decision success our with lost digital customers’ lending loans fully expansion lending in of experience, an into Approximately to encouraging digitally and transactions we start of the momentum nearly as but as across and that growing. digital existing trend funding small to our I’d no locations. closing, You is enhance now dedication that customers and operational to can all reduce activities physical stories. of platform transactions a our sales improve to early the customer slides sales and open a In have formal occurring where see percentage or currently can XX% digitally significantly credit hard little will now time are percentage small of lending increasing from are and that physical year thank digital the We’ll the and all up are building one-third lending for customers, businesses. from to short digital our business Q&A. loan for cases, employees past concludes remarks. Mortgage sales. That loan one lending our to solution enable growing these Migration businesses This some call to and is hour. XX% engagement our their in footprint. markets, efficiency ago. completed September, year. good Particularly we end-to-end, completed like and we’re outside is work throughout the and digital off mortgage the is year up Currently,

Operator

question of comes Instructions] line the from McDonald [Operator first Research. Your Certainly. Autonomous with John

is line open. Your

John McDonald

operating hi, I ask good you Thank about to wanted you. the and morning. leverage Andy Terry, for target this year. guys

in processing came X.X the the from low some of range, quarter, that days issue. cycle to the the included pressure You but at X this end billing

do do higher as lower to get operating what of bias of the end need or end at guess, would of to that range? get to I environment target So higher the said you what kind it differently, the have Or the would end? a and you leverage towards lower may X the you X.XX ahead, to look be

Terry Dolan

Yes, will driven based more be where in by the range, upon we growth the gives John. of I of to is both us continue extent end, that sort end of long-term bit The we’re that up opportunity decisions to to year. the that throughout think company. growth revenue a little revenue we objectives picks if going to the end lower see what the up challenging a likely This the higher and I close Terry. environment, but And partly to of range to short-term we’re it’s and closer think sort to manage be make revenue just

John McDonald

up this expense of on year? And And the hand, surcharge getting our off. growth investments compliance kind should You a the right have you’re USB for stepping about help Okay. there, spend a target you expenses? for relief from and but And in what’s think kind roll level good FDIC’s of little about some what’s environment? of little less we from a what you pressure and got guys? other you’re How this think

Andy Cecere

benefit Yes, you’re some compliance from is cost items. pressure eased of This both as on is about The Andy. these FDIC. well we’re John. as Hi, getting right

investments technology capabilities We I in all to will referred make to comments. the continue for my that digital

factor think the of another is what the consent order. important lifting I

lot and have physical optimization. flexibility We more a asset

the would I I of going lever couple other is that reduction us of branch utilized next in see expect actual So which you’re optimization, physical the XX% account branches. XX% to years, over to think our

net We’re going footprint, places, XX% and to some be down open remodeling the going the up will of it changing in to XX%. to be we’re but

John McDonald

you cadence the that And days there end? the with operating processing keep first just the then or the did billing the and in operating to Is and Okay. you quarter hurt follow-up Thanks. seasonality of at leverage. one on lower issue leverage any kind

Terry Dolan

Yes.

then impact So standpoint, But the expand of a tends fairly quarter, the card credit through to probably consistent as certainly fourth did from just the up it’s year. and impacting a the narrows growth end midyear in little seasonality it. revenue bit

Andy Cecere

the over the years, many in weakest seasonality, I driven but principally our a revenue and three, lot two, weakest. payment quarters just businesses, of right, Terry. a of Typically four, by it’s terms of businesses, strongest think one to strongest That’s past lot

John McDonald

X.X? so depend environment Okay. whether you more to But necessarily year-over-year operating that the get in up terms leverage that doesn’t apply, of that’ll on

Terry Dolan

the on right. environment, revenue Yes,

Andy Cecere

Yes, of where it’s the revenue grows because variable some expense.

John McDonald

you. Thank Okay.

Andy Cecere

welcome. You’re

Operator

with question Your next of comes line Pancari the Evercore. John from

is line open. Your

John Pancari

Good morning.

Andy Cecere

John. Hi,

Terry Dolan

Hey, John.

John Pancari

good on we if get around the bit the pace a side, a and into saw us margin that more first. your the continued deposits, you shift non-interest-bearing more you interest-bearing? specifically quarter. around little on in that driver the pretty in that give thoughts – actually Can first On I color of the want to expect decline at

Terry Dolan

Yes.

deposits sort there’s So certainly some be migration by to of customers. to continues interest-bearing our

kind mostly We’re be also earnings the more excess well as wholesale yield. they seeing that’s a credit deposits on not increase come earnings deposits. rising of rates shift. think up simply on be trust as credit as rates looking able least function a at the little have moderates but on lot reduced, that the side. then any I rates on excess higher that pressure them opportunity going short-term rates is with of side have going and the bit do that function that there’s it with hold, And for to lower to a to to just a less a of It’s the of bit because

moderate it to bit. I a do So, expect

John Pancari

Okay.

to would that the continue bit of margin fair abatement? outlook flow a but you here, play with assume as expected interest So expansion Is into quarter. that in how bearing about despite saw to this relatively your Thanks. stable into it

Terry Dolan

Yes.

on one our interest saw, as was So linked-quarter basis net up basis. margin a point a

little that rate bit. base the a be creep from is the more loan where to current than, a the will growth growth is occurring. that environment, will compare, up loan Given continue by expectations It deposit deposit standpoint will driven pricing my

quarter, margin. no there is flat. rate I to the is would really a outlook flat little is of relatively bit expectation interest the the that or bit portfolio. flat little the fairly a year, down And point point for that environment, Our seasonality the a hikes it’s just card the us In other of thing second rest credit stays that then out because is of rest our for our net basis yield the given year for one curve And usually of two.

in full we through of the expect second year, and for quarter, of just the So kind be expect much but year rest it pretty the flat. that to the

John Pancari

Got All Terry. Thanks, it. right.

Operator

comes question America. Erika of Najarian next Your from with Bank

Your line is open.

Erika Najarian

morning. Good Hi,

Terry Dolan

Erica. morning, Good

Erika Najarian

positive operating to on John’s wanted follow-up question just I on leverage.

market of comments think be your call. bit because on to the there’s clear little wanted Just I previous a confusion the how interpreted

revenue environment the are NII in fees it single-digits, in? assume that’s we’re to interpreting we I’m make that are So flat low going up both correctly. X% we we’re and that just can the to sure expenses will be environment if trying

Terry Dolan

now. Yes. to understand opportunity be our Erika, we’re to we And environment able we’re revenue don’t in down. right every expenses at that the clearly manage looking

at leverage spending. discretionary physical any going expectation your with think from right to looking -- that talked I at prudent be you’re we’re bit a to So respect our is very about standpoint, optimization total look We a Andy spending.

quarter, have went business. us with benefits an this will opportunity year in some through kind the to at taking Welsh first You the our fourth Tim and consumer to organizational quarter gives of redesign the remember of that the structure. also the kind look design That organizational from throughout us over banking we

to surcharge get be So different order of then in giving whole us little able if things. you FDIC some flexibility variety way there. the remember going it’s And to

levers, we’re So, going end I but that that’s think having of to manage expectation. but it are up to our and number environment different there is in challenging,

Erika Najarian

have rate the because And on well side in you do what In talked net of your interest outlook you trend pricing? Perfect. for commercial the you’ve about of of the Got concept your especially think often environment hikes, past, to side? side. how so terminal done of no if on flexibility you kind us us And we’ve on margin, sense the could, give the the underneath retail Fed versus a commercial will flat betas it. pricing

Terry Dolan

Yes.

you the to I sort that changes I the be the and need again, pricing deposit see and think, and a given that loan rate what without function the growth you to right hikes, think competition of how of environment have wholesale -- the expect will -- pressure, do I but going with do to be bit. still that alleviates be that there some continue in situation. a is respect believe itself that, that deposits quite I side, on to trust

is The know, flexibility you other – balances, thing the growth, at we’re terms of and is site in pricing the consumer deposit that on that, better. if looking end growth you our as little of bit deposit a seeing

Erika Najarian

Got it. you. Thank

Operator

of Siefers question comes Scott the Your next Sandler with O’Neill. line from

line Your open. is

Scott Siefers

taking my Thanks question. for Good morning, guys.

Terry Dolan

Scott. Moring,

Scott Siefers

second if of your pay sort your a outlook. the of times. maybe couple wondering could and I remarks, guess, sort of Terry. But was a and just from down side the bit I weaker particularly be was accelerate a on would growth you my things then you’ve into loan XQ understanding CRE in just there. spend digging seasonally pressure the prepared mentioned,

any have just trajectory? loan for on So thoughts might the overall curious you updated growth

Terry Dolan

Yes.

we looking So end up when the loan at growth.

it’s loan little the growth of of to X.X%, in a year-over-year, about about up think, with a saw in was of in dynamics. be when too linked-quarter about The the first quarter, second context basis, terms to will growth is some we it hard stronger a linked-quarter bit and quarter, was far. the may let Certainly a But X%. first think closer that give middle look me quarter. kind the of our its we that line I loans grow in market expectations also on

and was It was in Residential kind of a less investment. the quarter, to a spend saw a are is competitive -- to our little strong expect in a and space. with this makes first to that first we believe the that’s the continue. solid, mortgages mortgage C&I business volume growth C&I, be going and good our particular time We lending. I mean, saw the auto So to think and during positive general, thing. continue strong was growth middle quarter we so some businesses economy price to our continue at are I good. point we a nice in market respect in bit pipelines

sort And lot different a so continue. that would of is suggest I think that factors of growth will there

the We within corporates kind there the in but is the a grow there’re what drag think a drag. coming total -- be equation guess challenging. portfolio, a two staying little business to slowly talked rates and year at opportunity just our the expectation created then Estate corporate is about size individuals appetite bit high, the our continue of loans. I things bit I C&I to of cycle. change equation exempt a exempt of is bit rest loans that pretty in will continue And where in bit for of size of we’re banking a a Commercial a terms overall Real to tax throughout when build upon where the little And buried or based tax that tax to more the down,

So about that drag on for in a points basis was us. linked-quarter first quarter the basis XX

the kind our of of and and where is we good about where but it overall, puts economy So takes, feel spending. are businesses a is number

Scott Siefers

a of of you income, maybe $XXX think a $XXX consistently good Perfect, And long That that I about kind range. be big was in a quarter. to kind your ago steadily, million that’s could, sort of kind $XXX take appreciate of recently, one were million there if not more it’s that. been up more outsized there quarter, color. million a I but fee crapped one, – definitely just Okay. doing other where then I too

go was is a look at quarter, unusual this If or to base $XXX that pretty anything you there off good or in there? volatile of million

Terry Dolan

to year, lumpy the to million up that, That’s terms is be rest a basis. revenue. the range would guidance of between the $XXX somewhere $XXX Probably Yes. in of little you I we bit expect would through end quarterly million other the of the on that giving

a estimate. So there, between I of good if that’s you’re modeling think kind in

Scott Siefers

All very perfect. much. Thank right. you That’s

Operator

line the of of Jefferies. Your line next question comes Ken with Usdin from

is line Your open.

Ken Usdin

guys. all strategic don’t of where think of morning, Good Thanks. you’ve quarter. you we since far on current equals if branches. know Andy, consolidate got mergers the the last of imperatives And know up as the I as some digital I transactions work spoken have stood the strategy we

desire your point? just strategic how size U.S. not to as banks of the And Bank differently bigger about if but you down road think today, even, about if wondering a from stand on view and just you the either Just where any or our M&A picture think scale? need

Andy Cecere

Ken. Sure,

company. on. near-term businesses, on First, growth businesses any say and/or for we I focus all would for let processing strategic will available working that me likely tell that we that you, and at sensible our to the be options anything we’re think consider look initiative fee the I will is trust focusing our But be

We momentum of the of very we’re lot today. with we’re a we now all across feel a are that of plans, across business you and lot a flexibility out have have where lot comfortable I progress more of consent and making our our digital activities, order,

Ken Usdin

ones. Okay. two just then And small

in First, on us terms consumer? but you’re just in cycle, the part is card slowing, underlying just to spending one. was just the seeing what a terms changes just growth of I was talk you of the billing first it That just of of any feeling the can or about know rate

underneath loans increase? Thanks I’m second was just, a sequentially basis wondering was up are The that just one what guys. lot commercial points, about XX

Terry Dolan

Yes.

January, kind little So drop of and March. kind impact. year-over-year dramatically, is it growth necessarily in we the that a we saw February maybe post fewer of But is that in spend stronger days did spend, X% holiday talked on one an back came thing of the the again processing consumer rate pretty in about consumer was that

our third year, think continuing basis to is year for a X% the to that, recapture standpoint. from that stronger in again, that, single-digits the I some the days. given of quarter. to point continue in expectation quarter, X% sales first for low continue debit and revenue is We’ll terms of going to card and But stronger processing that of full kind full the in credit of a a on get really accelerate From perspective, at get it’s will those expectation sort particular revenue our this in time. second of to Our range impact

Andy Cecere

was first shut And, equity government turbulence look our Terry, was period now, us things all quarter, across passed those down, what there market, the weather it that why more some impacts that’s in sales, and was geographies confident we and there right more.

Terry Dolan

Yes, it one is first hard to anyone some things. But every identified any part them of had of of in single those early quarter. or impact the I the think

Operator

Your next question comes Betsy with Stanley. from of the Graseck line Morgan

is open. line Your

Betsy Graseck

Hi, good morning.

Terry Dolan

Hi, Betsy.

Betsy Graseck

I the pretty left? be going whole announced Derek Chief senior I to you’ve so what’s our know Bancorp? Digital what is for a your revamp did just Derek Officer, impacting wondering mobile wanted of and our you is new hiring higher, expectation Recently, of U.S. I’m platform, White, how understand to He’s a a

Andy Cecere

lot is left. a There

of activity a we lot perspective. the on So going from have digital

in studios We have agile a XX growing.

a app and and developed just to that. we improve to enhance have we’re We new continue to continue

as We side as the the have payments wholesale, and consumer equation that’s payments. real-time of well impacting ultimately, the

have We going on. AI

have chain. We block

across so vision lines goal optimizing will our Derek’s initiatives leveraging with customer. the all lines and digital lines have the sort all customers across across of really bring theme, and that benefit capabilities of our of activities a altogether business that into focused really on business we’re to U.S. common all and really for bank their We be the business

background, have fit board. to going a He on Derek excited he’s perfectly. great to I we’re think and team So great the in has capabilities,

Betsy Graseck

Okay.

also and like consumer areas in beyond it’s So BXB?

Andy Cecere

It is. Yes.

Terry Dolan

Yes.

kind all digital of improve and is enhance the that drive those I data lot to a growth that strategy, that in things ties think anti-digital other one of of marketing into sort our into help that the future. to of and continuing will capabilities analytics other things

Betsy Graseck

neutral? think how is, up on about Is your P&L? Does the -- about just I’m improvement impact positive give real-time and P&L, very how ROIC and it you think clients. it this? slowed, trying for improvement digital in all think the volume? but we to obviously, it get the when And through impact does Do in of back you the

Andy Cecere

and additional about the acquisition this, to to allow I as Because Betsy, well it a revenue from I standpoint, customer think, as Yes, customer both centrality going as from think expense. these enhancements a is for think revenue retention, I standpoint. building

efficiencies. side think, expense , the equation offers of On the operational I it

If about of think, will offer processing, check on of those cost sides. all overtime, source think it things, carrier things and benefits you both I

Betsy Graseck

And in the bigger flows deal? really give up is that

Andy Cecere

the negative – with that. positive there’s not that is flow negative think be I the No to going material. and And

Betsy Graseck

you. Thank Okay.

Operator

Your Morgan. JP Juneja comes with from Vivek next the question

line Your is open.

Andy Cecere

Good morning, Vivek.

Vivek Juneja

questions that by of One first correctly couple the A you. the in morning. I Good I did for or did change points is, XXX quarter accounting miss XXXX prepaid to cash cards, this the basis of benefited that? hear

Terry Dolan

impact the Yes, was favorable a year ago.

basis to points. impact it this year the XXX about had negative of rate a actually So growth

you drag first a spend related processing drag where we saw basis did associated fewer X.X%, there three was early XXX the days, the basis in I then XXX we’re and quarter. to with accounting change, consumer drag down think about If the point the dynamics that points

Vivek Juneja

Terry, accounting that change, of benefit favorable How did did then that is or in reversed XXXX rest And this play it something XXXX? of all Okay. that out? the

Terry Dolan

item the time. No, one it quarter was so a onetime XXXX, it in first of was

So from a related anything it standpoint. comparison our to future won’t impact quarters

Vivek Juneja

processing completely next it quarters do the point the fuel this take that It. to of is or reversal should multiple days that? Okay. basis quarter Got XXX course with And

Terry Dolan

principally quarter. basis, to the expect quarter. XXXX We it in would in in not processing is XXXX it necessarily third the Yes, By versus days total. they’re year-over-year second reverse actually fewer two

it not back, but some get of to them year. going all we’re So of this

Vivek Juneja

Yes, okay.

Thank you. Okay, great.

Terry Dolan

bet. You

Andy Cecere

that. for Thanks

Operator

line Jaffray. of a question next from comes Your Barker Piper Kevin with

Your is open. line

Kevin Barker

here up shift made Good feels of the environment morning. about follow comments we the of latter I XXXX. on distinct outlook like is XXXX estate, versus there we some a commercial just competitive real as want into is it the for go the to you half on that saw

more in estate your wanted some either on color a in am I softness are just the certain seeing now parts You in little of remarks, the business commercial to some real or maybe in we cycle competition of you’re outsized where mentioned where get market.

Terry Dolan

Yes.

So rates I opportunity refinanced coming we’re I think to the we think, respect to quarter. capital down saw, for in markets first seen, certainly be the of with that with project financing some

that’s part I it. of think

got We’re a that permanent anomaly seen past. construction forward the of taking active we the rest of little an little plans pay have and I to into expect have going of a out quarter activity then real also got it pension the down with continue. to seeing we the year first what through lending insurance first fourth Fourth about commercial the bit of maybe the been activity, quarter respect quarter when companies, in think order. of some we type financing providing estate, – because the the But was kind for think more us, pulled

So, the be coin to through the in fairly probably going is year. the consistent portfolio

real we’re it, construction In all kind the from different in terms really in I permanent to the terms is, and not point of this of time. of but we’re cycle, to particular that at point particular out estate willing part respect go just seeing terms that it’s where of And type board this areas, extend financing deeper with of just to product, terms we’re commercial really of across stage. in business in at the

Andy Cecere

the to Terry, cost of the these flat funding yield in add just allowing nonbanks It’s to curve. spots the is certainly some advantage on in the lower of And curve… take another factors

Terry Dolan

Yes.

Andy Cecere

we go. typically would That

Terry Dolan

Yes.

Kevin Barker

around Okay. small mobile an up on rollout, has you that of looks the overall what strategy, some it the give you lending in done seen the just growth. follow growth the that and comments update loan progress business And introduced then from to you you’ve from your the the mobile last and like incrementally did app to That’s Can year. what helpful. on

Andy Cecere

Yeah.

choice. So customers typically – of was agile to what of together that funding spent for project, great in we it’s mentioned innings weeks in days early a but allowed the a I offering And hours. very was the to of teams, in favorable of agile team example terms coming the product been matter a that develop and a convenient it’s months or

just about get navigation to mobile much activity and funding and process approval or information. that of talked simple and options that convenient, of it’s we rapidly approved, the allows sales before app more all them part the also more questions a Your set for

are also the So be that to part phase also capabilities. standpoint. huge a convenience of one. and end-to-end want apps of It digital a app it’s you’ll And currently that in more in that just done and a out great my will customer enhanced a continue XX% to mentioned I of fashion are introducing highlight which larger improvement mortgage we prepared I from it’s more our mobile now is strategy. updated and these see and a remarks

Terry Dolan

stronger, And rest is of origination it’s the why through of bullish I think that of one are of the drivers terms one in year. feel pretty really seeing and mortgage on application why we the we the reasons

Kevin Barker

Thank you Okay. thank Andy you and Terry.

Andrew Cecere

Yes.

Terry Dolan

Thanks, Kevin.

Operator

of Instructions] Martinez from the UBS. [Operator with comes Your line next question Saul

is line open. Your

Saul Martinez

questions. Hey, good morning of guys. A of sort couple questions, granular

the ATM to in think in but goes comparable Obviously, is all processing, there away. $XXX of ATM million. First fourth that on not one the the sale deposit month service sale, of it’s the it been because business I was prior that of which And quarter, quarters. not understanding prior quarters consolidated had – my your charges in

a the how quarter the versus quarter. $XXX first I think previous quarters So about like-for-like basis million do the fourth on versus and

million what but an to quarter, get they apples do were of doing comparison? the quarters of prior make adjustments $XX like a need to to to more kind we think I apples

Terry Dolan

of was quarter. sold mid business fourth ATM the Yes,

and of deposit charges I service to that’s service a way think quarter forward. impact respect have And me, the going deposit on charges kind will is type metric first excuse of good first best probably indicator with the that of it So it. thinking change or to pretty the fourth, quarter about

Saul Martinez

Okay.

sorry. So,

the So in sort quarter of the look best XXXX. of first ways it was year-on-year versus to Delta where the at

Terry Dolan

million, was metric. So a the think Delta the I million, about $XX is Delta pretty good $XX

Saul Martinez

Okay.

So it’s $XX about a $XX million to million.

in posting processing that away services of what ATM previously $XX goes all which million was it line, not So from to were million like a quarter. $XX you

Terry Dolan

was as as branded provider that fees it third ATM That’s included fees. well right. party Because in that service

Saul Martinez

quarter basis a Got this were basis I your XX XX up like it. high bit think in which points, fairly up quite yields, XX, it have points, loan quarter. C&I And tipped where almost even is then a They you on quarters, unusual less LIBOR and tick it hike if seems we a The that prior and should obviously pretty moved of LIBORmoved aware that yields anything in in increase. than average up or commercial big up up. be loan like a

Terry Dolan

points. more typically that the of so in it XX the about maybe expect hike by basis kind portfolio. The rate the XX% be rest is driven normal, see in to of growth of Yes, would I the that really mix think you of probably maybe would

a really it’s mix of issue. more So

Saul Martinez

Okay.

from some So obviously guess then and the I benefiting hike you as mix well. rate get you’re

Terry Dolan

Yes. Exactly.

Saul Martinez

All right.

Okay. Thank Got you. It.

Operator

with Your Mike next line Fargo question Mayo Securities. comes of Wells from

is open. line Your

Mike Mayo

can you Hi, me? hear

Terry Dolan

Yes, Mike.

Andy Cecere

Mike. Yes,

Mike Mayo

question pretty I from one White, about one I big comes Derek digital the know higher. guess Great, of BBVA, leaders Betsy in a is which That’s considered so asked banking.

three it see we should be if customers White for digital banking metrics will for two be doing Is your Derek outside successful? digitally? percentage of metrics will one, that engaged satisfaction? look what So years, Say success effort be customer the to or on in there? whatever are What the would is it

Andy Cecere

It’s and you Thanks Mike. more It’s engagement. and those a with all going is digital going as be going via it’s customer digital share digital activity focused be And sure activity on, of it make to sales we’re from things, starting focused on it. very to we this call platform it you’re because platform. those and earnings something did of we’re in be company aware we’re our on because want I and with quarterly what perspective is and a to to today

Mike Mayo

recently national in yours. That’s doing this that – go banking be out for does you does like market to joining of of some wars, of But might said term, hiring How speak. retail the kind everyone’s plans my same so customers? out digital more with on I it seem going not your pretty impact around the time. think banking digital to And you efforts, footprint were

Andy Cecere

as on reminder, XX or states we mortgage our a That number are our loan that a have credit either And customers. plan. is still of card, customers outside of

light and bank employee encompassing expanding a digital base few which what bases. the have strategy, capability becoming is with more with that branch first current on a this also call I’ll we’re strategy, is branches digital I light We And what it focused think strategy, experience we’re and for full and customer talking large about digital those customers.

Mike Mayo

one. And short follow-up then one last by

long lot card You’ve other of time, we many deposit and other a been selling haven’t cross of and to examples products. just credit it’s the company. business, industry A say found around a too the

changing making customer, cards and in a single it’s You product credit relationship full whether are or them a auto customer.

So different? that don’t. Or why you I examples maybe now is there’s see that

Terry Dolan

question, Yes, Mike. a fair

over is changed past what’s digital can platform. you the that think years from I few do a capabilities the

customer branches, physical branches, presence branch historically, if the really expand So of have relationship. the the weren’t you you in a need able a or that extend you to didn’t density really to And location relationship. many

branch think digital to the I major a from I today, few device. all And of two market mobile a platform the light with digital use with the with allow fact ago. on thirds this think you is years transactions that’s capabilities that different platform, change. those our of a enter the happen customers The XX% facts that a concept

Mike Mayo

thank right, you. All

Andy Cecere

Yeah.

I part think would much to associated that world thing attempt, more the occur, as to And you opportunity. going continues I Millennials that think of add about with cetera, big it’s think the that the to it. being Gen digitally think aspect continue other is if digital et and a I create that experiential – I and that is Z

Mike Mayo

Thanks again.

Andy Cecere

Mike. Thanks

Operator

comes Gerard line Cassidy Your RBC. next from of with question

lines is Your open.

Gerard Cassidy

good how are you? you, Andy Thank morning. and Terry,

Andy Cecere

Good morning, Gerard.

Terry Dolan

well. Doing

Gerard Cassidy

then is eye guys strong for we general that that should also and share down and just pressure that aware as the horizon trend your be you down might as throughout Could any credit you can of you folks that well, quality in shutting question, type us, a answered exposure some the and also on activity on the with about stores issues on of increased your that’s as be to there obviously there retail very industry are road? credit you’re you keeping the malls stuff retailers think in portfolio and maybe

Terry Dolan

respect about Yeah, business good too across question. that we’re that’s to you nothing portfolio, the grade of of is investment all product portfolio based we customers typically grade, an type the know and consumer concerned commercial with with. horizon prime high there’s that true that as Certainly and really our equation do our the on our is side sort of of investment on principally

retail think maybe our not as certainly But back us, continue And that you point we than things to will business stands we of it expand us, hold one exposure as those don’t think at opposed terms So less that concern an and why that to malls, for in prudent I it’s the just in to extending is real question grow. that the particular the have I $XXX of areas sorts out think estate. particular commercial a it your we’re be just think I about And own industry. if then there – million. pressure to and believe the area to of for with to coming respect reasons is continue is a cycle, this

big for isn’t just particular a point exposure this us it at time. So in

Gerard Cassidy

from his and rates decides Chairman futures to XXXX, shifted interest he And would betas cut deposit then raising to following Very are that. Paul in your six Chairman cutting within XXXX. back do might short shifting policy some rates to the reducing end good. months If deposit markets Greenspan and XXXX, fed to fund in How suggesting start Fed fall rates rates? fall betas this rates quickly

Terry Dolan

the it. in bringing of I the proactive with as soon and deposit terms think fairly industry we moving down, As down be pricing would rate starts along

Gerard Cassidy

you. Very Thank good.

Terry Dolan

Gerard. Thanks, Yeah.

Operator

like this at to to Jenn for There remarks. turn time. are now back I closing over questions call the further no would Thompson

Jenn Thompson

any Thank have if you the earnings for Relations Investor all follow-up department you listening to Please our contact call. questions.

Operator

earnings XXXX call. concludes thank U.S. participation. We you first conference your quarter for This the Bancorp’s

You may now disconnect.

U.S. Bancorp (USB) 17 Apr 192019 Q1 Earnings call transcript