USB - Earnings call transcript Q1 2020

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Operator

Welcome to U.S. Bancorp's First Quarter 2020 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 12 o'clock p.m. XXnd o'clock April Eastern Wednesday, through at midnight XX Time. Eastern

call now for Jen turn will over U.S. the Relations I Investor conference to of Thompson, Bancorp. Director

Jen Thompson

usual, everyone. you, Risk CEO; and Officer, our our on Dolan, Officer. and me Thank the good Financial Terry Cecere, Chief morning Jodi Chief Mark joining and today, Chairman, Richard; Jenika, and Runkel. as Credit Chief Also are our President call Andy our are With Officer, us today

Terry earnings will at copy are and referencing supplemental During a presentation, A their Andy our usbank.com. prepared schedules presentation. be of as slide remarks, website analyst on available well release, slide the as our and

Factors assumptions presentation in I'd page with forward-looking like our the to SEC. made today's any that to are two and change of release during file press uncertainty. Form statements reports could current our described XX-K you are subsequent materially today's on forward-looking remind in and that call our and subject risk on

I'll over now to turn Andy. the call

Andy Cecere

Thanks, remarks, slide good Terry our I'll questions on our have. finish joining and and I thank call. prepared And Jen, you you morning, Jodi, will take After Mark begin I any and X. Terry, for everyone.

per share the first quarter, $X.XX. we reported In of earnings

Our COVID-XX and global impacted performance economies. by quarter adversely in this was the the U.S.

and were Consumers quarter sentiment supported developing The few in conditions. deposit reflective of weeks are affecting growth businesses growth, last number affecting are ways. particularly dynamics these the needs. orders temporary, our the We a distress activity of and country, activity. our which economic for loan And across restricting in quarter in the stay financial liquidity is we industry results related first economic and customers’ as banking saw the These strong home are dealing at while and the necessary significantly many. and fallout, resulting with business of

while cash to During this loans strengthen for funded customers of position. approximately timeframe, billion our continuing Company the our $XX

to varying affected were businesses degrees. fee Our

Our both the by spend a sharp many consumers a importance in payments in the line this impacted with in to having businesses terms. was mortgage rates drop economic at the decline mix, growth commercial activity and more attractive allowed interest of as in declining more quarter business Demonstrating well-diversified consumer global were mortgage refinance revenue their negatively strong activity, March.

our in Nonperforming We of turn activity. economic with losses in assets also the this see for lower right growth higher reflecting revenue, as We saw allowance grew well-capitalized. value our X% the can quarter, markets Book stress. to strong first response products robust in started reflecting slide, quadrant year current loan ago. we you the to share capital a increased in remain economic increased the compared conditions. And per commercial

the lower common in Slide performance on delivered a first metrics. X earnings provides key tangible the XX.X% to economic quarter, current equity impacted due by return We environment.

distributed agile get digital development which Slide are to ability check improving through X has tools help accept mobile significant to efforts. more stimulus to recent Because over of shows uptake seamlessly treasury We've made activities, via and in of more government to to to social the distancing number bank our we've access added help several trends. funds at banking updates as helping the our who do capabilities become digital weeks deposit, home. the our customers and continue quickly customers customers investments in checks choose processes will being years last our digital The widespread. continually we've a made

in all way. financial were deploy to design goals quickly bank new a core look a is doing customers for beyond. help forbearance customers ways social than to innovative a of period digital this Within to digital from work forbearance our continue Digital launched, we’ll through so to meet week distancing and a strategy, and more our home part and tool. teams of of and this being Our feature XX% requesting

the turn I'll call provide color to Terry to Now, quarter. more over Terry? on the

Terry Dolan

Thanks, Andy.

If review by first trends. of X, discussion sheet the followed to start quarter earnings you balance a with slide turn I'll

X.X% basis, the a Average driven on liquidity commercial future loans was activity, linked in drew quarter or loans $XX mortgage grew linked basis X.X% billion and quarter low to Linked loan toward rate On XX.X% to the residential year-over-year. a support Business support end customers business and reflected quarter year-over-year. growth X.X% and and mortgage of quarter period-end requirements. increased loans. Strong growth by loans lines growth environment. the primarily interest increased down

and X. in a year-over-year, growth wealth billion commercial X.X% Average to savings management and Average year-over-year. slide corporate deposits grew on $XX.X a deposits increase or increased banking. services, X.X% and investment driven consumer and period-end On business by basis year-over-year. Turning X.X% XX.X% linked XX.X% quarter basis, and quarter and banking, deposits increased linked

X. to Turning slide

assets stable nonperforming basis, XX.X% reflecting both quarter economic linked relatively on While and net ratio recent the the was increased stress. sequentially, charge-off year-over-year

have approach in risk ratings for changes considered the credit a risk to We evaluating rating the portfolio of commercial evaluation entire taken and the losses. loan proactive allowance across our

offset that programs current allowance estimate unemployment, expectation of XXst. increase The by losses provision economic the million for non-performing in government as from as was will our related impact benefits our best the in COVID-XX levels. charge-offs, the increase changes in risk of deterioration of considered in stimulus was impact credit in $XXX March first net and U.S. of the on slower of increase loss and quarter, and reserve driven of and conditions, economies, higher the $XXX build The partially on and million by of credit to the losses significantly the credit economic $XXX reflective Our growth of ratings million. reserve global assets

given metrics highlights X the and to Slide segments, current exposures our environment. certain key at-risk underwriting

to cycle consistent which growth culture a have Bank, that produce portfolio in support us stress, credit the and cash by based allows lending to economic We considers supported U.S. results. management flow relationship-based strong through sensitivity proactive diversification, and

as stimulus the will risk duration in the will COVID-XX programs, the the of change. net it of credit continue as the and for extent credit of adequacy shelter-in-place actual benefit situation, government the orders of on and consumer business while likely impact to well on shelter depend -- quality that activity, However, charge-offs credit is conditions changes ratings allowance losses assess and the of as results

per XX the earnings we quarter $X.XX first Slide an summary. provides reported In of XXXX, share.

additional declined equivalent and basis-point by funding our declined rates Turning yield margin fully income The as interest net with and to slide mix, basis a the by basis line demand. were declining Net interest one flatter The a to loan by growth well X.X% lower flatter in on of year-over-year, XX. rates versus These yield impact net deposit cash partially approximately X interest lower the deposit of expectations fourth offset X higher reflected a intentionally taxable mix. was curve quarter. balances by as offset day. accommodate due maintained drag factors in as points margin and being and loan customer mostly beneficial for -- to curve lower shifts liquidity and

of -- being liquidity rates We extent demand pricing. interest the expect to net mix timing more quarter quarter, growth with build-up changes significant in to in due and in see significant on floors changes second experienced, first pressure on and loan primarily in loan deposit the support the loan late interest the the margin of impact our to in

on mortgage income, primarily we mortgage margins non-interest to Slide expected came was Compared strong sale trends than and better due with which results gain capital of hedging mortgage highlights in in expected, servicing a and fixed markets stronger of XX changes the in production first higher valuation activity. higher net offset income by quarter than partially the activities. rights banking year-ago,

lower XX declined the X.X% reflecting quarter lines, exposures to lower as on provides shelter-in-place orders services payment revenue sales volume March impacted revenue, by in revenue driven lower our services payments Slide including merchant a about year-over-year our information industries. payment many corporate products impacted In acquiring customers. and first of business’s basis, significantly

the merchant months the with a XX% quarter. between two increase basis sales declined second the business, high half single-digits in in year-over-year mid the first Within March acquiring the of XX% of and in compared to an volumes on

Within our declined in spend activity. XX% of between volumes volumes slowdown to on the economic fees worldwide XX% commercial late and bond The customer the March, declined accounts derivative XX% due XX% credit about sales payments corporate March. Government sales between business government corporate business benefited in payments by valuation to business, to revenue, offset for of corporate revenue. total the partly Commercial XX% and late trading higher products portfolio. from related impact losses revenue

in consumer mortgage to through the trend be the valuation reflecting markets. Payments investment the due likely Trust business credit line revenue to changes decline ratings remainder the the revenue activity. recent slow likely reflect relatively given declines may levels, the and with for It is near-term, continue is affected to the quarter the first the in likely later in trends in spend equity year, quarter effectiveness, production during but will adversely and customers. of activity. markets hedging first refinancing from year, to begin will significant be volatility The in losses and risk to in strong significant that in

as investment slide as and including XX. capital mortgage reflecting related million year-over-year, expenses well of to Non-interest markets increased capabilities higher Turning to $XX activities. X.X% digital approximately business expense production revenue-related

including airline providing employees. future of to Additionally, approximately principally potential for to tied we costs for to $XXX but environment a related working also premium expenses COVID-XX-related industry incurred frontline expenses for safe related other paid to workers the million, merchants, related and liabilities incremental increasing claims delivery and our

At current was expected X common XX of position. implementation highlights our reflecting ratio, Slide Tier accounting equity March full credit the our the X.X%. capital loss XXst, capital methodology

March capital methodology Our with credit X calculated was related accordance implementation regulatory expected current in X.X%. to capital ratio common requirements Tier the equity at loss transitional XXst

I'll hand it remarks. Andy for closing back to

Andy Cecere

banking are on COVID-XX from brought pandemic. environment stress The in operating by and is Terry. Thanks, the we a not challenging economic industry immune

managed However, this the we'll period, just in through as difficult we past. difficult I'm periods confident manage that through

are situations. perhaps businesses Our be balance and a our proven especially and adverse strong, time, during over sheet to factor culture our diverse differentiating is has

ideal, we to and benefit our manageable. our credit bank disciplined deposit industry, but we from will when record. portfolio rate and have a core base, will debt is downturn rating and the our really environment consistent interest this not we to The higher entire pay for as it quality as like diversity times strong but need a a off. global reputation at it's view underwriting continue strong on And flight basis. costs And And track best-in-class economic

develop at It's will point or how opens rebound. economy to when up this be start how we'll situation unclear it will long the the and until

strong weather more us give downturn. flexibility. give us to suspended capital position our However, recently even program ample ability a We've to buyback severe our the and liquidity share

from year, we potential an We be maintain we emerge other on economic situations. if that persisted employees level. scenarios, current believe will most able continually and the to the focused even what meantime, our would customers, its their believe the at are I evaluating intently But can for and this side. of dividend downturn are through communities stronger unique our they in with we as deal on we we doing

Paycheck the Protection with support and financial to make see businesses, adjustments products expect Small ready Main significant as such customers and stand continues the loan stress. Administration, to be may the consumer affordable lending We've small to Street Lending we the as the Program, up weeks government accessible demand to made them We experiencing and and more who certain in support Business existing to services necessary Program. to to roll coming business liquidity this facilities

also We mobile limits deposit mobile many app. customers our for using check raised

these local communities $XX precarious investments, housing work redirected number short premium the with protect office we of a the safety provide of many and shelter-in-place assistance. million frontline $XX individuals of of a XX% of pay including hourly to time, across increase of financial support wage steps are situation employees affordable country have to their transitioned to Recognizing education, and from to and to We number new taken employees non-profit Within a million a which period announced conditions. in, continue work announced a support program of to to we our XX% during our We've be a are and the our initiatives families critical able home. employees.

employees our customer also protection We keeping at equipment sites. with our flexible expanded we're personal our leave and policies facing safe

you're I'm want from doing frontlines. the those call and constituents very together and thank by and with work our on I in this come difficult home saying employees, the to way end to you of time. those all of you’ve partner working our support proud this to the

We open up will call Q&A. now the for

Bank of from Erika Najarian Instructions] [Operator the first Your line question of of America. comes

Erika Najarian

wondering, unemployment we're you X.X% relative for on quarters. you for positive, the Could over would that look talk we told comments like reserve us DFAST the is what's losses And very was worse at how the And build recession for how about also and I'm -- Thanks the Company-run from reserve the negative? so XX% your with for rate X.XX, Clearly we as you in see? the the what's DFAST stress, results, think capped before think more And is pro-cyclical. different credit. potentially at much CECL this nine to here, that about better, could the cumulative results. wondering

Terry Dolan

of coverage over we're So, let with losses when maybe associated we at the thinking the is ratio a time. the up that nine-quarter That of me strong. period is that current address And, we relative to about maybe relatively try kind DFAST first. to end state that allowance questions think experiencing,

lot to able that. of revenue produce pre-provision a of respect our capability in with to terms net have We capacity being

have we especially if able of about it you to amount kind progress of need our to problematic. where become be to to, absorb where level think the before need is, we’d pretty substantial So, a opportunity when losses capital

the clearly perspective to rapid terms and healthcare being the from in of unemployed an development home ratio, we about work change. when here quickly. to think the I think and So, X.X%, will continue think or to either think different on that obviously the the impacts things progress is from I and about pretty reserve and people having recession situation out, when peaks of from employment we evolve this How coverage the crisis,

because impact a As have think into of place take that into and that of about the the certainly down. over sustained took time now on more lot a It's process, moving there's it particularly it as period were right judge, come just we we consideration, consideration it to parts. would increase tried hard the starts thinking before to about we take unemployment to reserving rapid and would then

thing is whole that I the your think, difficult other of play, get to the kind package. is which comes arms around into stimulus

put quality and able governments of employment. they're manage continue to now to to to and lot But, when into the a as to bridge delinquencies it. statistics programs the think, continue the that be businesses stabilize as to get that's quickly And I between able of place, and markets well one both play time. to to do to customers nonperforming and out the things have related things that will and we upward over we'll that and like will expect credit watch back progress

Erika Najarian

question. are is progress? expect by The through impossible -- quarter? down and merchant double-digits at to second -- happened But, this but what payments how two in we to question down is processing? I the of should revenues, to What's the what a driven points tale exposure And given we future Should second different this related least quarter. liabilities clearly related delivery increased airline year-over-year, know another X% expect

Terry Dolan

Yes.

to percentage tried you as revenue of to in sense give as of on the terms good the businesses industries severely of a the revenue our of Company we the total slide represent as of payments percentage are of a industries, things one mix both impacted. that do more the is that So, the well XX

next So, and several level believe at do low we're the kind to we business possibly testing going believe let level. do the and spend But, high fourth that that about quarters, me when think spend I end consumer of of second, break stress of relatively be at is it kind and we third how quarter the down. a through

continue basis going CPS RPS XX% that at on to in And XX% to the going are continue to that, of continue about we're XX% merchant probably thinking to XX% testing the it's that is of how about as that's, down XX% I thinking as function down the to be quarters, of be that to that think year-over-year is migrate in a So, kind it. range we're we're thinking modeling a example, range, going closer downward, to mix stress And well. sort to that to future for is XX% of and we and businesses. starts to But it's to today. migrate that's it as XX% do that and

being So, of an tied from merchant about to have travel business, significantly down you and hospitality the week. a about is that if think impacted, upon the XX% depending to is and retail. as example -- we XX% businesses acquiring of business another XX% XX% to directly revenue tied and pretty And the both directly are airlines those

it even bit. stressing we and So, a think quite we're third second, quarter, as it's the down -- fourth into about

Erika Najarian

The on follow-up question the...

Terry Dolan

sorry. Oh, yes. Yes, I'm delivery, future delivery. Future

And future the tickets other well as or the airline flight. between in for is provide industry, airline the about think merchant for stands the that future ticket of upfront service that customer. that will a their where -- some kind industry merchants customers future that stands for delivery, to the the customer between you transactions airline paying buying and if in that we merchant So, acquirer travel process are as

extent to a then airline right to provide it, against customer is has merchant that the to unable that go back So, acquirer. the the

customer happening dissipate the dissipates is ends and Now, airline over when gets either fly customer. has airline the and the provides particular flight starts future to exposure that to the it what happening what decides been is time or -- not customer that or up credits to the refunds

we're risk accounting wanted us recognize future over that to continues we delivery and to potential And sure to so, time. make dissipate to exposure the that we'll and with an required manage to associated standpoint future delivery But, risk it. continue from

Andy Cecere

on to and add Terry's corporate payments card a little the going comments just merchant I'm And Erika, spend. to bit

the stress last we about think half of three quarter, the months, month. first So, really saw the in if last you the

had quarter impact And businesses. March merchant, is payments sort merchant Terry we in you XX% in a in is last those months two that what of plus in that was So, retail a on down one-sixth on in and of we particularly what telling spend and the range. those saw corporate

would when to But to we Now, come with when sure. for understanding have. -- stress the you and going the what that's we're we is back, no impact knows that testing it it, detail. comes indicated one But wanted exactly back. impact uncertain that’s And the he exposure Terry it’s that's provide as

Erika Najarian

not revenue? just spend clarify, And that’s to

Terry Dolan

get Well, it’s closely when really said, the sort back what function the arms to that to businesses testing And the And I of Andy the around. it, duration spend, about. work again, it trends. and a same of is revenue your as situation. is pretty stress is really when But and tied relaunch, hard do of we're what to based upon is talked get people

Operator

question Bill Carcache from next Nomura. line the of Your of comes

Bill Carcache

you. morning. Thank Good

about First, capture Terry, on delinquencies your metrics you I certain following expecting think losses. lifetime wanted to in it's to theory, question up response credit higher to question from here. If ask CECL Erika's like to head we supposed a about

trajectory just, already into so that to delinquencies reserve allowance from incremental allowance. And guess, I contemplated building [Ph] what's upward here what And -- so, at X/XX. versus it you losses take shouldn't will your be versus that in us could baked help in and already wondering if understand drive

Terry Dolan

Yes.

Bill. question, great So,

take unemployment how everything -- so, insight CECL has as we what going was bad process if you But, was to know, and had going into else that consideration. exactly get, to perfect insights. if you and and knew happen exactly And GDP perfect would nobody into we the

things to around get and constantly sorts GDP all back are changing. of expectations when work the and fact, and people In unemployment

likely any best make in looks that progress change. forecast like, conditions to have time, based of particular how what that knowing on we continue at to point to our it's So, estimate

going days -- you Sachs, impacts the Goldman change, process, with whole might end Moody's go economy if when seven last potential and we variety been those and what to up Morgan projections Analytics, to we looking the of end even significant. of how through be, like course the pretty over And respect So, has is so, up at things that or Stanley, a different.

into that to are perfect. models we process. never lot about It's et that have Think at the Then, consideration exactly going to are of those all the what to impact of a really time judgmental as particular a of know going take consideration package. the things into from course, into we're play, this in are part that take is stimulus There So, things to standpoint. of point have cetera. benefits to the hard come

consider. So, a we lot there's have to of factors different that just to try

that over reserve going believe continue it's quarters. we next over the to the evolve build So, several time. to that's And to impact going really

Bill Carcache

is of in allowances, but helpful, in is how March, let's information were guess, literally think we you get about the economic end little were was the deterioration after? a where that at that based that of guess still sheet that super Is be until That's as balance I earnings, trying you early the terms through, quarter. the out And in extent GDP first didn't became allowance you room that of I of existed unemployment Just real on greater using it of before bit X/XX April information XXst. or it your sense works? But, you something like, be that guess rate just there through that Terry. say, then, date, judgment Would the guys to it thought the or forecast and for than there? X/XX, information X/XX new that in the available March contemplate what that and about would to was I find at suggests

Terry Dolan

quarter. we're is of end this around we trends we Yes. know Well, the to do the what right to snap that we be. our think we really of base going going you to try line with what assessment But what the and And consideration say respect judgment have eventually, to into chalk apply have on. to are kind do to obviously, and take the

as So, we'll to things change, consideration. have into that take

it. put of some terms the The process, other maybe around reserving kind whole to context of in just thing,

at into have lot judgment the comes that is. of the end your and with the at quarter, economic up reserve coverage and we you looking forecast at book feel But, of of kind up time. we first et kind particular come charge-offs in this in and overall ratios a ratios to are in those So, about the terms the reasonable coverage of end what's we that at cetera, point as have think of we play when terms it, obviously there's of least loan like

insight, Also kind on the of of severe CECL we in mind point made had that keep the time. with growth moderate that of make you and we And of some certain one, a over we assessment assessments either amount forecast, or to in economic XX% kind a day of respect shown, environment judgments give recessions, to it judgment little at when that a particular to be have would recession. or the slower

were views different the go. there of was respect where going So, lots to to economy with

customers prime stress flow grade high loan-to-value high coverage ratios ability our And side of to and equation. with based investment of business the have we side take or about the secured consideration consideration one. think where the terms important very of we day from? good on taken in And So, and some portfolio be FICO starting portfolios you to you're to cash book it's tends And of withstand. as cash on commercial principally flows, into consumer then, sort terms our of on allowance, be very prime that our able are to where in of into a super scores determining also our if of part

of all credit in a good into coverage good underwriting, from start allowance. taken estimate profile, consideration things we are those the our So, ratios, of terms risk strong

Bill Carcache

in other was period, we versus to really the position stronger great the because you other think used a on That's a very on customers. Andy. helpful. with relationships an for If could Andy, USB as squeeze you mentioned in new release, recession, guys is your stronger many win how going proving of in I and to side pandemic there to press more I In commented about that partner you one -- the the you the part partners, were emerge in guess banks. when opportunity reliable

you As you to to stronger guys the stand we downturn this are think more coming in where itself or see I difficult environment, opportunities this USB speaking, banks, because a in it differentiate generally do for relative the into position guess today, is great about recession?

Andy Cecere

speaking, banks our position customers exactly are employees, a is which while is we're generally all on. able what which in think why we're I protecting to help all focused now, good right

I losses. is, the have dynamics, on other as all about across things of importantly, said credit been One the talked things we we've well margin, based stressing all And the fees, as I we believe what of dividend, most through the if factor today, for maintain an persisted the economic shareholders. downturn can even know also year, still important is the we the which

Operator

Fargo. the next question of Wells Instructions] Mike [Operator Your of Mayo line comes from

Unidentified Analyst

Just view of economy end Hi. you the saw a at the few This given you more March? what I is addressed last specifics your of a of has what have the on previously. little How -- is since in on the the third -- again, that changed? to and has think done know the end I mean, Chris of just behalf This weeks, degree, Mike. is quarter, of just that kind how related but you you to the we what questions you economy had

Terry Dolan

particularly since think, with I respect the come the in think, Again, Yes. dramatically, of number a quarter. end declining GDP that second have March, to there forecasts of I are out

sort recovery. more take but forecasts think, U-shaped a a V-shaped I call sort there of to I maybe into of are try not that would consideration recovery, what only other

think out Morgan the to quarter, then, risk come from reports most time, you those started at the peaks to you I a amount. has environment. have least whether related least look So, at that since look the what of Sachs JP incorporate at downside end unemployment And of have changed a Goldman or at the the period either or duration at fair of where level Moody's Analytics, over it’s sustained

Unidentified Analyst

seen Okay. on today with on lower you've a your might the today adjustments and you've levels And reserving, Because commitments. coverage can what just even and the financial it's And the have a GFC. questions then, and since crisis? unused builds ratio made today, during much relate also, then versus couple you all reserve for of the reserves made you

more changed or ago? in So, say how you much has so ratio to today versus just XX confidence had, might give your portfolio what have years the you coverage X

Terry Dolan

Yes.

mean, are I if our of XXXX, you and pipe the But, XXXX on on side I'll underwriting Mark tighter or you -- underwritten and to to environments, the mortgage at ability it ourselves, about the So, changed in et if manage maybe think bit. think in think since industry, consideration the is have mortgage certainly here end back rate across flows, how product, cetera. the different scenarios have take little up into I than rate a they certainly consumer side, think portfolios customer's then, about I cash if including looking a the that standards you equation, were even

and side the kind I commercial things address the to those of of of think exposure you the equation, could that? different. lending Mark, is some On of leverage But related sorts is

Mark Runkel

has very or addition say, on said, just to side, the consumer the the strong. in continues side to what would mentioned, I like I be Terry Yes. retail portfolio

of the today, well from values is of card loan quality lease point the portfolios. of estate both in we're well to credit profile going stronger, especially auto That our were borrower as loan perspective at portfolio. would be in think, with the real last stronger cycle terms economic positioned as the the this true are portfolio, our and as lower, credit into portfolio than I we average the better is a downturn,

continues on So, quality said be investment we But, as the much side to portfolio the good. equivalent. or feel Terry much pretty grade is of prime, very the commercial

downturn during earlier. really to got strategy the about funding with provided towards say what that we of had the we've higher today last draws of quality some the talked As -- we I and move billion you last that capitalized has large of would the corporate going we $XX know, downturn, borrowers and into some that which than

we stronger compared business today, and real the would a a gone were sponsors we've say at commercial estate, the time in that where on we've really then, And based. long downturn. been I and last upmarket relationship really that's And to focused in

changing as think, very I is the credit from perspective, we enter this environment. strong a quality economic into portfolio

Terry Dolan

we of the bringing the last estate underwriting been our to really side for construction respect tightening equation, exposure the Chris, down real with things on lending. And maybe and years, commercial one the last two have the of

contemplation I relatively significant we associated And have think, pretty conservative in we've some that a And difference. doing that. been have been we that's form of downturn. that a with ultimately

see. to Ultimately, If one last think, increasing end peak, reserve that of kind to what is, time you rates about up the X.X% about X.X% of at the kind ended building kind peaks looking of up questions did in of ended up you charge-off kind I had loans of cycle of and sort the we really at overall. the the of

I charge-offs say, the end But, -- these to think up I there's migrate. to to we said you statistics, other non-performing to up et relative that's we I charges-offs, they're continue today, why terms good, and net I strong ratios assets, build, looking cetera. allowance at that coverage looking So, of think at -- of today allowance have at to some you and end while continue future going quarters the the going it’s in if even look --

are ratios strong. very coverage Our

Unidentified Analyst

you. Thank

on then. follow-up quick a Just that

So, for the commitments? the in slight allowance decline

Terry Dolan

Yes.

to we But, take have what exist is, unfunded into But, I rates apply that to they you... have from perspective and it. and reserving that commitments out a think part then that consideration commitments now there become what Mark, funded do of probabilities loss will you can to the funded. what try is

Mark Runkel

would at that borrowers. of quality say look those we I Yes. commitments, the unfunded just also the credit

of what the well. some so, as the on remains And quality borrowers balance stronger is sheet

Operator

Morgan. the JP comes of Vivek of question next Juneja from line The

Vivek Juneja

A question. Sorry. Multiple quick calls.

may have a what you already that and but multiple have is Just -- you I to question this, calls. mentioned

So, loans in your reserves pardon you me. card putting What aside reserve build? against are credit

Terry Dolan

with your is, reserving or to credit are respect themselves? into So, what cards taking we question consideration

Vivek Juneja

Yes.

Terry Dolan

Mark, why don’t you answer that?

Mark Runkel

X.XX% end Reserve Yes. was rate the at QX. of

Vivek Juneja

Thanks. Okay. you've some have missed. given already which Thanks. That's -- detail, I presuming

with you whether you settle out. where metrics give that year, IR you're given expect you’ve up already Did expecting next where follow on to about any to that? it do I'll pan So, out unemployment

Terry Dolan

modeling X% the evolve continue as the to change we this We process, And talk high -- we being we of dissipating considered modeling process and that of tried as end a about fact take in single Yes. as that. is to between at period a the estimates will into in and talked ultimately about and But change. number March, time for level XX%. that the digits of different sustained ultimately a XXXX. forecasts, the of certain didn't we In get

Vivek Juneja

Is you a take as a while, best that $XXX think what this do little reserve of if for merchant there's to processing library. I And likely than continues million you for you or bit guesstimate your have to you the more the that took took? noticed

Terry Dolan

good programs At of future flights, to to exposure it's is. airlines again, for to might tends we airlines. in different choosing this the using a be we area, think what again feel refunds, making liability this government that's reasons, a Yes. that what be do particular them related point not delivery. time, exposure being pretty for And the that order exposure estimate that, the including fly a by or like in dissipate of variety stimulus the to customers credit whole In given their to future particular able

have So need of to thing to a bit. And you that a kind merchant that is relaunch, airlines these will in it they other the mind then, acquirer. dissipate keep quite for guys

prioritization is that so, ready make And to acquirer a their and from perspective, go. merchant want they sure onboard to

those resolution the to is future tend that to helpful. they make acquirer of that sure prioritize merchant exposures, delivery So,

Operator

Rahul line Your Evercore Patil ISI. of comes next question of from the

Rahul Patil

Hi. the and reserve whole This level I Patil revisit want is loss. in cumulative around Rahul discussion of just behalf on John. to

you and Fed's results, had billion So, your quarters own nine per for billion over it the I so DFAST $XX.X believe of losses model. XXXX projections was $XX.X your per losses

I reserve current are losses now coming assuming incremental builds you just level of quarters? when you around now want stands reserve $X.X billion. reserve sizing accumulative a what up right are potential portion Your for in the right and/or to get that sense

Terry Dolan

Yes.

sort we again, time. reserve as billion to over And would estimate, results. experience with when of would severe you're get unemployment place well what pretty at and to a losses both of ourselves. pretty trying by that is is substantial kind taking I close think, over to that that you as Fed compare a So, $XX the think period being our about really DFAST DFAST and nine-quarter amount that sustained of And how

as Our level. both the might above allowance any today to represents just that shy be be certainly capital losses of from earnings as able point -- capacity the XX% on. that manage time. perspective in about with it again, we a as from of necessarily DFAST, well We up reserve that. it go And perspective to a have And quarters coverage necessarily to this losses we but pretty of don't come think as a percentage think relative will progress the is I strong at particular

Rahul Patil

it. you you've that said mainly begun All it's well? $X.X then, right. And Got of modified. have that Is billion loans consumer loans commercial as restructuring you loans or

Mark Runkel

forward-looking helped That or would in would are kind those portfolios. of drawn view. we've on number I modifications be a a both What the that of is, customers. We've say programs past

have XXX,XXX the granted last consumer customers, programs of we few off-balance portfolio weeks, X.X% extensions and of over about On on is exposure. the sheet about which and

customers exposure of business $X helped billion well. we've of In X,XXX as total about or addition,

included that would in at. not those So, those restructured looking numbers you're be

Rahul Patil

last one question. just then, And

I'm billion it $XX like your cited compares That you seems where billion of around draw-downs. today. that you $XX.X assumed looking at line yearend as So, LCR disclosures the of to

two-part just So, question.

dressing stress today? with some a due and scenario the draw-downs or do draw-downs disclosure is expect companies impact period, wave in compare of another then, baked the you So, coming weeks? what environment saw there you LCR how secondly, of was line window And in does March XX-day to over into by sort of that that

Terry Dolan

to week high and April. in in were March draw-downs of The started fourth out Sorry. level the third early and

saw already we think, the occurring. I So, peak

up a bit question. around first What little your was the December question You on XXst? broke

Rahul Patil

Yes.

I $XX So of disclosures LCR you billion I'm draw-downs compare wondering, how what that period. stress were assuming, disclosures at assuming XX-day stress looking it were like seems with LCR was does of you're just $XX over your your to and that today? scenario the seeing like where in just And you basically, sort billion a scenario

Terry Dolan

Yes.

liquidity a kind with LCR higher the So, which And disclosed to there's there's and coverage ratios there's different of much test. actually itself. aren't stress two stress the LCR liquidity tests, respect than are tests,

be under stress So, very effectively. that liquidity the manage and to scenario, ability we the able have a to

that kind we're whether And today, sheet maintaining off-balance liquidity, now, right that have of cash we of then, that to. In terms we're another of that's about investment kind draw there liquidity we had probably variety we And the of $XX realistically substantial lines what have billion is down targeting. we and is billion sources. through a $XX within of could different portfolio, about if

even liquidity under a from significant perspective, comfortable. we stress, feel So pretty pretty a

Rahul Patil

you. Thank Okay.

Terry Dolan

you. Thank

Operator

The of next question comes John line from Autonomous. McDonald the of

UnidentifiedAnalyst

modeling? for Hi RPS for there. stress This that or payments, mentioned figures quarters CPS is those for [ph] you're in for cases and in case the to Were The David Smith your now also. big those you're filling you drops few XX% and base are XX% merchant John. down modeling that next

Terry Dolan

think term. situation the and that I fourth stress near quarter, would I trying on talked to really with quarter, it's base understand like. And COVID Well, test, third it's second in probably of continues look when case for if about so purposes the what the

we consumers of So, I to and what expect businesses recover back of think start get kind would that's employment, term, near full so speak. to kind until to

Jen Thompson

on any have the we other do Operator, line? callers

Operator

There questioners are queue. further no in

Jen Thompson

Thank great. you for today. call Okay, listening our to

contact have any you. you questions, Investor If other Thank please Relations.

Operator

today's concludes This conference call.

disconnect. now may You

U.S. Bancorp (USB) 15 Apr 202020 Q1 Earnings call transcript