USB - Earnings call transcript Q4 2020

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Operator

Welcome to U.S. Bancorp's Fourth Quarter 2020 Earnings Conference Call.

Following a review of the results by Andy Cecere, Chairman, President, and Chief Executive Officer and Terry Dolan, Vice Chair 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 12:00 PM Eastern, through Wednesday, February the 3, 2021 at 12:00 midnight Eastern. I will now turn the conference call over to Jen Thompson, Director of Investor Relations and Economic Analysis for U.S. Bancorp.

Jen Thompson

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

presentation, release schedules their remarks, Andy as a available copy A and presentation. Andy. slide website assumptions prepared I'd and SEC. release presentation, referencing and at in analyst forward-looking are call risks uncertainties. During to subject like and you forward-looking that of in our our as are made well and Form could to reports the on page materially our earnings to our with call slide today's XX-K on during are that Terry will on file the supplemental over current today's our change described statements the usbank.com. subsequent be any remind I'll press Factors of turn now two

Andy Cecere

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

headwinds prepared in be banking, trust margin, due businesses our diversified the spend business on to payments we this net rate markets I'll our three. full fourth on revenue as Terry, XXXX, Following of share and past lower the will evident by in the year and totaled earnings and to offset low billion caused $X.XX. COVID-XX the due quarter, of In our delivered the reduced in expect reported quarter, per corporate begin third we which our the value model environment interest the slide $XX.X mortgage we and to near-term for interest you billion questions Revenue Jodi, capital activity. take any the spite record pressure I economic stable $X.X remarks, have. strength pandemic. and Mark in shutdowns of a was The year,

saw I'm in outlook, encouraged for remains, months quarter, have been that vaccine coming improving pressure exception merchant half uncertainty European sales economic economic affected second our improving In by government our acquiring with progress some additional by operations, of of a fourth and shutdown own trends in potential the given the on generally the which recent data, quarter. in an businesses, payments of continuation While we was better-than-expected on data stimulus. in economic and the the the the

consumer operations stable the as And improve, growth European the While target expect expense to to we pressure volume remains to quarter, expect as long in we line experience spend first with payments continue Non-interest continue to third activity. flat challenging. levels, expenses sequential in trends we to quarter. were with revenue continue compared

quarter. neither little this Our in were position. Credit And a balance built sheet is a reserves quality released the as in better-than-anticipated expected, nor we metrics strong fourth quarter.

maintain to liquidity and to to will capital customers positions, which continue strong We environment. this support us our in allow continue

we quarter. a we Slide a that channel. subject minimum results delivered $X digital Slide capital test buybacks buffer, beginning billion which in to this key fourth in the return on performance tangible shows four common -- the fourth XX.X% five provides metrics that migration quarter, to equity. see of continue Fed be we indicated December, announced to stock will stress the with the Following we to in program stress repurchase common continue the

Now, quarter. the color will provide let to on Terry, more turn who the over me call

Terry Dolan

Andy. Thanks

by by loans reflecting earnings lower trends. higher the partly If of balances. paydowns Average commercial loan fourth continued we you primarily turn declined a corporate with start compared review mortgage to sheet decline offset slide with loans, the quarter was quarter. X.X% by by followed third six, customers, by The discussion balance driven

XXXX. of remain continues somewhat we early slow, to activity to it expect in paydown While part elevated the

seven, to favorable. X.X% and deposits with overall to continues Turning increased be third compared deposit the slide mix quarter average

deposits deposits non-interest-bearing that credit can eight, slide better On quality see grew continues our you time declined relative X.X%. X.X%, to while expectations. Our to perform

in to third ratio fourth quarter, which X.XX X.XX% estate the card Our assets at was fourth was in at the end other the and in and with the quarter compared end loss The points down ratio X.XX% basis quarter, reflecting compared third commercial X.XX% loans both the rates. to of was of net of quarter. non-performing the charge-off credit improvement real

$XXX was charge-offs the was which provision to loss quarter, loan fourth quarter. equivalent during our the million net Our in

level of government Our allowance stimulus and allowance X.XX% and loss offset for XXst impact highlights of unemployment, of programs. estimate reflected key elevated losses loan slower credit as loans. best consideration of category. or growth nine partially of metrics Slide breakdown by loan underwriting of allowance the our totaled The benefits billion our the $X.X December economic by

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

the per compared slide quarter fourth at-risk the of XX the that had impacted payment are no XXXX, fourth XX, The We loans. XX notable of XXXX. declined XXXX. quarter in meaningfully to in Slide of that of relief earnings certain quarter we items to table to share. fourth stable shows environment, $X.XX Turning the items the quarter. of provides diluted an summary. total top given notable quarter with volume fourth in earnings the third In current the left X.X% exposures Slide segments, shows that earned

X.X% the primarily and balances to amortization. interest on reflecting decrease loan NIM basis billion margin. higher our net driven quarter, and The with by which basis slide balances, average equivalent in higher lower XX net taxable hurt point a net interest cash interest XX, Turning a eight income points third in declined margin the fully $X.X basis decline by was of premium compared

amortization quarter balances highlights XX outlook to non-interest trends XXXX We fourth peak premium activity, expect and that be expense. cash refinancing prove income. current Slide the will believe in in stability and the mortgage the near-term given for level for we

Excluding on partly and activity our industry-wide notable fourth impact income offset the service businesses mortgage by XXXX, charges, reflecting items non-interest of revenue the banking was strong Slide a payments services about pre-COVID consumer declined payments quarter spending levels. of in X.X%, lower Year-over-year and provides by higher business to exposures pressured revenue payment XX impacted compared our lines, industries. information business reduced with commercial product revenue. activity including consumer spend and deposit

in the trends albeit consumer quarter. improved pace throughout a at quarter, However, sales saw third we than generally slower the fourth

volumes expected, continued activity volumes were spending negatively As related the following in by stimulus our prepaid acquiring impacted Europe, card lower fourth activity programs quarter. to quarter. Merchant in impacted volumes increased related moderated improve the by the sales sales the of fourth volumes payment and a quarter business payments mix business as to were an Commercial card in decline within during corporate to the COVID-XX. spend in shutdowns economic fourth

on basis. and Turning notable capital and on business stable by by quarter basis, expenses. expenses COVID-XX-related non-interest was Growth non-interest higher expected, to highlights Slide were expenses in a XX, compensation items a increased fourth the slide technology our communication as XX costs production, linked-quarter related position. revenue-generating X.X% driven year-over-year excluding of XXXX, to

some capital forward-looking Our I'll XX at X.X%. ratio common Tier December X provide guidance. equity was

decline net For the in to fully equivalent taxable due to first income we days. quarter the interest seasonally part in low-single-digits, XXXX, expect of fewer

are decline to as strong are down funding likely continue corporations continue and loans attractive relatively their use in the capital markets to and balances interest stable. margin We expect be alternatives flow loans. quarter to first PPP net to as forgiven to our cash pay Loan

in balances start second expect growing see the to we loan to average However, quarter.

refinancing We XX% lower to expect decline a to to in In XX% between a continues we industry, basis; first revenue and moderate. expect payments revenue mortgage corporate on as both and year-over-year basis, linked-quarter with revenue the activity levels. pre-COVID the compared on hospitality merchant with quarter, volumes decline travel reflecting acquiring to line

hospitality excluding to be activities. in expect sequential upon activity. we of on and to will The timing travel with continue spend of a vaccinations in sales behavior line and the volume and basis, changes hospitality consumer However, spend business dependent and improve efficacy trends business and and consumer recovery travel

to travel debit hospitality a basis volumes the card card credit low-double-digits in We expect growth as increase and and and prepaid volumes. more lower revenue offset in debit year-over-year on than

expenses to generally been quarter. has months. than and economic better market the have past expectations, fourth with the indicators stable outlook non-interest Recently, relatively expect We compared few improved be in the

first exist uncertainties to assets quarter. remain relatively in trends current remain cases state given level expect related stable that to COVID-XX related expect the recent we However, net we charge-offs and elevated in non-performing restrictions, and

increase We year. continue to half expect the of net in the charge-offs to second

to charge-offs there's decline allowance to outlook regarding will timing of expect certainty begin credit the We the the more for economic when peak net losses and occur. when

assess allowance to continue for losses credit as change. the adequacy We of will conditions the

for back taxable our expect I'll currently we to remarks. closing XXXX, approximately it tax year full Andy XX%. hand be the For equivalent rate to

Andy Cecere

employees Terry. support Thanks, challenging our solutions many, year for and was came needs. how find a XXXX individual together help for of I'm them to to our communities their and customers proud

move industry-leading As deliver results. continue XXXX, U.S. Bank we positioned I'm to to confident is well into that

we revenue will serve through diverse stream us Our phases cycle. the the of continue to move as well various economic

which bring and for meaningful for for and up and our day. allow company stewards call thank a our for credit We continue employees management, year on this to record culture good and over always this our lens. do we and differentiators and optimization our the while us our is the why to I resiliency, view our prudent to is businesses our with all hard operating capabilities. to work our a focus shareholders' approach innovative digital now life company, consistent payments want as capital scale, manage every invest expenses, past this will will culture Q&A. We'll carefully to manage they to of open in all long-term We flexibility risk and track

Operator

first [Operator line Morgan the is Betsy with question Instructions] Stanley. Your Graseck of from

Betsy Graseck

good Hi, morning.

Terry Dolan

Betsy. morning, Good

Andy Cecere

Hi Betsy.

Betsy Graseck

any on speak and a how understand drivers bit progression about just are as go kind little to the growth side you wanted the consumer through of and commercial can the the timing or I about that loan thinking to side? year you of you

Terry Dolan

Yes.

do an So likely we Betsy, that to talked to be said, point. quarter, we down inflection loan but when see we first it's in growth, we the that at end factors up we because as looking the are of expect, starting about,

bit stronger. from there's seems I than M&A getting in business a be activity an little perspective CapEx, terms of it spend to better think

overall really to the of some growth pressure to that to as it's We in get will alleviate. do behaviors change consumer kind the credit is fourth the we really The our we've for side gone that of quarter, has biggest inflection to start So and in point XXXX, commercial on hit that and been consumer as loans spend on expect starts year, the us when that continue expectation loan and equation which grow. throughout starts improve. stronger challenge of card the through

as second And that so, half quarter the well. second will start year, of come as that I do and expect balances the get we up to card into credit

you to so little that flavor a of commercial. and And consumer bit with of respect gives kind

Betsy Graseck

And consolidation a bit you've you mentioned look obviously, on you about that, past us M&A? your in of look from comments, a industry, We've the can quite at over And for appetite give I how you're you'll prior quarters. have bar. sense thinking – high a own but couple had, of activity the know –

if given all, wondering, M&A? and liquidity capital your any with the perspective reserves, from opportunity for that Just set changes – is at flush

Andy Cecere

Andy. is Betsy, this Hey,

partnerships, with Our alliance capabilities, as what did -- talked a increase about. look our position if meets with both for really on at our We'll acquisition in our customer opportunities. growth, opportunities that from and as strategic hurdles, continue we well M&A scale, to it to the Farm to addition financial like State we is organic sense consistent

open-minded we'll about be So that.

Betsy Graseck

lastly, of us as the sense you those Light locations Farm pace of and you years? then And kind to anticipate to give market drive will couple other Could where on just you're Digital Thanks. Charlotte strategy. of, First the, the next Okay. the strategies of doing benefit expansion the and that State some growth Branch a over

Andy Cecere

Yeah.

side. Let Farm me the on State start

know, deposits. acquisition an of that as you balances as well So card was as

there. little Charlotte both of products with banking also to in slowed the acquisition. branches well in and And of of and categories, other other would is exceeding because current that is we're both of track in customer addition expect going very alliance, COVID, smooth. business a additional small and and customer so going those terms but we very increases that expectations, get continued conversion opportunities back in well to new as extending terms our We the as bit relationships, on was

Charlotte the bit would just given increase. than size Farm, acquisition say, expectations. So in they're I the exceeding Charlotte both cases, our -- a State more material little

Betsy Graseck

it. Got

Okay. Thank you.

Andy Cecere

You bet.

Operator

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

Andy Cecere

Hi, John.

John Pancari

Good morning.

to see a you are give you're front, thought your can you bit that charge-off can factors you to so perhaps the implying backdrop, not charge-offs, regarding and just to process know color see that what release around macro us I the I reserve On indicated have then economic I separately, peaking the on -- peak to you for why want little the here? And more if before that give of that know Thank signal credit you reserve mentioned looking releases? see release? you you want are if you I a you. just watching elaborate there. you

Terry Dolan

need don't maybe Yeah. no, respect question, I peak. with think see I we to mean, second your to them

think to time our that have continues the unemployment just I and I is to confidence terms of I the some going need on, continue economic of in as occur. think think better get improve, that's to that's we Obviously, stronger. expectation. that move mean level when generally and to high economic outlook which I And factors continues to great.

more the There when about kind to which the things see reserve, that uncertainty, be think continue think restrictions alleviate. we wanted continue spiking. of just I now, number like economies be or change those a to we thing want thought just the I we waiting to more were cases And to of reverse, just put as to is and fourth COVID state that that want some think the quarter, there's as we're on. and I of that see those biggest we to we're see conservative starting of that's to But uncertainties about positive. we appropriateness and think see enough

John Pancari

And then hear on growth Thank Okay. likely you're to in beginning that terms of front, separately, I loan All you. inflection the right. see. the you

How see should in asset could it, loan to for up year. year strengthening could contributors will what you versus the think we growth help for as shape loan think separately, be as materializes then And you about you greatest the frame classes your about think GDP? growth this do through you full of us inflection the the XXXX? growth think terms year how So you loan and

Terry Dolan

Yes.

obviously, GDP GDP, to to relative strong. projected So is pretty be

with -- that growth I the think bit a industry to -- think, low with loan balances. that industry perspective, the to entire markets been has cash see certainly, The flows the to I and their a little and going continues get stronger, the behind So occur. flows economy out what seen is able pay we've had is lag that. think cash from that refinance growth to I But we're very challenges, rates, use that own loan will good as go to strong have down biggest that companies and/or

activity using corporate of all things. and saw there's we liquidity time, deposits, to what M&A need to that similar so, they of the of expenditure, And in start there a out with last lot terms themselves capital some And America. liquidity of sorts

are thing green with positive things, loan to take time. all the is of, and we associated see now there reverse of that's, off, shoots to starting and the that front last what that some saw we end kind similar growth those So

Andy Cecere

the credit start spend That's the accelerates card opposed and loans areas like using companies as And activity opportunity CapEx those balances. to just and probably the now right, of are increase starts as areas Terry. credit most think Most increase as that corporate you said, to M&A right I increase. to that, offer the transactors, spend card

John Pancari

Got it.

guys. Okay. Thanks,

Andy Cecere

You bet.

Operator

John is from the with McDonald question Research. of next Autonomous Your line

Andy Cecere

John. Hey,

Terry Dolan

Hey, John.

John McDonald

a year guess, will managing about XXXX are what revenue guidance the leverage? tailwinds higher Good of XXXX. terms operating on front? be detailed how and level, you how maybe headwinds about of for Terry for items Andy, morning. kind you're Hi. in at And thinking gave I some thinking

Andy Cecere

Yes, John.

about So let their think the me the one thinking by great of I company attributes XXXX, diversified year model. because of revenue our start is

and commercial in trust NIM, of positives couple our corporate and like corporate headwinds mortgage businesses products our by our businesses. -- business and and we a in had payments auto So offset and

think those about we will particularly about of think begin as in -- headwinds, I As dissipate. to XXXX, some I think payments,

of have you as start think areas quarter and I the three get pressure to because back those We to operations. is four. come hospitality. back, outside travel particularly that European starting in our some fourth spend to normal, But, know, And will in two, quarters particularly and

will retail made we've have not that in be new XXXX, the see a and Mortgage the be strong activity, investments expansion So positives purchase a to was we continues and positive. there, as there. what a high Maybe activity it so strong. but I given as

an is as about, strong. investment I think, of opportunity do area to then, growth. will Trust loan talked business the and Terry in other Our continue And is

think we about And manage the we year, diversity we the as expenses, be be about very quarter, have. to relatively going first think helpful. said, that as the of flat. to we'll we revenue continue given is to expect we as So it opportunities revenue And

John McDonald

operating leverage I Okay. achievability call. And that? of it's in how you the tough this year, handicap terms would a know

Andy Cecere

A Yes. as also -- always investments goal, try there. our to but we to going me make recognize current We're we best can, John, and start it's need environment revenue. to, the given let perform the little the

of for our So uncertainty the and always strive front. we'll leverage on still XXXX. operating goal, There's that is a revenue positive in lot

So continue that we'll to we'll see and give how plays updates. out,

John McDonald

beyond the should the you excess You've Tier running Thanks. here And of of on us you using where just time? fair you capital over how buybacks X? maybe be about company? Terry, amount terms of terms first in in remind course equity just then, weigh you do And Okay. the think common think could of management, quarter a got

Terry Dolan

Yes.

terms X we X.X%, ratio. and at you know, of in So, we're X.X%. Tier our Currently, X.X% operate between typically is and as somewhere X% overall target

is opportunity So, there's there be to for to and that down. able capacity us certainly bring

that the that think continues outlook capital do take of advantage perspective the I strengthen in thing variety capital use as management a from is to and watch economic the of, continue to plenty to there's uncertainties strengthen. clearly of opportunity We'll but we'll we'll earnings a ways.

John McDonald

Thank you.

Operator

is next Sandler. Piper Scott the from with line Your of Siefers question

Scott Siefers

question. Thanks Good morning, taking guys. the for

Andy Cecere

Hey Scott.

Terry Dolan

Hi Scott.

Scott Siefers

you was on comments bit to I to with regard the to ask corporate on hoping a Terry, touched one liquidity. you Maybe, expand a second ago of

these all wash Just generally, kind is of the on deposits, world whole in deposits. a

sort thoughts come of Just your of overall you're on those top level if drawn just there? kind down, when what kind down they how get of and thinking

Terry Dolan

Yes. perspective, is policy sort from going Certainly, our a support expectation fairly XXXX a for is continue that to an of Federal the Reserve or high level to environment. accommodative

will to that Our that maybe were but continue deposits not in certainly expectation grow, XXXX. the pace is at they

it's be of going that's deposit to have both cetera. portfolio, we investment the Corporate But a to going to investing, flow the able America terms in look to the et as for liquidity at have. example, So, also they us an that in of from challenge create for be opportunity amount

Scott Siefers

peers And on some can of reversed there it's then underlying a been a touch hoping curious expectations. of kind could of trends just declining. commercial if was where the and sort of revenue you sort I sense, about talk year Okay, of it has the and some you the in at products earlier perfect. line In bit. peaked And we the Thanks. see trends

Terry Dolan

was peak product commercial kind we when really of timeframe. the in quarter the I about third revenue, mean, Certainly, think sort second, of Yes.

the more of ends mix our in happening investment-grade is sort high terms customers as high marketplace because of impacting the that really on what's think of up focus in For I yield. of generally XXXX is -- capital And opposed you us, relative When to a that -- always at it quarter for down. growth look kind markets little to comes always we're we rates with of activities. to though, bit bullish maybe us, seasonality respect there's Fourth industry. the our

Scott Siefers

perfect. you Okay, very much. Thank

Operator

Najarian Your with next question is Erika from America. the of of line Bank

Terry Dolan

Erika. morning, Good

Andy Cecere

Erika. Hey

Erika Najarian

of NII is outlook Hi year. first just out for good teasing the the rest morning. the My question

so, quarter represent be of if income think question, interest will net As first would into there expect there? from expect I growth you Part income? that And loan it we in should to for to guidance? this a do Sorry, your that quarter about B bottom grow premium of any XXXX NIM, fourth comments peak on PPP-related you're you the and is -- putting

Terry Dolan

last margin probably net big it expectation driver saw mean impact et one. Well, with in and net all the that respect I it's the things is pressures for PPP, here be is kind will a the I of Yes. occurs, Maybe question, maybe through last quarter expectation as first and with the will interest is certainly But helpful back starting going year. associated to mean, associated yield cetera. to our that us. obviously, actually not our your with to stable, of income the coming to year from though, point, first interest we curve us. sorts be forgiveness

As inflection respect that's terms point don't we need that point strong, they terms to that of the inflection income liquidity. deposit as we continue more balances, in to if well. as flows, build any then be a net we be going in certainly interest to And to see loan with of believe big driver

so, we'll the reinvesting at market. And that opportunistically in look

Erika Najarian

about 'XX. $XXX fee million the this Got fourth million versus -- quarter the in think And as it. is trajectory XQ quarter income and for versus payments we related $XXX

a about the bit rate to back you $XXX of you do think your little million XQ think to part that longer for economy, of you payments outlook XXXX, As do come will could global by think back? take you the or certain run go

Terry Dolan

expansion the card year Yes. we about we say fourth perspective of respect was the terms our from think saw continue We sales in to flattish that but year. card, we're we as grow -- space. in with quarter, quarter, debit expand spend domestic when commercial corporate certainly, merchant expect spend in The to the optimistic in payments do kind saw throughout the to good that do Well, and and business, credit a progresses. fourth here sales of generally, I would payments when we volumes the

back is the back the terms get pre-COVID be in though, in bit and do travel that subdued more to your which that levels. at a -- of to question least quickly of how revenue you getting think XXXX. little piece, going A thing is just driver probably to I entertainment

Erika Najarian

a could here if is Got I And this question it. final Andy. sneak for and

As lot on or questions perspective, U.S. transformational that of a transformational here transformational. something either follow-up size peers investors something you terms terms with a as your different assets from of Betsy's at is is, treatment? whether somewhat to would a not from it -- question, do growth the closest bank billion the get tier of And $XXX question seeing non-organic I do for $XXX or in more a as bright of line did does year-end, a in indicates billion regulatory

Andy Cecere

think, the that is answer short a about I I as think line. bright don't Erika,

across making of channels. the a digital year. particularly We talked about, we we're $X.X businesses, all spent investments our billion As in

the have We across all and good scale at increase businesses. acquisition opportunities scale, customer look opportunity the increase that but we'll to

would or lines but of there bright in do. aren't do what any or look terms -- wouldn't So we at

Erika Najarian

it. Got Thank you.

Andy Cecere

Sure.

Operator

Your next the question Deutsche of line is Matt with O'Connor Bank. from

Matt O'Connor

morning. Good

Terry Dolan

Good morning, Matt.

Matt O'Connor

year think missed a guidance, guidance you the it. question, quarter sorry said stable but first if did XXXX give expense costs? First, versus the clarifying But I on XQ, I in you full

Terry Dolan

And that leverage, didn't year. target earlier our to to Andy going kind to guidance. be I back to of positive the – expenses full revenue manage would environment. and after in of and is we it's our said, the is expectation Yes, year flat, give challenging achieve especially given always part goal what necessarily the in especially come the our just

Matt O'Connor

you That's $XX contribution a there, I think little Okay. the of from of and you And card and helpful. billion what opportunity revenue you north that kind brought of $X bit just separately, the, can think overtime? alliance the But the deposits about be State with talk have that in then of about Farm, billion earnings longer-term do some loans.

Terry Dolan

talked this you out I about When in terms Andy dollars XX,XXX that though, of about customers. And of organizations Yeah. lot is agents pretty card they think mean, respect and biggest business the before, business credit that there's mentioned has small just they're we the with opportunity, of one are and to deposits the and so have close. there. a

And about a to that opportunity gathering, and so of improve terms deposit as terms really we think has well initiatives that number early business as to when But we credit certainly as enhance about that expanding and opportunity of existed. there's there's are them our also we of have with the card as it, program opportunities. in relationship in auto different going expanding around focus lending – well small think

Matt O'Connor

And the could sustainable, is a of kind and I'm you. all that investments. it is needle, like, building it investing needle, if sudden, it's it getting picked Thank with years, right? a years up just out at, of that look what something Is five we move a initiatives? so like mortgage, or kind along if number fruits of not this something just I guess in of could this you're shows other all and the some just massive number. it's start And of of Like, sudden block for even moving the a heavily activity the

Terry Dolan

the other of of able those be significant. one in any is leveraging move that it we've agencies, we those to thing, and needle think ours. us. a for you digital Matt, time the is on access to plan that I And invested I order We that, their think mean, support XX,XXX through capabilities in can capabilities. digital customers lot No, all things that's have very

more a very Farm we're the alliance, State about to And bullish. very we're come. excited So lot

Matt O'Connor

Thank you.

Operator

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

Terry Dolan

Ken. Hi,

Ken Usdin

guys, morning morning. Hey,

much – it's to your that get currently to point is point either impact is change and Just way a there couple understand, of an quick it's in follow-ups, first numeric the of all, terms to point, that been a how how much you of directional has there at can on premium this am help bottoming, the point about or us given bottoming? that

Terry Dolan

Yeah. we I dollars haven't mean, with any premium associated disclosed necessarily amortization.

or If significant driven is about of this balances, eight you amount. the related is quarter, thinking card end up it so to of really amortization by the really basis rest XX premium it points

I So first – fourth it's is quarter, quarter respect really peaked. think with to or

I quarter, to with XXXX. into it's really really refinancings It's think, how mortgage end going track, First the industry. along within occur

Ken Usdin

the you in and domestically? started stimulus consider flush that already to into the impact, as stimulus. you How And expect Okay. what at the So, that's businesses, through least does this look to potentially year more payments Thanks. does weigh see for revenues? on and revenues? kind are stimulus through the net to other come And it do you you the anticipating statement, through? what that given help more Does – prospect even FX, of income

Terry Dolan

about the when pretty mean, in think, throughout and would it card recent businesses with the that helps our I there's to short-term, respect significantly. think certainly, I another continue of round help prepaid it stimulus, one most that the you it, that think Yeah. if to year. think and help and we it I stimulus, stimulate will terms activity XXXX. does will, do see of the did consumer about last buying in help is to and we and our did businesses But payments in that as going help And

me, that, very So a thing. to favorable is

positive likely of credit and think hoped it from the to bit think And for, create is on more what those is net side $XXX standpoint, think it's than lower well maybe at is does as the the net billion customers come. question think but other a charge-off I in stimulus I a terms so occurs. a is going to I to as real keep you nice thing The both be perspective was that the charge-off it start, there consumer the little revenue if a about most that really terms when thoughts bridge there to of in a been that had base, speak. for from

Ken Usdin

can business. from seen lag what opposed follow-up payments does lockdowns the results. lockdown revenue it into How the you've -- quickly What's that to observed wait the one that fourth that's European expect? stream? this does start Meaning prior side just is -- quarter in and changes coincident, the first move on now and And as experience of the the would this Yeah. on to happened one, you've

Terry Dolan

it to a -- but does It take days bounce The happen XX XX that that I fast. it see for fast. days back, get Yeah. does within timeframe, is back certainly pretty for to you to trajectory it mean is to it. start pretty while

impact in probably see X%, keep it's in The amount a continue the respect lockdown. -- small European Total Bank. very U.S. is happens so but terms And to total is what to revenue with we'll other of thing revenue mind to to revenue. around

Ken Usdin

Okay. Thank you.

Andy Cecere

Ken. Thanks,

Operator

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

Mike Mayo

Hi.

Andy Cecere

Hey, Mike.

Terry Dolan

Mike. Hi,

Mike Mayo

I stand you I guess, Well, missed out, unless it.

no no miss no the built about You the in but that? I fourth releases so, why quarters, or I releases pandemic $X So prior that billion reserves reserve quarter. get And with right? did of releases? Did three related, if up

Terry Dolan

at still correct. out the is there with to at out at restrictions we reasons some to a be of end up I or for allowance the credit and see existed And And we is think that's respect able least this as that looking exist reversal the to I Mike, just bit one we a COVID up uncertainties a starting credit of of losses, associated looking at see, have that I point. really to see want cases. But end that we want the that which for the of, of back Yeah. the held of the we little allowance losses we end we're at see, with that earlier, sign. kind good the to happening, is When said there think the some -- year. reversal what

Mike Mayo

not your clients. conservative -- just with So you're just the environment? it's being It's

Terry Dolan

those it's improve. like Well, environment. just of the uncertainty to continue yeah, few in We'd I the a think to see

Mike Mayo

like branches, or can the have trying question relates an you of with you to put and talks coincides, Or, newer be, that to that market companies business and you enhanced December, your and your one-fourth a what you feels understand Any with Y? businesses, ecosystem with completely middle how business business more which from example. around market your with after metrics it share direction payments endgame guess, for share recreating your on to anything the closing X payments your percent specific middle can around and small improve update Okay. I bigger of metric customers. about that could companies your improving And going give want for payments My strategic the didn't that. presentation of concrete the if and the you're I and of also? to One basically share, of move

Andy Cecere

this is Mike, Andy. Yes,

the branches. Let start with me

the branch did complete January. we in early closures So,

down over that's about, branches. just So, branches. we consumer just so as we We're X,XXX And X,XXX talked behaviors. function of were over about XX%, really a

about As seeking it's you consult, down the channel. Those channel, saw from to the the chart, XX% branch advice still while and of still digital and our customers XX%. using are important using

accelerated behavior number the a there's result change a that. the reflect pandemic closures That's one. as of and So that's

a opportunity. On significant business, think business very it's banking the small I front,

We business. have a payments great

a all banking of going I full customers them we're huge together Payments forward, that update banking important. we And offer but those those business, new there's opportunity. think on. banking goals capabilities articulated two ecosystem and customer we haven't add to that three capabilities, payments go focus And we'll weaving metrics critically think customers add I great we is have of capabilities and have acquisition. We and to three for for that a but goals, as a that set it's

Mike Mayo

far And mean, have so closed certainly all I branches, extra if as, question, as spending, you in done it's Okay. you savings. January, last your

went in tech quarter-over-quarter Your fourth the up quarter. spend

spend tech create you increase looking to kind are while So ecosystem? newer you this of your

Andy Cecere

the One on bit think relatively two savings optimization is same about really the So, guidance while Mike, which guidance, we you at investing talked through for a current on flat as And new. that model expense our flat. components. achieving business time, is, there's little the expense, about

model. going these by flat current areas, business to expenses be expand us we're to to on saving retaining So, continue while the in able to invest to allow

Mike Mayo

All right. you. Thank

Andy Cecere

You bet.

Operator

Your of Juneja next line from question is the Vivek with JPMorgan. the

Andy Cecere

Vivek. Hi,

Vivek Juneja

Terry. Hey, Andy. Hi,

Andy Cecere

Good morning.

Vivek Juneja

questions. Thanks. good. I’m questions. my A taking for couple Thanks of

I is opening the those want you as that you talk expansion more pandemic. branches? need a year? sort is early to Firstly, thinking Are about come? lot with branch know about you the Charlotte, to line obviously thinking closures, in that for What's but branches? you strategy. could Do you all of rest How you the given said changing more Do did If whole And that your for behavior with to that, pieces. of Jan. in your there's this think consumer year? many this in done open both you more

Andy Cecere

Sure, Vivek.

you branches. a think as about dozen So we targeting Charlotte, were

nearly XX to about think you If twin the XXX. we cities, have

new the current we market So, different business the a than open model. would be in way would significantly

term. now. In substantial I point changes terms to of a the number, But to opportunities I right at branches. stable think in time We'll branches, the opening wouldn't at at look new expect continue the same optimize near we're relatively

Vivek Juneja

of Okay. the your small versus to Great. percentage is What processing Different merchant revenues question. mid-sized large? merchants

Terry Dolan

a mix, omni sort Well, if be of just I end tended that that well. to don't looking part have equation. of And they of you have as mix are at of the at have overall necessarily sort up medium-sized and pretty But my fingertips. distribution good we kind businesses or kind small customers merchants of that of

One we grow and has of sort that and or the of very last continue the expand is so. capabilities, year things e-commerce nicely our to grown over

Vivek Juneja

would you Would half you your are that they guess? What Over half? expect business?

Terry Dolan

guess, I were -- -- were a to cetera. say end little small bit venture you it et a characterizing if I'd I If up upon medium, Yes. and how depends maybe

thing Vivek. a the with struggling that's bit, think here little I'm I

Andy Cecere

ago, terms component way and was and was One because a airline. where and that And on the about it nearly Vivek, our it's one we you're of very travel, the so in look going it XX%, focused entertainment, acquiring And back lot XX%. XX%. I'd recovery. is thing is merchant I think today, add a XXXX, of year in at that

decline that the that's focused normal. improvement think or to airline. in XX% it's the of future. exists business, has about principally else as area has as occurred got for small And continued that travel we spend large opportunity the and been opposed that where area Everything been in in So, to actually back is

Vivek Juneja

All Great. stayed very strong. if Mortgage one banking it's I Thanks. I right. down. one, know still last And may.

that been presuming plan look on that what's fee the GSE is -- able You refi forward? I'm thus And you've for the pass case? you the to far, as

Terry Dolan

made a That when is would that we've a situation of refi. money, about the to thing about mortgage well. banking case. lot too, purchase business very talk the of Again, the be people we I'd the continues in we purchase investment think do terms the mortgage, the in that business remind that lot that for maybe and But

quarter, refinancing. I the you looking think of at was the XX% last -- versus up it production about it's applications if in end purchase

area about of think that, that will we and know I So, future. think opportunity an people at as look I that actually the that, that's

Vivek Juneja

All right.

much. Thank Okay, great. very you Thanks.

Terry Dolan

Thanks Vivek.

Operator

of from Wolfe with is line question the Bill next Research. Your Carcache

Terry Dolan

Good morning Bill.

Andy Cecere

morning Good Bill.

Bill Carcache

competitively you tethered compete guys for bigger more that some of disadvantaged given PayPal, more to payments. of could a how investors picture doing and concerns is morning. I Good native the point-of-sale follow-up like players? some respond to is business guys broadly, And merchant those to the wanted physical color you against what kinds is the USB you also, discuss acquiring Stripe? Square, that of to Thank against speaking, with you on But Broadly USB's have would all and names digitally if question.

Andy Cecere

of fashion their solves customers their we that's most years over weaving Good made array e-commerce banking need expansions easy of has businesses. Yes. one darn businesses the is help their we've think and those It's a really run need so the convenient, those and problems small services. in why side it's been a not the And e-commerce; the they twofold, is most the I the occurred business. the you business last of those players mechanisms, deposit one, and investments not questions, we're on think of our number of and offer capabilities that if payments on just helps And can and focused so acceptance, payments payments together because against need they equation. loans, described need two banking full run I Bill. And those just them they advice to advantages

So payments, it's our combination I banking of important. advantage where a think and that's so that's darn And is.

Bill Carcache

maybe a super relative And in you That's could the this color. on guys one, quarter? I'm a discussed reinvestment bit But little of Andy. curve guys sorry rates what kind if in saw we securities Thanks, what I another are kind portfolio. you represent? of opportunity could squeeze to fourth steeper seeing already helpful what on the If

Terry Dolan

bit come starts better the as curve I that, kind point. It's when another the fourth better and of of quarter has some timing shrunk of is. mean, up, our expect see reinvestment for the end third well. it long as that little to portfolio, we inflection get quarter, I what the is Certainly, matter we differential I do that a that think think of Yeah. relative, just a example, got probably would the securities from

Bill Carcache

much very Thanks for it. answering Got my questions.

Terry Dolan

Yes. Thank Bill. you,

Operator

Gerard final RBC. of is Our with line Cassidy question from the

Terry Dolan

Hey, Gerard.

Gerard Cassidy

Andy and good morning, Terry. morning, Good

Andy Cecere

Good morning.

Gerard Cassidy

always Do loan you course, X%? are eventually X.XX% I when reserve was higher it loan share of Maybe, you January guys in still think A out loans where number look you outlook into we for correctly, future. as conservative, about guys to about at the back your can where us, were you question coming see for Terry, on with you that's have I read I adjustment, today and X, if are, Clearly, and very CECL been reserves the than we loss had reserves. the X.XX%. you about to think it to was your pre-pandemic number the

Terry Dolan

be get around mix of certainly, sort as business when through of we look environment. and of the us at our really kind It the Yeah. overall we and our timing. sense, portfolio, underwriting our pandemic that will to But X% makes

Gerard Cassidy

what bigger will than go night, maybe but are GDP question. record half. be months? you about When the XX vaccines more real the strongly the for as are the a hopefully, Very to peers, back down to widespread, picture do you The of is you some next XX of little growth second about you are Clearly, outlook a as X%. at at that elevator in of think know. worry economy the is calls there then, guys' equity conservative to And levels, Andy, middle that risks the your good. year expectation the maybe the come markets your by X% There seems

Andy Cecere

again the half risks and you the headwinds the XXXX for a Gerard, in the and are second risks, we ones I economic flat which we yield that And But you dissipate the think of economic have back. principal and for struggled sure the other to and Well, NIM described, mentioned turn headwinds are to And starting well curve. the diversified it we faced starting payments, come are some growth businesses revenue do I reasons the you stream think in start with regarding businesses and saw the the of see to loan those recovery we to that that will the as environments. all different start way different to headwinds described.

principal be us in. will the economic – different is, a actions we're into of revenue as banks by thing diversified plans the the the get how and helpful. But whatever So the the will forbearance impacted that And cycle in the we think businesses one very of and is in back ways all that and as then ways, economic about of really recovery. different the normal stimulus how government, help of well helps some so stream value perform us

area us I of concern right for principal think all that's the now. of

Gerard Cassidy

good. you. Very Thank

Andy Cecere

bet. Gerard Thanks, You

Operator

There further are no questions.

Jen Thompson

questions. joining any call Please you Investor the our call Relations for with Thank follow-up today. department

Operator

quarter U.S. Bancorp XXXX call. This concludes today's for participation. you Thank your earnings fourth

may disconnect. You now

U.S. Bancorp (USB) 20 Jan 212020 Q4 Earnings call transcript