USB - Earnings call transcript Q1 2022

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Operator

Welcome to U.S. Bancorp's First Quarter 2022 Earnings Conference Call.

Following a review of the results by Andy Cecere, Chairman, President and Chief Executive Officer; and Terry Dolan, 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 11:00 AM Central Time through Thursday, April 21, 2022, at 10:59 PM Central Time. I will now turn the conference call over to Jen Thompson, Head of Corporate Finance and Investor Relations for U.S. Bancorp.

Jen Thompson

good Chairman, With Terry President Chief Officer. and Andy today Dolan, Francie, Financial our Cecere, and you, morning, me everyone. are our Thank CEO; and

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

Andy Cecere

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

questions and credit reported Following I'll in earnings Terry we quarter momentum total our of Slide prepared per quarter, businesses, strong begin payments revenue expenses remarks, take well-controlled share I by billion. growth, $X.XX loan you In first was The strong $X.X on our continued and have. X. the of and any highlighted will quality.

banking refinancing mortgage declined activity expected, revenue quarter slower first As in in due to the the market.

management revenue a However, investment business management. other treasury within growth related businesses, momentum fee we payments, and good and and saw activity including trust in

strengths digital Slide engagement. tangible of sales XX.X%. sales. in transactions total key In This account for first March continued our was and about of a XX, total in return delivered X X.X%. ratio quarter, strong common a credit assets performance loss account on total the loan released on we CETX of $XX loan And metrics. at X we million provides and XX% X.XX% over digital for quality. X/X loan quarter, of return transactions Digital equity reflecting highlights capital reserves, Slide

adoption customers, we to customers further understand have but and customer helping by progress believe financial assist the with pleased digital available seen their the there of in far, managing them is business increase consumers capabilities to through opportunity are We lives. scope so full to engagement

adding plus and approach. efficient digital and A have functionality are driver great human engagements with features continually a well Through this number interactions become digital key Do-it-Together is more of co-browse a example applying enhancing and have and as of our We this tool, effective. increased in customers, technology. as our

to for and customers payments payments the We services services our and payments The next years. company. X. company opportunity our return drive to Slide products for our competitive differential meaningful to profit believe connect with complete banking banking with our advantage our several and Turning is continue our customers over our ecosystem a will and products

XX% business just related many will believe suite small Our driving relationships years. and the XX% by we we see to customers and us those initiative business of to both that of next X account relationships. by XX% over growth offer We the example our is revenue grow small XX% to to allow products deeper few

form we manage to encouraged simple, business small needs format in their allows the banking the uptake payments talech by a a are functionality, of we trends dashboard. which our are that particularly We of the customers in provide seeing and point-of-sale in easy-to-use

new talech you XXXX, slide, talech fivefold On are can XXXX new compared that the growth trajectory increased the that in see and full XXXX. number customers of has year Year-to-date, XXXX the customers continued in right side level. of X.Xx the to strong

on quarter. the Now provide let me Terry to turn over to call details the more

Terry Dolan

Thanks, Andy.

auto growth the balance by fourth earnings needs the activity retail linked being trends. X.X% quarter portfolio, sheet lending. by X.X% start balance Average commercial and increased and are X, Slide a If moved discussion inventory you driven with with Credit declined by quarter, the loans impact In to first I'll across the of and compared followed loans, commercial review fourth Client good quarter, slowing residential building, loans the and driven other other and paydowns, utilization growth M&A X.X% business loans, reflecting increased average card retail sale for growth expenditures. rates loans sentiment balances including typical is growth. geographies. certain loan impacted CapEx we to X.X% sectors activity in mortgage quarter, reflected higher being in and seasonality of loans. growth in and many held growth retail which Commercial stable in total lending most in mortgage turn saw

Total with Turning the deposits. a typical ratio Credit quality increased to a compared X.X% to noninterest-bearing across ago. increased March Slide shows seasonal compared loan to assets X Total trends. strong deposits nonperforming average of continues our reduction quarter deposits average the X.XX% in quality XX with X.X% X.XX% credit portfolio. fourth with December at X. year at compared Slide despite other be real and XX estate The was X.XX% and ago. loans year

X.XX% than charge-off with but net the first of quarter X.XX%. the ratio quarter level higher compared quarter of was lower level XXXX first slightly X.XX%, fourth Our of of

period-end share. XXXX, as allowance an diluted earnings a $X.XX relatively first Our the included we In small results reserve credit of totaled These of $X.X earned loans. per quarter March billion Slide for $XX XX million. losses or XX release summary. of of X.XX% provides

strengthening The taxable to Turning linked a totaled fully particularly increase XX. loan billion. quarter, basis on reflected Net growth X.X% quarter loan in $X.X the and Slide strong equivalent income margins interest growth. commercial

as activity payments compared revenue XX.X% reflecting on income. revenue, banking refinancing changing management mortgage fees and capacity commercial X.XX% cyclical and well first cash the year ago, revenue impact to of are the actions the card tighter strong recovery making. banking offset partially card prepaid management strong XX trends by product The earlier gain mortgage a giving decline and basis by due portfolio noninterest balances, credit X excess by year the offset lower Slide of increased in and continued a in volume as a debit increased improved in quarter, on loan higher lower impact industry. we mix. Credit fees, noninterest revenues X.X%, income and post-pandemic trust investment year-over-year by margins and highlights Compared basis, trends increased revenue higher yield growth market business lower services and revenue. underlying investments in lower in reflecting as the treasury both supported to payments lower In margin offset interest sale X.X% debit to the net a Our investment reflected curve, was card activity. with total points

XX which well and at card revenue momentum. have increased businesses year our merchant fee of provided Slides that XX X.X% information pandemic our a as a of the illustrates business Both naturally as double-digit additional revenue, compared debit with quarter card growth products underlying typical the Slide by fees industries prepaid on impacted XX, course occurs business. increased cyclical a recovery middle XXXX. services first payment, we would with ago, compared with and processing over payments pace X year. a payment and in provide of Excluding cyclicality corporate both revenue the credit the table, of the driven of In each

quarter. you the can to right that continued side impacted COVID-XX the the see recover industries of On first slide, throughout

XXXX, volumes of pre-pandemic exceeded of we volume the first compared levels. credit quarter levels. pre-pandemic of was travel debit to recovery the first have and card of airline March time XXXX, seen XXXX, In As flat March to

rates and on pre-pandemic In of X the a cyclical quadrant. pre-pandemic in trajectory. they environment. revenue March, right believe corporate year-over-year businesses, growth business provide Although the payments still best in government over the our are continued continue dissipated. Slide negatively are their level. nature card volumes linked in card our revenue indicator upward past of the back Because stimulus provides quarters revenue details by upper our of below year-over-year X impacted trends prepaid businesses. volumes the T&E-related quarter levels, performance underlying the trends decline corporate for the fee as of CPS XX in to were card We be credit payments payments XX% normal business T&E has the debit of Year-over-year, prepaid benefit revenue and to growth in we

have rate a While credit a bottom processing through impact growth pandemic-related half which the of fee prepaid illustrates revenue the and revenue and quarters, year-over-year is merchant rates several recovery. XXXX. linked-quarter on partly over year-over-year debit comparisons basis, past run slide it fee strong corporate revenue will card card the the reflected the The approaching end payments both in of

on levels, we to merchant revenue high rates single-digit the fee expect moderate in continue a and believe payments we basis year-over-year While corporate can a pace from environment. both growth that post-pandemic year-over-year a grow at processing current to

development marketing by in quarter linked a professional on X.X% was expense decreased employee benefit and expense by expense, expenses, of taxes expense Slide the The Noninterest fourth growth highlights increases XX our communication seasonally quarter XX. business driven and services offset the includes in partially to impact lower Slide acquisitions of position. higher to technology Turning basis. expense decline capital and other completed quarter noninterest primarily XXXX. expenses. due payroll the Linked and

Our common equity Tier XX was at X.X%. March X capital ratio

suspended the to our CETX target of After between to closing and our reminder, Union operate we program of acquisition, a X.X%. we of the third pending As at acquisition the expect XXXX, share at a the buyback quarter beginning Bank. ratio due ratio

CETX that I ratio expect a The Bank. close. to X.X% guidance program standalone will our repurchase for is now our reaches Bank any include continue from not following following the some deferred and potential on a will basis Union deal until does impact be provide We forward-looking guidance. pending share U.S.

start with me full Let year guidance.

to our We interest updated have market consistent be expectations. rate with expectations

net XX% charges X% taxable deposit mortgage we our fee and growth reflecting in banking assumptions, other now revenue interest with primarily businesses. rate increase interest to Given lower to income and X% net stable service revenue due to fee X% XXXX, in income, to compared total equivalent, expect growth offsetting revised

at operating in positive basis points of We least XXX expect XXXX. leverage

basis, quality interest second and higher impact business and on in expenses income the compensation-related second waivers. costs seasonally Credit second a loan specifically, a quarter, to seasonal higher and rates a many linked-quarter of of we the our X% expect quarter the recapture due primarily As to spend. it relates fee benefiting we In growth businesses, increase of strength revenue basis, strong. X% remains expect X% investment to growth of on net to continued X% from on quarter linked-quarter fee to the total

lower Over continue historic to normalize to will few the levels, expect time. charge-off the quarters, over net than next ratio but we remain

the our For year full approximately be equivalent taxable we to XX%. to XX% XXXX, expect tax rate

Slide entered the we announced definitive agreement a announced acquire Bank. of turn franchise pending that I'll XX, regional into to acquisition provide on of had an Union September of MUFG Bank. banking Union you update to In our If XXXX, previously we core

planning in the first regulatory we the closing approval. progress significant await for We deal make XXXX, continue while to half of in

As impact approvals you within of know, not the may regulatory closing the timing are the and company's control the deal. of

U.S. close approval. XX anticipated the of the after We second regulatory days deal expect to being late XXXX. approximately Conversion in granted half is

a a return strategic XX%, both We initial continue assumptions, to our excess and financial of with will deal above feel is this an believe of expectation comfortable of financial from it our is our compelling cost that rate capital. which deal including well of We about capital an generate use internal perspective.

million XX revenue date, close synergies. XXXX, to in Bank Union $XXX cost to approximately a June net considering our pre-provision we pretax before contribute Assuming expect

of $XX synergies million $XXX approximately expect second in to deal the half XXXX. savings achieve to continue cost cost the of of million total We related to million with approximately $XXX to achieved

merger We prepare charges billion, we anticipated in million for in $X.X target continue integration incurred and quarter costs the integration. $XXX with XXXX which of second as total be approximately some system of to will

approximately to be will existing remarks. required a it loan loss rules there Day $XXX I'll Andy of Day provision accounting at there closing accordance million be addition, CECL with hand million. In will loss back X to in -- closing X -- for the $XXX

Andy Cecere

Terry. Thanks,

part trends we Credit We good . quarter. through-the-cycle credit us by we Our results in we activity strong continue a quarter seeing strong. year, seeing second and quality and our encouraged fee that the loan the positioned lens. with decisions first are growth the across are for the remains the the well are secular business have of to we Nonetheless, early approach rest businesses. trends about of feel

year we recovery continued to continues as and in revenue to payments the travel look entertainment Our cyclical and progresses. recover,

initiatives More aimed intermediate term, in business pay the importantly, power ecosystem multiyear will strategic and investments our and off. continue over leveraging near to our payments the the this at of

allows highlight modernization. payments managing our technology recent a cardholders Pay, plan needs. that the option On digital which like few We existing service a announcements. operating later we are that expenses we closely they and a enhanced front, where in now, I'd call choose consumer pay as that even of invest We their flexible offering buy can payment to business to initiatives, our our capabilities and suits Extend our our an

investment rolled directly customers payment Those meaningful bills for to We payment payment we to February, real-time announced to cloud financial out aimed the in the at transformation rails. and create have a capability, allowing option leading-edge a also to experiences. send assets request bank's In allows via merchants accounts. as the applications which send improve while biller foundation security customers' of of our immediately our privacy to customer is which to technology modernizing for strategy, further our and data, so customer the infrastructure

closing, employees they deeper to believe to a our goals franchise communities. next several meaningful and to good to and services support we We customers years. like will serve our continue continue across thank leverage our the will all enhance start, experience, to the and support continue products, strategic customer growth of which relationships customer I'd and account for entire -- over suit to is off our and capabilities In XXXX do our our

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

Operator

Matt [Operator O'Connor comes Instructions] first of from Your question Deutsche line Bank. the from

Matt O’Connor

I'm I environment guys know the and impact standalone it sure a was obviously, had really but to changed. update balance provide on in little has going make USB sensitive, asset could I was rate the you what's their sensitivity not hoping UB? then at of asset you sheet. an happening point, more X said of you

asset there please? So sensitivity, some on updates

Terry Dolan

of maybe Yes. Matt, look kind to the would had of With disclosures to question. to let basis the respect probably one in that kind movement. me XXX gradual I'm best to we kind and upward at sensitivity, XX-K refer and take going be asset back of point an the

that that point in particular is least market time. the at think I implied with environment that, this at the expected

up about of a applying what see estimate kind kind So deposit you I if of the end in that Maybe see to sensitivity quarter, fourth you betas I interest net we of in be think of of we X.X% good income relatively gives early going terms of forward. the that that think cycle, it qualitatively, sort will rate pretty benefit when low.

fixed floating rate it's about XX% you probably about XX% XX%, Our rate. look XX% portfolio, loans, when to at and is is

be XX, assets we'll we’ll XX their the a us. a kind So in that at more probably view, substantial gives I to expecting sensitive of acquiring, Bank move as reinvest end up we've you should some and of, perspective it's so Union a with what opportunity point that of cash amount and bit deposit-heavy, points. of the we're When portfolio respect rates looking that basis From the as say, see. help us than to It kind to said be past, it is the would to asset able you -- have up. as

Matt O’Connor

then the the was that UB X% actual on you it just the from on a mentioned both estimated gave And capital, separately, CETX deal reduction. value, upfront book I the tangible of you What's think earlier? Okay. and acquisition the then impact marks impact

Terry Dolan

Yes.

So of currently, terms the at of it that CETX end ratio. as the in said, at we're X% in we've to We will our the X.X% be closing. would range X.X% of expect

much the now how upon will it and dependent rates course, closing actual time. be Of move between

higher time rising bit disclosed different. terms little X we had significantly of provision than -- rates, at From because asset credit originally a think but of a I talked anticipated Our will Day simply or not -- be mark, in little the acquisition, an the the it what I the about mark. of in the bit

Matt O’Connor

a the suggestion It a way, of if down. be it slide. of to on lots it guidance scramble some call. the put just could It would good by And is great day all and busy you the drive such in

side. for on Some us of really helpful it's that your peers this and do

Terry Dolan

would more as We moves forward. deal Yes. of we'll to anticipate incorporate that the start

Operator

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

John Pancari

could on bit side, Are detail any a you're signs of terms just more spend pullbacks On any just of you consumer us seeing you and in give can some business, the little your towards seeing nondiscretionary if shifts from some shifts of card what payment all? behavior? in point to there? that your Curious if spend. curious that and We're in see type spend softening seeing the if impacting starting that is discretionary at outlook you're

Terry Dolan

Yes.

what growth year-over-year really board. Andy it. XXXX and see, continuing then good, So to let to Certainly, back both strong, of are add John, quarter the to and start the me kind through across first comparisons we is can

feel what period of opportunity that move terms sort an in forward. like will from activities. shift I would service-oriented us that think see continue in think and to the and travel, continue I trends to specifically a in to is durable were as a develop was so expect or at is is think But we be call to what that that's the of entertainment overall that past strengthen. a airline do of I quarter would the people continuing we that add? back you think pre-pandemic couple spending for going and going specifically that CPS level I grow March. there's some on and And in we second for that's dollars travel about of to you'll time. as And their talked about that, of to least beyond. occurred We I more spend, would business, that to to continue and the the tailwind goods the probably extent Andy, I expect some continuing

Andy Cecere

XX%. yet pre-pandemic that first as The because to the data still about get a to better to Consumer XX%. continue of side, T&E, pre-pandemic credit get corporate pre-pandemic area I still on Terry corporate X which merchant at think versus the to is to back XX%, start spend we spend is if still normal XX% look up up is versus is card it's all and more. that on good we levels, levels not up John, mentioned X% in or the that's payments that we expect and quarter, summary, would recovery interesting consumer what out Terry. road

any we're to negative it thus seeing very be not far, strong. continues So and trends

John Pancari

to loan that side. remarks your commercial And you the you continue a as Or a know to appetite still inflationary the cited dynamics Ukraine? driver on dynamics look potential growth commercial then that supply the as issues Do beginning you on in foresee behind I side, CapEx prepared amid expect are you we plans borrower chain in here? out impact do the on and see

Terry Dolan

Yes.

I think driven that of the is couple capital a by probably expenditure different things.

that have of been most the the course with couple holding of kind businesses think expenditure. capital of over to last years back respect I

an And of increase to just respect automation so inflationary and that I there's business of spend look offsetting acquire to companies And being that do ways that pressure think going as I kind in to of they to then the and with bit they're more some think as of related actually see to a more talent. business that. pressure, see that

at that the I to And least think will capital that continue near reasonably term, our be so strong. expenditure is expectation, in

Andy Cecere

think our that, -- rates support our I And Terry. utilization

last to in but running for XX% XX% saw we have in a XX% that not We of months. and few certainly normal or been increase, the number in an levels, quarters, the plus minus, to

Terry Dolan

Yes.

Operator

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

Ryan Kenny

bit is a behalf little Wondering of Ryan on in deposit dig could Betsy. This on if we betas. more Kenny

that you know deposit early be expecting that relatively to in betas cycle, mentioned low. you're the So I

have liquidity. headlines other you But have rate day. a might X faster lot you inflation be hand, on hikes of every little that cognizant an with on industry consumers excess with hand, a the more then bit the coming So of on

have fintech You competition. rising

the thinking So really putting and first that rates after all about how that? XXX over I'm betas following then together, you're wondering the bps deposit

Terry Dolan

Yes.

based up to XX% to you give relatively that will XX% higher it be and higher in you slow. move of get think we is kind early of you helpful end have XXXX of would the maybe the maybe is development the and accelerate about perspective, cycle, our into which basis. bit a will, is consumer betas a have at cycle, will slightly probably that full some bit. a I further of looking as it's our or But it And balances, the betas So cycle start business that consumer tends context. if a it terminal little beta. a on will institutional, expect But then the maybe we deposit expectation, through When little XX% then than to of to of on less especially

little relative higher the between One last side, deposit our believe it, institutional would by XXXX last level balances that that, reasons. we XX% couple bit are X% as relative cycle with somewhere of cycle. things betas we that. to, a A example, the expect bit less the of maybe about to cycle looking that different for are little a XX% a through the couple On we for than terminal is and sensitive at the that's will be to larger a consumer

have related We of -- to in deposits, the but which corporate have in balances are concentrations And from still Our concentration. brokerage-related more lower deposit past. some, then of we of of so has type away the we deposit base the moved a mix terms trust changed. had lower

those to beta the So in saw going growth lower we all are drive past. of things what than

Ryan Kenny

forward the wondering of if the linked keeps there follow-up, dig portfolio? per quarter, as drawdowns higher? that And can outlook anything could is of then rate X% AOCI if you the came do from the And a share you to value AFS just moving AOCI hit much book decline on mitigate into going how

Terry Dolan

think change gains investment vast couple losses driver, different not was tied all the we portfolio. a the and majority, on then to unrealized of started And things. in to change we The really it, when if of Yes. the the about the future,

certainly, more our investment we the securities As billion more with close quarter, on portfolio, Bank, mark of we'll reinvesting the the into of then held we and as fourth in runoff continue well. of we move lot to So Union are to held-to-maturity about opportunity that that of moved a to move investment held-to-maturity to associated $XX the into after sort And the have category. as maturity we

is expectation And So some the category, is period up our held-to-maturity portfolio that today, about over of XX% we in of the would time, move significantly. overall percentage

Operator

the Your next from question of comes Najarian UBS. Erika of line

Erika Najarian

Just going have rates? much remind do to by ask, NII borrowings power the of in some X% putting together what -- base think benchmark deposits, and immediately underneath period of the short-term back growth, for changes Matt's XX% And how underlying again, how that today? to us corporate the question end is of much delay breakdown growth, re-price recent trust pricing be on to us also you your today? to deposit given you you're I And question everybody Or most to the to of give could question, the indexed? expecting of trying loan ability more a able asset strength some those little a And repricing? in Do at $XX bit know in your is billion. terms I they Terry, book in are perhaps

Terry Dolan

Yes.

represent in Services that So kind -- everything, to question just interest-bearing which business -- deposits Corporate includes the institutional and talk trust But me. let deposits me the Corporate Trust, don't or the Group, of about deposits. bit extent XX% the with a Trust about Investment total start of their cover then the last the and remind I little in

that Now rate the about was in XX%. last cycle,

mix. So any rate. vast And to it's indexed of then the to down particular the it relative overall is majority not

pressure within A we amount than manage are what as is the to was That helpful. to the it little higher I in that the fair pressure But of a which from. Trust market we start money so up, be have some percentage the do that's where have well, deposits relative past. come ability And to is noninterest-bearing to that. as do comes that. really -- move of bit think lag will probably Corporate will ability competitive the But funds competitive

Erika Najarian

underlying Just you earning asset a follow-up the have underneath that -- assumption on

Terry Dolan

Yes.

end be of So growth the assets, vast side portfolio that stable, will of end of the on relatively will flat the equation. our up the at is earning expectation and the or investment come when we portfolio looking majority really the the year loan through

continue the that As it a second expectation linked may be about as at strong. our was quarter, a growth to into quarter we it look not reminder, be up And This will and, is loan C&I as think linked on that X.X%. while and up I level, cetera. growth solid be to it stronger, continue on et will seasonally nicely, basis expect would as in we very to good a cards quarter start get still the portfolio well credit will basis

Erika Najarian

potentially hit just approach And more run CETX I'm billion] we Andy the shy you [$XXX think follow-up CETX. Do the I'm TCE capital hit management? because and doesn't billion. how wondering closed of And X question And I Matt's to just CETX. years, on total -- When should than Union in Terry? a question about be in mark Bank, you was of think estimating your asset asset AOCI $XXX to your through size obviously context

I'm we your as think of the in replenish crossing guess I about even how potentially like next buybacks So wondering to terms years? differently return your after that X and the X you capital capital might management XXX, over influence

Terry Dolan

with respect size your the estimates are Erika, I to think total Yes. reasonable.

to you need give X-quarter you is some able an to the to rules, Our at rules average at you million. period say kind of be over up of -- a that, when perspective, need be looking expectation that end you $XXX to above

when entity. of between exists bit category we runway So a sort might now of there's a and become to that

between of out. quarters I And help some now earnings will will frame. that. -- things the let's composition things all think about generate talked of held-to-maturity to of and, fair through the with think, X of I of those kind that help that or portfolio, I X we'll of the amount respect investment a actions Some manage the that Certainly, say, time kind mitigate us

Bank, Union it's is thing other close of heavy mix. that deposit The the terms in when do on we

that and to $XXX a would it of utilize be in to expect stay that of will down to help period borrowings be So or order below amount that extended us and we cash, to like manage million significant an for things time. threshold billion able $X

Erika Najarian

the deploy as pro is shrink Just sheet to just from broad it, UB, than sheet not to growth more to you able balance balance to forma for to growth client clarify, the intention UBS? accommodate the cash but rather be close

Terry Dolan

Exactly.

Operator

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

Ken Usdin

a full Just you I much do waivers, that's And the running recovered the XQ? year question million? think around in recovery been I full contemplate that $XX which fees your revenue do on you have guide? assume said to How of start. fully in fully guide, fee recovering you've In also you've

Terry Dolan

Yes.

the of of given point it point to of it XX% quarter. XX fully after recover So year. residual the marketplace of third would amount second it answer of rates, the in recovered a And basis we'll by and movement yes, significant movement. piece, with as just about respect first XX with all XX% in basis of Maybe third that certainly the end to the projections kind recovered be it the a last amount see a of movement. in in next quarter XX basis reminder, we kind the the point the in

most but of quarter, third. second the So it in the amount in some

Andy Cecere

XX% about the it of second quarter in So timeframe.

Ken Usdin

just mortgage the and your of and expectation production the business. the from where outlook had outs and gone you for on rates ins the here servicing? given us, just Obviously, also have that reset given then And

Terry Dolan

home business is going trend time, and Yes. Obviously, point is XX% refinancing. with sales the business at to the in mix XX% refinancings, mortgage the of along banking probably

less refinancings -- quarter it past. in will the be of basis, what the than linked has been the So a impact on

home down it So will kind of to activity. sale come

that And be kind channel We will that, retail think continue of investment be to in strong. reasonably the our good. will

upon will I that be that on will on of sale think margins kind in basis, is perform thinking the drivers, just fast comes point we'll of quarter way linked looking driven about the good -- Ken, we'll as future the a particular system. of time, I think, things how least be where this and But industry in gain go based at at a how at be how do capacity the of metrics, kind well. out really

Operator

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

Mike Mayo

leverage from just to X% points X% is you that to to X% X%, basis make and X% operating from guidance, my improved facts sure have X% there, so XX% XXX Just from XXX to straight revenues to I to points. clarify, to I basis NII correct? XXXX to want

Andy Cecere

You it, got Mike.

Mike Mayo

is due improved is due payments that that some activities? of growth? rate? higher guidance, of due other or much much how loan to of that So better to interest to how And simply that How much is

Terry Dolan

Yes.

excuse think be again, that me, would we that, stable fee expect that -- year-over-year a I mortgage relatively on basis. income will

be XX%, probably with don't on because if to I XX% me, kind to but side up it's driver, be have and at it's think here growth So from between a be I interest I of when the a of what's had you I out, rates on loan going you will going it and and -- to And interest that portfolio XX%, of end XX% the balance the looking net income. equation. rates loan necessarily give kind growth mix

Mike Mayo

Okay.

of there percentage-wise from in Is expecting? big might region? So some a commercial the with see are this just was loan I And it your growth but pivot the pandemic? sort inventory loan commercial basis we loan said you by Is being your It the loan differences quarter think big Is on wind there, build? than recovery Is growth CapEx? you -- growth by bank. any of fast. it this just the best -- it linked up a that is onetime been element of -- I'm commercial might pretty have what growth kind

around little color a great. more be that would just So

Andy Cecere

I'll will This Mike. in is Sure, Terry Andy on. earlier, is there there. and those one-timer all and I add start. It's no across mentioned categories

So growth. is core it

takedowns have One talked which of geographically rates, our our utilization hovering as is, and in activities. true things well. you nearly to large those all I percent been It's other within fairly up inventory XX-or-so CapEx is market It's factors fund again, about, well middle widespread. key that and as and as is as corporate a growth spread which they're is component, our and the mentioned, which XX%,

would add? Terry, across it you a categories. So many strength is what

Terry Dolan

Yes.

see third seasonal second The other would get with that thing and just credit some benefit to portfolio is start into as quarter. I we the the we'll say associated card

Mike Mayo

that the Okay. And payment. question of is to then other part related

of for year-over-year little was a XX% growth. I bit payments think a of disappointment this little come back a a bit now it's time, and little quarter, bit

is headwinds? performing that from is Are your the expectations? and do to about your Just is So to it think relative recovery there the how or back? still payments you the expectations? how business? Or payments Or not expectations helping pandemic back market's I guess you own -- do

Terry Dolan

very Yes. excited payments mean, we're I the about business.

there's I place. are of number think dynamics taking a that

to and lot period the still we've the business so, areas, what our going that's single our Xx ago ago X investment. to continue CPS there's to X years were kind of of we at years and fact merchant cyclical represented on acquiring would revenue environment, see our overall or payments represents good. talked example, our say, in some recovery going expect let's that of time, it within continue Today, grow of those that that XX% revenue. recovery about I that expect wane, in X our to and I the normal high we or you're we about That's in travel think course We and making. of XX%, to that's airline about the making sorts been and last the a acquiring of entertainment over Mike, and talked that investments digits. sort would to because acquiring a we've as all we that of businesses. our think accelerate investments cyclical the when an And we're merchant started starts years, as tech-led merchant seeing, few for the

we're feel payments about at point. this from what we perspective would So particular you at a really Andy, good add? where

Andy Cecere

that right. as mortgage down deposit a that the by that's year in of offset businesses is for businesses. our full relatively coming asked the are stable, I overdrafts, have mentioned now And and you we Terry we made changes trust which when as some positively fees as well that the charges about and that think payments guidance the is with Mike, some the well fair service bit of as expectations

those payments of revenue diversification and and it's and through value some streams, coming in trust. there's So

Mike Mayo

just Can a it That it lower -- was a should digits? back could the answer. If push up? keep the growth? my XX% range? Should settle you high detailed Or I growth that be limit, down around any to payments numbers single

Terry Dolan

components, consistent the up think but on an digits, card at credit it growing. ongoing looking Yes. way industry the a than will the be probably with the single end CPS if Again, and of be merchant lower I at you think rest I high basis, is will that, level

Andy Cecere

Mike, part card And the years still impacts XXXX. credit prior comp, is that prepaid of of the in impacting comps is year-over-year

Operator

of Your line question Juneja the comes from of next Vivek JPMorgan.

Vivek Juneja

clarification Terry, just a there.

high think get processing clarify you so single payments, cards? So should And So that the beyond? or in post for on that, for the be are want what should and after easier, you those. 'XX, digit hurt I 'XX do to merchant credit credit to but referring comps corporate because just 'XX those card

Terry Dolan

high The normalize industry. year as single card but merchant kind impacted 'XX, XXXX. rest that And think comps, starts the by will consistent say, coming into for the perform and be believe credit down, post as because then we card digits. prepaid with the of get is revenue will to this you of Again, that CPS, you we that

Vivek Juneja

could big factored in that single are this up card has us? come that Or high expecting Or been the within into merchant? much credit are not or guidance? you your the expecting you more contract to renewals And impact just any that of digits,

Terry Dolan

the the of side X that. got this expect ago, renegotiated about large in and time. of that contracts at run Yes, years kind point a the on equation fully we don't in lot that's The rate of CPS were particular more

know are you years those that usually XX, As in length. contracts XX

the there. don't we So see horizon anything on

Vivek Juneja

the and you're looking One this is loan we've talked mix to it. Okay. that request, I portfolios, know in your about FICO actually that disclosing of past

do. your to very I loans, consumer given that. have Your peers be high helpful think mix would it And of

Andy Cecere

All look that. a Thanks right. the Thanks, take Vivek. feedback. We'll at for

Operator

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

Gerard Cassidy

on growing Terry, you look possibly and following banking your to attempt as the because going -- with as rates, comments yourselves activity is can where higher, the refinancing the the a industry or your there of can up they for higher are mortgage depressing well moving business, and an to probably has that be rates But shrinking equity has cetera? of of that refinancing lines? business equity yourselves alternative line been a home could equity years. that home into the -- business, industry et lines, industry business, This an course, the home over for people or been you

Andy Cecere

won't would shrink it level reasons equity, you just -- I refinancing same at mentioned certainly shrinking, would has it cause be been think and money because that speak. the home for replace Gerard, out, that to people have the would of so

going the it So but is be will I mortgage trend certainly a think see impacts I there. not directly, It to positive. you'll think offset positive

Gerard Cassidy

more about thought is really aggressive guys' Or And any on that? in not to be part marketing you plan maybe there your have those products?

Terry Dolan

areas at looking to need. they always the customers in opportunities We're serve

that or a remarks, pay equity improvements, whole now, home another examples I -- some of a other you about through of in mentioned but as financing my of that sort related the financing we way buy The now, pay later new component think prepared is point sale. a about. buy is later talked

something that's we're also So focused on.

Gerard Cassidy

and with to banks, do Got on is the Or Bancorp because distinguished nervous? then today very interest you assess not rate included, U.S. years delivering issue do kind and points you it. through have U.S. here get yours that's when for risks question focus of very think have, Fed If year credit when I possibly above guys you Bancorp? returns XXX about get we a you itself XX-year a the business nervous over the basis this the second, the Fed the of to And environment? an How strong for of funds obviously X%. most credit strong start obviously, do and comes in end at shareholders. that has at the having And well

Terry Dolan

Gerard, example, will there or I not conversation XX in And our as we -- issues today sort an question right We've ago business, always really be start and consumer terms and fair months seeing, lot we're underwriting what's going that customers are business, a a see focused in would whether and by card pretty I of looking I because in we on side, to prime it's of think at prime what changed we outlook that in been said, now robust continue end our the cetera. out. we of on we we recessionary approach. the just super question. a And around never when saying auto That very decisions Fair focus up year affect economic our XX a us. credit there's Yes. pressures more kind made environment. to think et to

years. been like changes of over cetera, portfolio last do mortgages the think different associated have lending side malls, corporate et help. kind today cetera. lot XX of will our was structurally the very side I impacted than areas we on of to activities it leverage sort retail the of is little But retail, with the a which years just the and that the equation equation, kind underwriting ago, made C&I of mortgage, We've or then of several XX, the et

So I we'll pressures think in event we that the that well were to develop. quite perform actually recessionary see

Gerard Cassidy

sale the balance a we this your how to moving And the industry Terry, the Bancorp, just of for environment, that your from maturity to of available you just In in and sheet bond -- in that portfolio. about about for a but not as more follow-up risks for is talked do standpoint, rising U.S. there, rate a business, start maybe see well? greater help part

Terry Dolan

investment the portfolio? example, for Within,

Gerard Cassidy

Correct. Correct.

this eyes that our we on we don't just mark because I'm open to for. march to wondering focus if wondering I'm in haven't that just the -- the you out have market. years. But And held-to-maturity, take, Just something may to I know keep need there's people had

Terry Dolan

worthwhile own highly government-backed, the think in I putting trying into mean, people as particular their securities of types are of cetera, -- that our of I think to of securities. mortgage-backed get not terms When certain understand I investments the kind may stress well and into Yes. types concentrated perform it's et portfolio, investment you in that mix of economy, portfolio. treasury in just the

see don't our a but credit -- something an standpoint, watching. from it in we I of think is particular risk worthwhile So portfolio, it's lot industry

Operator

the from of from comes question Stephens. Terry next line McEvoy Your

Terry McEvoy

just I back to If was XXXX? XX% simply year? I million. late I [indiscernible] the this this of out $XXX call, cost go $XXX savings to a Terry, on think $XX you And that September, about the to believe is from Union year, million in function realize to expected was which it of million pushing

Terry Dolan

timing. related all It's to Yes. the

Terry McEvoy

update occur? your the on the that of of then kind year, any XXX% And bulk Okay. on thoughts XXXX, of when full end XXXX by a savings will the

Terry Dolan

close first I mean this of 'XX, I we XXXX. of when year, realized the the but get bulk will quarter it fourth and of certainly, realized. does think to quarter we majority some vast Yes. get the that into And in of of the -- bulk to later it realize the that it savings, start certainly

So of I we very the what consistent by just deal. the about think is timing talked with timing the affected

Terry McEvoy

truly the basis. a seasonal was was the coming in seasonal Anything as In noninterest-bearing average then do that And component? in think decline into it the I factors was an Or release, on kind think decline? that a Understood. deposits, you of that follow-up, of X% terms play. beyond just

Terry Dolan

almost as that a deposit to type and closed see always year we a get through the deals we the of With and near of XXth clockwork Yes. our Trust business, like around see Corporate runoff. ramp-up try the of end February, January in

our So from really seasonal standpoint. all it's

Operator

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

Bill Carcache

apologize back have, bit -- faster if sheet could on before. when perhaps and already to if go I transcript. was talked a deposit betas. about of faster risk ask to as might we you the I'll noninterest-bearing if And that? outflowing deposits exited this I I than wanted happening this balance have you the we think comment about impacts I it. and if on Could comment But you the Fed last reserve just cycle runoff missed on of the perhaps and

Terry Dolan

on through we is not go going will of think going that to good will it's economy. with growth is the And our But but we a think the I you're more do certainly, overall of levels that look expectation deposit deposit be that the how end And so that No, up we line see overall the information at slowly. going slow. only grow Yes. to us, industry, just I affecting question. kind -- then as growth of in kind to it's modeling the

a deposits continue but at expectation our grow rate. is So lower that to

Bill Carcache

believe, remind for following appear USB little be of And that banks point-of-sale you're on there Andy, Understood. of debate us you the among seems then use your new Zelle to commentary, to who at, bit I looking willing like retail promote a solutions some around up about debate? in your would Zelle prefer payments payments the risk stands Can you versus to a think product potentially cannibalizing And where that of how that of others some volume? wait.

Andy Cecere

on just across focused the What Zelle with our we're of Zelle is utilization customer base. increasing

we're it's at think a looking just overall, trying cases. of We're increase has product. lot utilization. I what use It the different a cases. to But is do terrific use

Bill Carcache

the U.S. Elavon XXXX for losing moved XXXX share dollar I seeing acquiring in published is player merchant view based may, some I investors acquirers this using finally, legacy it been but -- that in merchant merchant then among market Elavon the following to a there's Nielsen shows the on volume. this And guess, #X up you're technology stats up strength if There's #X share view in on actually legacy side. acquiring, Fintech and from been in its and

think making So space? your gain position? you're share protecting from where the you you can to talech in more it in help is investments that the acquiring actually continue stand, digital effectively initiatives Or do other and you

Andy Cecere

can allow We Bill, to share. us think, do No. gain that

combination years. number X a a of of the talked things. last X it's or Terry made the about we over think I investments

growth, tech-led on product ago. together X set, differently merchant than points selling focus comprehensive And or future expanding customer initiatives us dashboard, then customers. the within base things it processing acquiring and talked those banking about also think Our both years that the bringing position for and of have, a and new we talech growth that well but all was we X with combination into I

Operator

And speakers, the Please any over phone. we don't continue. questions have

Jen Thompson

any earnings listening questions. for That follow-up please our Relations the you concludes department, and you have today's Investor call. call, Thank if to contact

Operator

this for your gentlemen, today's concludes you and call. participation. Ladies conference Thank

You may disconnect. now

U.S. Bancorp (USB) 14 Apr 222022 Q1 Earnings call transcript