U.S. Bancorp (USB) 16 Jan 252024 Q4 Earnings call transcript

Company Profile

Participants

George Andersen	executive
Andrew Cecere	executive
John Stern	executive
Robert Siefers	analyst
John McDonald	analyst
Gunjan Kedia	executive
Betsy Graseck	analyst
Ebrahim Poonawala	analyst
L. Erika Penala	analyst
John Pancari	analyst
Michael Mayo	analyst
Matthew O'Connor	analyst
David Long	analyst
Vivek Juneja	analyst
Bill Carcache	analyst
Saul Martinez	analyst

Call transcript

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Operator

Welcome to the U.S. Bancorp Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] This call will be recorded and available for replay beginning today at approximately 11:00 a.m. Central Time.

I will now turn the conference over to George Andersen, Senior Vice President and Director of Investor Relations for U.S. Bancorp. ahead. go Please

George Andersen

Vice and our Audra, Kedia, everyone. I'm Senior Today, Chair John Thank and good CEO, by Executive and Dolan; Chairman CAO; Gunjan and Andy joined CFO, and Stern. you, Terry morning, President Cecere; Vice President,

moment, press will be Andy be supplemental schedules release together and slide referencing of copy found John remarks. website can prepared all their A and at on the a a presentation In with presentation, ir.usbank.com. our our consolidated

forward-looking any to Factors could forward-looking that the Please release, during subject release our materially Page made current press note call are on press with earnings SEC. and statements risks today's our of described and that today's our assumptions presentation, file X reports uncertainty. are change on

remarks be Following questions this take any will you morning, to we that happy have. our prepared

will turn Andy. I call to the now over

Andrew Cecere

thank morning, begin Slide Good X. everyone, George. Thanks, for and I'll call. joining on our you

fourth top basis XXX after quarter, reported the effective resulted and on leverage year-over-year. revenue interest prepared diversified diluted which notable mix by of billion sequential billion in earning per and quarter growth revenue discuss adjusted income fee the discipline, balance our and points onetime remarks. growth as expense $X.XX in will business driven and line quarterly net noninterest asset positive income, highlighted an by for was for Net highly in his and management, year, saw totaled continued John sheet repricing and basis offerings. operating we charges adjusting In for $XX.X quarter year-over-year these both $X or $X.XX we the share, the items. Overall,

driven quarter balance slight Turning earning increasing to sheet liquidity. this We on-balance assets higher growth Slide with by X. average sheet had X.X%,

and had we reserve largely credit modest portfolio improved of quality more quarter, favorable mix. loan release, a This reflective loss

right XX.X%. our from points capital the quarter increased the to prior slide, that you see CETX the can XX On bottom of ratio basis

at $XX.XX XX.X% XX, end December year. share to the book last tangible totaled of compared of an Our per value increase

initial During the of quarter, we share repurchases. effectively balanced an continued accretion $XXX million with capital

performance we quarter. Slide efficiency equity basis, adjusted key XX.X% the fourth and an X return provides tangible metrics. XX.X% an common an in improved ratio on On of delivered

income total in Turning quarter. driven XX% by X. investment management net product this over year-over-year in trust revenues. represented revenue quarter of Results the commercial and Fee to double-digit fourth fee investment growth and Slide products, were

franchise. highlights X the of our selected interconnectedness Slide key few initiatives a on across

forward-looking to the who Let me detail the call guidance. more provide now turn will well as John, over as on quarter

John Stern

Andy. Thanks,

start earnings to you a with I'll detailed X, quarter by a summary, fourth If more turn trends. Slide followed of discussion earnings

related quarter, initiatives $XXX billion included million with actions. deposits fourth $XXX restructuring notable strategic share real items, continue balance earnings quarter on deposits operational and basis delivered million $XX the Total relationship-based notable maintained as increased a for these this prioritize share net we X expense of X.X% the a common common from or impairments pricing to summary. items sheet and quarter provides per which per discipline. $X.XX we estate $X.XX, included In of diluted earnings After average quarter. Slide linked of $XX million items, diluted $XX Notable of million reported tax. efficiency lease we to associated adjusting our to for

institutional the quarter, While by quarter. the deposit seasonality deposits was driven of total noninterest-bearing slightly this increased at largely this end

mortgages originations paydowns increase a as now of credit stabilized and initiatives, total totaled seasonality, as a spend. commercial deposits noninterest-bearing residential to in after Average earlier our well deposits on basis, looks card billion, line in X.X% higher modest to for accounting linked lending $XXX by expectations. our percentage Importantly, of quarter this loans seasonal have with slower new driven

securities. to slightly XX, our repurchases of investment on $XXX from balance December the increased portfolio ending opportunistic At billion

of saw we impact slight than investment repricing. of the the quarter, variable rates portfolio as benefits yield book more asset in a offset the both across and average fixed decline loan our This

Turning which to interest fully stable Slide XX. third Net billion, was totaled income quarter. the to basis on taxable a equivalent $X.XX

total basis our was equivalent income For interest better on of a net guidance billion. fully year, earlier the taxable than $XX.X slightly

Slide XX saw by and partially noninterest quarter, revenue in highlights in growth income. noninterest seasonally we mortgage the other that revenue. investment management was banking payments Linked trust and lower trends offset income and lower

our XXXX full diversified and from growth excluding compared we income noninterest benefited XXXX, business consistent year losses, security X.X% differentiated mix. continued across guidance Importantly, to our increased as with

billion Turning to Slide as XX. Noninterest the quarter $X.X adjusted. totaled expense for

$XX.XX year guidance was efficiencies on noninterest just operational We than continued expense $XX.X remain billion. was below which year, and prudent or across the management better For from expense of company. billion as the to adjusted, full total benefit our focused

Slide credit quality our XX performance. highlights

Asset this expectations quarter line with quality stability. in reflected ongoing metrics macroeconomic were and

a losses real Our flat other was compared XX X.XX% of and of ratio assets loans nonperforming ratio credit XX. the year and totaled quarter with charge-off at net fourth The allowance December December X.XX% as X.XX% $X.X billion, September or loans ago. our estate to period-end quarter and third X.XX% X.XX% at was for to at XX, expected, of

XX. Turning to Slide

$XXX ratio Our XX this quarter. of million of included distributions, XX.X% XX of which CETX points an capital of increased as share basis December net initial buybacks

balance level modest with as we and expect in continued Moving accretion buybacks pace remain the of the near to distributions. capital term forward, we

Slide quarter expected to fourth Net quarter stable first provide of now guidance. Starting XXXX and relatively first XXXX, full the will to of year interest income days. quarter impact excluding XXXX the forward-looking I XX. with be is the guidance fewer on

fourth expected fewer be fourth quarter to days billion stable the first the quarter relatively to level $X.X noninterest quarter. approximately as adjusted. of Total As is expense a X the than reminder, has

in more We expect year-over-year the operating first points positive leverage of basis. XXX deliver to or a quarter basis on

Total in compared is I'll basis X% be range year now provide to year full XXXX. revenue growth to of an to guidance. on XXXX estimated full the adjusted X% the

for the greater excluding operating the of year. security impact full of losses or points achieve leverage, XXX to We basis gains positive expect than

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

Andrew Cecere

Thanks, our in story. important John. pivotal marked in a the and XXXX company a it inflection many year point for was ways, very

was much Going most uncertainty to broader persistent through volatility, into changes headwinds, inflation, on executed a effectively regulatory and year, environment, significant the the respect to few. rate strategic managed macroeconomic the name But political with and importantly, there we our objectives.

commitment quarter highlighted showcase execution, by Fourth which points delivery basis results XXX was our leverage. to of operating of positive our

effective expect and momentum stabilize that the the into did we management, fully and strong prudently quality interconnectedness our sheet deliver franchise capital it us balance As continue financial we position, discipline to our XXXX. was and credit results to across expanding continue enable to that fully this quarter, manage

extend to to by Los Angeles. like I'd those Finally, in ongoing the wildfires our thoughts impacted devastating and

in We are our our teams response help closely across best support bank collective the have monitoring customers the involved efforts employees, and their to situation and communities.

to and me company. Let for shareholders a was in clients, dedication our the communities close continued what meaningful by their our employees for thanking year

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

Operator

Scott Sandler. [Operator we'll Siefers at Piper go Instructions] And to first

Robert Siefers

John, sort ends from delve I to drivers up X% in little discuss fees? coming maybe words, hoping revenue much a NII, year In how the to more of other expected how comes 'XX growth. of could much you was full from the X%

XQ I think then the and day maybe NII saying clarification. about guide, flat you're And you're a the guess count When I talking -- excluding little difference.

basis certain, fewer just would thinking marginally be just it reported we're on So a due to I days. be down to want

John Stern

Scott. Thanks, Right.

question take your a first. So million reported let excluding days, be me basis. would Yes, lower $XX last about on

So of representing we're stable excluding days -- that. kind X those of million. That's $XX that that's how

into revenue to the sure, and on -- on X% interest X% net your drivers growth, go the with over fees the I'll income. On me start let then

solid headwinds particularly fee things. the our We things that well of we as that's saw, healthy side on freight. really prepaid had have on on some growth lot and side the a And despite and building, card momentum of of as we

the So saw space some in headwinds. areas that payment some

servicing with headwinds the our exit of saw also ATM cash We business.

things or will abated have here abate in those XXXX. So

And obviously so core. we in momentum see the

At growth our a really really fund be formation. there. for think strong XXXX we is reasonable strong XXXX. for for market for comes about seeing expectations rate as XXXX core our about we're to to range digits it our fee area, term areas Investor about macro growth. The us the Day, we share, medium -- expectation our that's and And for mid-single at within to And really Payments. of think down trust talked

strategic have a areas, number management We underway. markets continue initiatives of are in that capital momentum strong have certain areas. growth good and Treasury in to

volumes A on persist really basis with year, on sale to be to $XXX And gain per continue revenue our as will range then rates, the well. stable million a is that see average lot it an couple $XXX in was or of mortgage. quarter. watching other million pretty hard and in is areas that be stronger these to it's than prior Mortgages we're higher

we expect So grow. another put way, to fees

for we and to begin. that think momentum, mid-single is reasonable digit strong that is place -- us have We a

As is interest asset better stabilize That's in The we X seen noninterest-bearing saw at we spot. we've and shift drivers key deposit for again, this a will our slow starting We've which We seen XXXX. from into positioned. inflection normalization. continue. -- of rotation think interest shift think a mix, come great net net It's balance throughout to the higher-returning really really sheet That about more assets. to level. down about is well income, And income. going in

was September year, particularly going our we're importantly, a at then call, a the curve. curve treasury, with seen on SOFR back since steepening. versus and back And positive X-year is now to actually. fixed the -- that last always in asset we be this book I We've driver And on inverted this meaningful were look meaningfully repricing

trajectory. so is back And some book us to nice we the give going think

that we loans of runs about residential loans to reprices and Just at $X per billion includes fixed like average $X basis reprice rate have And that $X today's to that XXX billion as assets an points rates. the off, which XXX example, points of replaced quarter, portfolio kind And have, $X XXX an that have XXX spread. we to things at of that's can then billion billion on mortgage, basis investment assuming that, and that commercial on that other mark. again auto we get

really So with X% interest either we're both our all confident X% net up growth. income. way, come to that's it put fees very and our we revenue where and on together, total you growth, And in

Operator

McDonald John Truist to next move We'll Securities. at

John McDonald

the is first questions. ask to one strategic Maybe for wanted Gunjan. I two

what the growth new Just on new Yesterday the for the announced this and the and give will a week, for just payments there. do organization us head opportunities plan kind or the business. of setup consumer side. to Maybe reorganized hope you and you you payments,

Gunjan Kedia

you time. that me Let the facts of we of just shared last remind some

strategic interconnect our can do set we a that sense very Our to consumer for payments franchise. franchise with our asset franchise more and is product And our is institutional us. that

X the aligned with is that the into an it splitting franchise and structure pieces are to org parts of the accelerate So expectation the X more execution.

So it's focus. strategic not really a

we his pleased welcome joins year, We the in Earlier next leaders. stepped us very the Courtney on Mark are role institutional very Runkel, side announced Kelso month. Amex X to and from he earlier. into high-quality

our was for sort the to intention truly of goal is the and So our interconnectedness. around that vision accelerate execution

John McDonald

and Bank State be Jones for the maybe bank, Union you're footprint, looking of the where company? foot? to moving offense you U.S. have growth And kind through the Okay. seeds maybe in invested broader, where I might in just and kind Farm. planted the across of has for excited where But and across Edward maybe retail Andy, think franchise front about your are just partners, you you the

Andrew Cecere

John. Thanks,

think management I about activity, our which that John about, an talked is the business, business, activity, investment our across articulated And Investor all if loans. in retail interconnectedness. targeted with loan growth in about deposit we our business profitable Day, business, momentum But commercial products concept business, it's Gunjan of trust about business and payments commercial think the it's talked the and growth that in our our lines. you that our

with John think, So Couple have in a sort momentum the I net really positive was that talked drives the the interest John. curve we of income. momentum that of that, going about, lot yield that on headwind

I which for expense last flat And think that this with about, operating have relatively all positive we that fee momentum. is positive leverage coupled all quarters, which The talked categories about. we of talked drives X the

positive, it's deliver revenue, and of going that's positive leverage. operating to categories the all managed, across well expenses the So

Operator

Betsy Stanley. go Morgan Graseck to next We'll at

Betsy Graseck

beginning you might it but ticky-tacky, what sure based I NII but your want today. -- is and make I forward And is, know, mentioned I understand, lot reason the sound noticed on? curve like I December ask guide think forward I today, to between curve just as of all has we a that changed very the and

question. first the that's So

John Stern

Sure.

we curve, our of do terms have in X embedded. So assumptions rate cut

and I September. May think one in is is in one

think at level. curve. of the the short the So end is that's end the about curve we of long And kind how of this

That's right the where we're So of now, of That's a at X.XX%. treasury place. the probably is kind kind good XX-year throughout year. at

volatile, we kind we that's matter course, sorts that why our it's those of that's the at say know I Of these when of things. been it's But and does curve projections. -- volatile, look are

Betsy Graseck

understand you the Okay. us that move help [indiscernible]. how end got That's Great. up more? And fewer in or of can event you've cuts projections your rate the long went kind would

John Stern

Exactly.

interest So to rate continued again, an have risk standpoint. neutral we be from

the or the the So on expect Where those movements some if really changes X particular cycle those of even we mentioned, to as the which right, the will is or be there possible Fed shape more cuts we But is can curve. -- things I as of the end want manifest shift. neutral as on know hikes cuts. don't curve. be from We there's short to Fed the cuts,

curve, a It's are. the steeper interest better put would bit off income. net So more the pressure then on we more a little inverted, that

are the and of puts kind takes. a high level, at So those

Betsy Graseck

coming And thinking you deceleration the that as sense year, the about? it Or as acceleration a just us or through the during there to that is repricing? we asset cadence roll give any be through quarterly fixed should same? kind can year of we Is

John Stern

consistent. It's pretty

doesn't corridor on It's $X doesn't I tail consistent. $X going portfolio, in quarter. billion pretty it the So But to each off. investment it's range pretty of Same quarter. consistent it I the mentioned year. billion to accelerate, course throughout the that per the mean

Operator

next America. our with to move Bank Poonawala We'll question Ebrahim from of

Ebrahim Poonawala

one, shoots about in we of guidance deposit year demand? I for Sorry NII and if loan growth? Like, a your we revenue assumption seeing from outlook, When are think remarks. perspective? the a what's underpinning the your missed pickup yes, this green growth loan that in prepared what's And the so of or any lending

John Stern

Ebrahim. Thanks, Sure.

our So loans, terms we yet growth on 'XX, of have but in and year. we're pretty -- I loan and how forecast for not modest just deposit did the comment say full purposes about would thinking we for

variety, things that clearly, of terms lot and in Now a sentiment of positivity. there's of

excited. is base client Our

at that there's think momentum clearly point. our not lot We're translated But this thinking I yet of in loan see we can that perhaps, has pipelines a elevated changes. growth into pickup our the for the forecast we in it's hopefully, year, of growth. we anticipate loan back But half projections, and of in that the can our terms see in modest year.

Ebrahim Poonawala

addressed I payments guess you talk I little just Got the it. maybe And about -- around think business. bit a

of market forward? the As overall obviously, And there that of sort a you Are what across yesterday. of ambition in going drill losing share, we of context new Remind of the categories head think expectations payments, can about around positioning. brought if fee revenue market your guide. you year-over-year is share? into payments in And revenue the winning we sort us

John Stern

Sure.

the we payments in mentioned had had, earlier, there. I core have We as So some side. headwinds momentum on

we through of in on in X% and categories, card just the continuing the the had prepaid -- that our going lap but some side in we And the quarter then products. in second lot to we about prepaid I momentum growth hurt in total side, revenue. nearly have impact again we'll credit fully card anticipate of card on of quarter, if was different strong kind in first the different a us the there, revenue really. of things, the given exiting That's this sales just quarter. But points, side, percentage go X by So over

is our coming Smartly online. card that We have

of a have lot that. excitement around We

acquisition, Our penetration. that increasing Union

in retail side that -- growth card mid-single-digit terms things. the of of expect on So we continue to

side had, sales. merchant things, strong the we've On again, of

there Our tech-led formation growth really and making been has investments. been strong. We've

their looking things, travel than, growth but course, as was be growth sales expect XXXX, Clearly, on in been expectations. there. clients quarterly our below as of high-volume, strong. we've had of investments we to see it side year. type improve, our rate then lot pace, growth We aspiration the their best strong more a continuing are we had, Freight, better And same-store of we're to making digits improve. the 'XX that lower-margin rate high at our single lot The at CPS a XXXX. And may We've of not lapped. pipelines for they

of lot things penetration a really again, positive So there. the And Union paying us is be off to for going well. as

we And single so well. there see digits as high

Operator

at Erika to Najarian go We'll next UBS.

L. Erika Penala

during Investor and the billion that. You share I about think $X authorization repurchase market did quite that got Day, excited announce

heard if prepared $XXX and about are thinking I terms pacing did of In loud puts modest terms the you're conservative begin of you guys it balance in that that pace more a the to guess you and looking growth, of buybacks, revenue growth puts I the but the little a the have terms with. clear for you're this you what considering for and is I loan of what to takes know But quarter. and your million guidance the are start modest that soft in remarks, pacing? sheet in during guide takes seems embedded buybacks? like

John Stern

thereabouts. where being capital basis. We really between about want talked II Erika, Sure. a we get high bank or on And need a we level, don't to to be where XXXX II we to a balance our Cat be At XX% to level obviously, growing approximate expect until perspective. it's our be a from Category Cat the to II of

the So side it. one that's of really

stepping into just then it's But mentioned. an is going you going about opportunity on started, those quarter deployment. this, we -- as talked -- we're we're and is, pace said, dictated I that be we thereafter factors side other and the for be just to the to The to going next if growth, we're there's loan just weaker, as

L. Erika Penala

and And Andy. laid to then either operating this or as a for just positive you're Slide there's leverage. softer, terms The the way environment, payments going follow-up or points deliver guide flex of revenue or way projection there of better XXXX? interest other, message your that in maybe for revenue the sort is XX you the enough on and -- here, is now what regardless income XXX-plus the be basis that net out maybe swing in the one baseline where can here point is the of you where to a to is If

Andrew Cecere

Sure, quarter it's do of positive points on we've have I'm We are the some our the been still in regardless a John, John a basis of number Erika. But leverage. to Short of about very what leverage across positive XXX to we company, flex environment highlight different don't some Erika, expense. to of talk plus answer, on that fifth operating yes, is in flat going the levers? ask you the managing revenue areas. is This quarters. investing of operating And flat we're base expense for managing expenses. We're but many why areas. confident is. And

John Stern

automation -- to of Yes. and continued estate fragmented have the a as be more of thus the about. side the We're at, But far, very efforts of of see work optimization kind simplicity have notable then see we certain item teams as opportunities groups that proud made expense. just to organizational year obviously, but throughout Clearly, and together spend well we're we kind and real looking lot bringing we centralizing and talk processes. actions, of had third-party done continue we'll things. on there. we've levers Procurement aspects. And the of the on a that different There's

inflection automating investments terms our help talked in by manage we've then the a about that have about Day over Investor lot digital of at processes, been We point that in capabilities. us certain and investment we that talking expense that of

we've now that excited And we're So digital along cost which if a place, that that we're you J-curve, that at the about. on stabilization of really flat increased we're amount digital bending the all investment, side, curve will. and

the those those at. but But different main levers we others, lot kind the a initiatives. pieces. that There's are different of we So are of have look

Operator

at Evercore next We'll John from ISI. question our Pancari take

John Pancari

outlook by interest around commentary net Just fees I and of breakout your the color, appreciate then revenue the the growth income.

we margin you the us commentary that interest income maybe out XXXX, perhaps behind -- coming could even thoughts mentioned the up you us around deposit exit of net margin trends. a maybe rate net some -- for with Just interest help repricing your the trajectory medium-term normalization, an and and help us how as year? And fixed give the drivers just look through end it give what as to around the could the of the asset better where color means around

John Stern

from And increase. manage net given -- net the we Sure. anticipate standpoint, interest net don't We, interest management anticipate drivers, and Thanks, margin we we John. a interest to certainly, income margin. do follow the

that basis example, going I should We due points there's Day follow. entirely how about and to in that As really not be momentum of puts mean, an it But this us quarter, liquidity, kind X%, mean I time. always and into a to it there's transitional right? to -- about but fell anything So drivers talked mentioned to all lot it. just categories those Investor magical there's over level X that takes at directionally, certainly get I about of

down, of repricing. can our as our deposit I management the loan shape big that asset and and things book really fixed that goes are the up it think back which growth impacts then the move or curve,

are those through directionally to to net going interest be the but certainly margin time. expect march we the components, So as improve

John Pancari

separately, then capital. it. to back And All right, Got John.

and the another -- the possibly would And different given terms across then what be guess, expect or front, putting at role as M&A I more comprehensively would a that results M&A of has we longer term options just has opportunity. I election you've whole you changed more would the Or guess, supervisory it Gunjan, only post been in near-term know your -- in the look at view? does be Investor your that the versus a regulators? a regulatory change how of Day, question -- all? that large view a On franchise I near-term clear Andy, M&A bank consideration change

Andrew Cecere

same, us the The purchase may factor is the the So John, is And bank valuations isn't which now. perspective our all process, of this. into it's not clear a priority the yet. approval but right combination regulatory which for improve, accounting current marks

may growth we on may our return So large have because And organic lot term, while we're return, opportunities it a of over focused the M&A bank very longer that's where we're them. putting can Gunjan, our efforts maybe couple priorities right think you of because have that of that because and emphasis highlight of we opportunities in I front a the now. And is them us.

Gunjan Kedia

add is Very of trust regulatory is growth while that very for saw because investor our we true. significant I'll very the too, our high. markets environment opportunities, and very and and organic confidence our consumer fees attractive confidence a capital acceleration fees investment

So of the our real a our many, focus. growth across business. very drive much it's operating inflection with in And positive organic is leverage parts many ability to

On balance have business. product markets sheet we support the a side, that a bigger capital would much

And quite at that. we good, really there good product capabilities very new pace. deepening as is introducing across interconnectivity We're franchise on focused So a the sets the well. are our

So strategy our it's growth good now. very drive right with operating and leverage, to is focus that positive a

Operator

Securities. Mike go Mayo to We'll Wells next at Fargo

Michael Mayo

You're basis points. finally said leverage, turning on XXX least corner operating at you the positive

having story. operating of leverage, -- positive it's after it's I a think are so think I show-me -- wondering long not people kind

today, you and of you do basis in points a understand Some lot than have the industry. guiding might that. Under higher think other XXX more have guide? could scenario think the banks are you what I tailwinds actually you

are that this. could your is people the Because high down, questioning What stock would reaction? go? how So be

Andrew Cecere

wanted in is on in this we're provide we to in guide confident inflection to in conservatively that and confidence I'm manage we environment, point what our to very expense ability revenue Mike, the the a I'm that numbers. giving and very do you components. confident have

So that's plus guide. we point a XXX put basis why on that

that expectation of But the expect and we'll things that into bit different comfortable the like XXX takes helps our give the to want with, guide the an hit curve market extent on side little revenue that So John you talked a that the yield very curve. and we're that. take it control a that we us we I and are above puts yield to with to be about, But out at least. account and the

Michael Mayo

And there points expected? XX fourth more question. competitive acquiring that yield, Is then and The the merchant the pressure? yield? year-over-year What's points quarter, Was revenues it like in specific basis the accelerate with looked that causing basis didn't contraction XX a that contracted a volumes. in merchant the surprise? acquiring Was

John Stern

Sure.

So Mike, initiatives which tech-led was when think about tech-led continues the and our the on same-store business X/X mentioned I our merchant terms of and total sales I pretty -- we it that growing mentioned, and strong in -- while although to growth base, has be side. I strong client had of quick the has are margins, X/X been it

of year. And of that kind and persisted kind of XXXX kind The growth the kind that that's has in on that. that the lower margin, of creating you here of talked we mentioned other about side has of our client throughout just have disconnect expectations base been and in because that volume, higher the has followed

Gunjan Kedia

about two this that care and proposition and the space franchise talech were the there, health here, customer results we X space. to client really as if business That's for but very I see very we can add and there. in proud very the quarter were part, rates and our of, different did part We which showing the is I well, some tech-led business very John, may. is merchant color are disappointed the retail strong growth of around is the acquisitions Salucro the we the now. The across the X/X value nice characteristics.

show revenue that good and patterns. sales So volumes you part, see

low-margin few a vast growth in saw a very have we of side, partners, we other group the just On businesses. large and very volume,

that was And the some the on but of side of quarter might here. that business, persist that

Operator

our Deutsche O'Connor at next from We'll question take Matt Bank.

Matthew O'Connor

trends commercial if wondering the in year. quarters year-over-year, but revenue. bit lower seen you was products you've this kind nicely versus was was the up talk other a little I about the can It of run rate

the of And markets us, of a contributor decent like there's drivers I us remind underlying in Just businesses capital remind the are. that. think what

John Stern

Sure.

heard So Matt, this is say. I commercial the what products, is you

been in story yes, had a highlighted good strong as commercial at course, it, has So investor us. then well. conference growth Investor for Day products. It obviously in fourth at We've conferences, and we various a of quarter

also swaps lot It bond up quite in this foreign we've different was the which bit here interest either kick talked seeing it. But the as well, really about were came activity, syndication So quarter. exchange. underwriting. was new products areas in And client-related a Loan rate derivative of a in. growth we're or

syndication things So ABS we've desks like talked and about commodities and some that. of desks, our other

growth And XX% growth. with the the things focus that, verticals we really year us of expectations we've expect the product our nothing And have of changed. side side. And our so and talked in really interconnectedness and has private credit about we on this really help on with that -- that's about new was

business. expectations for high have We this

Matthew O'Connor

Okay. noticed down And row. quarter then And grew. deposits I little separately, were on bit a seasonality the a some in the quarter deposits, but they on period average end, the the third this for

really just say there's seasonality that. you think to period focus modest And I end, but much expect answered too deposit maybe growth. So maybe on question address I that just did the you

period to narrative add lower. to So just though anything that end the the was

John Stern

Yes. Sure.

We deposit strong is we've growth was balance a do as in than some the at average get standpoint. of we a -- movements third end very us, pretty from for indicator talked the The So fluctuate. quarter really ending. ending particularly the can better quarters, meaningful get about, can

deposits pretty was high the the of even third surge compared had it to quarter, really so fourth of a a end quarter. at And we though big

net our talk first clients. So if DDA kind seasonally income of institutional quarter, side we and particularly first of example. In a or as we in that's example, in you there's the just because just deployment investment of our just part from accounts of deposits first the in is have about institutional overall of and an clients that stable quarter, decline, corporate-related things from for the our think about our quarter one the there, interest a operational wholesale either investments lot reason

sorts growth of it. that's standpoint. But things the kind with driver think you is deposit a being QX I'd characterize a Those of about kind so of And how a overall, modest from deposits industry. consistent of should

Operator

to at [Operator Raymond Long Instructions] next We'll James. go David

David Long

the I throughout just And costs your the in I down quarter, your cost do you're in with XXXX? came for deposits and here. average competition out deposit it pricing? plays And theme curious for some line seeing -- what to how the just seeing that think with what of when with at stick you look wanted peers. And I'm deposit

John Stern

Thanks, David. Sure.

terms it's So kind is, more two and apart, institutional whether that, projections equal I of of I to growth the it's it modest up. growth that's on expect our and would things it from or of like of of break of embedded it loosened those -- pieces things rate lately that do say, the side, either in consumer a the in in in terms -- have kind have nature. competitive been cuts seems like on side goes side. If things and occurred, either, kind with be the consumer deposit on again, standpoint, deposits. this I comes

It retail better not And so But competitively. competitiveness up time, the in over terms of bit moderate. little we pricing immediately we're seeing would expect a to this quarter. show may

that it side, at institutional would also this the of standard kind comes call but point. I On goes, and pretty

now or that's the competitive is But and think up some negative very expect QT, one the institutional in we right that out all, competitive liquidity obviously been create headwind there. to be can natures on I side. drying all

of We helping we have kind puts of and products takes. very that about are a are the and And that. new lot us grow strongly great feel main deposits, those

Operator

We'll go JPMorgan. next to Vivek Juneja at

Vivek Juneja

And a Payments, previous question. there's a been calls. it's about So already. on talked discussion question we've that strategic some

to year. heard response, ] [ Your is cut that into news rest and well, tech-led Gunjan's drag, but continues next I the probably doing the --

given pricing areas about a that? rid of where a getting doing the where business, of much you're business pressures, you considered have wouldn't Given returns? you whether the and -- to other should deploy much the stronger think capital Why better you in position, get this you're

Andrew Cecere

been. way, And is But have of and And can on. fee-focused and ability that a in technology with with And XX the we very of moving this money we interconnectedness I'll I all environment, is as lending Vivek, the money we the add terrific ever that and interconnectedness concept have start, capital-efficient, to this money Gunjan extent ask it's think of the payments banking is intertwined. want important as and together storing together, it's that things last in platform a grow as is these to critical the been offer the retain business. also as years. why in to to

on opportunity. And So Gunjan, why focused business that this of add very don't because we're on? you

Gunjan Kedia

question. saying is to add here. thoughtful Andy And what I'll It's a

market of on are set a to and attractive has a that market and the term, building talking a to returns. clients, of high the share profitability, industry, embedded very more is client area value focus of it do is investments are return look it focus rather sort we It we business deltas deep It's just have been with client where retention we product First, where just our the of this gains. And in expectations, from lot interactions banking the you than just proposition come one some but into long a and and routine the competitive and on discipline if very on products. has hard share, more an anchors way is frequent the some business. seeing about very

of money that with to have healthy, we banking you XX% a So clients center of credit of revenue, very that the movement X/X conviction parts needs issuing steady by on just the payments our just business, relationship there. shares is our It's also of core the be very card our total size card, financial the surrounded business. remind of capabilities. I'll various of market deep

issuing very pipelines. card also Our payment healthy looking business and is at corporate

for great and and gives both to this out, corporate the small capacity of it Elavon with us All the the areas. for stay build business business

So to in this good it's you question. the your want capability strategically, And answer clients. question, your with a mix

Operator

We'll Carcache next Bill Research. to move Wolfe at

Bill Carcache

merchant some fintech new X% that seems take that a growth attrition? and There's Can at of growth time. disadvantage service still you us a solid a inside additions customer you're revenue of versus between your Your competitors. perception to processing at tech-led discuss the breakdown

Gunjan Kedia

just me start here. Let

here the is the proposition back-end of competition It's space is the What on ways. easy reliability, in tech-led do to the front end. One user partner two not partners front. tech-led operations. experience the the provide our value the the we be in in a So with the unique on comes

to the It's good And you're monitoring. it rate we other a where contributor monitoring. is strong a of of as it's of networks a So matter around front very of take success shift more time more and this I bit. their as total we It's all areas. transaction do with the systems. very expect it. partnerships, vast -- number of dynamic over fraud playing of as little really versus This mean partnership franchise. To have It's your goes business. question reliability And role. can It's growth to and a it's that new will by, competition it end is be business that go sort into of space. mix in much now, the a that the a the

really the we too. it's So manage, that portfolio

Bill Carcache

in to you expectations? deposit this, from Got given the Separately, following expect on your where rate did NIM grow quarter? up where costs average here missed it. I cost funding have And but would may the your commentary,

John Stern

Sure.

you're maybe Fed because easier in will next it's standpoint, cost the to the of that first speak to think deposit moves that fourth going terms see a quarter, I'll quarter little impact saw impact I to bit obviously, beta the it we quarter. from utilize but just because So a in

We mid- quarter be our through results. fourth beta the at to we first to the was look XXs cumulative at our kind beta So high XX%. as anticipate quarter of

And see rate the that decline you'll so forward. on as move deposit we

Bill Carcache

progress squeeze versus And you pay much and it. rates If through for on flow that I year? changes fair hedge one. cash active? could exposure the any color receive guess both? how value Can notional Got how one discuss in last is I as we

John Stern

Sure.

So really a why as working actually work and this is program good intended. hedging example it's of our quarter at

We to have basis saw swaps. have protect upward receive-fixed rates help rise. XX rise. They intended pay-fixed movement. The swaps, did pay-fixed and are we capital We interest swaps when point

us level to that's little number that that AOCI that that did going pay-fixed swaps, and Our things Cat magnitude on of the with perhaps of I nearly others but variety. create II to. Obviously, spoke that a increase, manage a not helps NII. bit capital drag And

was that to that receive-fixed they been rate attached commercial relative swaps our otherwise. and our either those to offsetting swaps However, have would increased receive-fixed or loans where debt, were

those as largely can offsetting. you think so And of

neutral. from an relatively income So standpoint, the are hedges

Operator

question final Martinez from We'll take Saul HSBC. at our

Saul Martinez

I another acquiring merchant how Vivek in but the struggling way. yourself differentiate I'm asked -- I to ask Vivek it guess think question, my I'll maybe see you businesses.

There's innovation in a of exception lot share the space, amount banks have Chase, years. With over that capital maybe that of the lost of most in enormous space.

Is you the does you. that value legacy to was lost make it's worth You've more an years. I and business you you're to in merchant that share business? volume franchise? to to this over you providers to to I do the entire at power succeeding measures? guess that seen that question how can just this answer growth? adjunct business? this Vivek's question going to measure are entire -- whether shift have franchise, question Is somebody the entire that answer? And to success in argument the than answer is and I to it How the revenue strategy the software the Are the acquired is ask business is else guess guess the -- your in growth, provide to what do whether I is other value acquirers there -- you're you And whether you your here from measure adding looking

Andrew Cecere

some are very run in their movement and those information which payments. this areas interconnectedness going and ask investments what platform start So capabilities to on. start of Saul, and And reiterating we're on I'm that by the This other and made help to business focused we've care is before, provide said businesses on. health I and to going is focused banking to categories Gunjan verticals like I'm their and money and of then that add Andy.

in the I it's the growth things. what's about profitable movement that we're think components important in more we And We're merchant payments top yet, verticals bottom and progress we're interconnected heading in money focused interlocking terms headed we've we're components advantage but are, provider, add? not very is importantly, those banking to has terms line overall component. them the made we've focused And of our want talked that the line those in growth, So to growth. in versus all but direction. we're we've would right in for, what happened in you revenue opportunities. And all of in of are indications our embedded a certain what help looking pure-play be right become the that's It's those I way. Gunjan, on, run verticals tech-led, their where revenue think, that the business. terms And

Gunjan Kedia

we of level it, if XX the user the is the where front. some of clients. look franchise, experience the of to franchise, that the lot industry. Saul, high bring in million called the with gap innovation, have the players you it's of transaction at a stand-alone very that's the you and of distribution investment infrastructure provision And and power client partnerships the to table, connect their Add the the innovation the and services and beyond innovation come a in the as

transform merchants with the investments to are easy, that to have and need demand on the bring a And be all that But in and we have a direction where we see quick provide so has making. the partnership connect experience, to going, very us. of that's onboarding model we off. very able easy and ability been to for And we significant very

that distribution all competitive give So of capabilities it's back-end side it's edge product the the and the make, us here.

Saul Martinez

I quick I you're QX. in every deposit curve forward through-the-cycle end us high guess is I the cycle, in Okay. of to heard what then although just the mid- rate seemingly John. beta cutting expecting. the there's guess the XXs expecting. But remind a helpful. on follow-up what closer shifts day, That's we're to deposits,

think you is like you think -- XXs high what low is XXs, through-the-cycle right beta? the I that

John Stern

Saul. right, That's

this as of So we spot quarter. XX% think about -- is through-the-cycle

the to are. assuming XXs we kind And is where XX%. in quarter. mid- that of to first high of our kind through-the-cycle additional expectations expect cuts, of would level migrate that there's We North

Operator

this no conference Andersen, over to Mr. turn are questions there back time. at the And you. further I'll

George Andersen

the Please morning. have you Thank questions. everyone our follow-up this if Thanks, Audra. call to you joined any Investor contact who Relations department

may disconnect call. You now the

Operator

your participation. And this concludes you call. conference today's for Thank

disconnect. You now may

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