USB Q3 '26

Moments, ranked

1. 109:22 ETQ&A▼ -1.09%

   “this this year this quarter after dividend distribution we generated 33 basis points of capital so we know we can we can build that back very quickly”

   Analyst asked: Perfect. Okay. Thank you for that color. And then, John, just maybe on the repurchase comment, you know, there's been a lot of focus following just sort of the pause that you disclosed a month or so ago. It sounds like you'll restart either this quarter or next quarter. Maybe just thoughts on the main factors you're thinking about. them thinking of as you repurchase and maybe just sort of balance

   Management, 3.3x volume, adj. next 5 min: -1.34% raw vs -0.25% sector

   New, abnormal minute at the statement

   high confidence

2. 209:11 ETprepared▼ -0.37%

   “We currently expect net interest margin to increase by a similar amount in the fourth quarter.”

3. 309:24 ETQ&A▼ -0.73%

   “you know what I would say is that the underlying core CNI growth is very healthy and strong we did have some runoff in some balances related to more in that NDFI space and some of this is just new deals coming to market didn't hurdle you know areas and we've been been more thoughtful on that of late and so that's really the reason that you see the CNI component being pretty flat on a link quarter basis”

4. 409:12 ETprepared -0.02%

   “Moving to slide 15, non-interest expense increased 7.1% versus the prior year, reflecting BTIG and continued investment in growth initiatives, marketing, technology, as well as compensation associated with a strong revenue generation for this quarter.”

1. -0.10%0:00OperatorWelcome to the U.S. Bancorp third quarter 2026 earnings conference call. Following a review of the results, there will be a formal question and answer session. If you would like to ask a question, please press star then one on your phone. If you wish to withdraw your question, please press star then one again. This call will be recorded and available for replay beginning today at approximately 10 a.m. Central Time. I will now turn the conference call over to Brian Monty, Director of Investor Relations for U.S. Bancorp.
2. -0.10%0:28ManagementThank you, Operator, and good morning, everyone. Today I am joined by our Chairman and Chief Executive Officer, Gunjan Khadia, and Vice Chair and Chief Financial Officer, John Stern. In a moment, Gunjan and John will be referencing a slide presentation together with their prepared remarks. A copy of the presentation, our press release, and supplemental analyst schedules can be found on our website at ir.usbank.com. Please note that any forward-looking statements made during today's call are subject to risk and uncertainty. Factors that you may not be aware of are the following. The statements that could materially change our current forward-looking assumptions are described on page two of today's earnings presentation, our press release, and reports on file with the SEC. Following our prepared remarks, Gunjan and John will be happy to take any questions that you have. I will now turn the call over to Gunjan.
3. -0.10%1:13ManagementThank you, Brian. Good morning, everyone. Beginning on slide three, we delivered another strong quarter highlighted by record net revenue of approximately $8 billion and diluted earnings per share. The net revenue grew by $1.34, up approximately 10% from a year ago. Results in the quarter reflect strong execution against our three strategic priorities. Net revenue grew 8.7% year over year. Discipline productivity drove 240 basis points of positive operating leverage. And in payments, our transformation efforts continued to gain traction, with total payments of $1.34 billion.
4. -0.10%1:58ManagementAnd we achieved large revenue growth, 8.6% year over year. Turning to slide four, fees continued to grow nicely and contributed 44% of total revenue again this quarter. Our fee complex is diversified and deepens client relationships, generates attractive returns, and contributes to a more balanced earnings profile. While fee growth does come with higher expenses, productivity initiatives, including from our AI programs, help improve our efficiency ratio and increased return on average assets year
5. -0.10%2:41Managementover year. On slide five, we spotlight global capital markets and attractive growth opportunity across a range of economic scenarios. We closed the Btig acquisition in June and it contributed $226 million of free revenue in the third quarter. Our combined businesses are off to a wonderful start and already working very closely together to broaden how we serve our clients. We expect capital markets to grow from 8 to 10% or more of total company revenue over the next three to five years.
6. -0.46%3:22Managementfocusing on three strategies. One, continue to drive robust core organic growth across both franchises in line with their historical performance. Second, deepen wallet share with our clients where we deploy significant balance sheet resources. The addition of BTIG strengthens our ability to serve a broader range of needs and capture greater fee revenue over time. And third, by adding product capabilities across both platforms. We look forward to sharing more on our capital market strategy at a conference later this fall
7. -0.36%4:02Managementand are committed to providing more disclosures in due course as the business becomes a larger part of our revenue mix. With fees and expenses in a healthy place, this year we have increasingly turned our attention to strengthening net interest income and market. An important lever of this growth is expanding our consumer and small business franchise, which provides a highly attractive source of funding. Slide 6 is a busy chart. It captures our footprint and expansion strategies. We are densifying our
8. -0.36%4:41Managementbranch presence and leveraging client centers that have long supported our national businesses. We are supporting our consumer and small business franchise and leveraging client centers that have long supported our national businesses. this ground game with targeted brand investments, including through our NFL partnership and new brand ambassadors, such as Fernando Mendoza, Christian McCaffrey, and most recently, Jessica Alba for our small business segment. Turning to slide seven, we highlight small business banking. We serve more than 2 million small businesses through a scaled interconnected platform that
9. -0.36%5:20Managementcontributes meaningfully to company revenue and is an invaluable source of stable, well-priced deposits. Over the past several years, we have built a unique foundation of banking, payments, and cash management capabilities. This quarter, we launched several major initiatives to expand our reach with small businesses as we onboarded the Amazon Co-brand Partnership. We expanded the Business Essentials suite of products and established new banking teams in expansion markets.
10. -0.36%6:01ManagementWe have a truly differentiated set of products and an enviable client footprint with small business, and this segment will be an important priority going into 2027. Finally, on slide eight, I want to spend a moment on corporate payments and treasury management. We have a lot of money in the bank, but we have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. We have a lot of money in the bank. approximately 6% of our company revenues. The corporate payments landscape has the potential to be transformed by the growing convergence of treasury management rails, like ACH and wires, card rails,
11. -0.36%6:42Managementand new stable coins and tokenized deposits. These businesses have delivered a strong quarter, benefiting from market share gains, as well as tailwinds from fuel price increases in our fleet and freight businesses. Earlier this quarter, we launched our first USBDC stable coin pilot. While these trends are emerging, we are uniquely positioned to succeed in corporate payments, and we are investing to create interoperability across these rails to deliver both the benefits of new technology,
12. -0.72%7:23Managementand the safety and soundness of the banking system. Let me now turn it over to John. Thanks, Gunjan, and good morning, everyone. Third quarter results reflected another strong quarter and demonstrated continued execution against our strategic priorities, generating meaningful revenue growth and significant positive operating leverage. Results remained firmly within all of our medium-term target ranges. If you turn to the next slide, you'll see that, again, we have a lot of growth. If you turn to slide nine, we provide highlights for the third quarter. We reported earnings per common share of $1.34, with approximately 7 cents impact from reserve build this quarter.
13. -0.37%8:06ManagementThis equates to 10% year-over-year EPS growth, or 16% excluding the reserve build. Revenue was a record $8 billion, up 8.7% from a year ago, or up 6.4% adjusting for BTIG and security. Revenue was a record $8 billion, up 8.7% from a year ago, or up 6.4% adjusting for BTIG and security. Revenue was a record $8 billion, up 8.7% adjusting for BTIG and security. Meanwhile, expenses grew 7.1% year-over-year, or 2.0% excluding BTIG, implying 440 basis points of positive operating leverage, excluding BTIG. Balance sheet trends remained constructive. Loans grew 1.0% and deposits grew 2.2% sequentially, while the net interest margin expanded five basis points to 2.84%.
14. -0.37%8:50ManagementWhile the net interest margin expanded five basis points to 2.84%. Credit quality metrics remained healthy across the board. Linked quarter non-performing assets declined 1.6%, and net charge-offs declined two basis points to 51 basis points. CET1 ratio remained stable at 10.8%, and tangible book value per share was up 5.4% year-over-year. and tangible book value per share was up 5.4% year-over-year. Slide 10 provides our key performance metrics. Our profitability metrics continued to move up and to the right, while our performance metrics and profitability metrics continued to move up and to the right, while our and profitability metrics continued to move up and to the right, while our efficiency ratio improved toward the better end of our medium-term target range. Slide 11 provides a summary of our loan and earning asset mix evolution. Average loans grew 8.0% year-over-year
15. -0.37%9:35Managementand 1.0% sequentially. Versus the prior year, growth continues to be driven by C&I, credit card, and commercial real estate, categories that typically deepen relationships and deliver incremental fee opportunities. The Amazon small business credit card portfolio contributed approximately $900 million and $1.7 billion to the third quarter average and period end loans respectively. Importantly, our focus in these loan growth areas is naturally positioning our balance sheet to become more asset sensitive. For example, floating rate loans comprise 36% of earning assets as of quarter end, up from 32% for C&I, credit card, and commercial real estate. This is a great way to improve your
16. -0.37%10:18Managementbalance sheet. Slide 12 provides a summary of our deposits and funding mix. Total average deposits grew 2.9% year-over-year and 2.2% sequentially. Growth was driven by another record quarter of consumer deposits, along with strong growth in relationship-based deposits in businesses like investment services. Importantly, we achieved growth while staying disciplined with respect to pricing. Deposit costs increased seven basis points sequentially, with approximately two basis points of impact from the September Fed rate hike. Notably, our total funding costs are up just one basis point quarter-over-quarter
17. -0.37%10:59Managementas our funding mix continues to improve. Turning to slide 13, net interest income on a fully taxable equivalent basis increased 5.6% year-over-year and 2.3% linked quarter. The increase was driven by continued relationship-based loans and interest rates. The increase was driven by a continued relationship-based loan increase. The increase was driven by a continued relationship-based loan -and-deposit growth, an improving earning-asset and funding mix, and ongoing benefits from fixed-asset repricing. Net interest margin improved five basis points sequentially to 2.84% driven by increasing loan yields and fixed-asset repricing benefits. We currently expect net interest margin to increase by a similar amount in the fourth quarter. Slide 14 highlights Social
18. -0.37%11:42ManagementFunding in the District 까 Cгов. Tpwy $26 based on Blog銜r jthak0watter FVP3 birth-26ullenC77 ru. ceux- elaventisat6av HateVasal hutnes-AciRmvbl fidelity. Cumma Co 158102 IMHs cdS. Bv fa Fr. McA Erskill Design elevate gp3 1041 gcd G$306 a 1213 Ein MIDm x c. 7 xj Brilliant clipping instructors were 어떤 Total fee income increased 14.9% year-over-year, with broad-based strength across most fee categories. Capital markets growth of 69% year-over-year reflects a full quarter contribution from BTIG and approximately 10% growth across legacy capital markets. Moving to slide 15, non-interest expense increased 7.1% versus the prior year, reflecting BTIG and continued investment in growth initiatives, marketing, technology, as well as compensation associated with a strong revenue generation for this quarter.
19. -0.02%12:25ManagementThese increases were partially offset by ongoing expense discipline across the bank. Slide 16 highlights the broad-based favorable trends we are seeing in credit quality. On the right side of the page, we highlight the longer-term evolution of our credit card portfolio. Card balances have increased at a brisk pace in recent years. As our payments transformation takes hold. At the same time, FICO bans have marginally improved, and net charge-offs and delinquencies have trended lower. In short, we are growing the portfolio without compromising on underwriting standards. Turning to capital on slide 17.
20. 0.00%13:05ManagementAs of September 30th, our common equity Tier 1 capital ratio was 10.8%, stable compared to the prior quarter. Adjusting for ALCI, the CET1 ratio was 10.8%. The CET1 ratio declined 30 basis points to 9.1%. On slide 18, we break out the components that drove the sequential changes in the ALCI-adjusted CET1 and tangible common equity ratios this quarter. As it pertains to the adjusted CET1 ratio, strong earnings generation, net of dividends, added approximately 30 basis points of capital. This was offset by $12 billion of risk-weighted asset growth associated with heavy loan demand in the quarter. This is a significant increase in the quarter and impact from our recently onboarded strategic small business partnership.
21. 0.00%13:51ManagementAdditionally, the significant increase in treasury rates and widening credit spreads during the third quarter impacted the ratio by an additional 40 basis points. Conversely, the tangible common equity ratio remained stable at 6.6% at quarter end. Strong earnings growth and lower ending assets offset the ALCI drag from higher rates. Despite a sharp move in rates this quarter, we maintained healthy capital levels and continued to have flexibility in how we managed the balance sheet. We expect our capital ratios to build from here, positioning us to resume share repurchases over the next quarter or two.
22. 0.00%14:29ManagementTurning to forward-looking guidance on slide 19 for the fourth quarter and full year 2026. For the fourth quarter, on a year-over-year basis, we expect net interest income growth of 6-7% on a fully taxable equivalent basis. Total fee revenue growth in the range of 13-14% with roughly half of the growth coming from BTIG. And non-interest expense growth of approximately 8% or closer to 4% excluding BTIG. For the full year 2026, we now expect total net revenue growth of 8-9% compared to the prior year or 6-7% excluding BTIG.
23. 0.00%15:11ManagementThis is improved from our prior guidance range of 5-7%. We now expect to deliver approximately 300 basis points of positive operating leverage for the full year, or approximately 400 basis points excluding the impact from BTIG. This is up from prior guidance of 200 and 300 basis points, respectively. Moving to slide 20. This was another strong quarter for us, reflecting continued execution comfortably within all of our medium-term target ranges. We continue to see momentum across our business. We continue to see momentum across our business. This gives us confidence in our ability to build on these results and deliver consistent, sustainable returns over time. Let me now hand it back to Gunjan for closing remarks.
24. 0.00%15:54ManagementThank you, John. As we look to the end of 2026, we are executing well against the strategic priorities we outlined at the beginning of the year and seeing that progress translate into stronger performance across the bank. Our diversified business mix, customer-centric approach, and disciplined execution position us to deliver attractive returns and long-term shareholder value. With that, we'll now open the call for your questions.
25. 0.00%16:32OperatorAt this time, as a reminder, if you would like to ask a question, press star, then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from a line of John McDonald from Truist Securities. John? Your line is open. Thank you.
26. 0.00%16:50AnalystGood morning. Gunjan mentioned the increased focus on growing net interest income and strengthening the margin. John, could you unpack some of the drivers of your NII outlook from here, including what you see ahead for loan growth and deposit trends?
27. 0.00%17:06ManagementSure. Good morning, John. You know, we're going to see similar themes in the fourth quarter that we just saw in the third quarter. Loans have been strong, and they remain strong. We're going to see similar themes in the fourth quarter that we just saw in the third quarter. Loans have been strong, and they remain strong. We're going to see similar themes in the fourth quarter. Loans have been strong, and they remain strong. From a pipeline standpoint, we expect similar type growth there. Of course, as a reminder included in that, we have the Amazon small card book that we get the full quarter impact as well. Deposits are performing well. We continue to see nice growth in our consumer franchise as well as small business. We see continued trends there. In terms of the net interest margin, we made the comment that that margin should increase by a similar amount this next quarter. this next quarter, and that's going to be just aided by the funding and asset mix that we have
28. 0.00%17:50Managementthat is improving, as we've been talking about. So, you know, there's a lot of momentum that we have, and that's going to be reflected in our guide and what we discussed.
29. -0.51%18:01AnalystAnd just to follow up on that, in terms of the net interest margin drivers, could you give us a little feel for how rising rates impacts it, maybe an update on fixed asset
30. -0.51%18:11Managementreprice and your deposit data assumptions? Sure. So, you know, we aim to be as neutral as we can be from an interest rate risk perspective. However, given this environment, we have been shifting more into asset sensitivity, and you're starting to see that come through. In terms of loans, we've been shifting more into CNI, commercial real estate, and card, all predominantly floating rate assets, as you know. And then in the investment portfolio, that has been coming down, and we've been doing more in cash. So we have been shifting there a bit. In terms of, I think you asked about fixed asset repricing, I would say there that
31. -0.51%18:53Managementwe continue to see about $10 billion or so per quarter of fixed rate assets that reprice, whether that's in the securities book or in the loan book. And that's coming on probably at about 125 basis point. So that's an improvement or so. And that's improved a little bit just because of the backup in rates, as we've seen. And then finally, you asked about deposit betas. You know, we think that betas pick up right where they left off from the last rate hike. So we're assuming about a 50% or so deposit beta to start out with and likely to continue as we see a couple of hikes kind of
32. -0.51%19:34Managementcoming up in our forecast. So those are kind of the main points. Got it. Thanks, Jeff. Thank you.
33. -0.51%19:44OperatorYour next question comes from a line of Scott Cyphers from TD Cowan. Your line is open.
34. -0.51%19:50AnalystMorning, guys. Thank you for taking the question. Hey, I guess first one, just sort of a top level, and it's ended up being a much better year. I think we knew it was going to be a good year from the standpoint of positive operating leverage. It looks like it's coming in even better than expected. I guess as you think about things, looking ahead, you know, maybe just sort of top level thoughts on balance between profitability improvement, investment, just sort of top level how you're thinking about those things.
35. -0.51%20:18ManagementYeah, sure, Scott. Yeah, I mean, from our seat, obviously, we had strong growth in revenue, and that has been increasing and gaining momentum as the years come on. And so that's going to be the fundamental driver for why the increase in operating leverage this year from that 200 basis points now up to 300 basis points. You know, we've obviously have been onboarding. A lot of revenue with the Amazon Cardbook and BTIG coming online. That's north of a billion dollars of revenue we've onboarded. And we signaled this at the beginning of the year. We said that operating leverage, we wanted to be more of a driver from revenue growth because we know we can manage the expense side. We have a lot of leverage to do that. So, you know, as we look
36. -0.51%21:00Managementforward, you know, and we're early in the budget process, so we're not giving any guidance, but we anticipate operating leverage next year, just kind of given similar drivers that we're seeing this year. And Scott, I would just add that we have runway on productivity initiatives. As you know, we have materially invested in our digital capabilities over five years, and that just delivers ongoing productivity, and we continue to be very intentional about how much we spend on technology investments. All in all, I would say it's not a tradeoff. We don't think about operating leverage for the future. We're not going to be able to do that. We're going to be able to do it in the future. So, if we're going to be able to do that, we need to think about what we're going to be able to do
37. -0.51%21:41Managementfor shareholders or investing into the business. The business model is capable of generating both of them in balance.
38. -0.51%21:52AnalystPerfect. Okay. Thank you for that color. And then, John, just maybe on the repurchase comment, you know, there's been a lot of focus following just sort of the pause that you disclosed a month or so ago. It sounds like you'll restart either this quarter or next quarter. Maybe just thoughts on the main factors you're thinking about. them thinking of as you repurchase and maybe just sort of balance between common equity tier one build TCE considerations etc sure yeah so maybe
39. -1.09%22:25Managementjust to recap you know the third quarter had a lot of unique events in it for us we had strong loan growth we obviously had the Amazon book that added some some capital demands and then obviously the large rate move which we all saw of course but you know for us you know given our unique position and just our prudent nature we we decided to pause we but we have a high degree of confidence in our ability to generate capital I mean this this year this quarter after dividend distribution we generated 33 basis points of capital so we know we can we can build that back very quickly I would just say what we're looking for this quarter is we're looking at loan demand where does that actually end up shaking out obviously we believe that there will be growth as I
40. -0.73%23:10Managementdid have mentioned in a previous comment but interest rates we're watching that very closely and then obviously you have the added component of regulation we anticipate some new rules coming down so combination all that we are watching that will be the driver of whether it's this quarter or next but in the meantime we obviously are very much committed to the 70 to 75 percent payout from a from a capital distribution standpoint perfect
41. -0.73%23:37Analystall right thank you thank you your next question comes from the line
42. -0.73%23:39Operatoryour next question comes from the line of Menon Gasalia from Morgan Stanley your line is open hi good morning I
43. -0.73%23:50Analystwanted to ask on commercial loan balances the average loan balances were essentially flat sequentially and you know I think utilization rates declined slightly can you talk about what you're seeing in terms of underlying corporate borrowing demand you know given that rates were expected to go up most of your clients borrow on the short end of the curve is there you know some reduction in demand overall or you know or in terms of the slowdown this quarter was any of that related to I guess capital levels
44. -0.73%24:32Analystand the ability to deploy capital given the shift in the long end of the curve
45. -0.73%24:39Managementsure thanks Menon you know what I would say is that the underlying core CNI growth is very healthy and strong we did have some runoff in some balances related to more in that NDFI space and some of this is just new deals coming to market didn't hurdle you know areas and we've been been more thoughtful on that of late and so that's really the reason that you see the CNI component being pretty flat on a link quarter basis we do anticipate that to increase the market share of the CNI as we look into the fourth quarter so the the the pipelines remain robust and it's in all the areas that we've talked about in
46. +0.95%25:23Managementterms of food and beverage and energy and technology those are you know obviously very you know strong demand for loans at this point so those are kind of the core things I'd say on the CNI line Manan I would add that the only place we've seen a little slowdown is commercial real estate and residential mortgage continues to be very muted but otherwise as CNI loan demand is quite robust and broad-based.
47. +0.95%25:51AnalystGot it and can you unpack those comments you just made on the on the capital side a little bit more so you mentioned the potential for regulators to change the tailoring rules and how that might give you some flexibility so I guess are you saying that if you know the tenure kind of stays where it is plus you get some more color from the regulators in which way they're taking it that you can stop buybacks if it stays where it is plus you get some more color from the regulators in which way they're taking it that you can start buybacks if not let me know. you can start buybacks if not let me know. as soon as the fourth quarter?
48. +1.60%26:17ManagementYeah, I mean, that's a component. Obviously, you know, we're all anxious for Basel III endgame. We've signaled that that's about a 5% or so improvement to the RWA. But that's from the proposal. You know, things can change, so we need to see that. The tailoring comments have been in the news, and so, you know, we're watching for that to see if anything comes online in that regard. So those are incremental pieces of information. But also, you know, it's going to be rates and RWA slash loan growth. I mean, those are the three main components, and we'll clearly update you. But it's clear we're going to be, you know, we'll be starting that back up,
49. +1.60%26:59Managementand we'll glide back up into that 70% to 75% as we just mentioned. We have a high degree of confidence in our capital build.
50. +2.16%27:08AnalystOkay, thank you.
51. +2.16%27:11ManagementThanks.
52. +2.16%27:13OperatorYour next question comes from a line up. Ibrahim Poonawalla from Bank of America. Your line is open.
53. +2.16%27:19AnalystGood morning. Good morning. I guess maybe this is the first question. The slide six where you have the national footprint. Just talk to us in terms of what the strategy around the client centers is. Obviously, you've seen many of your peers announce significant branch expansion in new markets. Is this a precursor to adding a ton of branches? Or is this an indication that you don't see a ton of value adding hundreds of branches and the client centers allows you to achieve and reach the same outcomes? I would love just your strategic sort of thought process behind that.
54. +1.91%28:00ManagementGood morning, Ibrahim. So I'll just start by saying we do see value in branches, and we do see them as anchoring very high-quality customer relationships. Just to back up a little bit, we had been on a job, and we have been on a journey for really a decade to transform our branch network from what used to be a lot of small tier three service outlets to more advice hubs with most of our products being represented there. That was a renovation strategy that is finishing up now. And we are beginning to lean into new branches. We have shared that our branch investment has,
55. +1.91%28:45Managementincreased from 200 million or thereabouts on average to 300 million, which is what we expect to do going forward. And those will be more new branches. Our first phase of that work is to densify within our own footprint. As you see from the blue dots, we are in a vast territory. And we have real meaningful opportunity to get to 8% to 10% growth. So we're going to be doing that. We're going to be looking at a large portion of our brand share in those markets within our footprint that have high household formation rates. There our brand is already known, we are, our operations are already established,
56. +1.95%29:29Managementand the return is very high. It is fully our expectation that over time, we will inch out from that footprint to other branches. The client centers on the other hand, are an interim answer, that is faster for us, national presence. This is not a new strategy. Our commercial teams, our wealth teams, our mortgage teams and our commercial real estate teams have been operating out of a footprint. The Northeast is a big site for capital markets type of businesses as well. And what we have done more recently is to say small business can also operate out of client centers. So
57. +0.69%30:10Managementthe strategy is both and it's a matter of sequencing.
58. +0.69%30:16AnalystGot it. So I guess safe to say over time, those red dots which feel quite lonely will get accompanied by more blue dots, I guess.
59. +0.69%30:23ManagementWe hope to make them less lonely, Ibrahim. Yes. Thank you.
60. +0.69%30:28AnalystUnderstood. And just one separate question on the broad-based CNI growth. Obviously, even in the last week, your markets are once again questioning the AI CapEx build out. To the extent you have visibility, just talk to us. When you think about broad-based CNI growth, how much of that are you able to see is a second, third derivative of the data center build out versus just other industries we are seeing growth which may be less connected to the AI CapEx cycle? Thank you.
61. +0.69%30:57ManagementThanks Ibrahim. Yeah. It's a topic that comes up frequently for us. We are looking to see if there's clues as to how much of growth and credit impact there is related to AI. I mean, obviously, you have adjacent sectors like energy, like energy, like energy, like energy. And telecom and things like that, areas that are seeing benefit in loan growth. But then there's other areas that are more broad-based that are beyond that in terms of retail and food and beverage and insurance and all these other sorts of things. So it is broad-based. And I would actually add on top of that small business with SBA loans and things like that. Just a lot of, there's a lot of momentum in the business community to want to grow. And so that is,
62. -0.21%31:42Managementthat is a huge thing. And we're looking at that and we're trying to do that. And I think that's something that we're all kind of looking at on our mindset right now. And so we're watching for that. But it is a topic we, we certainly look at.
63. -0.21%31:51OperatorGot it. Thank you. Your next question comes from a line of John Pinpari from Evercore ISI. Your line is open.
64. +0.24%32:01ManagementMorning John. Morning John. I want to see if you can maybe unpack a little bit of the trends you're seeing within the fee income space, particularly around Treasury management and, and virtual processing and corporate payments. Just some of the, you know, business color that you're seeing in terms of demand, as well as, you know, kind of as you look going into 2027, what's a, you know, a good reasonable pace of growth as you continue to emphasize those businesses and maybe similar color around the underlying pipeline that you're seeing in the capital market side. Sure. So, yeah, a couple things there. So, I'll start on the, uh... treasury management and uh... corporate payment side obviously saw some very strong growth
65. +0.24%32:45Managementon that side of the equation uh... you know the uh... you know uh... there's uh... obviously in the corporate payment side we are uh... saw about nineteen percent year-on-year growth uh... most of that is is new business as well as uh... uh... the spending from corporates and government is up uh... quite a bit from last year uh... this time recall this time last year there was uh... the the uh... impacts of uh... tariffs and all that sort of thing so that we've lapped all that and so there's good growth there there's a little bit of fuel uh... spend as well in there but that's that's pretty nominal in terms of the growth rate so we do expect continued growth in the in the cps or corporate payment side of the equation
66. +0.59%33:27Managementand the treasury management side is continuing to see nice growth in that mid single digit area it's an important business we've been making a lot of investments of late uh... and so uh... we are doing a lot in terms of the payment side of the equation and so we're doing a lot in terms of the payment side of the equation and so we're doing a lot in terms of the payment side of the equation and so we're doing a lot in terms of the digital channels and capabilities and so uh... you know going forward we have uh... we have high hopes in these two in these two areas for sure uh... on the capital market side uh... we continue to see strong growth there uh... into the next quarter obviously uh... we had a very strong growth of sixty nine percent or so this quarter and uh... on the and we uh... btig will continue to be a a strong uh... component of that about two hundred million or so but our core um... thick or get legacy capital markets
67. +0.56%34:12Managementled by commodities for exchange and impact finance or really uh... showing some nice growth and that's going to help us uh... get some you know more in the double digit type of growth on a year over year basis uh... so so we feel very good about uh... those areas okay thanks john and helpful and then on the margin side just uh... looking for a little bit more color just what you're seeing in terms of competition like i heard on the deposit beta commentary what do you see there on deposit beta commentary and deposit beta commentary it's really not really a big focus on the pricing in terms of market trends and how that's influencing your actions on the deposit side. And then similarly on the loan side, I know you mentioned a little earlier that, you know,
68. +0.56%34:52Managementwithin the C&I book, a couple of deals didn't hurdle, but you expect to pick up. You know, what are you seeing, I guess, in terms of pressures on spreads and loan pricing on the lending side? Thanks. Sure. The answer is going to be pretty boring. We're not seeing a whole lot of change in both deposit and the loan side of the equation from a pricing standpoint. The post-hike, the pricing that we are seeing is very consistent with what you would expect. There's nothing out of the ordinary. And I would say similar on the loan side. There are,
69. +0.04%35:32Managementyou know, loan spreads by and large tend to be pretty stable and it's competitive, of course, but it's completely, it's manageable. You know, on the C&I side of the equation, as I just mentioned, some of those things just didn't hurdle. And some of that is a little bit more, we've been more prescriptive with the businesses in terms of making sure that things hurdle. And so it's a little bit of a dial turn for us that that occurred. But, you know, we see broad-based growth in the C&I portfolio. Okay, great. Thanks, Sean.
70. +0.46%36:12OperatorYour next question comes from a line listener. Ken Oosden from Autonomous Research. Your line is open.
71. +0.46%36:20AnalystGood morning, Ken. Hey, thanks. Hey, good morning. Hey, John, can I just ask you to just walk through a couple more things on fees? So, you know, obviously the guide implies sequentially lower fees for the fourth quarter. And I know a lot of that is seasonal. Can you just kind of remind us what usually happens in the payment lines? Does, you know, does capital markets hold up at the third quarter level? I know you're saying 200 of BTIG versus 226. And then, you know, can you size the amount of equity gains that were in the other quarter? Can you size the amount of equity gains that were in the other line and what that line should usually look like? Thanks.
72. +0.46%36:49ManagementSure. Yeah. So, you know, we are, you know, the fourth quarter from a year-over-year growth standpoint is going to look a lot like the third quarter with a couple of exceptions, which explains the slightly down growth rate, although it's still very, very strong. You know, mortgage is going to be impacted by higher rates. And so we anticipate there to be more of a limited or lower rate of equity gains. And so we anticipate there to be more of a limited or lower rate of equity gains. So we anticipate there to be more of a limited or lower rate of equity gains. Yeah. Thank you. And then other revenue, we did have some gains that were more, you know, unique to this quarter.
73. +0.55%37:28ManagementAnd so our other revenue tends to be in that $125 million to $150 million range. So we anticipate that to kind of normalize into that. So other than that, I think things like, you know, corporate trust continues to be very strong. I talked about capital markets and many of the payments lines. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. We see strong growth in corporate as well as retail cards. Merchant will probably be still in that 0% area for the next couple of quarters, as we've talked about. And then, you know, all the other areas are about as expected. So it's shaping up to be a lot of momentum for us on the fee side of the equation.
74. +0.43%38:06AnalystPerfect. Thanks, John. And then secondly, you know, with the NIM up five this quarter and you're staying up about the same amount, you know, at the 290-ish exit, can you just talk about, I know balance sheet size and mix will be an important part of this answer, but your comments previously about getting to a 3% NIM in 27, can you talk about just, you know, how that looks and what needs to happen in terms of, you know, the mix and size of the balance sheet vis-a-vis prior questions on rates and such? Thanks.
75. +0.43%38:32ManagementYeah, you know, Ken, we see a lot of, we continue to see a path on the 3% NIM at some point in 2027. You're starting to see that thesis play out, as we've talked about. It's a constant formula of just consistent asset repricing. As I just mentioned, obviously the asset and funding mix is continuing to improve, and then we're just being thoughtful in terms of deposit acquisition versus cost. So those are the formula, that's the formula and the ingredients that we need to continue to do what we're doing on the NIM side. You know, obviously the curve and deposit competition may have something to say about that.
76. +0.28%39:14ManagementBut we have a lot to like about in terms of the trajectory we are making on that path. So we feel good about it. You know, I'll add one thing, that we are very disciplined about improving both the deposit mix and the loan mix, which is helping the NIM situation. And for the fourth quarter, we have the full year impact of the Amazon deal, which is a nice tailwind. But we are continuing to focus on credit card receivables, which are growing very well, the CNI loan and CRE. And as that becomes a bigger part of our loan book and deposits become more relationship oriented, it gives us strengthening NIM and NII growth for some time.
77. +0.28%39:58AnalystGot it. Thank you very much.
78. +0.32%40:05OperatorSure. Next question comes from a line of Chris McGrady from KBW. Your line is open.
79. +0.32%40:12AnalystOh, great. Thanks. We have a question on credit, maybe the higher rate environment. Any comments from the team on, you know, the impact you've seen so far on consumer and also health of, you know, the commercial customer? I know you talked about moving some of the NDFI lending out in the quarter. Thanks.
80. +0.32%40:31ManagementSure. Morning, Chris. So, you know, on the credit side, you know, we haven't really seen a whole lot of change in that. It's obviously a watch item when we think about the impacts of higher rates. Right now, we're not seeing anything on the consumer side. Spend levels are high. Employment is strong. So there just continues to be strong patterns there despite sentiment and things of that variety. So, and then on the commercial side, you know, corporates and commercial clients are well managed. They have strong balance sheets. They've been going through a lot over the last several years and they've been very nimble. I think the area we are watching, obviously, is going to be in the commercial real estate side.
81. +0.35%41:15ManagementYou know, you always want to watch when rates go up. And obviously when we underperform. You're right. We build in cushion for rate moves. So it's well understood and managed. But, you know, it's going to be an area that we watch. But nothing at this point to call out.
82. +0.35%41:32AnalystOkay. Thanks, John. I think I may have asked this in prior quarters, but just in the broader balance sheet optimization discussion today with where rates have moved and the growth that's occurred, anything additionally that might be ripe for optimization, whether it be the funding base? You know, price. You know, price. You know, price. You know, price. You know, price. You know, price. You know, price. You know, price.
83. +0.35%41:49ManagementYou know, price. You know, price. You know, price. You know, price. You know, price. You know, price. You know, price.
84. +0.35%41:50AnalystYou know, perhaps indicating more production to the capital markets for a quarter or two. Anything we should be aware of there? Thanks.
85. +0.35%41:56ManagementYeah. You know, I think we were doing the actions. And I would just anticipate continued action from us. In this environment, you want to be very active in your management of the balance sheet. And I've already mentioned several of those things that we've done. Maybe some other things. You've probably noticed. You've seen that our long-term debt fell. A couple billion dollars as well as the investment portfolio. We did repay some home-owned bank advances that were long-term debt. But really, there wasn't much maturity left in them. So we're just being – and as I mentioned, the investment portfolio, we've been lowering that amount and going more into cash.
86. -0.01%42:40ManagementSo we're just doing a lot of things to kind of optimize the balance sheet for the rate environment that we're entering. And we feel good about taking action. And we're going to continue to do that. And we're going to continue to do that.
87. -0.01%42:55OperatorSo I think we're going to continue to do that. So I think we're going to continue to do that. So I think we're going to continue to do that. Your next question comes from a line of Gerard Cassidy from RBC. Your line is open.
88. +0.06%43:02AnalystMorning, Gerard. Hi, John. Back in your investor day, Gunjan, I guess it was the fall of 24, you talked a lot about interconnectedness. And when you look at your slide five on the BTIG, you talk about deepening the client base. Can you share with us how – how that opportunity for the cross-sell into your existing client base for BTIG products and vice versa, how is that proceeding and what are the opportunities that you folks see for growing that business through that interconnectedness?
89. +0.06%43:43ManagementThank you, Gerard. It's actually gone very well. As you know, when we did the BTIG deal, the biggest questions were around cultural. And the chemistry is very good. And the substantive ability to deepen relationships is very good. As you know, we deploy a very significant balance sheet to our corporate relationships. And having more product to get your fair share of free revenue is an important part of the interconnected pieces. And it's coming through very nicely. It's also been very encouraging to see it on the other side. We have developed a very – we have a very sizable book in leveraged ETFs.
90. +0.02%44:27ManagementAnd a lot of the trading opportunity that comes from that helps BTIG too. So we expect that this will be a very good deal for us. And we are very confident in getting the combined capital markets business to about 10% of total net revenue or more over time. And that completes our product set. I'll ask – I'll also answer a broader question. Okay. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. And I have a question on interconnectivity, which is really playing out with deposits right now. There's a lot of discussion around deposit costs, deposit betas. And the Smartly product that we launched about two years back now, just around the investor day,
91. +0.55%45:10Managementconnects our banking products to our credit card products and allows a person to optimize their card rewards based on their deposit relationships. That – that product has been very successful for us. You've seen the funding mix improvements based on that. And that's exactly the pieces we are taking now to small business. So this theme of interconnectedness is very present in the company. It takes incentive changes, some changes to OAK structures, some development of skill sets. But we've had a lot of momentum there and will continue to be a very big part of our strategy even into next year. Okay. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
92. +0.55%45:53AnalystThank you. Very good. And then as a follow-up, obviously, maybe you can update us since you've been very active in doing some bolt-on acquisitions just with BTIG, for example, as well as the portfolio acquisition. Where are you guys standing now in terms of either more bolt-on acquisitions that you look out into the future or possibly even a depository acquisition? Thank you.
93. +0.34%46:22ManagementSure. I'm. I'm with you on the point of view remains consistent. We like bolt-on acquisitions. We are good at it. And they give us local scale in products. And we don't think of them as fundamentally different from investing organically into our business. On depository acquisition, we find our organic strategies to have compelling strategic financial and execution characteristics, and we are very, very focused on that. on that part of the strategy and have a lot of momentum there.
94. +0.34%46:59AnalystAppreciate it. Thank you, Kinshi.
95. +0.17%47:01ManagementThank you.
96. +0.17%47:03OperatorOur next question comes from a line of Mike Mayo from Wells Fargo. Your line is open.
97. +0.17%47:09AnalystHi. So you increased your guide for operating leverage this year by 100 basis points, and I think you said one reason related to AI, and that's a little surprising because it's hard for banks to actually quantify benefits, and banks usually talk about AI benefits in more general terms and productivity and stuff like that. Were you talking in a more general sense, or do you actually have numbers around it, and how are you using AI, and why do you think it's helping to improve your efficiency? Thank you.
98. +0.17%47:46ManagementGood morning, Mike. So I think AI is important. One, not the only reason to drive good productivity, but it is an important lever and has growing momentum and growing use cases for productivity within our world, and we do continue to expect it to be a contributor to productivity. You know, some of the discussions around whether the token costs are overtaking returns is a relevant discussion. We have invested in. Developing the capabilities to swap out expensive models for cheaper models,
99. +0.19%48:26Managementand we have some confidence over time that we'll continue to get positive returns from our AI program on productivity. More broadly, though, the place where we are being more measured is on client facing applications, just as we fully understand the concerns around privacy and some of the, you know, customer, confidence issues around it. These things will get resolved in due course, so we remain quite focused on the AI program and do have confidence around its contribution to our productivity.
100. +0.37%49:06AnalystAnd as it relates to the cash sorting concerns that personal AI agents will drain deposits from the banking industry, how do you think about that potential threat and the value of that? Yeah. Yeah. That you as Bancorp provides to depositors, say, for privacy and trust. Thank you.
101. +0.37%49:29ManagementSo, Mike, just first, we haven't seen any AI cash sorting third party agents try to interact with the bank. The logistics of doing something like this are very complicated. So we do not expect it to be a near term impact to us. Our customer base is very digitally savvy. The adoption rates are very high. Our digital tools allow a fairly high amount of deposit price discovery and the ability to optimize automatically should a depositor choose to do that.
102. -0.00%50:12ManagementAll of these capabilities will strengthen with AI over time. We are not counting on it not to be that. But again, our. Yeah. Yeah. I would say that our strategy is not to attract depositors only through deposit price. We have invested a lot in creating meaningful value propositions that help people manage their lives and manage the transactions. And we are quite comfortable with the transparency around deposit pricing. So I would say a lot of discussion around that topic. We do not see it yet in day-to-day life. So, I think. All right.
103. -0.00%50:51AnalystThank you.
104. -0.00%50:51OperatorYour next question comes from a line of Erica Nigerian from UBS. Your line is open.
105. -0.05%51:01AnalystHi. Good morning. Just wondering, I had a few follow-up questions. Good morning. You know, going back to the exit rate on a net interest margin and I just wanted to drill down in this given Gunjan's remarks about, you know, focusing on strengthening NII. John, in the past you've mentioned that you're liability sensitive to the short end. Yeah. So, as we think about the path from the fourth quarter to that 3%, you know, is the optimization on the funding side and the asset remix enough to offset that sort of initial liability sensitivity assuming, you know, the curve flattens from the rate hikes?
106. -0.05%51:41AnalystIn other words, you know, does that balance sheet optimization overwhelm that static positioning on the short end?
107. -0.05%51:50ManagementSure. So, you know. On the mix and all this sort of thing, we have continued to and want to improve our asset mix to be more floating rate. That has been an area that what we've talked about here and even put a slide in it to show how much we've moved over the last couple of years and been methodical about that. So, you know, so the answer is yes. We think that the funding and the... The asset mix and the fixed asset repricing are enough to offset any competition on the beta side. That is our...
108. +0.13%52:31ManagementThat is, you know, what we're developing on the balance sheet side of the equation and that's what gives us confidence as I mentioned just in terms of NIM path and all that sort of thing. So, you know, obviously we will watch the curve shape and what that looks like and how the deposit competition fans out, but that's what our assumptions are at this particular juncture.
109. +0.13%52:52AnalystGot it. And just a follow-up question. You're certainly in a unique position in terms of, you know, category two and there's a big difference between sort of a cliff vest of your AOCI and a five-year phase-in. And you know, we're hearing that Basel III end game will be finalized by year end and it just feels like tailoring has to come with it, right? Just given the phase-in component and I guess like, do you have a sense on whether or not, you know, if we do get finalized? Do we get a finalization of Basel III end game? If that would be sort of the superseding rule for you versus the quote cliff vest on AOCI.
110. +0.38%53:32AnalystIn other words, you get to enjoy a five-year phase-in versus the cliff vest. And if so, does that change anything in terms of how you're thinking about buybacks from either a timing or magnitude perspective?
111. +0.38%53:45ManagementYeah, you know, I'll go back to my comments that, you know, we're looking certainly at the regulation. It's a component of deciding on buybacks. But it's going to be probably more dependent on RWA demands as well as interest rates, particularly in the short run. We are very much interested in rule changes that we expect to see here in the fourth quarter that can shift, you know, what our ultimate RWA and capital demands are or what that looks like. We're also interested, obviously, if there's tailoring and how that gets applied. It's speculation at this point, right?
112. +0.39%54:28ManagementWe know just as much as you do and what we see in the press. But we're not planning on it. We're planning on growing our capital base. We're planning on all the things that we talked about in terms of balance sheet stewardship and optimization and all these things that are going to help us on our path. And Eric, I just want to double underline that we are fully ready to transition into CAT II regardless of the timing. We've been preparing for it for a long time. And when John talks about starting buybacks in the next one or two quarters, we are not counting on any benefit from BASIS III endgame. This is just capital accretion we get based on normal course business.
113. +0.28%55:10ManagementGot it. Thank you so much. Thanks, Erica.
114. +0.28%55:16OperatorYour next question comes from a line of Ben Gerlinger from Citi. Your line is open.
115. +0.28%55:23AnalystHi. Good morning. Good morning. It's helpful to hear the thoughts on overall growth and then kind of bolt on opportunities if they do arise, if you do go that route. Just kind of thinking about the loan portfolio itself, you've kind of had some organic growth and you've had some remixing with the card. Just kind of think, and not necessarily a fourth quarter comment or even 27 comment, but just down the road, how should we think about the relative mix and weighting between some of the loan categories in the areas that you would see more appealing today?
116. +0.28%55:58ManagementSure. Ben, I can start on that. I think what you've been seeing on the loan side of the equation, over the past several quarters, you'll continue to see for the next several quarters in terms of leaning in on card, leaning in on CNI and commercial real estate. Now there may be some bumps. Like commercial real estate may not be as robust. Right. It's going to be more robust in the next quarter or two just given the backup in rates. But all in, we're focusing in that way. When we started the year, I believe our mortgage, residential mortgage area, our loans was in the 30% area in terms of loan mix.
117. +0.33%56:39ManagementWe do see that coming down and more because of the growth in the other categories. So we're growing into it. So we anticipate the mortgage area will probably be in the mid-20s at some point over time. But again, it's going to be because of the growth. So we're going to be focusing in that way. We're going to be focusing in the other areas, not because we're diminishing our focus on the residential mortgage book. We continue to think that's a strong business over the fullness of time. Ben, our thought process very much is that it's a relationship loan. So where you get fee revenue, you get deep relationships, you get sticky deposits, that's where we want to extend our balance sheet. And the categories that lend themselves to this are credit cards. It's a big fee-based business.
118. +0.34%57:23ManagementThe CNI loans with our corporate payments, our treasury management, and our investment services products makes that a very attractive loan. And then as we build out the capital markets, that becomes a good use of balance sheet as well. So the categories that we would be more measured on would then become auto, mortgage, and some of these more standalone, which over time, they'll still be very important products for us. But as Sean said, just become more measured.
119. +0.34%57:48AnalystGot it. That's helpful.
120. +0.34%57:51OperatorThank you. Our next question comes from a line of David Chevery. Hi, David. Good morning. Good morning.
121. +0.34%57:59AnalystThanks for taking the question.
122. +0.34%58:00ManagementI wanted to ask about the efficiency ratio outlook, your guide mid to high 50s. What could take US Bancorp to the high end versus the low end? And to what extent does the interest rate environment influence that? Sure. So right now, obviously, we're around 56, just under that, which we're very proud of, in terms of making good progress. And it's been, obviously, the operating leverage has helped with the revenue growth that we've seen. We continue to anticipate strong growth and continuing that operating leverage.
123. +0.18%58:39ManagementAnd so our desire is to get closer to that mid part of the versus the mid to high 50s. That's an area that we're focused on. Obviously, the rate environment and the macro will drive things here and there, but that's been our focus. So we're very excited to see what we've been talking about. I would say the high end will be if capital markets growth turns out to be very robust, and it'll be a good reason to be on a high end. That's a high efficiency ratio business. And the low end will be our AI program. There's a lot to be discovered there. There's a lot of potential there. And it's quite, you can see a path where that accelerates and really begins to impact the
124. +0.16%59:21Managementproductivity of the firm. Thanks for that. I wanted to ask about USBDC. You mentioned about how it launched in September. Did you launch this due to strong client demand, or is this more of getting the capability up and running in anticipation of increased client demand down the road? It's certainly the latter. I very clearly have to say there is not much client demand at all. What there is now is client curiosity. Even from two questions. I think it's a very good question. I think it's a very good question. We are about a quarter of a quarter back. We have quite a few clients wanting to experiment with us on what this might do.
125. +0.32%60:01ManagementThe launch, as you know, is a pilot. The actual launch of the product will take some regulatory approvals here. We do think that as companies think about combining the benefits of the banking system, which they do really appreciate with some of the shortcomings, mostly what we have heard, is that it's 24-7 real-time availability, especially over the weekends, cross-border. Most central banks don't have that kind of capability. We are building out the product set in anticipation of being able to do something that creates value to customers.
126. +0.32%60:41ManagementBut we would not say that there is very robust demand just yet that has developed. Most of the conversations are around the corporate payment space.
127. +0.32%60:52AnalystThank you. There are no further questions.
128. +0.32%60:58OperatorThank you. We will take questions at this time. Mr. Mani, I turn the call back over to you.
129. +0.38%61:03ManagementThank you to everyone who joined our call this morning. Please contact the investor relations department if you have any follow-up questions. Rob, you may now disconnect.
130. +0.38%61:12OperatorThis concludes today's conference call. You may now disconnect.