US BANCORP \DE\ Q4 FY2024 earnings call

• Top line revenue growth and continued expense discipline led to 190 basis points of positive operating leverage year-over-year. - Slight balance sheet growth with average earning assets increasing 1.2%. - Modest loan loss reserve release due to improved credit quality and favorable portfolio mix. - CET1 capital ratio increased 10 basis points to 10.6%. - Tangible book value per share increased 10.4%. - Fee income driven by double-digit growth in commercial products, trust and investment management, etc. - Focus on prudent expense management and operational efficiencies across the company.

In the fourth quarter, net revenue totaled $7 billion, with $27.5 billion for the year. Fee income represented over 40% of total net revenue. Average earning assets increased 1.2% driven by higher on-balance sheet liquidity. The CET1 capital ratio was 10.6%, up 10 basis points from the prior quarter. Tangible book value per share was $24.63, an increase of 10.4% from the end of the previous year. Net interest income on a fully taxable equivalent basis totaled $4.18 billion in Q4, stable to the third quarter. Non-interest expense for the quarter was $4.2 billion, with total non-interest expense for the year $16.79 billion, just below full-year guidance.

• First quarter 2025 net interest income expected to be relatively stable to the fourth quarter of 2024, excluding the impact of fewer days. - Full-year 2025 total revenue growth estimated in the range of 3% to 5% compared to 2024. - Expect to achieve positive operating leverage excluding the impact of security gains or losses of greater than 200 basis points for the full year. - First quarter 2025 total non-interest expense expected to be relatively stable to the fourth quarter level of approximately $4.2 billion as adjusted.

• Macroeconomic uncertainties that could impact financial performance. - Regulatory headwinds that may affect business operations. - Yield curve fluctuations that can influence net interest income. - Competitive pressures in the payments and merchant acquiring spaces that could impact revenue and margins.

Q: John, could you delve in a little more to discuss the drivers of the 3% to 5% expected full year ‘25 revenue growth?

A: John Stern responded that fees have strong momentum with mid-single-digit growth expected, and net interest income is well positioned with drivers like better asset mix, deposit normalization, and fixed asset repricing.

Q: John, what's the assumption of loan and deposit growth for 2025?

A: John Stern said they anticipate modest loan and deposit growth for the full year 2025, with potential pick up in the back half of the year.

Q: Mike Mayo asked about the merchant acquiring yield contraction. What's causing that?

A: John Stern explained that there was a mix of higher volume, lower margin clients and the tech-led part of the business with strong growth but a disconnect in yield.

Q: Erika Najarian asked about the pacing of share buybacks. What's the consideration?

A: John Stern said it's about balancing capital accretion and distributions, with the pace being modest initially.

Q: Vivek Juneja asked about the payments business. How is it valued?

A: Andy Cecere and Gunjan Kedia responded that the interconnectedness of banking and payments is important, and the business has high returns and anchors client value proposition.