U.S. Bancorp Q4 FY2025 earnings call

• Delivered strong earnings per share of $1.26, up ~18% year over year on an adjusted basis.
• Net interest income grew 3.3% year over year, fee revenue grew 7.6% year over year.
• Focused on restoring investor confidence, operating within medium-term target ranges for two consecutive quarters.
• Expense management with four productivity programs, achieving nine straight quarters of largely stable expenses, contributing to positive operating leverage.
• Acquired BTIG to capture revenue synergies, with a ten-year partnership and cultural fit.
• Global Fund Services business grew 12% in 2025 with a 11% CAGR since 2021, and innovative in digital assets and ETF products.
• Payments transformation progressing, with payments businesses showing strengthening growth rates.
• Net interest income and margin improving, record consumer deposits, and improving asset quality.

In the fourth quarter, net interest income increased 3.3% year over year, supported by strong consumer deposit growth. Fee revenue grew 7.6% year over year with broad-based strength across most fee businesses. For the fourth quarter, total net revenue was $7.4 billion, and for the full year, it was $28.7 billion, both record levels. Fee income represented 42% of total net revenues for the full year and grew 6.7% year over year. The Global Fund Services business had strong growth, with 12% growth in 2025 and an 11% CAGR since 2021. The payments transformation is a strategic priority, with growth in payments businesses as execution progresses.

• Full-year 2026 total net revenue growth expected in the range of 4% to 6% compared to prior year.
• Expected positive operating leverage of 200 basis points or more for the full year, excluding BTIG acquisition impact which adds $175 million to $200 million fee revenue per quarter.
• First-quarter 2026 guidance: net interest growth 3%-4%, fee revenue growth 5%-6%, noninterest expense growth ~1%.

• Geopolitical risks.
• Potential detrimental impact of credit card rate caps on clients.
• Uncertainty around regulatory changes such as the Credit Card Competition Act and digital assets tokenization.

Q: Speak to how you might think about the pace of share repurchase as this year plays out.

A: Intention is to gradually increase share repurchase amount, starting from ~$100 million to $200 million this quarter, with the goal to glide into a 75% payout target over time.

Q: Thoughts on credit card rate caps and the Credit Card Competition Act.

A: 90+% of clients would be detrimentally impacted by a 10% rate cap; CCCA not a meaningful focus currently, with focus on client communication and financial education.

Q: Revenue growth expectation for 2026, spread vs fee growth.

A: Expect mid-single-digit growth for both net interest income and fee revenue growth, led by key businesses like capital markets and payments.

Q: Flexibility to achieve positive operating leverage if revenue doesn't cooperate.

A: Expense management has productivity from digital upgrades and AI, with flexibility on strategic investments as they are quarterly in nature.

Q: Balance sheet growth outlook in 2026.

A: Loan growth led by commercial and card, with commercial real estate showing growth, and deposit growth focusing on consumer and operational wholesale deposits.

Q: Drivers of deposit growth and mix shift.

A: Consumer deposits driven by BankSmartly product, reduction in CDs, and growth in institutional and fund services deposits.

Q: Role of digital assets and tokenization.

A: Cryptocurrency custody and stablecoin custody offers, revenue from ETF launches, but payments side still speculative with revenue model to be figured out.

Q: Acquisition of BTIG, impact on capital markets.

A: No impact on share repurchase, 12 basis point impact on CET1 ratio, with revenue synergies with existing capital markets businesses.

Q: Impact of tailoring proposals on assets and LCR.

A: Continue growing assets, take regulatory changes in stride, LCR already incorporated into NIM guidance.

Q: Productivity savings and investment for future.

A: AI and stablecoin pilots get industry support, payments transformation has delayed revenue model, but productivity from digital upgrades over the last six years provides long runway.

Q: Commercial loan growth, especially commercial real estate.

A: Growth in multifamily, industrial, and C&I loans, broad-based growth with pipeline building.

Q: Geopolitical and other risks.

A: Economic backdrop constructive, focus on unexpected policy changes like capital bill and novel charters.

Q: Capital call for BTIG acquisition.

A: BTIG has low balance sheet, synergies in fund services and capital markets, self-funded.

Q: Global Fund Services competitive landscape and growth.

A: Niche products, sustainable growth from organic and market share gains.

Q: Branch strategy.

A: Closing in-store branches, building multi-client hubs, investing $200 million in branches for modern interconnected hubs.

Q: Market share goals and investment areas.

A: Investing in Denver, Minneapolis, Nashville, Arizona, California, focusing on hub branches in high-growth MSA areas.

Q: Consumer checking account growth.

A: Consumer deposits up $7 billion, driven by product offerings, pricing tools, and digital capabilities.