Summary

• U.S. Bancorp is a large bank holding company based in Minneapolis, Minnesota.
• U.S. Bancorp is the parent company of U.S. Bank National Association.
• U.S. Bancorp, with approximately 75,000 employees and $668 billion in assets.

U.S. Bancorp (NYSE: USB) is a large bank holding company based in Minneapolis, Minnesota. It is the parent company of U.S. Bank National Association, the fifth-largest bank in the United States. U.S. Bancorp provides a wide range of financial services to individuals, businesses, governmental entities, and other financial institutions. U.S. Bancorp, has approximately 75,000 employees and $668 billion in assets as of September 30, 2023.

Recent Developments

U.S. Bank Launches Avvance Point of Sale Lending Solution¹

October 24, 2023;  U.S. Bank, an industry leader in payment services, announces today the launch of Avvance, an embedded, multi-channel point of sale lending solution. Avvance empowers businesses with the ability to offer consumer financing during checkout with a quick application and instant decisioning.

MUFG Union Bank Acquisition

On December 1, 2022, the Company acquired MUFG Union Bank N.A.’s core regional banking franchise (“MUB”) from Mitsubishi UFJ Financial Group, Inc. Pursuant to the terms of a previously announced Share Purchase Agreement, the Company acquired all of the issued and outstanding shares of common stock of MUB for a purchase price consisting of $5.5 billion in cash and approximately 44 million shares of the Company’s common stock. The Company also received additional MUB capital of $3.5 billion upon completion of the acquisition. The additional capital received is held at the MUB subsidiary and required to be repaid to Mitsubishi UFJ Financial Group, Inc. on or prior to the fifth anniversary date of the completion of the purchase, in accordance with the terms of the Share Purchase Agreement. As such, it is recognized as debt at the parent company.

MUB operates approximately 300 branches in California, Washington and Oregon. The Company’s 2022 results reflect MUB’s operations for the month of December 2022, and the Company’s balance sheet as of December 31, 2022 includes MUB’s balances acquired or assumed in the transaction, including $81.4 billion in total assets, $53.1 billion of loans and $82.0 billion of deposits. As of the date of acquisition, MUB is a wholly-owned subsidiary of the Company and an affiliate of U.S. Bank National Association (“USBNA”), the Company’s primary banking subsidiary. The Company expects to merge MUB into USBNA in connection with the conversion of MUB customers and systems to the USBNA platform over Memorial Day weekend in 2023.

Financial Highlights

Third Quarter 2023 Results

October 18, 2023; U.S. Bancorp reported its third quarter 2023 results.²

Net income attributable to U.S. Bancorp was $1,523 million for the third quarter of 2023, which was $289 million lower than the $1,812 million for the third quarter of 2022 and $162 million higher than the $1,361 million for the second quarter of 2023. Diluted earnings per common share was $0.91 in the third quarter of 2023, compared with $1.16 in the third quarter of 2022 and $0.84 in the second quarter of 2023. The third quarter of 2023 included $213 million, or $(0.14) per diluted common share, of merger and integration-related charges net-of-tax associated with the acquisition of MUB, compared with $33 million $(0.02) per diluted common share in the third quarter of 2022, and notable items net-of-tax of $432 million, or $(0.28) per diluted common share, in the second quarter of 2023.

On an adjusted basis, excluding the impacts of these merger and integration-related charges and other notable items, net income applicable to common shareholders for the third quarter of 2023 was $1,624 million, which was $127 million lower than the third quarter of 2022 and $86 million lower than the second quarter of 2023. Adjusted diluted earnings per common share was $1.05 in the third quarter of 2023, representing a 11.0 percent decrease from the third quarter of 2022 and a 6.3 percent decrease from the second quarter of 2023.

The decrease in net income attributable to U.S. Bancorp year-over-year was driven by higher provision expense and noninterest expense, including the merger and integration-related charges, partially offset by higher total net revenue. Pretax income excluding merger and integration charges in the third quarter decreased 4.1 percent compared with a year ago. Net interest income increased 10.7 percent on a year-over-year taxable-equivalent basis due to the impact of rising interest rates on earning assets and the impact of the MUB acquisition. The net interest margin decreased to 2.81 percent in the third quarter of 2023 from 2.83 percent in the third quarter of 2022 primarily due to deposit mix and pricing, partially offset by the impact of higher rates on earning assets and the acquisition of MUB.

Noninterest income increased 11.9 percent compared with a year ago driven by higher payment services revenue, trust and investment management fees, commercial products revenue, mortgage banking revenue and other noninterest income. Noninterest expense increased 24.6 percent (18.1 percent excluding merger and integration-related charges), primarily driven by MUB operating expenses, including core deposit intangible amortization expense, and higher compensation expense to support business growth. Provision for credit losses increased $153 million compared with the third quarter of 2022 driven by the acquisition of MUB, normalizing credit losses and continued economic uncertainty.

Net income attributable to U.S. Bancorp increased 11.9 percent on a linked quarter basis reflecting higher noninterest income and lower provision for credit losses, partially offset by lower net interest income. Pretax income excluding notable items decreased 3.8 percent on a linked quarter basis. Net interest income decreased 4.1 percent on a taxable-equivalent basis due to deposit mix and pricing, partially offset by the impact of rising interest rates on earning assets and balance sheet repositioning. The net interest margin decreased to 2.81 percent in the third quarter of 2023 from 2.90 percent in the second quarter of 2023 driven by similar factors. Noninterest income increased 1.4 percent (0.6 percent excluding notable items) compared with the second quarter of 2023 driven by higher other noninterest income. Noninterest expense decreased 0.9 percent on a linked quarter basis driven by lower merger and integration-related charges. Excluding merger and integration-related charges, noninterest expense decreased 0.3 percent due to prudent expense management. Provision for credit losses decreased $306 million ($63 million excluding prior quarter notable items) compared with the second quarter of 2023 primarily due to relative stability in the economic outlook, partially offset by commercial real estate credit quality and normalizing credit losses.

Full Year 2022 Results

The Company reported net income attributable to U.S. Bancorp of $5.8 billion in 2022, or $3.69 per diluted common share, compared with $8.0 billion, or $5.10 per diluted common share, in 2021. Return on average assets and return on average common equity were 0.98 percent and 12.6 percent, respectively, in 2022, compared with 1.43 percent and 16.0 percent, respectively, in 2021. The results for 2022 included the impact of the 2022 acquisition of MUB. The transaction closed on December 1, 2022 and results reflect one month of operating results of MUB including $255 million of net interest income, $47 million of fee income and $221 million of noninterest expense. In addition, the results for 2022 included the impact of certain actions directly related to the acquisition, including $399 million of losses primarily related to interest rate economic hedges, entered into after regulatory approval for the acquisition was obtained, to manage the impact of interest rate volatility on capital prior to closing the transaction, $329 million of merger and integration charges, and $791 million of provision for credit losses related to acquired loans and balance sheet repositioning and capital management actions taken in the fourth quarter of 2022 in connection with the acquisition. Combined, these items decreased 2022 diluted earnings per common share by $0.76.

Total net revenue for 2022 was $1.5 billion (6.5 percent) higher than 2021, reflecting a 17.9 percent increase in net interest income (17.8 percent on a taxable-equivalent basis) and a 7.5 percent decrease in noninterest income.

Net interest income, on a taxable equivalent basis, was $14.8 billion in 2022, compared with $12.6 billion in 2021. Average total loans were $333.6 billion in 2022, compared with $297.0 billion in 2021. The $36.6 billion (12.3 percent) increase was due to growth in all loan classes, including a $4.6 billion impact related to the MUB acquisition.

Company Overview

U.S. Bancorp, with approximately 77,000 employees and $675 billion in assets as of Dec. 31, 2022, is the parent company of U.S. Bank National Association. The Minneapolis-based company serves millions of customers locally, nationally and globally through a diversified mix of businesses: Consumer and Business Banking; Payment Services; Corporate and Commercial Banking; and Wealth Management and Investment Services.³

Business Segments

The Company’s major lines of business are Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate resources and assess performance.

Corporate and Commercial Banking Corporate and Commercial Banking offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services, international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution, non-profit and public sector clients. Corporate and Commercial Banking contributed $1.8 billion, or 31.6 percent, of the Company’s net income in 2022, an increase of $277 million (17.7 percent) compared with 2021.

Consumer and Business Banking Consumer and Business Banking comprises consumer banking, small business banking and consumer lending. Products and services are delivered through banking offices, telephone servicing and sales, on-line services, direct mail, ATM processing, mobile devices, distributed mortgage loan officers, and intermediary relationships including auto dealerships, mortgage banks, and strategic business partners. Consumer and Business Banking contributed $1.8 billion, or 31.0 percent, of the Company’s net income in 2022, a decrease of $551 million (23.4 percent) compared with 2021.

Wealth Management and Investment Services Wealth Management and Investment Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust, custody and fund servicing through four businesses: Wealth Management, Global Corporate Trust & Custody, U.S. Bancorp Asset Management, and Fund Services. Wealth Management and Investment Services contributed $1.3 billion, or 22.6 percent, of the Company’s net income in 2022, an increase of $471 million (55.9 percent) compared with 2021.

Payment Services Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services and merchant processing. Payment Services contributed $1.3 billion, or 22.7 percent, of the Company’s net income in 2022, a decrease of $380 million (22.3 percent) compared with 2021.

Treasury and Corporate Support Treasury and Corporate Support includes the Company’s investment portfolios, funding, capital management, interest rate risk management, income taxes not allocated to the business lines, including most investments in tax-advantaged projects, and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated basis. Treasury and Corporate Support recorded a net loss of $459 million, or (7.9) percent, of the Company’s net income in 2022, a decrease of $2.0 billion compared with 2021.

Product and Services

Consumer and Business Banking

Branches; 24-hour customer centers; mobile banking; online banking; mortgages; consumer lending; ATM and debit processing; workplace banking; student banking.

Payment Services

Credit, debit, prepaid, virtual, corporate, purchasing and fleet cards; global payment processing; freight payment services; realtime payments; eCommerce.

Corporate and Commercial Banking

Lending; asset based financing; equipment finance and small-ticket leasing; correspondent banking; depository services; capital markets; international trade.

Wealth Management and Investment Services

Wealth planning, investments, trust services; private banking; specialty asset management; global custody solutions; global fund services; corporate and institutional trust services.

References

1. ^ https://ir.usbank.com/news-releases/news-release-details/us-bank-launches-avvance-point-sale-lending-solution
2. ^ https://ir.usbank.com/static-files/294b877a-a134-4b85-a2e8-7f5a40990e30
3. ^ https://fintel.io/doc/sec-us-bancorp-de-36104-10k-2023-february-27-19415-8772