U.S. Bancorp (USB) 17 Jul 242024 Q2 Earnings call transcript

Welcome to the U.S. Bancorp Second Quarter 2024 Earnings Conference Call. [Operator Instructions] This call will be recorded and available for replay beginning today at approximately 10:00 a.m. Central Time.

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

Vice made note good CEO, can Today, that schedules our and prepared found today's Andy SEC. that to Dolan; the any subject be Senior earnings and and our statements our could current joined Factors CAO, usbank.com. Please our analyst remarks, supplemental forward-looking Krista, John presentation, described presentation. and and website risk forward-looking CFO, A the will today's Chairman Cecere; of Executive a in Andy assumptions press you, and morning, on X presentation, during with change uncertainty. release and are be I'm everyone. on call reports by Terry Stern. John are Thank Together and with referencing their at slide and President release Page our Vice on materially of file Chair copy

and will over questions remarks, any John Following take Andy, Andy. to turn our now Terry prepared will have. I the you that call

George. you morning, joining our call. Thanks, and for everyone, thank Good

FDIC Slide assessment. begin notable quarter, earnings diluted item reported share $X.XX, the to $X.XX share In of related the I'll we per which of second included X. on per special

per Excluding this charge, share we of earnings onetime $X.XX. delivered

return basis. an an tangible This management, on income our growth, capital common income, credit strong XX.X% quarter prudent equity to adjusted quality was interest on by net increase Notably, accretion. expense highlighted increased in continued fee stabilization and

management that multiyear Union benefiting operating in linked down, efficiencies Turning the have investments many year-over-year and continued Bank, was growth across fee-based adjusted, across both prudent cost businesses. and our from improved to as business was as quarter Slide well Revenue as expense, spread X. synergies growth noninterest for effectiveness. a, greater enhanced income by resulted the quarter with of and supported expense On basis,

Average total modest with in liquidity industry NPAs. see deposits and as in to despite in stabilization and we headwinds. earlier, and As rates a were I results X.X%, quality increase our continue delinquency mentioned line expectations growth credit deposits in saw we consumer increased

tangible As than XX.X% last XX, increased share year. $XX.XX or our and of per higher June book -- than X.X% $XX.XX to last better quarter value

quarter points in points last Our CETX from year his will prior remarks. to ratio from XX XXX quarter at John basis increased end basis opening the year's discuss this takeaways key and test stress the capital XX.X%. from some

provides key X metrics. Slide performance

average Excluding to notable on on average increased and items, XX.X%. assets our common to improved return X.XX% equity return

improved first to Our basis. from efficiency adjusted ratio the quarter also on an XX.X%

strategic of Fee diversified ] consistency provide as well continue fees just capital net trust we're operate revenues X. earnings revenue product XX% our Slide progress at the efforts businesses. payment this to and we by and And most investment cycle. from Overall, treasury in quarter businesses us channels. income positioning These fee growth and through represents of and management income total making over deepen our well revenue. across our client [ benefited are continued to Strong seasonal relationships, differentiation. the Turning most profitable encouraged each distribution and for our improved management enhance set as growth expand importantly, scale are to high

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

Andy. Thanks,

noninterest-bearing deposit to of noninterest-bearing $X.X quarter. balance growth. consumer discussion a balances linked-quarter continue decline by average a generation. pace emphasize slow on continued on continued to billion or we Average If billion or I'll deposits followed stable of Total and balance quarter in balances $XX.X deposits linked-quarter sheet start basis with to deposit $XXX increased relationship-based you turn trends. a Slide X.X% decreased to a as institutional earnings summary stickier billion, second The X, basis by this driven X.X%

loans are we Average shows, billion, left remain volumes card of from upper quarter offset the growth loans other securities growth in estate to real increase spend relationships lower cash this and total on the short-dated, by securities on operational from an our opportunistically higher were and prudently increased pricing optimize corporate Loan investment was portfolio increased $X.X we increase driven and quarter. deposit managing better across credit levels. core loans high-quality focused commercial higher of franchise. growing elevated we as by partially the banking. total or loans. With retail linked chart X.X% The $XXX retaining the As with commercial was size levels, billion our

$XXX this portfolio an quarter, securities in XX. the increase average of ending the X.XX%, to the with together taken XX was increase As balance our result, June approximately on on runoff, resulted point Actions basis from yield as a a $X of quarter. prior billion portfolio investment investment billion

be we forward, portfolio current securities the benefit rates. approximately points X the on to to flat for the level reinvestment based on Going remain relatively would balance to from quarterly on expect X investment current average to basis the runoff and

Slide X quality our highlights credit performance.

was adverse for metrics line assets appropriately year continue XX In of XX of Nonperforming a approximately at points basis linked points X.X% increased in basis and develop quarter, quality reflecting XX, XX assets compared ago. March reserved XX real remain at points Asset pace slower The flat to conditions. the change. loans expectations, a potential sequentially. quarter, basis economic we and with and second ratio to with nonperforming delinquencies other June were estate

XX charge-off to in in basis ratio quarter Our points our points charge-off the this expectations, basis half basis continue the from XX of year. net and increased first of points expect with X our we to second line ratio quarter approach second net

period-end June billion totaled for loans. losses XX $X.X of or as allowance X.X% Our credit of

a second special X failures. quarter, increase last which share in charge provides share, the million detailed we for summary. the $X.XX $XX following more FDIC In $X.XX diluted a or earnings per reported year's Slide assessment per included an bank

other billion, approximately XX. net an Slide increase by increase a income totaled of growth, and driven on to combination of interest stabilization was pricing income mix quarter taken this and to a interest investment balances. quarter in basis on a asset and this linked margin $X.XX a drove basis migration Turning X.X% X net to deposit improved quarter slower volume taxable point as higher Net levels the on well liquidity cash actions as deposit basis. in The decline balance optimize Elevated X.XX%. sheet fixed loan interest equivalent on repricing, portfolio

commercial by payments of servicing in linked-quarter rights. banking stronger trends highlights a on bond Fee through approximate and million fee million. businesses. to fees investment the continue on XX to fees, and year-over-year securities This as we corporate seasonally the due $XXX sale gain deepening months our mortgage relationships offset sales slight which of decrease lower X losses increase year was product benefit $XX revenue or $XX on included from Slide basis mortgage noninterest X.X% driven income a increased first revenue income. basis, of higher on by an across increased X.X% in Noninterest a million income partially client

X.X% Noninterest occupancy partially as decreased marketing as as across and expense Turning development and realized higher equipment to or decreased as a from primarily noninterest adjusted, on offset million the decrease efficiencies $XX adjusted, expense, Union well XX. operational X.X% linked-quarter expenses, costs. Bank synergies business identified the which we Year-over-year, prudently managed was benefit compensation acquisition. The million net business or by Slide and driven expense, was basis. $X and lower as employee by

XX. Turning to Slide

released of a a fee macroeconomic our Fed's XX.X% preliminary result X.X%. modeled point Reserve increase year. X reflective resulted point industry that We XX, was Our Federal Slide stress our provision the the basis and will guidance. June the increased compared and an first and XX, potential well stress results. to reflective ratio in with common forward-looking to significantly a of increase stress, manage industry, were assumption capital buffer lower to is from stress last severe now equity guidance consistent previous XX basis which a which might remain point XX Tier provide income downturn. I test capitalized as on taken On expense with its any of Consistent improvement June the prepared XX-basis largely in from of of results quarter XXX to XXXX

We net $XX.X Full relatively second to is the the net an basis in FTE for basis an the be FTE billion. $XX.X XXXX on to billion be quarter. on to range of income income expect to third interest interest expected year quarter stable

noninterest For the full as adjusted. achieve in year, income we growth mid-single-digit expect to

We expect $XX.X noninterest adjusted to of as continue year full lower. expense billion or

back Andy Let turn for me to closing now it remarks.

Thanks, John. up on I'll Slide finish XX.

and revenue discipline diversified remain the of features highly highlighted robust management and capital our earnings risk business profile. We results in businesses deeper and the mix, a quarter key our aggressively and The Second competencies differentiators. core are growth across focused showing strong improved model client a that on generation that resiliency a acquisition, upon experiences enhanced investments further our are are of customer story. form through propelling the we're relationships building making

us, our and remain we Expense management this focused operating second positive priority year is for a and on of target in beyond. leverage half the of key

are interconnectedness product to well business and established us solid scale, capabilities future. returns across we the the the into ahead, continue already allow to well build Looking and to upon foundation positioned deliver reach our with that industry-leading

thanking make communities clients, serve. for shareholders do they destination and us everything of by to our employees many Let choice me for close we the

Q&A. open now call for We'll the up

from [Operator Scott Piper Instructions] comes Siefers question Your with Sandler. first

range. a would in discuss trajectory or within two the from year midpoint come It hoping that fourth end was takes the of sort like of full please? I assume of we if bump the low the range, full after factors sort John, toward just here. NII quarter the on maybe thought you guess high hopefully get stable we third a please of a looks you the or in quarter would end to could puts the cause the either I year and

position the grow, deposit. stabilized. Scott. all, net like we've that Loan improved. has rates and paid for mix have we're to our Rotation income interest see Sure, the taken we and ourselves pleased to of first actions Well, future

repricing deploy asset Our opportunistically fixed to working earning we've excess to -- portfolio liquidity. investment asset been the on. march continues with repricing And

about I'd the say going the these if different end So some a think lower things of and forward, things. you of of couple higher range,

rotation expect would that minuses it's and out going forward, deposits just I income. modest. all, say, slowed. to the third some of of we to going level pluses expect but We anticipate we of quarter would and do can I deposit going be net there tell, upon interest stable you as We growth. And rotation mentioned, expect as then be relatively it from depending is -- do there, First And beta.

In market. as forward move we rate our should that's you has as on But can positioning to good going feel occur. cuts well, and they be paid, tell, as slowed about of we that rate the dependent terms for

or portfolio Our mortgage and continue the investment to formulaic reprice, earning assets, be that's we know whether are going book. to the

that given We expect seeing. on current within And -- point to in be then levels. modest this forecast of the that loan just average range of X kind dynamics assume of basis X kind our going kind we're in forward, very we to given loan growth,

going is just And XXXX do, then cut it's although be the finally, what they Fed actions I just for and whether not to they would or say, the meaningful not. as of

about So and the of puts we kind takes couple the next are quarters. of those think as kind of

And Okay. deeply ask if to more delve could then portion a of Perfect. one that. into maybe you little I

this average seen Just growth all more the commercial backdrop commercial of modest sort of from your you looked guess we've you what growth terms What outlook, but demand? loan loan forward. the than are in I favorable loan of going modest a within little noted peers. asked I quarter here seeing

So the based insight curious on sort of as just to that.

Sure.

I'm some interest the -- this We in of loan and sure I occur spark thesis that really our the hasn't pockets I overall, growth loan will just did last lot a book growth, think that growth happen could on a tepid loan several find pockets we see The remains But there's But It very But good So of corporate some book. remains in loan there's the caution changed environment growth overall the clients. tepid. movement, quarter. things. it's over -- in market. -- corporate still of loan think to quarters. rate

from question comes next of Bank with Ebrahim Your of the line Poonawala America.

could maybe, I high NII. on just following billion. $X.X math, John, guess quarter, By up the as fourth your my as be like

the takes So I earlier. you appreciate puts and provided

X of your cut to terms a the balance NII think imply just about or and us sheet, deposit cuts corporate given trajectory scenario, the the on in of what in from side -- we remind makeup? rate the would positioning X sort your of X institutional As flex

Sure. Ebrahim. Thanks,

given there market change So well cut think the the base. we potential way positioned I are in mix of rate is shift deposit about that and our

corporate balances. balances environment are down will, institutional beta, about corporate-type of approximately of up. And they a our go of So balances as going the quickly and our those or of institutional are those XX% are in retail-based to you cut XX% if came balances, as

good that. feel we repositioning about So very the of

be the retail there'll would say always I to some side, On arc it's -- the just retail. that

will down. probably time, some at that levels. [indiscernible] come But So be there higher occurs over will those balances the repricing

overall, so advantage as for favorability repricing side us the rate you in things. lower should And the short-term to that of higher theory, it curve rate and on a gives and an steepen asset allows longer-term have start continued earning a

are is Where for categories to moderation about seen to the And growth? you revenue relative mid-single what in first you when half it. I going some the think where revenue going half you growth Got the to growth, expect the digits, do the think driven? do that of year? outlook be back fee guess we've What on just drive separately, fee more

Sure.

market of I fee the of solid to be areas and things, a it's to fees, trust capital I categories. think going we And had on to. management be combination investment space ones. be it's point it's going main all would in be going side a X quarter, various to payments, you we It's the in to to that is going momentum the probably expect the continue but our the

areas. side payment merchant continue talking strong see core tech-led we our of and you're the competencies whether in things, about On processing, to

of side credit we If the you're to some payments starting in see card, spend And of corporate levels. fleet. looking and you're us at freight our lap things, to about on talking strong things credit, continue

we positive things So be those us move for are as all to going forward.

us been of investment and deepening then businesses well backdrop, continue in growth kind different terms those of be strong in as there trust have position going well that of well in number very for our see of doing utilizing those continuing well in a relationships we terms here and and fees. to management and we to see base very The fees market client the as for as facets. the guidance tailwinds are mid-single-digit just investment capital that our as And markets

comes line Graseck next question Morgan with Betsy Stanley. Your from the of

you going I a bit know already there's slide the talked highlighted rate growth that but we through little utilization about loan the increase. deck, piece,

increase? it's at institution Do your the a I've you're just more types just utilization important, is because where on that first that? geographies least function of quarter I'm this you're of wondering, guess I attention So where driving clients how is more I new like the this -- seeing utilization new would that's seen and right, the industries that's perhaps [indiscernible] increased. Or you think focused

Sure. Thanks, Betsy.

new we've it's to new we're -- going would see utilization, it And increase. So tick with say to some line in the up. of in modest. investment utilization it's that as I wouldn't where would terms I say did pretty point I continued it seen much pretty past. in trend

really the mix a saw this I we of loan of think more function that quarter. it's

loans versus Some things were of came at of that off. a high some level brought the on that rolled the utilization

more So a rather just think a I mix change in than it's of shift trend.

the that year. just half towards more right? here. Is then wrong? the was I a through a the I sense coming Or And of that on maybe bit did credit outlook little back got there that get credit

from it's would in of delinquencies But half how in kind back credit at Well, as charge-off I perspective, anticipate from about charge-off. thinking basis points. a like It credit we XX approaching guidance It's we're be nonperforming don't to came in really very it's in, come changed of things in confidence us the the think have stabilizing. continues of XX We year, have our points come all, standpoint. and -- metrics and basis those net hasn't -- giving a have well, the here first our expected stabilized outlook. nicely,

already are And well. if a wondering release reserve there's behind you as NCOs? these reserved Just Okay. that for

in for Yes. growth, of of We reserve and things quarter, we the We because cards appropriately feel just simply a build particularly bit increase very much saw the reserved in have. our little of that like. book this

kind what driver has of reserve the on side. been So the that's

Your with Erika of line next question Najarian UBS. from comes the

Andy. is question first My for you,

results, balance baked was little bit MUFG is in all about the given I the sides thought test we surprised growth was stress really At the would both think I that what striking time, be that and sheet think quarter dynamics cleaner. a same really impressive fully we this were on outperforming by with the sheet peers. especially PPNR of the

I'm would of dynamics, this SCB X.X%. if And calculating how CETX about we sort adjusted X% of growth to balancing right, versus think element And relative about I'm this this the so are unpredictable thinking you changing quarter wondering, managing your as be those plus.

done a last assets belly huge have same to the little a going obviously, you a Fed Obviously, happen what's of longer, higher managing At are the the there's a bit risk-weighted cuts. burn-off rates to time, subscribes to staying the great on job AOCI. rate even for year. curve everyone at And as debate to and there's

should light So management we wondering about this especially quarter? in of sheet the growth that how here, balance experienced you from good think

Erika. me CCAR on And start the results. let Thanks, Sure.

focused So about MUFG, as you that there the were that that happen on think component came down. the component was did we expense

our even clarity fee why a the expected. have It happened component, And as spite fact banks. went was a fee actually in that it So for the of happened. Fed that and up growth component was happened positive. we the versus of into or lot that income of number don't that The last is year transparency

increased of banks. for was was the for SCB a part driver other us that that and of the the So number

capital me about step balance and Let the let and back a me sheet talk overall. take

talked past, in we've priorities from Erika, As changed. capital a haven't standpoint, about our the distribution

third in investing business, is first the buybacks. The is dividends, and second is

part fourth and And in of starting of about, distribution X% assumed saw test, as an ratio XX.X% this increase about the to talked the as quarter. stress year's our we've dividend so is referenced, you as as quarterly capital quarter. And planned this you our CETX

So capital each accretion have we quarter. to continue strong

fully the be threshold. to well we II -- above will that cross cross well targets our capital expect before We CAT loaded

basis capital to comfortable So to XX from and a points ability accrete our we're standpoint, levels quarter. XX a with our

rules. open while our one will So those III we to at before return targets we the have as our and update as targets know, the information endgame distribution item, prefer our have targets, we clarified, Investor and you XX. Basel And final as all is revising assess on capital well available on capital our Day distribution, whatever September

based XXth just we So CCAR on XX, think terms like sound doesn't XX seem what told my follow-up just in rest as in October we 'XX. It it next saw year. if about as of growth we us, the doesn't should of management XXXX Andrew, sheet as the balance Xst, and of active as similar of September is the you've year, expect

capital from points. this going additional I of had I to the we've XX points we think most a going quarter. a a bit to forward, optimization, earnings basis basis RWA XX quarter about, would XX as to talked forward, be but that We about accretion. little benefit we accretion about, think that talked be So normal XX of Erika through as And will expect

question the Ken Usdin next Jefferies. line comes Your with from of

ask just the -- But coming a growth to like the the growth the in help absolute as what in in of can math Obviously, we us rate go slowed to little business expect aside do the quarter year-over-year half. from kind have from in just first trajectory understand the you some within looked X on kind how And payments easier X% to the comps? to second. that you just comps areas? X% up wanted of second it but bit worked the dig know you I just normal, sequential I business.

Sure.

Ken. I So agree. And thanks, do

merchant businesses We're I comps. think momentum. that. about on processing. just obviously that I'll here, maybe with start different kind expect is of we I the do of If Part not think relying

a We a been -- growth. nice our tech-led growing on business are rate. categories now our strong good have The expansion in seeing initiative. core margins growth very of very that seen there. very about good non-travel X/X have lot of are and has And sales at That's our really a we seeing

kind So tailwinds. those are the of

this some positioned But is we're travel on that We have Europe. we will on volumes headwinds seen particularly like nature. hope things. the feel something that in things of and side But that merchant reverse that well quarter we of otherwise,

for I of forward. to freight starting to move of corporate we lapping all fleet On be going client card well. is did card say point that But then rate we increase a credit the things there. is the well -- penetration the bank well really Union a of strong But growth we're constructive. card, still, little Bank into retail a may things would that helpful. And quite acquisition, see side those we performing as side retail and we spend get of decrease side, as quarters and into of the bit of continuing may is quarter our strong very as linger are continue this card sorts to of prepaid on the the mitigation couple the just risk and but on as because things, pressure think to around pressure inflection which

of so think third very And in for to the rates some by corporate quarter. things that on fleet lapping allow about I the -- is we kind the think think, of as those so quarter I fourth really especially we are or payments, strong going

nicely. grow that high that a just to momentum grow there's side think So of allow level, we on the will us things and at

follow-up on NII. Great. One more

result, day. just example, just through And the like as what's It extra really quarter with outlook been lot you second stable, I'm your the You were have can that in back third would a not Was some here? that helped hold had from us the recur? wondering, either is for not quarter walk that's but looked good if securities one like NII I'm of it. that and in second higher just don't but a an the there sure terms growing yields things

why don't like the we just second So XX XX, saw that up see just growth from the quarter? straight we zone in

Sure. that going range and to of the just Well, to what's really outcomes the it. is it be think -- I deposit drive And question the earlier down thing. comes around that going to around behavior really it's

we saw certainly trends good Now DDA. rotation has very of of pace slowed. terms in out That

it continue so but We expect doesn't that to moving there's it slow forward, to mean component. it's And over, right?

On monitoring And don't the still growth how we of industry pressure rate the QT us liquidity paid and a the side is putting of just of still on will for is things, rates quarter, the for frankly, simply next competitiveness just and around because market. the we're just deposit quite deposit in go. expect lot

that's or market the that's not. of know driver. will top know the I cut and in, priced the just factory this if so Fed the we of kind thing. primary It's don't of just And watch has but of that. another on that, sort And that

those be factors I out. call the would So would

assumed more cuts, December. John, and in September projections, we've rate our And X

and That's right. rate cuts. December We've for assumed September

comes with Fargo. Wells line Your the Mayo Mike next of question from

not is mentioned you here, the the if Again, help just even just you third higher wrong X NII, for think with I can in items quarter. me that. math my out going assuming

If your little highlight just more. could reprice fixed you asset a bit

basis I per because securities correctly. if up reprice you wrong clearly said X that heard one, quarter, math, to should and my points it's X Here's

securities, take quarter. next that be like you basis X extra on if billion So points $XXX of $XXX would

on You But sure you met take get X more growth to cetera, not base basis your et your billion, of on the X take quarter, $XXX And on up if and then for guidance. basis you book cetera. quarter X% that's next almost I after X% points mortgage that million points a NII wasn't billion, et that. that, of that. you be $X would $XXX growth

I'm securities, wrong. or if fix my items X on the those So first, repricing what offset mortgages, of could fixed that And the doing that. far you confirm math all just then mentioned you asset as not, as

to Happy Mike. Sure, so.

I rate think a the of book. fixed given terms continue of going to mortgage, in much math that's terms in a that's very

the current investment increase. basis portfolio, given On expect to X we point rates, X would

assume that we be just floating sort rate our and will book projections of about thing. swap of half mentioned, our there to if we And as cut or that in a in However, September. floating is

And portfolio way. so And the of that shift. will side the start the on of other that investment deposits, course, will impact that to

Of the arc but to the right will have course, would side move institutional start it. away, retail to an site

so of a we a part quarter, the of within is which the sort And stable movement the why it's cut anticipate of quarter. relatively third

And just for basis X clarification, security? points books the by should reprice also, mortgage as upward you did intend -- quarter the a same

of kind X Yes, that's is book point Mortgage X right. to that basis range.

And then one more follow-up, and I'll requeue.

deposits. noninterest-bearing Your

between and for the it's all-time slowing. remind that us ratio? did mentioned quarter first what's second low what You that you and Can as one of factors it said you risk the your

XX% of quarter to I quarter. mix deposits, is so XX.X% the was It ago. where was total DDA On quarter that. this or or we the before came XX.X% so in think, It

it And changing is for an is of behave our at sure, clients be terms to that pace but goes, all look where how and it's just in low sort slowing. that as thing, going all-time So it for and we data. us, of back

down out in there's in the Slide quarter, the chart quarter a first and Mike, -- the migration slowed first to has in fourth down of second left X.X% quarter the that upper that slowed. X, on the X.X% in was It 'XX. then -- shows there's And X.X%

comes Your Cassidy from Gerard the next of with question line RBC Capital Markets.

from March up what average many your approach your Fed like starts the strategies what seeing of correctly, as the Can in to quarter. obviously John, took rates was interesting of cut them how other supplement versus quarter? you quarter you share down -- kind the the one time you or about thought your talked at was and down largest in with prior deposit us largest rates. deposits that in X.XX% market category, when sheet yield the that it went savings, X.XX% the I'm of if deposits you balance used will the money on I it the

Sure. Gerard, no problem.

category, deposits. you if category as that largest at for So look mentioned, our you

well So that and done grew mix -- it's I again, and obviously, loan we bit, sort business tremendously. it's it not growth, growing of as of little a retail wholesale is, a small light think have in it's but as not all thing. what of And

have us for to relationships appropriate we sense and bank look to our things at in that across so And do. the the manner price opportunity makes

some utilized retail network, taken distribution have we've our so national really side, app advantage growing in bank branch lower cost. really of and really our taking in advantage opportunities network, a whether And really the that we've that's exit deposits our to our deposits. taking reach in areas And on some partnerships, high-cost capabilities, the

that's rotation so that specific of the that you're in And category. seeing kind positive

lines? they clients got your to I the starts think when be And growth? don't share cut to in this put rates that benefit would private credit what line down clients, but and you potentially guys you competition the them you could want item, loan which Can I affecting it. other about mouth, draw is, from rates that they it's words to do are go at from alternative when thinking -- least, and the rate lower Andy, a CapEx us talk bit you what spending, to touched from balances enable moment are macro a the C&I with out obviously more commercial seeing utilization continue just to it increased guys be would bigger loans. C&I on about whether a question. second, little lenders, ago John or grow, beneficial. may which the Fed then any

Gerard. Yes,

did clients the our on We opportunity to think of survey, probably they're expense defense offense efficiency amplify focused productivity, are we that focused really CEO right activity now. management some more lending the efficiency, they're making that a and little just are than They bit to utilizing to talked clients. focused they're is on that I on. a investments that and extent

on So a more little bit defense.

forward. across utilization go up to rates John expect were the I board, mentioned, But as we would as continue that in and pockets modestly

So prior what from nothing saw is significantly different The competition we strong. quarters. in

to continuing that a that's volumes seek pricing full full as -- competition nonbank little and appropriate drive We're bank the relationships both driving with bit. returns, will So well. and

Are a to the quick grow are as How standpoint? the that for sheet? you just balance banks follow-up more you guys that underwriting want underwriting aggressive seeing seeing that on And competition. from

to underwriting significantly Gerard. that how Yes. would on the That's as is the focus I'm it. opposed changing not I pricing, sure

from Your next with comes question Matt the O'Connor line of Bank. Deutsche

lower details I bit that's your it of wanted good by the year. full of on on for growth A thinking was the kind if you And thoughts of then the you to kind just year circle than outlook, still lot little a wondering you And but be payments. if could this medium-term update before? what just then still expect were segment, -- might same. I back

rate payment question answer changed your I'll second medium-term growth in businesses. terms Yes. first. The of trajectory has not for outlook other

area. debit So card kind we system think the of of think growth high into and in we the single-digit categories, mid-single-digit of terms growth of and card, merchant payments credit get we as corporate

move had growth we this on we last in getting we've X% mentioned, quarters expect and as quarter I levels. and X% approaching would X forward basis, a or sort year-over-year then the we medium-term of those so momentum As and

upon feel and comes is. the through. ultimately going or spend the in of that the confident to the of of we some takes lower and I or And be to depend levels end have drivers the But -- kind And of course, are the is not whether we're that. market that going where where of end going higher mentioned earlier how terms puts and on is

So we in space. feel that like we're well positioned

what's to? it And mentioned if missed the that that what long might... is? prepaid referred in you've that Okay. past, And you how the us but can mitigation Maybe risk just remind then you card I

Yes. Sure.

things just variety of more it's picked fraud has up. that that So and

-- just we to against just things. we so that of those mitigate chosen we've And just there's some and some so that sorts away of there areas from step to want

is And last much then it? one. how will continue? long of it a how drag That's And my

about growth card rate it's so area I X%. about or saw was sales think I X% X% Well, you -- versus the to X% -- mean of our

to going pressure that So some in third or I so. think be the of there's quarter

of Your JPMorgan. next from question comes Vivek Juneja with the line

A on couple One follow-ups. payments. just of

volumes, in we've get slowest with was digit up. seen high to growth only the merchant the said try X.X% to that's volume to the year-on-year, quarters. merchant, at I What's understand, I I X you single look when So up expect you happening -- and know

all the So and to trying to great around? you're why much? the are why tech-led has that strength, -- despite that cause which so areas initiatives, growth slowed other is turn what volume And would then

Sure.

to can talk that, I So Vivek.

sales that the on X% or mentioned so. the So was component processing side, about merchant you

clients that volume some saw we travel, the things. where to just was Volumes do of side decreases terms area. lower European had particularly our for really in In particular were in with of

really that's point. really focal -- that's So the

in thing, the about lap -- we you in think come that I of thing that's sort that we sort expect if the second of year. of start in where momentum of some the same-store sales think as and half to

Okay.

Okay. Shifting gears.

Where so losses, XX half, still first, second You're Despite you And losses which your delinquencies that question NPLs you up. a high. in are C&I C&I expect you charge-off points, there. sectors? basis tick charge-offs But given these outlook -- talking points help. going of overall in rate are are the Where for about where coming which to from categories delinquencies up down? the are the industry seeing X-part basis that do your running should XX currently, would down, losses, running are

Sure. Sure.

the So on I'll C&I your parter, X first. take question

outside unique worked couple through, that there First a We that in that the C&I of or and its we anticipate went in idiosyncratic really through. saw was that. an way the book attributed of quarters loan really of that all, one anything NPA increase was charge-off ago to don't

something that we're something -- that concerned that that is not is about. -- So

big look card, did more be example, charge-offs -- of charge-offs office I just On we think kind in or of the a will and in on of would delinquency, picture of an more a it quarter the charge-offs, I at fourth estate you we the third credit And things. about the rest little the balance in expect of mentioned, as the the if like first first quarter. given side But increase see think to our bit an just real quarter. the as this commercial

and puts charge-off that's the takes guide. kind the to of So

Okay.

that one given up, what So you that refilled large ticked not bucket, loan John, actually but the down NPL then C&I? off, had has in written

modest. something I think more mean, just It's idiosyncratic-type that any very very -- we're loans. I It's holistically not yes, it's it's reach. Well, concerned at about

that as you the the are mentioned, so on delinquency second as idiosyncratic that up that. a will of it one that's to about We've go about The mentioned, think out as I that think card. the loan but mentioned we quarter. a come credit up and will was the a down office, CRE bit. bit And down. in certainly and just John John stable, talked and prior and the calls, mentioned cause future, drives manageable, Vivek, that We've stabilization little that's levels lumpiness going and little

the question Pancari next ISI. Your from comes of with line John Evercore

capital you what how Or CETX and your thinking you Is on it you continued know What Andy, the side? clarity? you're rates? appreciate target? could buybacks the at sidelines outlook? the to your there. BASEL get on and where changes If par look here. I on point expectation the priorities on the III us on clarity walk I walk you confidence just process and for gets you're through to Is internal capital Is buyback the through like AOCI about it it it color thought as still pull as you gave it, I sounds you that? guess, But

Yes.

our over So And in I'm number, It's our we've accrete great the improvements, to points you made let's from levels consistent with saw what basis start, XX and confident that as very ability saying talked XX that to year. basis we've John, capital. points. XXX about, capital the by last

there. start me let So

are Number and #X is now which about expectation, we my getting will is -- capital it as which if CCAR, we have that both clarity have more clarity endgame, answer, X on we Second, at X Investor not or XX. one And about closer to. way we seeking on and III as or we talked the on before, is John, we Basel components. the September targets we're will think other, update Day objectives our we'll perfect distribution

point. update So that at I'll full give a you

operating expectations. then I'm I And look that. leverage. you through mean, trying in the intent know ballparking I around at XXXX know reiterated achieving in confidence I could on operating What not is leverage the year. 'XX like quarters but leverage can looks operating you're half positive the you're into I that full expectations, mean of half formal Okay. to positive -- when points basis you generating of think help back that I your expectation. appreciate you giving XXXX? we what us in separately, as leverage operating second positive this XXX that look year mean it about

think terms were basis You below points prior, were where in above XXXX. operating of in about in that. a XXX it, What's be But you medium-term standpoint? years the from should that good to well way USB

in it Let me do components.

year this all, the flat, quarter, and expenses our 'XX. or were relatively focused you on lower for the of first So full as we billion $XX.X saw

expenses So we realizing are benefits from expenses. now past the in increasing and point on of curve the investment those the

going and businesses unique moderate the talked growth, managing continue give would and to us expect an about expense be from expect would I fee forward well. We that standpoint to that momentum and So I have. to growth we the

headwind as is into becomes in was I think of third we think net that things that drive into quarter, tailwind biggest into 'XX, stabilization the talked turned we 'XX. get a And a about the tailwind. this income those as positive interest And operating difference more the all leverage quarter. I

Oppenheimer. from Your question line Chris Kotowski the with next comes of

the... And by a me. like you your think zone year-over-year. how that I it would Yes. It's but because more given assets. it's Do to is you become than curious, mean I duration item, small suddenly down did XX% noticed attractive automobile category portfolio loan no-fly I'm short curiosity that just a be think

Chris. Sure, Sure.

we've standard. we that. And returns that the this have of like doesn't the our because we're in return have or and environment. different obviously, been at they aren't competitors That a mean profile facing exited anything sorts terms the banks, particular just market of auto active in haven't loan the as simply loans and not on drop, been spreads those So the in

that In spreads in very will of and that are been And continue market we we to some of strong and just been the fact, we space very the leasing terms if the very past. we've and some in active as other the in areas, monitor be appropriate, of closely. returns have

with the Saul comes Your HSBC. Martinez from line next of question

guess, will a to are Or on Just environment in tends well? of debit cards economic I credit where year-on-year, or That John, growth, outperform. there an you seeing unusual, be to follow-up the prepaid? any is exiting the due X.X%. slowdown that to exposure in reducing somewhat debit entirely the an as X.X% of is typically weakness

just any lap the -- to So did that, is And that transitory should thing, reaffirm in -- and wanted I a this this sort and of you quarter, suspect right? there? that color get additional fourth is that just I

Yes.

all spend union Those trends still side. difference think very I things simply, the the in It's partnerships to of those is good. prepaid things. just growth between that the of question Those all the all prepaid are I are and that have. sales we versus on side different terms things answer really and I all strong mean, penetration, very that that mentioned. the it's the We on all see and credit your the fee card all

Got And on Okay. then it. a just follow-up deposit dynamics.

-- sequential average. much and few much rotation but at I to end the or look larger different on fall a about times close -- -- in period see worse it than noninterest-bearing, much you X% talked decline did You've a slowing look if sequentially than you

Just that drove want What transitory is out? and or you that's not? something anything somewhat this it call Is there -- to that?

-- out. to something point I asking because to that want I want for question thanks

the in and due could month, quarter of lot basis business payments trust a end you daily that the and the to has of have day-to-day the holidays, the have coming the out ends, our NIB depending a levels, volatility. We week, end principally upon deposit on in where corporate volatility of the

indicate would it are does very very to volatile, average So you and could the balances, any we and trends. I day-to-day, on focused not be same because the encourage it do

Our next Wells Mayo Mike the from line of Fargo. with comes question

look repositioned. people leaving, get quarter, last the been management for people at September at the as we your "Wow, During presenters presenters these the changes, a there's say, we few ready Investor are And than getting Day, last and leaves different your saying lot XX a what some and tell might maybe us that I I So Day." directly, what of for And these I'm to time is tea out just just only can you trying of in remaining given ask are Investor And Andy. the horizon changes. terms figure CEO? recent think

of CEO color are taken little contenders have Just who a your successor? place. be on Bancorp? more next for consider the U.S. and outside U.S. would So the to And all looking you these Bancorp moves that

Thanks, Mike.

Day, relates to as to to going sure, new see you're Investor it for So faces going but see familiar some as you're some faces well.

So new. that familiar and we'll this very both with mix of some good you're have people a

X.X a to that wealth terrific. the about putting in is the we years of was the change combined the the made Gunjan role. group what Corporate and group, ago, and with Commercial WCIB, activity President's And just then together was called or things which evolved One that the customer combine we the focus and was with the institutional from and synergies that we

she's center and to that the under with the advantage to -- really it already together business. the one And payments organization with September forward story I'm has that job the the terrific the with and bank, businesses started entire have with same with all on to that under taking organization, businesses a that diverse with entire XX. do Banking looking Consumer do Gunjan and set the one to customer pulling the that of the So That's leadership fast objective. sharing very objective grow the done already. we Business bank the of and leader in She's really

that... the Is that? related And anything Okay. departures, to

sometimes We've in change but activity. Yes, there's Mike, years no I group stable messaging and senior for would just and leadership say had that's happens, natural that. a very years,

Okay.

one conference to is, much the theme so it's not front run And your USB. too

execute. looking wealth one with simple now the commercial, to So one whole the you've to to say, firm statement sort USB and be easy USB, done tough and deliver more of to you're that's client, that

Exactly.

question Ken Usdin Your next comes line Jefferies. with the of from

securities on follow-up a had book. just I the

quarter can much mentioned bond do understand of us that us book? that rate the then and increase understand XX% happened swapped the Is that that going help outlook? in can book the you this book you And and total Just how also, forward yields help is floating. the bond given of you then with is you meaningful the what

Sure.

point quarter, securities of it some in increase, liquidity XX-basis say, that that the we taking the and majority the to excess terms of into the book. opportunistically So was securities putting a book, had of related in on the

is And thing, an simple treasuries floating that to just about the think perspective from of that can a to treasury interest cash versus short-dated interest you kind sort of an a think swap risk equivalent or as is or net it. rate way so which of

That And within risk natural In say have XX% already terms gets I floating that that rate we hedged synthetically that just approximately terms swaps. in would comment of component. percent of or so book sort I floating risk or XX either thing, of itself, made through then the floating. and -- securities with are about that the have coupled that you AFS because are about floating the all to that of that, book, we

So that's kind of it. of the details

on to on that end protected book, swaps Now put rates if well. on corporate the our so have put fall, other that we're received hedges side of on do that, we fixed as

an we standpoint, where rate kind to today. all us in, balances interest it we to of are risk which which be to those are shocks, want neutral So is the gets from is where

Okay.

saying that's total around -- that you -- so to just are AFS book, the it half of So gets HTM? you and

Yes, correct. that's

Okay. Cool.

result, $XX.X the trajectory from one what the just Under after quarter sorry, can last just second you for one. here? And cost for remind us that means billion

that's billion we outlook. is the our $XX.X have of over at. expense Where Yes, where less, quarters we're couple our that's very with consistent been fee or -- last

investment talked we've that hit Andy about, As curve. point the on

we're managing in feel in going a terms to We of very continue like good spot forward. expense

I we to at over call back queue the in Andersen, have turn you. this our And time. questions no further Mr.

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

disconnect now call. you Krista, the can

Thank call. conference participation, for may you and today's concludes This you now your disconnect.