U.S. Bancorp Reports Record Q3 Revenue of About $8 Billion

U.S. Bancorp (NYSE: USB ) reported third-quarter financial results on Thursday. The transcript from the company's third-quarter earnings call has been provided below. This content is powered APIs.

For comprehensive financial data and transcripts, visit View the webcast at Summary U.S. Bancorp reported record net revenue of approximately $8 billion and diluted earnings per share of $1.34, marking a 10% increase from the previous year. The company achieved 240 basis points of positive operating leverage, driven by a net revenue growth of 8.7% year over year and a focus on Payments and Capital Markets as strategic growth areas. U.S.

Bancorp completed the BTIG acquisition, contributing $226 million in fee revenue, and aims to grow its Capital Markets to 8-10% of total revenue in the next 3-5 years. The company is investing in expanding its consumer and small business franchises, leveraging its branch network and brand partnerships to enhance deposit growth. Net interest income increased by 5.6% year over year, with an expected similar increase in net interest margin for the fourth quarter. The company reported strong credit quality metrics, with stable nonperforming assets and a CET1 ratio of 10.8%.

U.S. Bancorp plans to resume share repurchases over the next quarter or two, depending on loan demand, interest rates, and regulatory developments. The company launched a USB DC stablecoin pilot, indicating a strategic focus on future interoperability in Corporate Payments. Management highlighted the importance of AI and digital capabilities in driving productivity and efficiency improvements.

Full Transcript OPERATOR Welcome 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 10:00 a.m. Central Time. I will now turn the conference call over to Brian Monte, Director of Investor Relations for U.S.

Brian Monte, Director of Investor Relations Thank you, operator, and good morning, everyone. Today I am joined by our Chairman and Chief Executive Officer, Gunjan Kedia, 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 could materially change our current forward-looking assumptions are described on page 2 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.

Gunjan Kedia, President and CEO Thank you, Brian. Good morning, everyone. Beginning on slide 3, we delivered another strong quarter highlighted by record net revenue of approximately $8 billion and diluted earnings per share of $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. Disciplined productivity drove 240 basis points of positive operating leverage, and in Payments, our transformation efforts continue to gain traction with total Payments revenue growing 6.5% year over year. Turning to slide 4, 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, helped improve our efficiency ratio and increased return on average assets year over year. On slide 5, we spotlight global capital markets as an attractive growth opportunity across a range of economic scenarios. We closed the BTIG acquisition in June, and it contributed $226 million of fee 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 by focusing on three strategies: first, 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 Markets strategy at a conference later this fall and 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 margin. 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 branch presence and leveraging client centers that have long supported our national businesses. We are supporting 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 7, we highlight small business banking.

We serve more than 2 million small businesses through a scaled, interconnected platform that contributes 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, expanded the Business Essentials suite of products, and established new banking teams in expansion markets.

We 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 8, I want to spend a moment on Corporate Payments and Treasury Management, which together represent 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, and new stablecoins 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 USB DC stablecoin 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 technologies and the safety and soundness of the banking system. Let me now turn it over to John.

John Stern, Vice Chair and Chief Financial Officer 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 slide 9, we provide highlights for the third quarter.

We reported earnings per common share of $1.34, with approximately $0.07 impact from reserve build this quarter. This 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 securities losses. 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 remain constructive. Loans grew 1.0% and deposits grew 2.2% sequentially, while the net interest margin expanded 5 basis points to 2.84%. Credit quality metrics remained healthy across the board. Linked—quarter nonperforming assets declined 1.6%, and net charge—offs declined 2 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. Slide 10 provides our key performance metrics. Our 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 and 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% four years ago. 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 7 basis points sequentially, with approximately 2 basis points of impact from the September Fed rate hike. Notably, our total funding costs are up just 1 basis point quarter over quarter as 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 loan and deposit growth and improving earning asset and funding mix and ongoing benefits from fixed asset repricing. Net interest margin improved 5 basis points sequentially to 2.84% driven by improving 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 fee revenue trends within noninterest income.

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, noninterest expense increased 7.1% versus the prior year, reflecting BTIG and continued investment in growth initiatives, marketing, technology, as well as compensation associated with the strong revenue generation. For this quarter, these 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 bands 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, as of September 30, our Common Equity Tier 1 capital ratio was 10.8%, stable compared to the prior quarter. Adjusting for AOCI, 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 AOCI-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 and impact from our recently onboarded strategic small business partnership. Additionally, 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 AOCI drag from higher rates. Despite a sharp move in rates this quarter, we maintained healthy capital levels and continue to have flexibility in how we manage the balance sheet. We expect our capital ratios to build from here, positioning us to resume share repurchases over the next quarter or two.

Turning 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% to 7% on a fully taxable-equivalent basis, total fee revenue growth in the range of 13% to 14% with roughly half of the growth coming from BTIG, and noninterest 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% to 9% compared to the prior year, or 6% to 7% excluding BTIG. This is improved from our prior guidance range of 5% to 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, which 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. Gunjan Kedia, President and CEO Thank 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. OPERATOR At this time, as a reminder, if you would like to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of John McDonald from Truist Securities.

Your line is open. John McDonald, Analyst at Truist Securities Thank you. Good 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? John Stern, Vice Chair and Chief Financial Officer Sure. 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 from a pipeline standpoint, so 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, and we see continued trends there.

And then in terms of the net interest margin, we made the comment that margin should increase by a similar amount this next quarter, and that's going to be just aided by the funding and asset mix that we have that is improving, as we've been talking about. So you know, there's a lot of momentum that we have, and that's reflected in our guide and what we discussed. John McDonald, Analyst at Truist Securities And 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 impact it? Maybe an update on fixed asset repricing and your deposit beta assumptions?

John Stern, Vice Chair and Chief Financial Officer 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 C&I, 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 we 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 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.