U.S. Bancorp

The negative outlook on U.S. Bancorp and its operating subsidiaries reflects S&P Global Ratings' view of the elevated risks associated with the acquisition of MUFG Union Bank over the next two years. Specifically, we consider in the outlook heightened operational and integration risks associated with the acquisition, as well as added loan concentration and possible customer attrition. We could lower our ratings on USB if we believe its post-acquisition risk profile will not remain consistent with its strong historical performance prior to the acquisition. The following could demonstrate declining performance: Profitability that is no longer above and loan losses that are no longer below peer levels; or A deterioration in earnings quality or an increase in risk appetite, including elevated

...U.S. Bancorp's (USB) earnings should decline in 2022 but remain peer-leading. Although rising interest rates should boost net interest income, earnings will likely be pressured as provisions normalize and expenses increase. The biggest factor in terms of earnings pressure will likely be our expectation of $900 million of provisions in 2022 after negative provisions of $1.2 billion in 2021. The pending acquisition of MUFG Union Bank raises some credit concerns. It is the largest acquisition USB has made since the financial crisis and raises some concerns regarding heightened integration risk, a reduction in capital ratios, and loan concentration in California, with these concerns somewhat offset by expected expense and revenue synergies once the acquisition is completed. We expect the acquisition to close in the first half of 2022. The rating incorporates a positive adjustment notch for outperformance versus peers. The notch incorporates USB's peer-leading financial performance, consistent...

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