U.S. Bancorp

Positively, through a combination of earnings retention and balance sheet optimization, USB built capital in the second quarter quicker than we expected. Its common equity tier 1 (CET1) rose 60 basis points (bps) sequentially to 9.1%, but is still below the median of greater than 10.0% among rated U.S. bank peers. In August 2023, USB issued shares to Mitsubishi UFJ Financial Group, the former owner of MUFG Union and boosted its CET1 ratio by another 20 bps. The stable outlook on USB and its operating subsidiaries reflects our expectation that although the uncertain regional banking conditions could create some challenges for USB, the company will continue to perform better than most regional bank peers, while navigating economic risks. We expect

...We expect U.S. Bancorp (USB) to continue to perform well in the current environment, despite the heightened market volatility that followed the recent bank failures, In June 2023, we lowered USB's rating by one notch to indicate that its performance advantage over large regional peers is not as outsized as it used to be. Still, it remains among our highest rated regional bank with outperformance of bank industry averages, with top-tier return and efficiency metrics over an extended period of time. In the first half of 2023, it posted solid results as reflected by a return on average assets of over 1.10% (adjusted for acquisition expenses), near the top of peers. But its capital levels are among the lowest of large regional bank peers. Its risk-adjusted capital (RAC) ratio is also at the low end of peers, totaling 7.2% at year-end 2022, and at the lower end of our threshold to view it as adequate. Its tangible common equity (TCE) ratio totaled a below peer 4.8% at the end of the second quarter....

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