US Bancorp Q2 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Scott Siefers - Piper Sandler Companies - Analyst : John, I was hoping to start out on some NII dynamics. Maybe if you could spend a moment discussing where the margin goes from here off the [266] base. I think you mentioned part of the linked quarter decline was sort of transitory based on the actions you took in the second quarter. So what do you see as the best launching point? And kind of what would it take to move it higher or lower from here? In other words, the main puts and takes. I guess the final piece of it is maybe where we stand on the 3% medium-term margin aspiration.

Question: Scott Siefers - Piper Sandler Companies - Analyst : Perfect. Okay. Good. Thank you for that color. And then maybe the follow-up, John, when you talked about (inaudible), when you talk about expenses being, I think, $4.2 billion or lower in the third quarter, maybe just a second on where that flex could come from, if necessary. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 12:00PM, USB.N - Q2 2025 US Bancorp Earnings Call And kind of more broadly, I guess one of the concerns I hear from investors is that cutting costs to meet the operating leverage targets might just be preventing some necessary investments. Can you just sort of address that? I'm certain you all don't feel that way, but maybe if you could just spend a moment addressing it, please.

Question: Scott Siefers - Piper Sandler Companies - Analyst : Perfect. All right. Thank you very much.

Question: Betsy Graseck - Morgan Stanley - Analyst : A couple of follow-ups there. One is on the C&I book. And can you give us some color on the driver of that acceleration in growth and where we stand now with line utilizations 2Q? That would be helpful.

Question: Betsy Graseck - Morgan Stanley - Analyst : So that's advancing the private credit side of the business. Is that partly what's going on with the structured credit? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 12:00PM, USB.N - Q2 2025 US Bancorp Earnings Call

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. And then just a ticky-tacky question, but were there any gains or losses on the asset sales you did?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. Thank you.

Question: Mike Mayo - Wells Fargo Securities LLC - Analyst : I think these are for you, John, just still on the NIM. Did you say there was deposit competition that was 1 of the drags on the NIM? And also, I think I see RWA up $9 billion in a quarter when loans were flat and didn't quite understand why that happened.

Question: Mike Mayo - Wells Fargo Securities LLC - Analyst : All right. Now just because we hear from some others that yield-seeking behavior has really died down quite a bit. But going the lens out just on asset liability management generally, I guess you're not running the firm just for the NIM or NII, you're running it for revenues and value creation over time. I get it. But is there anything that you need to change holistically with asset liability management or that you've done over the past year that may show some results? Again, I'm just looking back a couple of years and you guys were caught with the unrealized securities losses, and that was an issue. And now here's NIMs falling short and it's deposits. And it just seems a little bit not in sync with the industry. Maybe as you said, it's going to pick up the next couple of quarters, and this thing will be in the past. But just any general thoughts about the process of ALM at USB?

Question: Mike Mayo - Wells Fargo Securities LLC - Analyst : And just lastly, the 3% NIM, is that something that could be seen in a year, two years, five years? Any sense?

Question: Mike Mayo - Wells Fargo Securities LLC - Analyst : Great. Thank you.

Question: John Pancari - Evercore Inc - Analyst : Just on the balance sheet trends, I appreciate the loan growth color you gave and some of the deposit dynamics. In terms of the growth outlook from here, is it -- I know previously you had pretty much described it as modest growth on both fronts, I believe, on loan growth and deposits. Can you maybe just update us how you're thinking about it now, particularly since you're seeing some acceleration in the underlying trends within commercial and your seeing some growth in card? How are you thinking about that now? Thanks.

Question: John Pancari - Evercore Inc - Analyst : Okay. All right. Thanks. And then in terms of your revision to the 3% to 5% revenue guide, I know you cited the lower end now. How much of that decision to revise that was coming from the NII headwinds? And I guess, also put the other way, what are you seeing in terms of your growth expectation as you look at the trend in payments and fees? Are you comfortable still at the mid-single-digit growth level for overall fees and within the payments businesses as well?

Question: John Pancari - Evercore Inc - Analyst : Right. Thanks for that, John. And then put back to the fees and payments, still comfortable with the mid-single-digit range?

Question: John Pancari - Evercore Inc - Analyst : Okay. All right. Thank you.

Question: Erika Najarian - UBS AG - Analyst : My first question is for John. John, I'm wondering if you could share your LCR ratio, I guess to continue on the theme that a lot of analysts have brought up. We're all scratching our heads because so far, none of your larger or similar size or smaller peers have really talked about this outsized commercial pricing pressure. And given sort of overall flattish loan growth in the quarter and then the sale of some of those loans, I guess I'm wondering why -- was there any sort of liquidity optimization reason behind paying up for those deposits?

Question: Erika Najarian - UBS AG - Analyst : Got it. And my next question is for Gunjan. And I think Scott asked this in the beginning of the call, but I just wanted to maybe reask it a different way. Clearly, you're embarking upon an inflection point for the company, and the stock hasn't yet reacted. I think a lot of the discussion with longer-term investors has been really honing in on the focus going forward. So what I mean by that is it struck me that -- you mentioned in your prepared remarks, expense management is number one, and organic growth is number two. And you also printed the word harvest, which is not necessarily a word that we've heard from someone like JPMorgan. I guess like the question here is, did we just really underappreciate the modernization that USB was going through REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 12:00PM, USB.N - Q2 2025 US Bancorp Earnings Call over the past five years and that there's a lot of sort of excess expenses to recycle because it just feels like focusing on expenses to drive positive up rating leverage may be good for the near term. But as I think about your longer-term shareholders and what they own, they typically own some of like the revenue outperformers like a JP or a Morgan Stanley and such.

Question: Erika Najarian - UBS AG - Analyst : Thank you, Gunjan. And I think investors will be warm to what you said about focuses on expenses is entirely short term and that you're looking forward to growth. Thanks for taking my questions.

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : John, I may have missed it, and I apologize, on the strategic sale of the portfolio that you identified, can you share with us why that action was taken? But second, could there be further or additional sales later in the year of parts of the portfolio?

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : Very good. Thank you for the color. And then Gunjan, maybe you can share with us, what your view and the bank's view about stable coins? It appears that it's very likely stable coins would the potential passage of the coin at down in Washington will be real soon and how you think that might impact your payments businesses as well as your deposits?

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : Thank you.

Question: Ken Usdin - Autonomous Research - Analyst : John, I just wanted to ask you real quick on the third quarter NII outlook and a little bit on the wholesale deposit costs. So I think you had mentioned in the conference circuit that there was just a kind of a hold back on giving customers some deposits. So I'm just wondering on that first point, you mentioned that you can start to bring down wholesale deposits when rates come down. But is there anything different about how you see that going in terms of a beta perspective? You guys used to be one of the faster up and down beta companies, it's a little slower this cycle so far. So what's changed or what's the nuance in the current environment about that?

Question: Ken Usdin - Autonomous Research - Analyst : Okay. And just given the moving parts that came through in the second quarter and the lower starting point, can you just help us understand [41, 42] like is there a bias on one side or the other that range? And what would be the -- get you to the bottom or get you to the top? Thank you.

Question: Ken Usdin - Autonomous Research - Analyst : Okay. Thanks a lot, John.

Question: Saul Martinez - HSBC - Analyst : A lot of focus here on deposit cost and deposit competition. But if I look at the actual increase in interest-bearing liability costs, the much bigger impact came in short-term borrowing costs, which were up $32 million and long-term debt costs, which were up, I think, close to $60 million. So in aggregate, those two things are up close to $90 million or about 3 times the impact on funding cost of deposits. And it all entirely was due to much larger balances there. So just normally, you would have a corresponding positive impact on the asset side in terms of things like excess liquidity, but it doesn't seem to happen. Can you just, John, walk us through what happened here? And is that sort of just a onetime increase that should go away? But just what's going on on the liability side beyond deposits that seems to be a drag?

Question: Saul Martinez - HSBC - Analyst : So the short-term borrowing should revert next quarter, and you have a little bit less pressure there? And is there a negative spread on those incremental short-term borrowings that should go away in terms of -- just thinking about the dollar NII impact of that happening next quarter.

Question: Saul Martinez - HSBC - Analyst : Yeah. That's helpful. Then maybe just a quick one on payments and what the expectations are there. I mean on the issuing side, I guess we're leapfrogging -- or lapping, sorry, the prepaid headwinds and we should see some acceleration there in the second half? And just any color on how you're thinking about corporate payments. You mentioned just economic headwinds there. But are you optimistic that we'll see some improvement on the corporate payments side as we go into the second half?

Question: Saul Martinez - HSBC - Analyst : Got it. Thank you.

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : A couple of follow-up questions, and apologies if I missed it. On the pace of buybacks, adjusted CET1 hitting 8.9%, I'm assuming crosses 9% next quarter. Does that mean anything in terms of should we see by the $100 million go to $150 million, $200 million starting 3Q? I mean the (inaudible) pricing that are forecasting that row? Would love kind of how you're thinking about adjusted CET1 relative to the outlook for buybacks from here. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 12:00PM, USB.N - Q2 2025 US Bancorp Earnings Call

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Got it. And just two quick ones. One, when we talk about fees, I think if you go back a year or two, there was a lot of excitement around commercial products revenue. We saw sort of a pretty decent momentum. That's flatlined over the last four to five quarters. Anything going on there? Like is there still a significant opportunity there? Or have we kind of captured most of it?

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : And just last one, if I can ask both of you, like your narrative around fees, payments, expenses sounds very, very strong. I think the street lacks confidence in the NII outlook, right? We came in April, the count benefit sells like NII is going higher. Just talk to us your degree of confidence that as we -- kind of what you've laid out in terms of NII should grow from here, like what could go wrong to not make that happen, especially as we think about the opportunity of getting the NIM to 3% over the next maybe 12 to 18 months? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 12:00PM, USB.N - Q2 2025 US Bancorp Earnings Call

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : That's good that you feel confident because I agree with Gunjan, lots of good things going on but you had 20 questions on NII and yields and all of that.

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : And I appreciate that, and I think there's a lot of skepticism and I'm hoping you give less things to skeptics to pick on and more to the non-skeptics. So hopefully, we made a shift there.

Question: Bill Carcache - Wolfe Research LLC - Analyst : One final follow-up on the magnitude of the fixed rate asset repricing benefit that should persist from here. Can you discuss where you still see the greatest repricing potential across the left side of the balance sheet? And anything that you would say to give investors confidence? you've addressed this in different questions, but the idea that those repricing tailwinds are going to show through and not be tempered by other actions we saw this quarter. Anything that you could say there? Thanks.

Question: Bill Carcache - Wolfe Research LLC - Analyst : Thank you.

Question: Christopher McGratty - Keefe Bruyette & Woods Inc - Analyst : Just wanted to look at slide 16 for a moment on the capital. A lot of questions and a lot of discussion about the operating leverage that's in front of the company. I guess my question is, is there a scenario with the improved regulatory environment that you would consider another bank acquisition to help accelerate what you're trying to do on the NII front?

Question: Christopher McGratty - Keefe Bruyette & Woods Inc - Analyst : Okay. Great. Thank you for that clarification. And then maybe a reminder when the organic cross. Any changes to where you're thinking about crossing into Cat 2? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 12:00PM, USB.N - Q2 2025 US Bancorp Earnings Call

Question: Christopher McGratty - Keefe Bruyette & Woods Inc - Analyst : Great. Thank you very much.

Question: Matt O-Connor - Deutsche Bank AG - Analyst : Any outlook comments on credit, the charge-offs have been amazingly stable. You had a little cleanup in CRE because C&I behaving very well. But any thoughts on just the overall level of charge-offs and reserves going forward? Thank you.

Question: Matt O-Connor - Deutsche Bank AG - Analyst : Okay. Just that last comment, the charge-offs -- so the card charge-offs lower this year versus last year? And then did you mean overall charge-offs?

Question: Matt O-Connor - Deutsche Bank AG - Analyst : Yeah, okay. All right. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 12:00PM, USB.N - Q2 2025 US Bancorp Earnings Call

Question: Vivek Juneja - JPMorgan Chase & Co - Analyst : I'm sorry to beat a dead horse. Just a little bit of clarity. I hear everything you're doing on NII and remixing the balance sheet with the sale of the resi mortgages, most of that, obviously. When I look at the segment data, which shows up in the corporate segment. But when I look at your corporate segment, and I hear you doing the multi-client and operational deposits and all that. I look at the net interest spread and that continues to come down every quarter and was down more sharply. So given everything you've just said, why does that continue to come down? And by the way, it was down linked quarter on the consumer side, too, but more trying to understand first on the corporate side what's going on.

Question: Vivek Juneja - JPMorgan Chase & Co - Analyst : A couple of other little questions. The C&I growth that you are talking about, what are you seeing in terms of growth to loans to NBFIs? How much of that growth has come from this particular segment?

Question: Vivek Juneja - JPMorgan Chase & Co - Analyst : One last, just a confirmation. You've talked recently about tech spend running at about $2.5 billion. Just want to confirm, is that still the number at which it is?

Question: Vivek Juneja - JPMorgan Chase & Co - Analyst : Thank you.

Question: Betsy Graseck - Morgan Stanley - Analyst : I just wanted to make sure I understand how many more quarters or years you're planning on doing this balance sheet restructuring. I see that the held-for-sale EOP went up QQ. So I'm assuming you're in train, but how long should we expect this is going to be continuing for?

Question: Betsy Graseck - Morgan Stanley - Analyst : Yes. I know Gunjan talked earlier about bringing down resi as a percentage of total, which you have significantly over the past year. And I'm wondering if there's a target resi percentage that you're moving towards if the market is there to help you move towards it?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 17, 2025 / 12:00PM, USB.N - Q2 2025 US Bancorp Earnings Call