US Bancorp Q3 2025 Earnings Call Summary

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

Question: John McDonald - Truist Securities - Analyst : Start off with a question for John. Just on the outlook. John, what are you seeing for net interest margin trend in the fourth quarter? And can you give us some puts and takes on your outlook for net interest income to be relatively flattish in the fourth quarter?

Question: John McDonald - Truist Securities - Analyst : Okay. And then just following up on that, looking a little further out, what are some of the drivers you have for net interest margin expansion next year in the context of maybe a few rate cuts? And do you still think that you could get towards 3% in 2027?

Question: John Pancari - Evercore Inc - Analyst : On the positive operating leverage came in particularly solid this quarter, and you're clearly confident in the 200 basis points-plus expectation to '25. Could you give us just a little more color in terms of your confidence in that front or in that pace as you look into 2026, just given some of the investments that you're looking at, but also conversely, some of the momentum you're clearly seeing on the revenue side? Could we see positive operating leverage exceed that 200 basis points-plus range as we look out?

Question: John Pancari - Evercore Inc - Analyst : Okay. Got it. And then on the fee side, also some clear momentum there. Some pretty good upside this quarter. And as you mentioned in your prepared remarks, you're certainly seeing some of the momentum follow through in terms of your key drivers and in your payments space as well. I mean, I guess on the Payment side, can you give us a little more color in terms of the drivers of the growth that you're seeing there and your confidence in that mid-single-digit expectation? And is there anything from the standpoint of customer acquisition or the benefits of the investments that you've made that you'd call out here as being key drivers to what seems to be a more sustainable consistency around your fee performance as of late? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 16, 2025 / 1:00PM, USB.N - Q3 2025 US Bancorp Earnings Call

Question: John Pancari - Evercore Inc - Analyst :

Question: Ken Usdin - Autonomous Research - Analyst : I just wanted to follow up on the Payments point and just ask you to dive in a little bit more. 3% year-over-year is not far from mid-single digit, but that Corporate piece is still comping negative and credit and debit is still [3%-ish]. So I just want to -- if you can give us some of the moving parts of the drivers now and across the lines, where do you expect those to inflect?

Question: Ken Usdin - Autonomous Research - Analyst : Great. One follow-up just related to consumer. It's great to see the card loss rate come back down now at 3.73% in the third quarter. Are we starting to see that maturation of the portfolio? And where do you expect to see that card loss rate go going forward, assuming a reasonably stable economy from here?

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : I just wanted to -- as you think about NRI margin, I think deposit growth and pricing matters. I think Gujan, in your opening remarks, you talked about the bank smartly partnerships, branches, like all of those, from an outside looking in, it's just very hard to figure out whether these are sticky deposits, lower cost deposits. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 16, 2025 / 1:00PM, USB.N - Q3 2025 US Bancorp Earnings Call If you don't mind spending some time on just the client acquisition that's happening through these channels and how we should think about either the magnitude of growth they can drive as we look out the next couple of years and the cost structure of these deposits?

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Got it. That's helpful. And I guess maybe going back to the margin discussion, John. So you've talked about it was pretty good expansion this quarter. You've talked about the 3%. I'm just wondering as we think through the journey from 2.75% to 3%, is there a point where there's a pretty material inflection outside of like the back book repricing everything that you talked about? I'm just wondering, is there a chance you could hit 3% by this time next year by the fourth quarter? Is it just very steady state? Or are there going to be big step-ups in the progress towards that 3% NIM?

Question: Mike Mayo - Wells Fargo Securities LLC - Analyst : I don't know if we put this in the category of the Loch Ness monster, the Bermuda Triangle, and the contents of NDFI, but I'm sure many appreciate your detailing of NDFI but that's not really the way you run the business by NDFI. So I guess it's just connecting regulatory reporting with your business lines. But since you did disclose that, can you just give us a little bit more color? You say that credit quality is higher on NDFI than your core C&I portfolio, which is interesting. NDFI is 12% of the total loan book, like where would that have been, say, 5 or 10 years ago? And any loans that you're not pursuing? I mean the key to good credit quality is choosing to say no a lot.

Question: Mike Mayo - Wells Fargo Securities LLC - Analyst : And my other question is, where would you say you choose to say no, a little bit more often than not? In other words, you could have faster loan growth, any bank could. Are there any areas where you say, hey, let's pay more attention to this?

Question: Saul Martinez - HSBC Securities (USA) Inc - Analyst : Just wanted to quickly follow up on the fourth-quarter net interest income outlook being stable. I get that there is a bias to the upside. But John, you did mention that there are some upside sources and there are some risks. And I think you mentioned credit card favorability in 3Q and some other risks. But I'm not sure I understand, could you just elaborate a little bit on what the card favorability dynamics are and what the other downside risks are? And what are you assuming there for rates in the fourth quarter? And how are you thinking about the rate backdrop in '26? Are you working with a forward curve? Which I think has five cuts in it, which presumably would be good for you. But just any color on how you're thinking about the rate backdrop next year? And also, is it -- what are you assuming for the fourth quarter? And how does that influence your guidance at all?

Question: Saul Martinez - HSBC Securities (USA) Inc - Analyst : Okay. That's helpful. And then maybe the surprise positively spread, I guess, by the size of the sustainable finance business and the growth that you've seen there, and it is a pretty big part of the other income line. I just wanted to make sure I understood. You aren't expecting continued growth as you see a pull forward of some of this activity and from current levels? And if that is the case, I guess, what does it -- I guess, what does it mean for the other income line? Because that has been moving higher, I guess. I know it could jump around quarter-to-quarter but is that -- should we be thinking that line is going to move higher as well as this business continues to grow?

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : Can you guys share with us -- obviously, there's a lot of talk about stable coin and the impact it may have on the Payments business. And can you share with us how you're getting out in front of it and what you're doing to prepare yourselves for the stable coin activity eventually coming into the Payments business?

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : Very good. And then can you remind us when you look out over the next 12 or 24 months, as your CET1 ratio with the AOCI included, continues to grow, your views of returning capital to shareholders? For years, US Bancorp consistently returned 75% to 80% of earnings. Can you refresh our memories on what you think the long-term return will be to shareholders? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 16, 2025 / 1:00PM, USB.N - Q3 2025 US Bancorp Earnings Call

Question: Gerard Cassidy - RBC Capital Markets Inc - Analyst : Great. And Gunjan, thank you for bringing Mark to Bob for the details about Payments. We appreciate it.

Question: Erika Najarian - UBS AG - Analyst : Just a few cleanup questions, if I may. Just first, I wanted to clarify, John, you said the fixed asset repricing is 2 to 3 basis points of embedded lift. I just wanted to clarify if that embedded lift is a per quarter statement? And also, as we think about fixed asset repricing, is that more tethered to the belly of the curve or the 10-year range that you mentioned [4.25%, 4.50%]?

Question: Erika Najarian - UBS AG - Analyst : And my second question is for Gunjan. The stock is clearly reacting favorably today. You had a nice beat to consensus really on the revenue side, and it's really the revenue side that's driving the positive operating leverage this quarter. As you think forward, how are you balancing some of the embedded momentum that you have been talking about on this call that you're going to continue to talk about in Boston in a few weeks, versus what seems to be a lot of questions and pressure on larger management teams in terms of questions on scale and having a relatively short inorganic growth window in this -- under this current administration?

Question: Erika Najarian - UBS AG - Analyst : And just to clarify, Gunjan, given how you answered that question, US fees-focused, and obviously, like John said, you're in the final phase of rebuilding capital. Your focus is inward and not outward in terms of bank acquisitions? Just want to be clear that that's the message that you're giving us.

Question: Betsy Graseck - Morgan Stanley - Analyst : I just wanted to circle back to the discussion earlier on the Impact Financing and the implication for tax rate. Gunjan, I think you mentioned that you will be leaning into this effort that you have and that as you do lean into it, it should have some impact on tax. Could you help us understand how much and over what timeframe is this? And I bring it up relative to the slide 32 that talks about key assumptions for medium term include current tax policy, and I wasn't sure if current tax policy meant current tax rate? Or the expectation for tax rate to come down as you increase Impact Finance?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. So right now, it's about 3% benefit to tax rate. And even with increasing this business, you expect it to hover in that range.

Question: Christopher McGratty - Keefe Bruyette & Woods Inc - Analyst : Looking at slide 19, I guess, '18, '19 together, the building upon medium-term targets comment, several larger banks have either put out revised targets or hinted at targets this quarter. I guess my question is, given that you're more or less there, is that something that we might think is on the horizon over the near to intermediate term?

Question: Christopher McGratty - Keefe Bruyette & Woods Inc - Analyst : Okay. And then, John, if I could just push out, what would -- I guess, what would it take for you to revisit them? Is it just staying here for a bit of time and the operating environment is staying good? Or what would specifically need to change?

Question: Matthew O'Connor - Deutsche Bank - Analyst : Just a quick clarification. You talked about assuming slightly higher rates in the forward curve in 2026. If the forward curve plays out versus your rate assumptions, would that be directionally positive or negative for your net interest margin?

Question: Matthew O'Connor - Deutsche Bank - Analyst : Okay. So positive on the short end, get back on the long end. And when you put all together, about the same.

Question: Vivek Juneja - JPMorgan Chase & Co - Analyst : Given that a lot of the bigger picture questions have been asked this -- in the realm of some cleanup, John, I have a question for you. What is included in your other earning assets where the yield went up 300 basis points linked quarter with an interest income increase of $100 million, which is over 60% of the increase in your NII linked quarter, and the yield is almost 8% is higher than any other asset on the balance sheet? What drove that? And how sustainable is that, John?

Question: Vivek Juneja - JPMorgan Chase & Co - Analyst : Okay. And another one for either of you. Your C&I NPLs were up 30% linked quarter. Any color on what you're seeing? Which industry sectors? What's the loss content like? Any color on that?

Question: Vivek Juneja - JPMorgan Chase & Co - Analyst : And have you taken any kind of a loss or a provision, therefore, for first brands? In what form was that exposure to the first brand, John? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 16, 2025 / 1:00PM, USB.N - Q3 2025 US Bancorp Earnings Call

Question: Vivek Juneja - JPMorgan Chase & Co - Analyst : And are there other similar structures like this that we should be worrying about, given I would presume that the first brand stuff showed up under your NDFI?

Question: Vivek Juneja - JPMorgan Chase & Co - Analyst : Gunjan, for you, what are you thinking of doing differently because first brands is obviously a big surprise for the market?

Question: Scott Siefers - Piper Sandler Companies - Analyst : I think most have been asked and answered. But maybe, John, I know we've had a little noise in the loan growth numbers this year with some of the actions you took earlier in the year. Are we at a point where we could expect to start to see more visible momentum? I know you saw some modest end of period growth in the aggregate, but just curious on your thoughts from here and what you're seeing in terms of overall demand.

Question: Scott Siefers - Piper Sandler Companies - Analyst : No. Loans.