US Bancorp at Bank of America Financial Services Conference Summary

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

Question: Ebrahim Poonawala - BofA Securities - Analyst : <_ALACRA_META_ABSTRACT>I'll say this, and not to put you on the spot, but you just had an Investor Day update, it felt like you had a good story to tell. And the sense was maybe there's a year or two where you would still be running the bank in terms of kind of navigating, getting some of these strategic sort of targets well on their way. So give us your thought process, the Board's thought process in terms of why is the right time now to announce this. And then in your role as Executive Chair, like do you expect to stay on for a long period of time? Just how are you thinking about it?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. I guess maybe the other aspect, I think it comes up anytime you have a CEO succession is, is this going to be business as usual? Should we expect some change of strategy? Do they go small? Just talk to us in terms of what you think investors should expect as part of this transition. Should we expect bigger changes, tactical changes? How do things evolve?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. And tied to that, I think one of the targets at the Investor Day was an ROA of 1.15% to 1.35%. Just talk to us, I mean, I think I've had this conversation with investors around it implies pretty powerful earnings growth for the Bank over the next few years. So if you don't mind spending some time around the big building blocks around how do we go from an ROE which is sub-1% today to maybe 1.25%, 1.30%, midpoint of that range?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. So maybe if we deconstruct that a little bit. I think you had a pretty strong message with earnings around 200 basis points plus of operating leverage this year. One, give us a sense of, from an expense standpoint, just the efficiency opportunities available to the bank. And when we think about that operating leverage, is that a 2025 story or is it something that investors can count on for the coming years or the next few years?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. And maybe on that, in terms of the revenue side of the equation, Andy, you mentioned the net interest margin, NII. If I go back and look at prepandemic, right, USB consistently had a 3% plus net interest margin. Give us a sense in terms of, one, is that still sort of the right way to think about where, in a steady-state world, the margin should be? And if so, what's the timeframe before it gets there? Is it just about the back book repricing? And if so, how long will it take?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Right. You mentioned loan growth, so taking a step back, talk to us in terms of your view around the operating outlook as you think about for the bank, what are you hearing from your clients? It feels like we spent all last year waiting for certainty on monetary policy, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 3:30PM, USB.N - US Bancorp at Bank of America Financial Services Conference elections, et cetera. We have some of that today. Do you think we have the right policy environment where your clients can begin to actually undertake investments and that begins to translate into loan growth?

Question: Ebrahim Poonawala - BofA Securities - Analyst : So on that, I think you're right, the inflation data came out, the yield curve is higher across the board. When you think about both for you in terms of the margin, it seems like it's a positive story even if you see yields higher. But how detrimental is that from a client activity standpoint? Does the cost of borrow yields moving higher keep clients on the sidelines for longer?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. I'm going to move to some of the businesses, but you mentioned deposits earlier. Just give us a sense of, when we think about deposits, could deposit growth resume from here? Like what's your expectation, the growth outlook? And from pricing, what are REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 3:30PM, USB.N - US Bancorp at Bank of America Financial Services Conference you seeing in terms of the market around the competitive pressures? And if the Fed is on the sidelines, just how long can deposit costs continue to decline?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. Maybe just moving to the -- you mentioned Payments earlier, historically viewed as a differentiator for USB. Just give us a sense of how you think about the competitive positioning of the business, whether it's under-invested, do you need to invest a lot more, or do you think it's well positioned, be it competing with the larger banking players or some of the digital-native players?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Just talk to us also in terms of two things around the Payments. One, the connectivity of that business with the rest of the bank, and the advantage of being a bank, bringing the balance sheet to the table when even pursuing some of these opportunities on the Merchant side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 3:30PM, USB.N - US Bancorp at Bank of America Financial Services Conference

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. And the other thing you mentioned, the freight business has been slow. That's weighed on the commercial payments or

Question: Ebrahim Poonawala - BofA Securities - Analyst : Maybe looking at some of the other fee businesses, I remember, I mean, you've talked a lot about we saw significant growth in the Commercial Products revenue over the last year or two. Just take a step back and tell us what are you doing. Is it just all macro? Are there things that you're doing differently today which is driving that growth?

Question: Ebrahim Poonawala - BofA Securities - Analyst : And when you think about those opportunities, are we in the early innings or is there just a lot of runway when we think about the growth? And could that be sort of the driver of -- I think you have a mid-single-digit fee revenue growth over the medium term.

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. And maybe switching gears, just talk to us about the brand strategy in terms of brick-and-mortar expansion. I think at the Investor Day, you talked about like ambitions and growing in the Southeast. So is that going to be -- we've seen some banks announce 50, 100 new branches across certain markets. Just one, is expansion of branches part of the play there in terms of the Southeast? Or how are you thinking about pursuing market share and growth there?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. Maybe just double-click on those partnerships in terms of how profitable these are, how good are these at converting clients who are coming in through those channels into a more stickier, broader, someone who's consuming multiple products from the Bank?

Question: Ebrahim Poonawala - BofA Securities - Analyst : And are there a lot more such opportunities in terms of partnerships, or were these kinds of the big ones?

Question: Ebrahim Poonawala - BofA Securities - Analyst : You mentioned Union a few times. Just give us an update on, in terms of that franchise, I think there's a lot of opportunities, not just on the expense side, but on the fee revenue side. Where are we in terms of monetizing that? Is it fully in the run rate today or is there more to go?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. I guess maybe switching back to the change in administration. I think one of the expectations is we could see a bit more of a shift back to a balanced, more predictable regulatory environment for the banks. One, do you share that view? And then in what tangible ways can the regulatory environment make life easier for you in terms of how you run the bank day today or how you manage capital? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 3:30PM, USB.N - US Bancorp at Bank of America Financial Services Conference

Question: Ebrahim Poonawala - BofA Securities - Analyst : Yeah, and on capital, just remind us in terms of how you're thinking about managing capital, adjusted for AOCI or not, and how we should think about -- yes, remind us of the just hierarchy of where capital will be deployed, and then your priority set.

Question: Ebrahim Poonawala - BofA Securities - Analyst : Right. We should expect some level of buybacks and capital return as continuing.

Question: Ebrahim Poonawala - BofA Securities - Analyst : And I guess the other conversation about USB, or even outside of USB, is around maybe the administration, the regulatory environment will be a lot more conducive to do bank M&A. I mean, you obviously did the Union transaction, has gone well. Give us your sense of where bank M&A, maybe in the Southeast, like doing an acquisition. How big of a priority is it? Banks are sold, not bought. If something great came through, like the likelihood that you would look at it and pursue a transaction like that.

Question: Ebrahim Poonawala - BofA Securities - Analyst : Very clear. Going back to lending and loan growth, when you think about expectations for this year, if we do see a pickup, are there two or three areas within sort of your loan book where you expect to be the drivers of loan growth for 2025?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. And we talked about efficiency, operating leverage, all of that. Talk to us a little bit about where the investment dollars are going today. Is it banker hiring? Is it branch expansion? Is it technology?

Question: Ebrahim Poonawala - BofA Securities - Analyst : And remind us where the bank is in terms of migration to the cloud, upgrading some of the legacy infrastructure, growth --

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. I guess one more, going back to the leadership bench at the bank, you announced, I think, recently expansion of the management committee, a few more members. Give us a sense -- we've seen a fair amount of external hires at the bank over the last 5 to, I guess, 10 years. Give us a sense of just when you look through across your businesses, the leadership team that's in place, is that the right set of people? Or do you think, as Gunjan takes over, maybe there's a need for a shuffle, bring more talent from the outside?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. I guess one last question, maybe I should have started with this. US Bancorp is the largest regional bank in the United States. Give us a sense of -- like there's been forever this debate around the right size for a bank's benefits of scale. Give us your perspective on, given where you sit in terms of your balance sheet size and scale, the advantages that you have relative to some of the other regional banks and being able to win business, gain market share, et cetera.

Question: Ebrahim Poonawala - BofA Securities - Analyst : With that, Andy, John.

Question: Ebrahim Poonawala - BofA Securities - Analyst : So I guess the message with shareholders who've kind of felt some pain over the last year or two is sit tight?

Question: Ebrahim Poonawala - BofA Securities - Analyst : On that note, thank you both. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 12, 2025 / 3:30PM, USB.N - US Bancorp at Bank of America Financial Services Conference