US Bancorp at Goldman Sachs U.S. Financial Services Conference Summary

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

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : <_ALACRA_META_ABSTRACT>Obviously a lot to talk about. Maybe we can just start off with your view of the state of the economy. Maybe you can talk a little bit about what you're seeing in terms of customer behavior, both from a spending, but also from a balance sheet perspective across consumers and corporates. And then just as an add-on to that with the election a month behind us, has that had any bearing on how you're thinking about the economic trajectory heading into next year.

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. And then, John, from a guidance perspective, can you just give us some high-level thoughts on the quarter? And maybe talk to if anything has changed since you last spoke on the guidance that you gave around revenues, expenses, and credit.

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : So Andy, you had your recent Investor Day, I think, just down the road in September. Can we just spend a few minutes just reminding us of the key messages from that day? And maybe you can talk a little bit about your strategic priorities heading into 2025. And look, have those changed in any way over the last six months?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. And we'll get into I think a lot of those in a moment. But before that, I think you also said you don't expect to be a Category 2 bank until at least 2027. If the loan growth environment does pick up meaningfully, would that expect change -- could that expectation change? And then would you consider limiting loan growth in any way to make sure that you don't cross into a Cat II bank before 2027

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. And then on buybacks, John, I think you talked about a $5 billion program. Maybe you can help us think through the pace of buybacks and then maybe put it into the context of the uncertainty around what's going to happen around the finalization of the Basel III rules. So if those rules don't get finalized, does that have any bearing in terms of how you're thinking about the pace of buybacks or the capital levels for the firm?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. And then on capital deployment priorities, you've been clear that organic growth is the primary focus. So maybe you can remind us of where you see the best organic growth opportunities today and maybe just talk us through some early wins that you're seeing.

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. And then on M&A more broadly, maybe you can talk a little bit about some of the stumbling blocks to the resurgence of bank M&A for USB specifically, maybe talk about the industry as a whole. Maybe talk about whether or not that -- you think that could change as a result of the change in administration. And outside of, I guess, larger bank deals, are there non-bank acquisitions or bolt-on deals that you think could make sense for USB over the next few years?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Just as a quick follow-on. Would you expect there to be more consolidation in the banking industry outside of USB as a result of the administration change over the next few years?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. So maybe we can talk a little bit about the balance sheet, both deposits and loans. We've had a few rate cuts since you last spoke. So maybe you can talk about what you've seen around those rate cuts in terms of deposit or customer behavior, how are -- how is pricing tracking relative to your expectations. And maybe you can also talk about migration from interest-bearing into noninterest-bearing and how that's tracking now that we're in a lower rate environment.

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. And then on loan demand, been a weak year in terms of loan demand broadly this year. Do you think that could change heading into '25? Have you seen any change in pipeline for loan demand either after the rate cuts or after the election? And are you expecting much of a bifurcation between corporate and consumer loan growth trends as we head into next year?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. And then turning to NII, I know you're going to give a more complete update in January. But maybe you can touch on your thoughts around the type of environment and time frame it takes to get to a 3% net interest margin for the firm, which I think you talked about at the Investor Day as a potential normalized margin for the firm.

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : And as we think about your positioning from a rate standpoint heading into next year, should we still think of you as being largely neutral from a rate perspective? And maybe you can talk a little bit about sensitivity to a steeper curve, if that's what we end up seeing.

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. So on fees, maybe we could talk a little bit about the growth outlook there. Capital markets is an area that is an important revenue driver for you going forward. How much of that is the environment versus investment in new products or deeper penetration with existing client bases? And has the opportunity set in capital markets changed significantly over the last few months post the election?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. So Andy, maybe we can talk a bit about the payment business, and maybe we can just start off with the recent announcement that you're splitting up the payment business under two separate leaders. Can you talk about what drove that decision, what you're looking to achieve from doing that? And then just as a follow-on, the new administration is very focused on improving government efficiency, potentially cutting government spending by up to $2 trillion. You have a very important sizable government relationship in your payment business. Could it be impacted if they do execute in terms of cutting government spending?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : That's interesting. Okay. So maybe we could talk a bit about expenses at the Investor Day. You talked about shifting the balance of investments from defensive to offensive. And I think you talked about two-third of investment spend now supporting growth initiatives. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 2:20PM, USB.N - US Bancorp at Goldman Sachs U.S. Financial Services Conference So maybe you can talk about some of the key areas of investment, how you expect those to evolve and perhaps talk about those investments in the context of achieving your medium-term efficiency targets.

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. And then, John, maybe just as a follow-up on operating leverage. I know it's a key focus. I know it's something the market is also very focused on. Can you talk about how dependent that is on the revenue side of the equation? And now the Union Bank integration is complete, as you just talked about, where do you see the greatest opportunities for expense initiatives? And maybe in the answer, you can talk a little bit about AI and automation and how your thought process around that has evolved over the last one or two years?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. And I think linked to that, you've done a lot in terms of changing the branch distribution network. I think you've gone from 3,100 locations to 2,200 locations. And I think you've closed something like 60% of your in-store locations, something like that. So can you just talk broadly about the distribution strategy, talk about where you are in terms of rationalizing the network? And maybe talk a little bit about what you think could look like in 5 years' time from here.

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : So from here, how do you think the distribution focus --

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. So let's turn to credit. So are there any lending categories that you're either particular --

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Yes, I wonder of that. But maybe we can talk about credit. Are there any lending categories that you're either particularly focused on or where you've tightened underwriting standards? And then maybe we can talk about risks that you're monitoring outside of credit. Is there -- what is top of mind today? And has that actually evolved over the last 12 months?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : And then just as an add-on to this. Are there areas where you think the market is mispricing credit, where you feel that the pricing doesn't compensate for the risk where you're changing underwriting status as a result of that?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. So maybe we can -- we've got a couple of minutes left. So maybe to close things out, when you talk to investors, what do you think is the most underappreciated element of the USB investment case? And what are the near-term catalysts that you're most excited about?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. One final question for you. We've obviously seen significant outperformance in bank share prices over the last few months. When you look at it, do you think it's rational or irrational exuberance when you think about it forward?

Question: Richard Ramsden - Goldman Sachs Group & Co. LLC - Analyst : Okay. Great. On that note, thank you very much for joining us. Look forward to seeing you next year.