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US BANCORP \DE\ (USB) Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered adjusted EPS of $1.07 on net revenue of $7.009B, with 190 bps of positive operating leverage (adjusted); reported EPS was $1.01 due to $109M notable items (lease impairments and efficiency actions) .
  • Net interest income was stable sequentially ($4.176B FTE; +0.2% q/q) while noninterest income rose 5.0% q/q and 8.1% y/y; NIM edged down 3 bps q/q to 2.71% on higher average earning assets .
  • Credit metrics were broadly stable: NCO ratio 0.60% (flat q/q), ACL/loans 2.09%, and NPAs/loans+ORE 0.48% (down 1 bp q/q) . CET1 improved to 10.6%; the company repurchased ~$100M of stock under its $5B authorization .
  • 2025 guide: Q1’25 NII “relatively stable” vs Q4 ex fewer days, FY’25 adjusted total revenue +3–5%, and ≥200 bps positive operating leverage; expenses “relatively stable” vs Q4 adjusted ~$4.2B. Payments leadership reorg announced (Courtney Kelso joining to lead consumer/small business payments) .

What Went Well and What Went Wrong

  • What Went Well
    • Fee momentum: trust & investment management (+13.2% y/y), commercial products (+11.7% y/y) and steady payments (+1.6% card, +2.4% merchant) lifted noninterest income (8.1% y/y; +5.0% q/q) .
    • Cost discipline: adjusted noninterest expense was flat both y/y and q/q at $4.202B; adjusted efficiency ratio 59.9% vs 61.1% in Q3 .
    • Capital and capital return: CET1 rose to 10.6%; initial $100M repurchase executed; adjusted ROTCE 18.3% with 190 bps adjusted positive operating leverage .
    • Management tone: reiterated confidence in delivering industry-leading ROTCE and sustained positive operating leverage in 2025 (CEO) .
  • What Went Wrong
    • NIM pressure: net interest margin fell 3 bps q/q to 2.71% (and 7 bps y/y) on balance sheet mix; NII growth remained minimal (+0.2% q/q FTE) .
    • Mortgage banking softness sequentially: mortgage revenue decreased 25.2% q/q on MSR valuation/hedging and lower production volume; also lower corporate payments and merchant volumes q/q .
    • Credit normalization: provision rose 9.4% y/y to $560M with continued elevated card charge-offs (card NCO 4.28%); NCO ratio 0.60% vs 0.49% a year ago .
    • Payments yields: merchant acquiring yield under pressure due to mix (higher-volume, lower-margin clients), a point scrutinized in Q&A .

Financial Results

Headline P&L vs prior quarters

MetricQ2 2024Q3 2024Q4 2024
Net Interest Income (FTE) ($B)$4.052 $4.166 $4.176
Noninterest Income ($B)$2.815 $2.698 $2.833
Total Net Revenue ($B)$6.867 $6.864 $7.009
Noninterest Expense – Reported ($B)$4.214 $4.204 $4.311
Noninterest Expense – Adjusted ($B)$4.188 $4.204 $4.202
Provision for Credit Losses ($B)$0.568 $0.557 $0.560
Net Income Attributable to USB ($B)$1.319 $1.714 $1.663
Diluted EPS – Reported$0.78 $1.03 $1.01
Diluted EPS – Adjusted$1.05 $0.98 $1.07

Profitability and Margin Metrics

MetricQ2 2024Q3 2024Q4 2024
Net Interest Margin (FTE)2.70% 2.74% 2.71%
Efficiency Ratio – Reported66.4% 60.2% 61.5%
Efficiency Ratio – Adjusted61.1% 60.7% 59.9%
Return on Avg Assets (ROAA)0.81% 1.03% 0.98%
Return on Tangible Common Equity (ROTCE)15.1% 17.9% 17.4% (18.3% adj)

Segment Net Income

Segment Net Income ($MM)Q2 2024Q3 2024Q4 2024
Wealth, Corporate, Commercial & Institutional Banking$1,177 $1,187 $1,273
Consumer & Business Banking$483 $476 $427
Payment Services$283 $277 $211
Treasury & Corporate Support($340) ($226) ($248)
Consolidated USB$1,603 $1,714 $1,663

Key Balance Sheet & Credit KPIs

KPIQ2 2024Q3 2024Q4 2024
Avg Total Loans ($B)$374.685 $374.070 $375.655
Avg Total Deposits ($B)$513.909 $508.757 $512.313
CET1 (Basel III Std)10.3% 10.5% 10.6%
Net Charge-off Ratio0.58% 0.60% 0.60%
Provision ($B)$0.568 $0.557 $0.560
NPAs / Loans+ORE0.49% 0.49% 0.48%
ACL / Period-End Loans2.11% 2.12% 2.09%
Book Value/Share (End)$31.80 $33.34 $33.19

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Income (FTE)Q1 2025N/ARelatively stable vs Q4’24 ($4.176B) excluding two fewer days New
Total Noninterest Expense (Adj)Q1 2025N/ARelatively stable vs Q4’24 adjusted ~$4.2B New
Positive Operating Leverage (Adj)Q1 2025N/A≥200 bps y/y New
Total Revenue (Adj)FY 2025N/A+3% to +5% vs FY’24 $27.6B (ex 3Q24 securities losses) New
Positive Operating Leverage (Adj)FY 2025N/A≥200 bps New
Capital ReturnNear termIntent to begin modest buybacks by early 2025 (prior) Executed $100M in 4Q; pace to remain modest near-term Executing

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
NII/NIM and rate pathNIM 2.70%; deposit pricing leverage; mix tailwinds NIM expanded to 2.74%; actions on securities; deposit pricing benefit; cuts positive over time NIM 2.71%; 2 Fed cuts assumed (May/Sep); neutral IRR; steeper curve helps; fixed-asset repricing consistent ($5–7B/qtr) Gradual NIM improvement tied to curve, back-book repricing
Deposit trends & betasAvg deposits $513.9B; discipline on pricing Avg deposits fell 1% q/q; focus on relationship deposits Avg deposits +0.7% q/q; seasonality in DDA; cumulative beta 38% (to mid/high-40s in 1Q) Stabilizing mix; betas drifting down as cuts flow through
Credit/CRE officeACL/loans 2.11%; NCO 0.58% CRE office reserved 10.8% CRE office reserve 11%; NCO 0.60% flat q/q; macro stabilization Stable with elevated card; CRE risks well reserved
Payments strategy—Leadership search; tech-led ~34% of merchant rev; growth investments Consumer/SMB payments head hired; payments split into PCS/PMI; mix challenges in merchant yields; core fee momentum Reorganization to accelerate execution; tech-led growth focus
Capital & buybacksCET1 10.3% $5B authorization; start early 2025 CET1 10.6%; $100M repurchased; modest near-term pacing Building while returning capital
Operating leverage & costs—Modest positive OL in Q3; guide to >1% in Q4 ≥200 bps positive OL in Q1/FY25; automation, procurement, real estate optimization Expanding positive OL targeted

Management Commentary

  • CEO: “We posted diluted EPS of $1.07 (adjusted) and delivered ROTCE of 18.3%... 190 basis points of positive operating leverage (adjusted)... diversified business model... CET1 10.6%... modest initial share buyback” .
  • CFO: “4Q EPS included $109M notable expense items (net $82M); after adjusting, diluted EPS was $1.07” .
  • CFO on NII/NIM: “Q1 NII stable excluding two fewer days (~$40M impact); steeper curve benefits; fixed-asset repricing ~$5–7B per quarter and ~$3B of securities per quarter at 150–200 bps better spread” .
  • President on payments: Splitting organization into consumer/small business and merchant/institutional to “accelerate execution” and deepen interconnectedness across the franchise .

Q&A Highlights

  • Revenue composition and NII guide: Fees expected mid-single-digit growth; NII supported by asset mix, deposit normalization, fixed-asset repricing; Q1 NII flat ex day count .
  • Rate assumptions and sensitivity: Two 2025 cuts embedded; neutral to front-end moves; steeper curve is positive for NII .
  • Capital return pacing: Modest to start; balanced with building to Cat II capital by ~2027 and loan growth needs .
  • Operating leverage durability: ≥200 bps positive OL in 2025 with expense levers (real estate, third-party procurement, automation) .
  • Payments/merchant yields: Tech-led merchant growing, but mix toward high-volume/low-margin clients pressured yields; leadership hires to drive execution .

Estimates Context

  • We attempted to pull S&P Global (Capital IQ) consensus for EPS and revenue, but the service returned a daily limit error; therefore, we cannot provide beat/miss vs Wall Street for Q4 2024 at this time. We will update when access is restored.
  • Actuals reported: Adjusted EPS $1.07; Revenue $7.009B; NII (FTE) $4.176B; Noninterest income $2.833B .
  • Note: Values would be compared to S&P Global consensus when available.

Key Takeaways for Investors

  • Constructive operating setup: Adjusted positive operating leverage already visible in Q4 (190 bps) with ≥200 bps targeted in Q1 and FY’25, underpinned by stable expenses and diversified fee growth .
  • Capital flexibility building: CET1 at 10.6% and initial $100M buybacks signal capacity to balance accretion and distributions; near-term repurchases likely modest pending clarity on Cat II transition and loan demand .
  • NII trajectory levered to curve/back-book: With deposit betas drifting lower and ~$8–10B/quarter of fixed assets repricing at +150–200 bps spreads, NII/NIM should grind higher as curve steepens .
  • Fee durability beyond payments: Trust & investment management and commercial products are carrying fee momentum; payments remains strategic with leadership reorg to address mix/yield headwinds .
  • Credit normalization manageable: NCOs stable q/q at 0.60% with elevated but expected card losses; CRE office exposure reserved (~11%) and NPAs stable to down .
  • Near-term focus points: Watch Q1 day-count effect on NII, deposit mix seasonality, merchant pricing dynamics, and execution on expense levers/automation outlined by management .
  • Medium-term thesis: Interconnected franchise (payments, capital markets, wealth) and operating efficiency progress support ROTCE sustainability as macro tailwinds (curve) emerge .

Appendix: Additional Tables

Payments and Major Fee Lines (Q/Q and Y/Y)

Noninterest Income Line ($MM)Q3 2024Q4 2024q/qy/y
Card Revenue426 433 +1.6%-0.7%
Corporate Payment Products203 191 -5.9%+4.9%
Merchant Processing440 419 -4.8%+2.4%
Trust & Investment Mgmt Fees667 703 +5.4%+13.2%
Commercial Products Revenue397 364 -8.3%+11.7%
Mortgage Banking Revenue155 116 -25.2%-15.3%

Capital & Share Count

  • CET1 (Basel III standardized): 10.5% (Q3), 10.6% (Q4) .
  • Tangible common equity / tangible assets: 5.7% (Q3), 5.8% (Q4) .
  • Ending common shares: 1,561M (Q3) vs 1,560M (Q4); repurchases resumed in Q4 .

Sources: Company 8‑K and earnings materials, Q4 2024 press release and supplement, and Q4 2024 earnings call transcript as cited in-line above .

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