US Bancorp Card Net Charge-Off Rate Hits 4.2%

U.S. Bancorp said in its latest earnings report that consumers are continuing to boost their credit card loans – and though charge-offs have increased, credit quality has remained strong.

Credit card loans in the quarter were $28 billion, adding more than 9% year over year, the parent company of U.S. Bank said Wednesday (April 17).

“Credit quality metrics continue to develop in line with our expectations,” CEO Andrew Cecere said, adding that “loan and deposit growth remains under pressure for the industry.”

Despite the industry-wide pressure, the company continues “to see consumer deposit growth,” the CEO added.

Consumer deposits in the most recent quarter were $225 billion, up from $222 billion a year ago and $224 billion in the fourth quarter of 2023.

The bank, he said, is seeing momentum as it expands its business banking and payments relationships. Earnings materials show that business banking revenues grew by 30%, compounded, through the past three fiscal years. Payments-related non-interest income grew to $977 million in the latest quarter from $936 million a year ago.

Management said on the call that growth in the payments related business (and fees) should be in the high single digits. Total credit card revenues increased 13% year on year, and merchant processing fees gained 4% in the same time frame. Corporate payments fees were down 3% tied in part to “ongoing softness in corporate freight,” as detailed in the corporate materials.

CFO John Stern said on the call that “clients are continuing to rotate out of low-cost deposits into higher-cost deposits. And the pace of this action is slowing. We absolutely see that.”

Targeting Additional Efficiencies

Elsewhere on the call, CEO Cecere said that U.S. Bancorp is focusing “on additional efficiencies in areas like procurement and third-party spend, our workplace management, and our properties and real estate.”

Asked on the call about credit metrics — especially in real estate — Terry Dolan, vice chair and chief administration officer, said that “credit generally is pretty strong. I think that we’re continuing to see non-performing assets that will continue to tick up and did tick up in the first quarter. It’s primarily related to commercial real estate office space.”

He noted, too, that in credit cards, the charge-off rate will move up “a bit in the second quarter and then start to moderate downward again. On a full-year basis, we would expect that charge-off rate to be pretty similar to the charge-off rate that we see in the first quarter.”