US Bancorp Anticipates Fee-Based Momentum After Year of ‘Uncertainty’

U.S. Bancorp’s most recent quarter took note of changing dynamics in deposit activity, growth in card loans, and momentum in its payments-related business lines that should last through the current year, according to management commentary Thursday (Jan. 16).

Earnings materials show credit card loans were $29.4 billion at the end of the most recent quarter, up from $27.7 billion a year ago. Net charge-offs were 4.28% in the most recent period, as measured against the overall credit card loan book, compared to 3.65% last year.

Elsewhere in the company’s data, the Payments Services segment saw 2.4% year over year growth in merchant processing fee revenues, and 4.9% growth in corporate payments fee revenues. Separate company filings revealed that U.S. Bancorp realized $191 million in corporate payments products revenues in the most recent quarter and $419 million in merchant processing services revenues.

Deposit Growth

CFO John Stern said on the conference call with analysts that total average deposits increased 0.7% on a linked-quarter basis to $512 billion. “Our percentage of non interest bearing deposits to total deposits now looks to have stabilized in line with our earlier expectations,” he said.

Total revenue growth is expected to be in the range of 3% to 5% for the current year as compared to 2024, according to Stern.

U.S. Bancorp shares were down 4% in intraday trading on Thursday.

CEO Andy Cecere said on the call that “going into the year, there was much uncertainty with respect to the broader macroeconomic environment, persistent inflation, significant rate volatility, political and regulatory headwinds to name a few, but we effectively managed through the changes and most importantly executed on our strategic objectives.”

During the question-and-answer session with analysts, Stern noted “really solid and healthy growth on the fee side of things. And we have a lot of momentum building. And that’s despite some headwinds that we saw, particularly on our prepaid, on the card side of things, as well as freight … We also saw headwinds with the ATM exit of our cash servicing business. So those things will abate or have abated here in 2024. And so we see obviously momentum in the core.” The company is holding forward guidance for its fee growth to be in the mid-single digits.

“In payments, we have good momentum in a number of areas, strategic initiatives that are underway. Treasury management and capital markets continue to have strong growth in certain areas,” said the CFO.

Looking ahead, Stern said that “for the purposes of our forecast, as we’re thinking about ’25, we have pretty modest loan and deposit growth for the full year.”

Asked later on the call about technology and digital initiatives, CEO Cecere said that “in this environment, this interconnectedness of banking and payments is as important as it’s ever been. And the concept of moving money together with storing money and lending money is all intertwined … To the extent we can offer these things together with a terrific technology platform that we have and also have the ability to grow that in a very capital-efficient, fee-focused way — that’s why we want to retain the business. And the interconnectedness of that is as critical as it’s been in the last 20 years. So we’re very focused on this business because of that opportunity.”