10-QPeriod: Q3 FY2021

US BANCORP \DE\ Quarterly Report for Q3 Ended Sep 30, 2021

Filed November 2, 2021For Securities:USBUSB-PHUSB-PPUSB-PRUSB-PQUSB-PSUSB-PA

Summary

U.S. Bancorp (USB) reported a strong third quarter of 2021, with net income attributable to the company increasing by 28.4% year-over-year to $2.03 billion, translating to diluted earnings per share of $1.30. This performance was bolstered by a significant reversal in the provision for credit losses, which moved from a $635 million expense in Q3 2020 to a $163 million benefit in Q3 2021, reflecting improved economic conditions and strong credit performance. While total net revenue saw a slight decline of 1.2% due to lower net interest income and noninterest income, driven by factors like commercial loan paydowns and lower mortgage banking revenue, this was largely offset by the substantial decrease in credit loss provisions. The company also announced a definitive agreement to acquire MUFG Union Bank's core regional banking franchise for approximately $8.0 billion, expected to close in the first half of 2022. This strategic move is poised to enhance USB's presence in key West Coast markets. Management highlighted the continued strength in payment services revenue and improvements in deposit service charges and treasury management fees. Despite a rise in noninterest expenses, primarily due to investments in technology and compensation, the bank's solid capital position and improved profitability indicate a positive operational outlook.

Financial Highlights

36 data points
Beta

Net Income

$2.03B

EPS (Diluted)

$1.30

Total Assets

$567.50B

Cash & Equivalents

$63.90B

Free Cash Flow

$2.65B

Financial Statements
Beta
Interest Expense$238.00M
Net Income$2.03B
EPS (Basic)$1.30
EPS (Diluted)$1.30
Shares Outstanding (Basic)1.48B
Shares Outstanding (Diluted)1.48B

Key Highlights

  • 1Net income attributable to U.S. Bancorp increased by 28.4% to $2.03 billion in Q3 2021, with diluted EPS at $1.30, up from $0.99 in Q3 2020.
  • 2The provision for credit losses swung from a $635 million expense in Q3 2020 to a $163 million benefit in Q3 2021, reflecting improving economic conditions and credit quality.
  • 3Total net revenue declined slightly by 1.2% to $5.89 billion, primarily due to a 1.7% decrease in net interest income and a 0.7% decrease in noninterest income.
  • 4Noninterest expense increased by 1.7% to $3.43 billion, driven by higher compensation, professional services, marketing, and technology expenses.
  • 5U.S. Bancorp announced the acquisition of MUFG Union Bank's regional banking franchise for $8.0 billion, expected to close in the first half of 2022.
  • 6Payment Services revenue saw a strong increase, driven by merchant processing services and credit/debit card revenue.
  • 7The company's Common Equity Tier 1 capital ratio improved to 10.2% from 9.7% at year-end 2020.

Frequently Asked Questions

For the third quarter of 2021, U.S. Bancorp reported net income attributable to U.S. Bancorp of $2.03 billion, or $1.30 per diluted common share. This represents a significant increase compared to the $1.58 billion, or $0.99 per diluted common share, reported in the third quarter of 2020.

The provision for credit losses was a significant positive factor in the third quarter of 2021. It shifted from an expense of $635 million in the prior year's third quarter to a benefit of $163 million in the current quarter. This favorable swing was attributed to an improvement in the global economy and strong credit and collateral performance, leading to a decrease in the allowance for credit losses.

The most significant strategic development is the announced acquisition of MUFG Union Bank's core regional banking franchise for approximately $8.0 billion. This transaction is expected to close in the first half of 2022 and aims to expand U.S. Bancorp's reach and capabilities, particularly in key West Coast markets.

The Payment Services segment showed strong growth, with revenue increasing by 3.4% year-over-year, driven by merchant processing and credit/debit card revenues. Consumer and Business Banking saw a slight decrease in net revenue but an increase in net interest income due to deposit growth. Corporate and Commercial Banking experienced a decrease in net revenue, mainly due to lower loan and deposit balances and capital markets activity. Wealth Management and Investment Services reported a decrease in net revenue, primarily due to lower net interest income.