Yahoo Finance U.S. Bancorp (USB) Q1 2024 Earnings Call Transcript Highlights: Key Financial Metrics and ...
Earnings Per Share (Reported): $0.78
Earnings Per Share (Adjusted): $0.90
CET1 Ratio: 10.0%
Return on Tangible Common Equity: 17.4% (adjusted)
Net Interest Income (Taxable Equivalent Basis): Approximately $4 billion
Loan Growth: Total average loans $371 billion, down 0.5% linked quarter
Deposit Growth: Total average deposits $503 billion, stable linked quarter
Net Interest Margin: Declined 8 basis points to 2.70%
Noninterest Income: Increased 7.7% year-over-year, decreased 1.4% linked quarter
Noninterest Expense (Adjusted): Decreased $10 million linked quarter, $117 million year-over-year
Nonperforming Assets: Increased 20% linked quarter
Charge-off Ratio: 0.53%, up from 0.49% in the previous quarter
Allowance for Credit Losses: $7.9 billion or 2.1% of period-end loans
Release Date: April 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Could you discuss the nuances in the tougher NII guide for the full year, particularly the main pressure points? A: (John C. Stern - CFO) The revised NII guidance reflects changes in the economy and deposit environment, with corporate and mid-market clients shifting their behavior due to a higher-for-longer interest rate environment. This has led to a rotation from low-cost to higher-cost deposits, affecting the pace of NII recovery. The second quarter NII is expected to be stable, with growth anticipated in the second half of the year.
Q: What are the drivers for the expected increase in net interest income in the second half of 2024? A: (John C. Stern - CFO) The expected NII increase is driven by the stabilization of deposit rotation, continued asset churn on loans and the investment portfolio, and actions taken to enhance return on equity. These factors contribute to a positive outlook for NII in the latter half of the year.
Q: Can you provide more details on the securities yield and noninterest-bearing deposits trends? A: (John C. Stern - CFO) The securities yield was relatively flat this quarter due to hedging actions that offset asset churn. Noninterest-bearing deposits are trending down as clients optimize their balances in a higher rate environment, potentially decreasing by a few percentage points from the current 17%.
Q: How are you managing the expense base in response to NII pressures? A: (Andrew J. Cecere - CEO) U.S. Bancorp is focusing on operational efficiencies, particularly in procurement, workplace management, and technology investments. These efforts are part of a broader initiative to manage expenses effectively while continuing to invest in the company.
Q: What is the outlook for fee revenue growth, and which areas are showing momentum? A: (John C. Stern - CFO) Fee revenue is expected to grow in the mid-single digits, driven by strong account growth, deepening client relationships, and robust capital markets activity. Notable growth areas include fixed income capital markets and payments, supported by ongoing investments in the payments ecosystem.
Q: How are you addressing the competitive dynamics in the market, particularly in relation to deposit mix and pricing? A: (John C. Stern - CFO) The competitive landscape has primarily impacted deposit mix and pricing, with a focus on being competitive in retail rates and managing commercial rates effectively. The company continues to prioritize growth and client retention by adapting to market conditions and client needs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
