U.S. Bancorp Q1 Earnings Call Highlights

Key Points

• U.S. Bancorp reported Q1 EPS of $1.18, up about 15% YoY, with total net revenue rising 4.7% to $7.3 billion and management citing 440 basis points of positive operating leverage and an improved efficiency ratio.
• Key growth drivers include the Amazon Small Business Card (expected to add ~$75–85 million per quarter) and the pending BTIG acquisition (forecast to contribute about $200 million of fee revenue per quarter once closed), alongside double‑digit credit‑card account acquisition and the new Business Essentials small‑business platform.
• Balance‑sheet and guidance: average loans grew to $394 billion and ending assets reached about $701 billion (raising Category II regulatory considerations), net interest margin was stable at 2.77% with a path to 3% by 2027, credit metrics remained healthy, and full‑year guidance was maintained for 4–6% net revenue growth and 200+ bps of operating leverage.

U.S. Bancorp NYSE: USB reported first-quarter 2026 earnings per share of $1.18, up about 15% from the prior year, as growth in both net interest income and fee revenue helped deliver another period of positive operating leverage. Management highlighted broad-based revenue gains across the company’s three major business lines, continued expense discipline, stable credit quality metrics, and an outlook that keeps full-year guidance intact while reflecting uncertainty around the interest-rate path.

Quarterly results show revenue growth and operating leverage

Chief Executive Officer Gunjan Kedia said total net revenue rose 4.7% year-over-year to $7.3 billion, supported by “broad-based growth across each of our three major business lines.” Net interest income (taxable equivalent basis) increased 4.1% year-over-year, which Kedia attributed to “robust core loan growth in commercial and credit cards, and a second consecutive quarter of record consumer deposits.”

Fee income grew 6.9% from a year ago, reflecting “improved payments performance and momentum across capital markets and investment services businesses,” Kedia said, adding that capital markets revenue was “particularly strong” due to new product penetration with existing clients and favorable market volatility.

Vice Chair and CFO John Stern said the company produced “positive operating leverage of 440 basis points” in the quarter and improved its efficiency ratio by 260 basis points year-over-year. He also noted the firm’s seventh consecutive quarter of positive operating leverage, calling disciplined expense management “foundational to how we operate.”

Balance sheet trends: loan growth, deposits, and margin

Stern said average total assets increased 0.7% from the prior quarter to $688 billion, with ending assets of $701 billion. He pointed to the regulatory implications of asset size, noting that a Category II transition requires four quarters of average assets at $700 billion or more.

Average loans totaled $394 billion, up 3.8% year-over-year, or 5.3% when adjusting for loan sales in the second quarter of 2025. Stern said growth was “broad-based and centered around credit card, commercial, and commercial real estate.”

On deposits, Stern said total average deposits were relatively flat quarter-over-quarter, as record consumer deposits were offset by seasonal factors in wholesale and investment services. Non-interest-bearing deposits remained about 16% of total average deposits.

Net interest margin was flat from the prior quarter at 2.77%. Stern said core loan growth and stable deposit pricing were offset by elevated mortgage prepayments and tighter credit spreads. In response to analyst questions, he said he expects mortgage-related headwinds to “abate,” and that the company “continue[s] to see progression in our net interest margin going forward,” while also reiterating a longer-term “path” to 3% net interest margin in 2027.

Fee businesses: capital markets strength, payments momentum, and partnerships

Stern said fee income growth was supported by nearly 30% growth in capital markets and nearly 10% growth in trust and institutional fees, alongside continued momentum in payments. He described the capital markets business as focused on fixed income, foreign exchange, and derivatives, including commodities, and said the pending BTIG acquisition is expected to add equity and investment banking capabilities. The company also updated the classification of certain fee categories to better align disclosures with internal management, restating prior periods with “no effect on total fee revenue,” he said.

In payments, Kedia said credit card account acquisitions have grown at a double-digit pace over the past four quarters, driven by new products aimed at “affluent transactors” and higher marketing spend. She later explained that faster acquisitions can create a lag before revenue growth shows up, as upfront rewards and onboarding dynamics affect near-term revenue, with a typical “4-6 quarters” lag before stronger revenue growth is reflected.

Management also discussed two initiatives it characterized as meaningful growth drivers:

• Amazon partnership: Stern said the Amazon Small Business Card is expected to come online in the third quarter, with about $1.6 billion of loans and roughly 70,000 co-brand clients at conversion. He estimated it could add “$75 million-$85 million per quarter,” with a majority in net interest income, and said it is fully included in the company’s guidance.
• Business banking “Business Essentials”: Kedia said U.S. Bank is investing in integrated solutions for small businesses—banking, card, spend management, and merchant solutions—branded Business Essentials, and described the Amazon partnership as a pathway to broader banking relationships over time.

Kedia also highlighted California performance following the Union Bank acquisition, stating the bank has realized about $1 billion in merger-related expense savings and is now focused on revenue synergies. She said California is “outperforming the broader franchise across multiple key dimensions.”

Credit quality and capital: stable metrics and Basel III commentary

Credit quality metrics remained stable, according to Stern. Non-performing assets to loans and other real estate improved to 0.38% at March 31, down three basis points from the prior quarter and seven basis points from a year earlier. The net charge-off ratio was 0.56%, up two basis points sequentially, which Stern attributed to credit card seasonality. Allowance for credit losses was nearly $8 billion, or 2.0% of period-end loans.

Stern also addressed U.S. Bank’s non-depository financial institution (NDFI) exposure, stating that business credit intermediaries represent about 3% of total ending loans and that exposures are “well structured,” citing over-collateralization, concentration limits, and first-lien collateral.

On capital, Stern said the Common Equity Tier 1 ratio was 10.8% (or 9.3% including AOCI). Management said it was encouraged by updated Basel III proposals and expects “meaningful RWA relief,” particularly in mortgage and investment-grade corporate lending, though it is waiting for final outcomes on topics such as AOCI phase-in and effective dates.

Guidance and strategic priorities: investments continue, targets maintained

Stern said first-quarter net interest income, fee revenue, and non-interest expense all exceeded previous guidance. For the second quarter of 2026, the bank guided for 6%-7% year-over-year growth in both net interest income (taxable equivalent) and total fee revenue, and 3%-4% growth in non-interest expense versus the second quarter of 2025.

For full-year 2026, guidance was unchanged, with total net revenue growth expected to be 4%-6% and positive operating leverage of 200 basis points or more. Stern said guidance excludes the pending BTIG acquisition, which is expected to contribute about $200 million of fee revenue per quarter once closed, with an anticipated close in the back half of the second quarter. He later told analysts the deal is expected to be “slightly accretive” for the year inclusive of integration charges, with impacts primarily in the back half of the year.

In Q&A, management emphasized that operating leverage for 2026 is expected to be driven more by revenue growth than cost cuts, while also stating that the bank intends to reinvest some savings into technology and marketing. Kedia said the bank’s growth priorities include expanding fee categories, strengthening the consumer and small business franchise, and becoming an “AI native organization.”

Closing the call, Kedia said the macro backdrop “remains constructive despite some softening of sentiment recently,” citing stability in consumer spend, loan demand, and delinquency trends, and said a more helpful regulatory environment could provide greater capital flexibility over time.

About U.S. Bancorp NYSE: USB

U.S. Bancorp NYSE: USB is a bank holding company and the parent of U.S. Bank, a national commercial bank that provides a wide range of banking, investment, mortgage, trust and payment services. The company operates through consumer and business banking, commercial banking, payment services, and wealth management segments. Its product set includes deposit accounts, consumer and commercial lending, mortgage origination and servicing, credit and debit card services, treasury and cash management, merchant processing, and institutional and trust services.

Headquartered in Minneapolis, Minnesota, U.S.

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