U.S. Bancorp (USB) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

July 19, 2023 10:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Welcome to the U.S. Bancorp second quarter 2023 earnings conference call. (Operator instructions). This call will be recorded and available for replay beginning today at approximately 11:00 a.m. Central Time.

I will now turn the conference call over to George Anderson, Senior Vice President and Director of Investor Relations for U.S. Bancorp.

George Anderson

Thank you, Brad, and good morning, everyone. With me today are Andy Cecere, our Chairman, President and Chief Executive Officer; Terry Dolan, our Vice Chair and Chief Financial Officer; and John Stern, Senior Executive Vice President and Head of Finance. During initial prepared remarks, Andy and Terry will be referencing a slide presentation. A copy of the presentation, our earnings release, and supplemental analyst schedules are available on our website at usbank.com. Please note that any forward-looking statements made during today's call are subject to risk and uncertainties. Factors that can materially change our current forward-looking assumptions are described on Page 2 of today's presentation, our press release, our Form 10-K, and in subsequent reports on file with the SEC. Following our prepared remarks, Andy, Terry, and John will take any questions that you have.

I will now turn the call over to Andy.

Andy Cecere

Thanks, George. Good morning, everyone, and thank you for joining our call. I'll begin on Slide 3. The second quarter was highlighted by our successful conversion of Union Bank and a meaningful increase in our common equity tier one ratio to 9.1%, 60 basis points higher than the first quarter, driven by earnings accretion and balance sheet optimization actions. Earnings per share totaled $0.84 in the second quarter, including $0.28 per share of notable items. Excluding the impact of notable items, earnings per share was $1.12.

Slide 4 provides reported and adjusted income statement results and other key metrics. Our second quarter results were supported by new customer account growth and deepening of relationships across our business lines, as well as continued disciplined expense management. Net interest income was lower compared with the first quarter, primarily due to pressures on deposit pricing. However, momentum and fee income businesses continue strong. One of the strengths of our business model is our diverse and stable funding that includes a mix of both consumer and operational wholesale deposits. This quarter, while our average deposit balances decreased by 2.6% linked-quarter, period end deposits were higher by 3.2% or approximately $522 billion, largely reflective of seasonal operational deposit flows in areas such as our corporate banking and trust businesses. Credit quality metrics remained strong versus pre-pandemic levels, but are normalizing as expected. This quarter, we strengthened our balance sheet by increasing the loan loss reserve, reflective of our prudent approach to credit risk management.