U.S. Bancorp Q4 2024 Earnings Report

U.S. Bancorp EPS Results

• Actual EPS: $1.07
• Consensus EPS: $1.06
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.99

U.S. Bancorp Revenue Results

• Actual Revenue: $7.01 billion
• Expected Revenue: $7.00 billion
• Beat/Miss: Beat by +$6.62 million
• YoY Revenue Growth: +3.70%

U.S. Bancorp Announcement Details

• Quarter: Q4 2024
• Date: 1/16/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 16, 2025
• Conference Call Time: 9:00AM ET

The earliest precursor to U.S. Bancorp (NYSE:USB) was founded in 1863 and is now headquartered in Minneapolis, Minnesota. The company owns the 24th national charter, issued in 1863, and is the second oldest original charter holder still in existence. Today, the bank is the 5th largest financial institution in the U.S. and is considered to be systemically important by the FSB. The company’s revenue in 2021 topped $22.7 billion, it listed more than $573 million in total assets and employed more than 68,700 people.

U.S. Bancorp Is now operating as a financial services holding company. The company provides various financial and banking-related services to individuals, businesses, institutions, and governments under the U.S. Bank, Elavon, and Elan Financial Services banners. Elavon is a payment processor for merchants while Elan Financial Services is a credit card issuer that works in conjunction with small banks and credit unions across the U.S.

The U.S. Bank's name got its start in 1891 as the United States National Bank of Portland. That bank was merged with several others over the years before the one resulting in US Bancorp of Oregon. That bank lasted until the late 1990’s when it was merged with the First Bank System of Minnesota. That merger created the now-recognizable U.S. Bancorp but the mergers do not end there. A final takeover by Firstar, another bank with a long history of mergers, resulted in the bank being traded on the New York Stock Exchange today.

U.S. Bank operates in 5 segments that include Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services and Treasury and Corporate Support segments. The company’s long-term debt all carries AA or A+ ratings and are considered investment quality.

U.S. Bancorp’s financial services include deposits, checking, savings accounts, and CDs as well as a range of lending and investment services. Lending services include consumer and business loans, lines of credit and credit cards as well as personal loans, and others. Investment and insurance services include asset management, fund administration, IRA, and access to markets. Services are available through a network of 2,213 branch offices throughout the western and midwestern U.S. Accounts are also accessible through 4,052 ATMs, mobile, online, and telephone. U.S. Bancorp has operations in 26 states.

U.S. Bancorp Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Welcome to the U. S. Bancorp 4th Quarter 2024 Earnings Conference Call. Following a review of the results, there will be a formal question and answer session. This call will be recorded and available for replay beginning today at approximately 11 am Central Time.

[Operator]

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

[George Andersen, Senior Vice President & Director of Investor Relations at U.S. Bancorp]

Thank you, Audra, and good morning, everyone. Today, I'm joined by our Chairman and CEO, Andy Cecere President, Gunjan Kedija Vice Chair and CAO, Terry Dolan and Senior Executive Vice President and CFO, John Stern. In a moment, Andy and John will be referencing a slide presentation together with their prepared remarks. A copy of the presentation, our press release and all supplemental consolidated schedules can be found on our website at ir.usbank.com. Please note that any forward looking statements made during today's call are subject to risk and uncertainty.

[George Andersen, Senior Vice President & Director of Investor Relations at U.S. Bancorp]

Factors that could materially change our current forward looking assumptions are described on Page 2 of today's earnings release, press presentation, our press release and in reports on file with the SEC. Following our prepared remarks this morning, we will be happy to take any questions that you have. I will now turn the call over to Andy.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Thanks, George. Good morning, everyone, and thank you for joining our call. I'll begin on Slide 3. In the Q4, we reported $1.01 per diluted share or $1.07 after adjusting for notable items. John will discuss these one time charges in his prepared remarks.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Net revenue totaled $7,000,000,000 for the quarter $27,500,000,000 for the year, as we saw both sequential and year over year quarterly growth in net interest income and non interest income, driven by effective balance sheet management, earning asset repricing and mix and our highly diversified fee business offerings. Overall, the quarter was highlighted by top line revenue growth and continued expense discipline, which resulted in 190 basis points of positive operating leverage on an adjusted basis year over year. Turning to Slide 4. We had slight balance sheet growth this quarter with average earning assets increasing 1.2% driven by higher on balance sheet liquidity. This quarter, we had modest loan loss reserve release largely reflective of improved credit quality and a more favorable portfolio mix.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

On the bottom right of the slide, you can see that our CET1 capital ratio increased 10 basis points from the prior quarter to 10.6%. Our tangible book value per share totaled $24.63 at December 31, an increase of 10.4% compared to the end of last year. During the quarter, we effectively balanced continued capital accretion with an initial $100,000,000 of share repurchases. Slide 5 provides key performance metrics. On an adjusted basis, we delivered an 18.3% return on tangible common equity and an improved efficiency ratio of 59.9 percent in the 4th quarter.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Turning to Slide 6, fee income represented over 40% of total net revenue in the 4th quarter. Results this quarter were driven by double digit year over year fee growth in commercial products, trust and investment management and investment product revenues. Slide 7 highlights a few of our key selected initiatives on interconnectedness across the franchise. Let me now turn over the call to John, who will provide more detail on the quarter as well as forward looking guidance.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Thanks, Andy. If you turn to Slide 8, I'll start with a more detailed earnings summary followed by a discussion of 4th quarter earnings trends. In the Q4, we reported earnings per diluted common share of $1.01 which included $109,000,000 of notable expense items or $82,000,000 net of tax. Notable items for the quarter included $60,000,000 related to operational efficiency initiatives and $49,000,000 from lease impairments associated with strategic real estate restructuring actions. After adjusting for these notable items, we delivered diluted earnings per common share of $1.07 this quarter.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Slide 9 provides a balance sheet summary. Total average deposits increased 0.7 percent on a linked quarter basis to $512,000,000,000 as we continue to prioritize relationship based deposits and maintained our pricing discipline. While total non interest bearing deposits increased slightly this quarter, this was largely driven by institutional deposit seasonality at the end of the quarter. Importantly, after accounting for this seasonality, our percentage of non interest bearing deposits to total deposits now looks to have stabilized in line with our earlier expectations. Average loans totaled $376,000,000,000 a modest increase of 0.4% on a linked quarter basis, driven by commercial lending initiatives, slower pay downs and new originations in residential mortgages, as well as higher seasonal credit card spend.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

At December 31st, the ending balance on our investment portfolio increased slightly to $171,000,000,000 from opportunistic repurchases of securities. This quarter, we saw a slight decline in the average yield across both our investment portfolio and loan book as the impact of variable rates more than offset the benefits of fixed asset repricing. Turning to slide 10. Net interest income on a fully taxable equivalent basis totaled $4,180,000,000 which was stable to the 3rd quarter. For the year, total net interest income on a fully taxable equivalent basis was slightly better than our earlier guidance of $16,400,000,000 Slide 11 highlights trends in non interest income.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Linked quarter, we saw non interest income growth in the Trust and Investment Management and other revenue that was partially offset by lower mortgage banking and seasonally lower payments revenue. Importantly, excluding security losses, full year non interest income increased 3.9% compared to 2023, consistent with our 2024 guidance as we benefited from continued growth across our diversified and differentiated business mix. Turning to slide 12, non interest expense for the quarter totaled $4,200,000,000 as adjusted. For the year, total non interest expense was $16,790,000,000 as adjusted, which was just below or better than our full year guidance of $16,800,000,000 We remain focused on prudent expense management continue to benefit from operational efficiencies across the company. Slide 13 highlights our credit quality performance.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Asset quality metrics this quarter were in line with expectations and reflected ongoing macroeconomic stability. Our ratio of non performing assets to loans and other real estate was 0.48 percent at December 31, compared with 0.49% at September 30 and 0.40 percent a year ago. The 4th quarter net charge off ratio of 0.60 percent was flat to the 3rd quarter as expected and our allowance for credit losses totaled $7,900,000,000 or 2.09 percent of period end loans at December 31. Turning to slide 14. Our CET1 capital ratio of 10.6 percent as of December 31 increased 10 basis points net of distributions, which included an initial $100,000,000 of share buybacks this quarter.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Moving forward, we expect the level and pace of buybacks to remain modest in the near term as we balance continued capital accretion with distributions. I will now provide Q1 and full year 2025 forward looking guidance on slide 15. Starting with the Q1 2025 guidance. Net interest income is expected to be relatively stable to the Q4 of 2024, excluding the impact of fewer days. As a reminder, the Q1 has 2 fewer days than the 4th quarter.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Total non interest expense is expected to be relatively stable to the 4th quarter level of approximately $4,200,000,000 as adjusted. We expect to deliver positive operating leverage in the Q1 of 200 basis points or more on a year over year basis. I'll now provide full year 2025 guidance. Total revenue growth on an adjusted basis is estimated to be in the range of 3% to 5% compared to the full year 2024. We expect to achieve positive operating leverage excluding the impact of security gains or losses of greater than 200 basis points for the full year.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

I'll now hand it back over to Andy for closing remarks.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Thanks, John. 2024 was a pivotal year for the company in many ways and it marked a very important inflection point in our story. 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. 4th quarter results showcase our commitment to execution, which was highlighted by our delivery of 190 basis points of positive operating leverage.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

As credit quality continued to stabilize and we prudently manage our capital position, it was effective balance sheet management, our financial discipline and expanding interconnectedness across the franchise that enable us to fully deliver the strong results we did this quarter and fully expect that momentum to continue into 2025. Finally, I'd like to extend our thoughts to those impacted by the devastating and ongoing wildfires in Los Angeles. We are closely monitoring the situation and have teams across the bank involved in our collective response efforts to help best support our employees, customers and their communities. Let me close by thanking our employees for their continued dedication to our clients, communities and shareholders in what was a meaningful year for the company. We will now open up the call for Q and A.

[Operator]

Thank you. And we'll go first to Scott Siefers at Piper Sandler.

[Scott Siefers, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Good morning, guys. Thank you for taking my questions.

[Scott Siefers, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Hey. John, I was hoping maybe you could delve in

[Scott Siefers, Managing Director & Senior Research Analyst at Piper Sandler Companies]

a little more to discuss the drivers of the 3% to 5% expected full year 2025 revenue growth. In other words, sort of how much comes from NII? How much ends up coming from fees? And maybe and then I guess a little clarification. When you're talking about the 1Q NII guide, I think you're saying flat excluding the day count difference.

[Scott Siefers, Managing Director & Senior Research Analyst at Piper Sandler Companies]

So I just want to be certain, we're thinking, it would be down on a reported basis marginally just due to fewer days.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Right. Thanks, Scott, and good morning. So maybe let me take your last question first. Yes, excluding days about $40,000,000 would be lower on a reported basis. So stable excluding those 2 days of that $40,000,000 That's kind of that's how we're representing that.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

On your on the sure, on the drivers on the 3% to 5% revenue growth, let me start with the fees and then I'll go over to into net interest income. We had 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. So some areas in the payments space that saw some headwinds. We also saw headwinds with the ATM exit of our cash servicing business.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

So those things will abate or have abated here in 2024. And so we see obviously momentum in the core. At Investor Day, we talked about our expectation for the medium term for rate our expectations for 20262027 to be at mid single digits for fee growth. And that's a reasonable range for us to really think about as we think about 2025. And it really comes down to core areas of growth within our trust area.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

We're seeing strong market share, fund formation. The macro is really strong there. 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. A couple of areas that we're watching is mortgage.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Mortgages with these higher rates, it's hard to see volumes really persist or be a lot stronger than it was in the prior year and gain on sale is pretty stable as well. And then our other revenue will continue to be in that $125,000,000 to $150,000,000 range on an average basis per quarter. So put another way, we expect fees to grow. We have strong momentum and we think that is that mid single digit is a reasonable place for us to begin. As we think about net interest income, again, well positioned.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

The balance sheet is in a great spot. We saw inflection in our throughout 2024. And we really think about 3 key drivers for net interest income. It's going to come from better asset mix, which we've seen more of a shift into higher returning assets. That shift will continue.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

We've seen deposit normalization. That's the non interest bearing rotation is starting to slow down and really stabilize at this level. And then importantly, fixed asset repricing on our back book is going to be a meaningful driver this year, particularly with the curve steepening. We've seen since we were last on this call, the curve and I always look at SOFR versus 5 year treasury. That was meaningfully inverted back in September and now we're positive actually.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

And so we think the back book is going to give us some nice trajectory. Just as an example, we have about $3,000,000,000 of an investment portfolio that reprises per quarter of $3,000,000,000 that runs off that can get replaced at 150 to 200 basis points of spread. And then on the other fixed rate assets that we have, which includes residential mortgage, commercial loans and auto loans and things like that, We have $5,000,000,000 to $7,000,000,000 on average that reprice again at that 150 to 200 basis points mark. And that's assuming kind of today's rates. So either way, we're very confident in our growth both on fees and the net interest income.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

You put it all together and that's really where we come up with our 3% to 5% total revenue growth.

[Scott Siefers, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Perfect. All right, good. Appreciate all the detail, John. Thank you.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

You bet.

[Operator]

We'll move next to John McDonald at Truist Securities.

[John McDonald, Senior Research Analyst at Truist Securities]

Hi, good morning.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Good morning.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Good morning, John.

[John McDonald, Senior Research Analyst at Truist Securities]

Hey guys. Wanted to ask 2 strategic questions. Maybe the first one is for Gunjan. Just on payments, you reorganized the business yesterday or this week you announced a new head to the consumer side. Maybe just kind of give us the plan for payments and what you hope the new organization and setup will do for the growth and opportunities there?

[Gunjan Kedia, President at U.S. Bancorp]

Good morning, John. Let me just remind you of some of the facts that we shared last time. Our payments franchise is a very strategic asset for us and our sense is that we can do more to interconnect that product set with our consumer franchise and our institutional franchise. So the OAK structure and splitting it into the 2 pieces that are more aligned with the two parts of the franchise is an expectation to accelerate execution. So it's not really a strategic focus.

[Gunjan Kedia, President at U.S. Bancorp]

We are very pleased to welcome 2 very high quality leaders. Mark Runkel, we announced earlier. Earlier in the year, he stepped into his role on the institutional side and Courtney Kelso joins us from Amex next month. So that was sort of the intention and the goal is to truly accelerate our execution around our vision for interconnectedness.

[John McDonald, Senior Research Analyst at Truist Securities]

Okay. Thanks, Gunjan. And Andy, maybe broader, just kind of where have you planted seeds for offense across the company? I think in the retail bank, you're looking in the union franchise and maybe through your partners, Edward Jones and State Farm. But maybe just across the footprint, where are you excited about where U.

[John McDonald, Senior Research Analyst at Truist Securities]

S. Bank has kind of invested for growth and you might be moving to the front foot?

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Thanks, John, and good morning. I think it's across all of our business lines. And it's that concept that we talked about in an Investor Day, which is about interconnectedness. But if you think about the momentum that John articulated and Gunjan talked about, our payments business, our trust and investment management business, our commercial products business, our retail business, the growth in deposit activity, our commercial business with the growth in targeted loan activity, profitable loans. So we really have a lot of momentum going in that.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

John coupled that with sort of the headwind that was the yield curve that John talked about, I think drives the positive momentum on net interest income. The fee categories we talked about, which I all think have positive momentum and all of that is coupled with a relatively flat expense for the last last quarters, which drives to this positive operating leverage that we talked about. So across all the categories of revenue, it's positive expenses well managed and that's going to deliver the positive operating leverage.

[John McDonald, Senior Research Analyst at Truist Securities]

Okay. Thank you.

[Operator]

We'll go next to Betsy Graseck at Morgan Stanley.

[Betsy Graseck, Managing Director at Morgan Stanley]

Hi, good morning.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Good morning, Betsy.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Hi, Betsy.

[Betsy Graseck, Managing Director at Morgan Stanley]

I noticed that mine sounds very ticky tacky, but I just want to make sure I understand what forward curve your NII guide is based on. And I think you mentioned today, but I and the reason I ask is, as we all know, the forward curve has changed a lot between like beginning of December and today. So that's the first question.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. So in terms of our curve, we do have 2 rate cut assumptions embedded. I think one's in May and one's in September. So that's kind of how we think about the short end of the curve. And the long end of the curve is at this level.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

So right now, the 10 year treasury is at 4.65%. That's probably a good place. That's kind of where we're at kind of throughout the year. Of course, we know that it's volatile, it's been volatile. And that's why I say the curve does matter when we kind of look at these sorts of things.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

But those are our projections.

[Betsy Graseck, Managing Director at Morgan Stanley]

Okay, great. And can you help us understand how your projections would move in the event that you've got fewer rate cuts or the long end went up more? Yes.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Exactly. So again, we have continued to be neutral from an interest rate risk standpoint. So as I mentioned, we expect 2 cuts, but if those cuts don't manifest or the Fed even hikes or there's more cuts, which we know the cycles, right, things will shift, we want to be as neutral as possible to those particular movements from the Fed on the short end of the curve. Where there is can be some change is really on the shape of the curve. So steeper curve, the better off we are.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

If it's more inverted, then that would put a little bit more pressure on the net interest income. So at a high level, those are kind of the puts and takes.

[Betsy Graseck, Managing Director at Morgan Stanley]

And as we roll through the year, can you just give us a sense as to that fixed asset repricing? Is it coming through kind of quarterly cadence the same or is there any acceleration or de deceleration during the year that we should be thinking about?

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

It's pretty consistent. So I mentioned the $5,000,000,000 to $7,000,000,000 per quarter. I mean, it's going to range in that corridor each quarter, but it doesn't accelerate, it doesn't tail off. It's pretty consistent throughout the course of the year, same on the investment portfolio, pretty consistent.

[Betsy Graseck, Managing Director at Morgan Stanley]

Okay. Thank you so much.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

You bet.

[Operator]

We'll move to our next question from Ebrahim Poonawala with Bank of America.

[Ebrahim Poonawala, Managing Director - Head of North American Banks Research at Bank of America Merrill Lynch]

Good morning.

[George Andersen, Senior Vice President & Director of Investor Relations at U.S. Bancorp]

Good morning.

[Ebrahim Poonawala, Managing Director - Head of North American Banks Research at Bank of America Merrill Lynch]

Sorry if I missed this in your prepared remarks. When we think about the NII guidance for the year or your revenue outlook, What's underpinning that from a loan growth perspective? Like, 1, so yes, what's the assumption on loan and deposit growth? And are we seeing any green shoots of a pickup in lending demand?

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. Thanks, Ebrahim. So, we did not comment yet on loans, but I would just say in terms for purposes of our forecast, how we're thinking about 2025, we have pretty modest loan and deposit growth for the full year. Now, in terms of sentiment and things of that variety, clearly, there's a lot of positivity. Our client base is excited.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

I think there's a lot of momentum clearly in our pipelines that we can see has not yet translated into elevated loan growth at this point. But perhaps that changes we're thinking hopefully it's in the back half of the year we can see that pickup in loan growth. But in terms of our forecast and our projections we anticipate modest for the year.

[Ebrahim Poonawala, Managing Director - Head of North American Banks Research at Bank of America Merrill Lynch]

Got it. And I guess maybe just talk about I think you addressed a little bit around the payments business. As we think about the fee revenue sort of categories across payments, if you can sort of drill into expectations around that year over year in context of your overall revenue guide and obviously you brought in a new head of payments yesterday. Remind us of the market positioning, are we winning share, losing market share and what the ambition is there going forward? Thank you.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. So, as I mentioned in payments earlier, we have momentum on the core side. We had had some headwinds there. So if I just kind of go through the different categories, on the card side of things, we had strong sales on the credit card side, 5 just over nearly 6% really. And total revenue was hurt in prepaid this quarter by about 4 percentage points, given the exiting some of our prepaid revenue.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

That's going to impact us again in the Q1, but then we'll fully lap that in the second quarter. But continuing in the card side, we anticipate growth there and we have a lot of momentum in different products. We have our Smartly card that is coming online. We have a lot of excitement around that. Our Union acquisition increasing that penetration.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

So we continue to expect that mid single digit growth in terms of on the retail card side of things. On the merchant side of things, we've had again strong sales. Our tech led formation and growth there has been really strong. We've been making investments. We expect travel to improve, same store sales to improve.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Clearly, our growth rate in 2024 was below our expectations. And as we see a lot more high volume, lower margin type clients continuing their pace, We're looking at the growth rate as better than of course 2024, but it may not be at our aspiration of high single digits for 2025. And then on the CPS side of things, strong quarter lead growth that we had, they had their best year. We've been making a lot of investments there. The pipelines are strong.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Freight, we have lapped. So a lot of positive things there. And again, the union penetration is going to be really paying off for us as well. And so we see high single digits there as well.

[Ebrahim Poonawala, Managing Director - Head of North American Banks Research at Bank of America Merrill Lynch]

All right. Thank you.

[Operator]

We'll go next to Erika Najarian at UBS.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

Yes, good

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

morning. You did announce that $5,000,000,000 share repurchase authorization during Investor Day, and I think the market got quite excited about that. In terms of the pacing of the buybacks, you did $100,000,000 this quarter. I guess, I heard you guys loud and clear during the prepared remarks, but what are the puts and takes that you're considering in terms of thinking about that pacing? I know that you're looking for modest pace to begin with.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

But if loan growth is a little soft and that it seems like you have conservative guidance embedded in your revenue guide for balance sheet growth. What are the puts and takes in terms of the more modest start to buybacks?

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. At a high level, Erica, it's really the balance between growing our capital to get to where we need to be from a Category 2 perspective. We talked about 10% being our approximate level of where we want to be on a CAT II basis. And obviously, we don't expect to be a CAT II bank until 2027 or thereabouts. So that's really the one side of it.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

The other side is, as you said, loan growth, if it's weaker, then there's an opportunity for deployment. But we're going to be we're going to as we just started, we're stepping into this, and we talked about the next quarter and the pace thereafter is just going to be dictated on those factors that I just mentioned.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

And just as a follow-up here and maybe this is for Andy. The way you laid out your projection on Slide 15 in terms of the revenue guide and then positive operating leverage, If net interest income or payments swing one way or the other, either to the better or maybe softer, is the message here that there's you're now to a point where there's enough flex where regardless of the revenue environment that 200 plus basis points is going to be sort of the baseline for what you can deliver in 2025?

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Sure, Erica. Short answer, Erica, is yes. It's 200 basis points plus on positive operating leverage. We do have flex on expense. I'm going to ask John to highlight some of the areas.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

But we've been managing to a flat expense base for a number of quarters. This is our 5th quarter of the flat expenses. We're still investing in the company, but we're managing across many different areas. And we are very confident in that positive operating leverage regardless of what the revenue environment is. And John, why don't you talk about some of the levers?

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Yes. Clearly, we've done a lot of work on the expense. We're very proud of the efforts that the teams have made thus far. But we have continued to see different levers that we're looking at and we'll kind of throughout the year kind of talk more about. But obviously, we had a notable item on the real estate side of things.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

There's continued to be optimization there. Procurement and third party spend actions, we see opportunity as well as organizational simplicity and bringing fragmented groups together and centralizing certain aspects. And then just automation of processes, we have a lot of the investments that we've been talking about over Investor Day help us manage that expense by automating certain processes. And then that inflection point that we talked about in terms of investment in our digital capabilities, so the stabilization of that digital investment, we've increased that amount all along the J curve, if you will, and now we're at a flat place and we're bending that cost curve on the digital side, which we're really excited about. So, those are kind of the main pieces.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

There's others. We have a lot of different initiatives, but those are the different levers that we look at.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

Great. Thank you.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Thanks, Erica.

[Operator]

We'll take our next question from John Pancari at Evercore ISI.

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

Good morning.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Good morning, John.

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

Good morning. Just appreciate the color, the breakout of the revenue growth outlook by fees and then your commentary around net interest income. Just behind that net interest income commentary and some of the drivers you mentioned around fixed asset repricing and deposit normalization.

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

Could you give us maybe your thoughts around the net interest margin trajectory as we look through the year? And perhaps maybe even help us with how the where the margin could end up as an exit rate coming out of 2025, just to help get us a better color around the what it means for the medium term trends? Thanks.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. Thanks, John. And we anticipate given the drivers, we do anticipate net interest margin to follow net interest income and increase. We certainly, from a management standpoint, we don't manage to net interest margin. As an example, this quarter, it fell 3 basis points entirely due to liquidity, right?

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

So, I mean, there's always going to be transitional puts and takes to it. But directionally, it should follow. We talked about at Investor Day about how not that there's anything magical about 3%, but I mean there's certainly a lot of momentum in all those categories and drivers that I just mentioned really to kind of get us into that level over time. I think the big things that can move it are really loan growth as that goes up and down, deposit management and then the shape of the curve which impacts our fixed asset or our back book repricing. So those are going to be the components, but certainly expect directionally the net interest margin to improve as we march through time.

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

Got it. All right, John. Thank you for that. And then separately back to capital. On the M and A front, I know post the Investor Day, you've been clear that larger whole bank M and A would only be more of a consideration longer term as you look at your franchise versus the near term opportunity.

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

I guess, Andy, has that or Gunjan, has that changed at all or just given the election results and how comprehensively we expect a regulatory supervisory role change across the different regulators? And then does it I guess another question would be what would change your view in terms of possibly putting M and A options more in the near term view? Thanks.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

So John, our perspective is the same, which is not a priority for us right now. The combination of the purchase accounting marks, the regulatory approval process, which may improve but isn't clear yet and the current bank valuations all factor into this. So while it may return large bank M and A may return over the longer term, we're very focused on our organic growth opportunities because we have a lot of them. And that's where we're putting our efforts and priorities right now. And Gunja, maybe you can highlight a couple of them because I think that emphasis is because of the opportunities that we have in front of us.

[Gunjan Kedia, President at U.S. Bancorp]

Very true. Good morning, John. I'll add that while the regulatory environment is very attractive for our organic growth opportunities too, we saw a very significant acceleration of our trust and investment fees and our capital markets fees because investor confidence and consumer confidence is very high. So the ability to drive a real inflection in organic growth with positive operating leverage is very much our focus and it's across many, many parts of our business. On the product side, we have a balance sheet that would support a much bigger capital markets business.

[Gunjan Kedia, President at U.S. Bancorp]

So we are very focused on that. We're introducing new capabilities there at quite a good pace. And the interconnectivity across our product sets is really deepening the franchise as well. So it's a very good strategy to drive growth with positive operating leverage and that is our focus right now.

[John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI]

Okay, great. Thank you, Vincent.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Thanks, John.

[Operator]

We'll go next to Mike Mayo at Wells Fargo Securities.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Good morning, Mike.

[Michael Mayo, Managing Director at Wells Fargo Securities]

Hi. You're finally turning the corner on positive Opio leverage. You said at least 200 basis points. I think after so long not having positive Opio leverage, I think it people are wondering, it's kind of a show me story.

[Michael Mayo, Managing Director at Wells Fargo Securities]

I think you might understand that. Under what scenario do you think you could have more than the 200 basis points guide? Some other banks are actually guiding higher today and you have some a lot of tailwinds in the industry. So how high could that go because the stock is down, people are questioning this. What would be your reaction?

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Mike, what we wanted to do is to provide a guide that we have confidence in and that we're conservatively giving you numbers. I'm very confident in our ability to manage expense in this environment and I'm very confident in the inflection point on the revenue components. So that's why we put a 200 basis point plus on that guide. So we'll hit 200 at least. But at the extent that the market helps us on the revenue side with the yield curve and the things that John talked about, I expect it to be above that.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

But we want to give you a guide and an expectation that we're very comfortable with and that we take into account the different puts and takes that are a little bit out of our control like yield curve.

[Michael Mayo, Managing Director at Wells Fargo Securities]

And then a more specific question, the merchant acquiring yield looked like it contracted 70 basis points year over year in the Q4 and the revenues didn't accelerate with the volumes. Was that expected? Was that a surprise? Is there competitive pressure? What's causing that 70 basis points contraction in the merchant acquiring yield?

[Michael Mayo, Managing Director at Wells Fargo Securities]

Thanks.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. So, Mike, I think I mentioned, although it was pretty quick when I mentioned the that our client base, while we had strong growth in terms of same store sales and tech led initiatives, which are the tech led has strong margins and it continues to be about a third and has been growing a third of our total business on the merchant side. The growth on the other side of our client base has been in higher volume, lower margin and that has persisted kind of throughout the year and that's kind of creating that disconnect that you just mentioned. And kind of talked about the expectations that we have here in 2025 is kind of followed because of that.

[Gunjan Kedia, President at U.S. Bancorp]

I can add some color here, John, if I may. We were disappointed in the merchant results for this quarter as well, but the business is really showing 2 very different characteristics. There's the part that we are very proud of, which is the tech led part, about a third of the business now. The value proposition to the customer and the client across our franchise is very strong there and we see very nice growth rates there. Talec and Silocru were 2 acquisitions we did around the retail space and the healthcare space.

[Gunjan Kedia, President at U.S. Bancorp]

So that part you see revenue and sales volumes show good patterns. On the other side, we have a very vast group of partners and we just saw growth in a few very large volume low margin businesses. And some of that might persist on that side of the business, but that was the quarter here.

[Michael Mayo, Managing Director at Wells Fargo Securities]

All right. Thank you.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Thanks, Mike.

[Operator]

We'll take our next question from Matt O'Connor at Deutsche Bank.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Good morning. I was

[Matthew O'Connor, Managing Director at Deutsche Bank]

wondering if you can talk about the trends in commercial products revenue. It was up nicely year over year, but was a little bit lower versus kind of the run rate you've seen the other quarters this year. Just remind us, I think there's a decent contributor of capital markets in that and remind us like what the drivers of the underlying businesses are.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. So this is the commercial products, Matt, is what I heard you say. So, yes, we had strong growth in commercial products. It's been a good story for us. We've highlighted it, of course, at various investor conferences, obviously at Investor Day and then in a Q4 conference as well.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

So, we've talked quite a bit about it. But the growth really came in a lot of different areas here this quarter. It was in client related derivative activity, which were either interest rate swaps or foreign exchange. Loan syndication was up as well, bond underwriting. And we're seeing the new products also kick in.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

So we've talked about some of our other ABS desks, syndication desks and commodities and things like that. And so that's about 20% of our growth this year was really on the new product side. And the verticals, interconnectedness we have with the private credit side of things, really help us focus in on that growth. And we expect and we've talked about our expectations with that and nothing has really changed. We have high expectations for this business.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Okay. And then separately on the deposits, the average deposits grew and I know there's some seasonality on the period end, but they were down a little bit this quarter for the Q3 in a row. So maybe I just answered the question that there's too much seasonality to really focus on period end, but maybe just address that. And I think you did say you expect modest deposit growth. So, just anything to add to the narrative though that the period end was lower?

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. Yes. So, for us, as we've talked about, the average balance is a better indicator than ending. The ending can really fluctuate. We do get we can get some pretty meaningful movements at the end of quarters, particularly in the Q3 was very strong from a deposit growth standpoint.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

And so even though we had a pretty big surge of deposits at the end of the Q4, it was compared to a really high third quarter. So that's just kind of one example. In the Q1, part of the reason we talk about a stable net interest income for the Q1 is in the Q1 deposits seasonally decline particularly in our institutional and wholesale side of things in DDA as an example, just because if you think about our operational accounts that we have there, there's a lot of either deployment of investments from our institutional clients or just overall investment from our corporate related clients. And so that's kind of a driver of Q1 from a deposit standpoint. But overall, you should think about deposits being a modest growth, consistent with the industry, those sorts of things is kind of how I would characterize it.

[Matthew O'Connor, Managing Director at Deutsche Bank]

Okay. Thank you.

[Operator]

We'll go next to David Long at Raymond James.

[David Long, Managing Director at Raymond James Financial]

Good morning, everyone.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Good Good morning.

[David Long, Managing Director at Raymond James Financial]

Just wanted to stick with the deposit theme here. And when I look at your average cost deposit cost for the quarter, it came down in line with what I'm seeing with some of your peers. And just curious what you're seeing in the competition for deposits and pricing and how do you think that plays out throughout 2025?

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. Thanks, David. So from a deposit standpoint, and this is again embedded in our growth projections and things like that of modest growth in deposits. I do expect it to be kind of equal in terms of either whether it's on the consumer side or on the institutional side. If I kind of break those two pieces apart, on the consumer side, it seems like things have been it's kind of either it comes and goes in terms of competitive nature, I would say, more lately with the rate cuts that have occurred, that's loosened things up.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

And so we're seeing a little bit better in terms of pricing competitively. It may not show up immediately this quarter, but over time, we would expect the retail competitiveness to moderate. On the institutional side, that also kind of comes and goes, but I would call it pretty standard at this point. I think the one negative or headwind right now is QT. That's been drying up liquidity and that can create some competitive natures on the institutional side.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

But all in all, we expect to be obviously very competitive out there. We have a lot of new great products that are helping us grow deposits and we feel very strongly about that. And those are kind of the main puts and takes.

[David Long, Managing Director at Raymond James Financial]

Excellent. Thanks, John. Appreciate

[David Long, Managing Director at Raymond James Financial]

it.

[Operator]

We'll

[Operator]

go next to Vivek Juneja at JPMorgan.

[Vivek Juneja, Analyst at JP Morgan]

Hi. Thanks for taking my question, Andy. So a strategic question, payments, there's been discussion about that already. And it's a question we've talked on previous calls. I heard Gunjan's response, the Tech Lead is doing well, but the rest continues to drag and had probably cut news into next year.

[Vivek Juneja, Analyst at JP Morgan]

Given the business, given the pricing pressures, have you considered about whether you should get rid of this business and deploy the capital to other areas where you're doing a much where you're in a much stronger position, getting better returns. Why wouldn't you think of that?

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

I'll start Vivek and ask Gunjan to add on. But I think 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. And 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 is why we want to retain the business. And the interconnectedness of that is as critical as it's been in the last 20 years.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

So we're very focused on this business because of that opportunity. And Gunjan, why don't you add on?

[Gunjan Kedia, President at U.S. Bancorp]

Vivek, good morning. It's a thoughtful question. And I'll add to what Andy is saying here. First, just we are talking about deltas to expectations, but the business has very high returns. It's a very attractive business.

[Gunjan Kedia, President at U.S. Bancorp]

It is an area where a lot of competitive set has been building market share and we are seeing more discipline come into this industry just focus on profitability, focus on return on investments rather than just market share gains. And if you look long term, it is the one product where we have frequent deep and embedded interactions with the clients and it anchors the client value proposition and the client retention in a way that is very hard to do from some of the banking and some of the more sort of routine products. So we have deep conviction that Money Movement needs to be on the center of a financial relationship with the client surrounded by banking capabilities. I also just remind you of the size of just the various parts of our payments business. It's a 25% of our total revenue, 2 thirds of that is our core credit card, card issuing business, very healthy, very steady market shares there.

[Gunjan Kedia, President at U.S. Bancorp]

Our corporate payment and card issuing business is also looking at very healthy pipelines. All of this gives us great capacity to stay with the Elavon business and build it out both for the small business and for the corporate areas. So to answer your question, it's a good question. And strategically, you want this capability in the mix with your clients.

[Vivek Juneja, Analyst at JP Morgan]

Okay. Thank you.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

Thanks, Vivek.

[Operator]

We'll move next to Bill Carcache at Wolfe Research.

[Bill Carcache, Equity Research Analyst at Wolfe Research]

Good morning, Bill. Good morning. Thanks for taking my question. Your tech led merchant processing service service revenue growth seems solid at a time there's still a perception that you're at a disadvantage to some of your FinTech competitors. Can you take us inside of that 9% growth and discuss the breakdown between new additions versus customer attrition?

[Gunjan Kedia, President at U.S. Bancorp]

Good morning, Bill. Let me just start here. So the competition on the Tech Lead comes in 2 ways. 1 is the user experience on the front end. What we do with our partners here in the tech led space is provide the reliability, the operations.

[Gunjan Kedia, President at U.S. Bancorp]

It's not easy to be the back end partner of a unique value proposition in the front. So it's fraud monitoring, it's transaction monitoring, it's reliability of systems, it's all of the networks that go into it. This is a very good partnership as much as it is competition with other areas. It's a matter of where you're playing role. And we do expect that to be a really strong contributor to the growth rate of this business.

[Gunjan Kedia, President at U.S. Bancorp]

And as time goes by, it will take over more and more of the total franchise. To your question around sort of the new business versus now it's a very dynamic space. I mean, we have a vast number of partnerships and their success in the front end can shift that mix a little bit. So it's really the portfolio that we managed to.

[Bill Carcache, Equity Research Analyst at Wolfe Research]

Got it. Separately following up on your NIM commentary, I may have missed this, but where did deposit funding costs in the quarter and where would you expect the average cost to grow from here given your rate expectations?

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. So from a deposit cost standpoint, maybe I'll speak to it in beta terms because I think it's just easier to utilize that because we're obviously you're going to see a little bit of impact next quarter, but the Fed moves that we saw in the Q4 will impact the Q1. So our cumulative beta for the throughout through the Q4 was 38%. We anticipate our beta to be at kind of the mid to high 40s as we look at our Q1 results. And so you'll see that decline on the deposit rate as we move forward.

[Bill Carcache, Equity Research Analyst at Wolfe Research]

Got it. If I could squeeze in one last one. Can you discuss how much cash flow and fair value hedge notional is active? I guess, how that exposure changes as we progress through the year? And any color on paid versus receive rates for both?

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

Sure. So, this quarter is actually a really good example of our hedging program at work and why it's working as intended. We have pay fix swaps and we have receive fix swaps. The pay fix swaps are intended to help protect capital when interest rates rise. They did rise.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

We saw 80 basis point upward movement. Our AOCI number did increase, but not nearly the magnitude that perhaps others and things of that variety. And that helps us manage that CAT II capital level that I spoke to. Obviously with pay fixed swaps that's going to create a little bit of a drag on NII. However, offsetting that was our receive fixed swaps that were attached to either commercial loans or debt And those received fixed swaps increased our rate relative to where they would have been otherwise.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

And so you can think of those as largely offsetting. So from an income standpoint, the hedges are relatively neutral.

[Bill Carcache, Equity Research Analyst at Wolfe Research]

Thank you for taking my questions.

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

You bet.

[Operator]

We'll take our final question from Saul Martinez at HSBC.

[Saul Martinez, Head of US Financials Research at HSBC]

Hey, good morning guys. Good morning. I think Vivek asked my question, but I'll maybe ask it another way. I guess I'm struggling to see how you differentiate yourself in the Merchant Acquire business. With the exception of maybe Chase, most banks have lost share over the years.

[Saul Martinez, Head of US Financials Research at HSBC]

There's enormous amount of innovation in that space, a lot of capital in that space. You've seen the shift in power to software providers and legacy Merchant Acquire have lost share over the years. I guess, what I was going to ask you is whether you can make an argument that it's worth more to somebody else than to you. And I guess the answer to that question from your answer to Vivek's question is that it does provide value to the entire franchise, to the entire business. Is that the answer?

[Saul Martinez, Head of US Financials Research at HSBC]

And I guess the adjunct to that question is, how do you measure success in the acquired business? Is this are you looking at just volume growth, revenue growth? Are there other measures? How do you measure whether this business is you're succeeding in your strategy here and this business is adding value to the entire franchise?

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

So, Saum, I'm going to start and then ask Gunjan to add on. This is Andy. I'm going to start by reiterating what I said before, which is this interconnectedness of banking and money movement and payments. And we've made investments in categories and verticals that are very focused on capabilities to provide information and help those businesses run their platform and their business like healthcare and some of the other areas that we're focused on. So what's happened in payments and money movement has become more embedded in the banking component.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

And I think that's our advantage versus as pure play merchant provider is interlocking those components to help them run their business. And we've focused in certain verticals that are, I think, very important in terms of our overall growth opportunities. And in terms of what we're looking for, it's all those things. It's top line revenue growth, but importantly, bottom line profitable revenue growth. And the progress we've made in the tech led, the interconnective components that we've talked about in terms of those verticals we're focused on are all indications that we're headed in the right directions.

[Andrew Cecere, Chairman & CEO at U.S. Bancorp]

We're not where we want to be yet, but we're heading the right way. Gunjan, what would you add?

[Gunjan Kedia, President at U.S. Bancorp]

I add the power of the distribution franchise. We have 15,000,000 clients. And if you look at standalone players that bring a very high level of innovation, as you called it, to the table, Their gap is the client franchise, and that's where the partnerships come with some of the innovation in the industry. Sol, it's a lot of infrastructure and investment to connect the transaction and the provision of the services beyond the user experience and the innovation in the front. And so we see very significant demand for a partnership with us.

[Gunjan Kedia, President at U.S. Bancorp]

But the model has to transform in the direction that we are going where we need to be able to provide and connect and have a very easy onboarding experience, very easy, quick ability to bring merchants on and off. And that's all of the investments that we have been making. So it's the distribution side and it's all of the back end product capabilities that make give us the competitive edge here.

[Saul Martinez, Head of US Financials Research at HSBC]

Okay. I mean, that's helpful. I guess just a quick follow-up then on deposits, John. I guess, we're closer to the end of the rate cutting cycle, although seemingly every day there's shifts in what the forward curve is expecting. But remind us what the through the cycle deposit beta you're expecting?

[Saul Martinez, Head of US Financials Research at HSBC]

I heard mid to 40s in Q1. I think like high 40s, low 50s is what you've is that the right through the cycle beta?

[John Stern, Senior Executive VP & CFO at U.S. Bancorp]

That's right. So also we think about 38% is spot through the cycle as of this quarter. We expect mid to high 40% s in the Q1. And assuming others additional cuts, we would migrate kind of through the cycle to that 50% north of that level is kind of where our expectations are. Thank you.

[Saul Martinez, Head of US Financials Research at HSBC]

Got it. Okay. Thank you.

[Operator]

And there are no further questions at this time. Mr. Anderson, I'll turn the conference back over to you.

[George Andersen, Senior Vice President & Director of Investor Relations at U.S. Bancorp]

Thanks Audra. Thank you to everyone who joined our call this morning. Please contact the Investor Relations department if you have any follow-up questions. You may now disconnect

[George Andersen, Senior Vice President & Director of Investor Relations at U.S. Bancorp]

the call.

[Operator]

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• George Andersen, Senior Vice President & Director of Investor Relations
• Andrew Cecere, Chairman & CEO
• John Stern, Senior Executive VP & CFO
• Gunjan Kedia, President

Analysts

• Scott Siefers, Managing Director & Senior Research Analyst at Piper Sandler Companies
• John McDonald, Senior Research Analyst at Truist Securities
• Betsy Graseck, Managing Director at Morgan Stanley
• Ebrahim Poonawala, Managing Director - Head of North American Banks Research at Bank of America Merrill Lynch
• Erika Najarian, Managing Director & Equity Research Analyst at UBS Group
• John Pancari, Senior Managing Director & Senior Research Analyst at Evercore ISI
• Michael Mayo, Managing Director at Wells Fargo Securities
• Matthew O'Connor, Managing Director at Deutsche Bank
• David Long, Managing Director at Raymond James Financial
• Vivek Juneja, Analyst at JP Morgan
• Bill Carcache, Equity Research Analyst at Wolfe Research
• Saul Martinez, Head of US Financials Research at HSBC