US Bancorp 1Q15 Earnings Call Notes

1.4 B net income

“U.S. Bank reported net income of $1.4 billion for the first quarter of 2015 or $0.76 per diluted common share, a 4.1% year-over-year. ”

Strong loan growth

“In addition, we continue to experience strong loan growth and total average deposits. Strong growth in total average deposits of 8.1% over the prior year, and 1.1% linked-quarter.”

NIM >3%

“you can see that this quarter’s net interest margin was 3.08%”

Very optimistic for Americans, less optimistic for bankers

“I remain very optimistic for the economy and for the great citizens of America, a little less optimistic for the bankers until the interest rates start to move up.”

Consumer confidence up

“if you think about it, consumer confidence continues to move up and particularly small business. Even corporate confidence continues to move up, but part of that confidence is found in their ability to operate more effectively during their day with more money in the bank, more of a reserve and their lines that they’ve got a back stop of equity in their homes and the belief that right now they don’t need to be indebted.”

I’m super optimistic about how things are moving

“I’m super optimistic about how things are moving. They are slow but steady, but they’ll continue to move forward. But I do think until rates move up it continues to impinge the ability for banks to be particularly as financially successful as they will be when things get better.”

Energy really not that material

“It all adds up to something that’s really not that material in terms of our $4 plus billion loan reserve, but it’s all baked in now and we’ve done all the analysis and we update that pricing back at least two times a year. So if we need to do it again we will.”

If rates don’t move up in June, then it’s going to be put pressure on operating leverage

“I will say however, that hinged the original expectation that interest rates will start moving up at midyear and based on our stress test and the prevailing views of economists a couple of months ago, if that doesn’t happen in June then it is going to put some stress on our ability to be positively operating leverage.”

It’s not an if, it’s a when for interest rates rising, so I don’t think you want me to manage the company without preparing for that

“I don’t think you always trust in the way we manage the company to cause me to want to start laying people off or doing something more draconian because it is not an if, it is a when for different interest rates and when that happens I will be very glad we have the quality of people we have ready to jump on whatever opportunities come along.”

Credit quality is going to be better than average for years

“I will tell you, its many, may years until we get to that number because it takes that long to get the loans on the books, takes that long to have them stress unless there is a money – event.

And then it takes a long time for our results to be used in order to accommodate that so, you will see interest rates move, up probably three to five years before you will see the kind of credit quality that would be impacted by what would be some maintain either for underwriting decisions or aggressive, underwriting decisions either when we’re not going to make but I think you will see the credit quality would be better than average for many years and will be the least thing what we talking about in the next couple.”

ROE is going to be permanently lower, but not necessarily ROA

“The ROE well for ever be lower for all banks based on the requirements that have been placed in this new world for higher capital and that’s the e part of the equation.

But the ROA is really a function, just how much money we can make and the quality which we do and that is no one is really taken that from us as long as consumers and business needs banks and use us and I have ever reason things that 1.6 to 1.9 ranges quite still reasonable and I think for our ROE, the 16 to 19 lower not there yet will also find its way through our normal standards and I think also think it will be at the high end of the peer group.”

We’re never going to waive our ability to create outcomes because something else is changing our future

“you’ll never hear on this call that we’re going to waive our ability to create outcomes because something else is changing our future like interest rates. We has to manage to it but it does take away our ability to be certain that we have control over the bottom line and this whole discussion today about when interest rates move, its torture for us but at the same time, I haven’t stretch so hard that I have to worry that something doesn’t go like we hope to,”

When employees trust the company it earns you a lot of goodwill

“We have never created a special campaign and named it tell people that they are going to lose their job and stop with that.

We are not going to do that and I am not. Maybe it is the effect of being in this for eight years but what I like to do is have gone through this whole recession and not have had to do that because I just can’t describe to you the impact of execution when the employees trust the company and trust that they are going to be safe.”

Remember in high school the bar hang?

Remember in high school, the bar hang, the bar hang was a test we have to take for the President’s Fitness Award. The bar hang was 90 seconds on the bar and if you remembered it all, the last 10 seconds were a torture. But they were equal to the exact same value as the first ten second which were nothing.

And I feel like we are here at the last 10 seconds and this company is going to hang on longer than anybody and it is torture but I want to do it for the right reasons because in two years and four years and six years, you guys are all going to be asking how we are doing in a positive environment with a great economy and I want to harken back to times like this and say, we gave up a 10 year to a near term profit in order to be able to say to you here in the future that we are amazing company doing as well in great times as we did in the tough time.”

A great quote like that bar hang one doesn’t go unrehearsed

“This is funny because last night I told my wife, what I was going to say if this came up at some – talking to this stupid bar hang, what you will think and she smiled and she turned around and she said and just a record tell them you actually hung on for two minutes.”

It’s the gut that carries you through

“So the fact is this company can hang on past the 90 seconds, we can. We are not all actually ready to roll. But it’s tough always I was trying to say not that we are about to follow, it just gets really tough and as long as you know that it’s the gut that carries you through the stuff and the best companies and our business are going to be the ones who have the will and the ability and the trust to get through it.”

When rates move up I am going to love the economy, I’m going to love the Fed

“when rates move up, I am going to love the economy and I’m going to love the Fed, I am going to love our future. But right now I think the economy is really that strong, record stock market performance, Europe is coming back, we have got customers – cash all over the place, they have got money in their pocket because fuel prices are down and they don’t need bankers much as they are going to need us.”

GE has some interesting parts, but we wont know until we get to take a look at it

“GE is way too early to know until I get out some RFPs and take a look at what pieces particularly leasing would be of interest to us as we look at our big equipments enhancing business that we have here in the company and there are other portfolios that we would be interested in defending that could be credit card portfolios, it could be high quality auto portfolios but it’s got to be something that we do already.”

We don’t like partners

“I don’t know their deal but no we don’t like partners. We are not great good partner. We want to own it, we want to control it, and with third party particularly, third party in every way no in banking has become an intensely added risk.”