US Bancorp 4Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Economy isn’t ready to push loan growth quite yet

“tempting as it might be to tell you guys we’re going to move to 1.5% to 2% linked quarter or 8% to 10% year-over-year, the economy doesn’t warrant that yet and we’re going to continue to take market share on the pricing benefits and the quality benefits we’ve been using for the last five to seven years, and as the economy slowly improves so will our loan growth but not remarkably, and therefore in a few years you’ll be satisfied that we have remarkably high credit quality and a continued stability on what we promised through the entire cycle.”

We’re expecting hte fed to raise rates mid year, but it’s not going to break the company if they don’t

“I think like a lot of our peers, we’ve adopted the Fed’s interest-rate scenario which starts to move up in the middle of the year. If that happens, that’s awesome. But if it doesn’t, we’re not entirely related. It’s not going to make or break this Company on whether interest rates move up. We’re going to control a lot of other things”

Hold discretionary investments back a bit until the fed raises rates. Invest in operations

“So the first half of ’15, given Fed’s interest-rate scenario, it will a lot like all of ’14 where we’ll continue to invest where we have to, we’ll watch the discretionary investments and keep them perhaps, defer them a bit until we can see a stronger economy, we’ll add the compliance, operating risk areas, audit areas where we think we continue to need to make sure we’re at the right level of support, and then when interest rates hit, we’re ready to pop and move on to some of these more discretionary investments.”

Short end is what impacts banks

“The short answer, John, is no. The long rate is less impactful to us. We’re most impactful at the very short end and if you think about the middle then two to three years is where we have a lot of impact. We don’t have a lot of assets in our book that are at the 10 year and beyond mark, so that’s less impactful. Again the short end is the most impactful to us, both in net interest income as well as fee income because of the way we’re using our money funds.”

Stability of our credit portfolio is the best ever

“the stability of our credit portfolio right now is the strongest I’ve ever seen. It’s just extremely all the loaners are performing well.”

Big deal that mortgage is growing again y/y

“We should have had the applause because that is a long anticipated moment where we’re starting to grow mortgage again on a year-over-year basis. That is a big number, Eric, so if you do the math, you’ll see that it’s more than enough to accomplish that.”

[analyst comment] your bank is awesome–Richard Bove – Rafferty Capital Markets

“I got to ask as I think 30,000 feet high for a second, when I look at your bank, I can see absolutely nothing wrong. In my view it’s about as perfect as a company can get in this industry.”

Rates rising is our chance to show what we’ve got

“The next opportunity for us to perform is when the rates pick up because the markets picked up and to show that the Bank is repositioned now to be as strong as it ever was when it was on defense and be better than anyone else on offense”

Not going to try to reconcile low 10 year with strong growth

“I say that because the Fed and the Fed equivalent across the globe, they’ve done some behaviors that are certainly not [indiscernible] and they are not things that we all learned in school. To the extent that they are being motivated by I think non-financial, more political activities and more financial data that might be backwards looking not forward-looking, I’m not going to be able to correlate those two for you, and I don’t think our customers are sitting there thinking that way either.”

60-70% of mortgages are new purchase

“The third quarter was 70-30 new, and because the rate is coming down a bit, it’s closer to 60-40, 62-38. So it’s coming down a little bit more high on the refinancing side and we are also starting the year strong that way because of the low rate environment. So I would expect it to be somewhere between that 60% and 70% new.”

Efficiency ratio falls because revenue grows

“let’s talk about the efficiency ratio, it’s what everybody looks at, it’s a fraction, right, it’s a quotient. So one of the reasons I think we can do well is because our revenue grows. I mean there is a very basic fact, like you all know, that if you grow revenues faster than expenses, your efficiency ratio comes down. That’s a fact.”

We’ve never brought in a third party to tell us where to cut expenses

“So in other words we’ve never brought in an outside party to look at our Company and tell us how to run it or tell us how to cut expenses, where you impose on employees some oversight if they didn’t do themselves, because number one, it’s intrusive, number two it’s really unnerving because if I have to cut 10 people out of a room of a 100, the rest 90 don’t know if they’re safe or they’re in the next group to fall.”