US Bank Q1 2016 Earnings Call

US Bank (USB) CEO Rich Davis said although energy loans remain a small portion of the company’s overall loan portfolio, the trajectory of the poorly preforming loans hurt performance“While our energy portfolio is a relatively small portion of our company’s overall loan portfolio at 1.3% of total loans, the deterioration in this sector has impacted certain credit metrics. This has resulted in a recognition of additional reserves of $15 million higher than charge-offs during the first quarter. I’d like to highlight that excluding the energy portfolio, credit quality for the company remained strong, which was reflected by our stable charge-off rates. Net charge-offs as a percentage of total average loans were 48 basis points, up one basis point from the prior quarter.”

The bank is working on blockchain technology for a host of reasons but namely because they believe it will improve the customer experience

“Certainly there is a lower expense from that and I think the principal reason we are doing is though is from a customer experience standpoint. So, customers who have the need to have a real-time exchange for whatever reason would have that capability on their phone and again, we are one of the first to introduce that. So that’s what it’s about; it’s how the customer is interacting with the bank and with other individuals.”

US Bank (USB) COO Andrew Cecere says the bank is focusing it’s information technology budget on a key few areas

“Our area of focus is in three principal areas. Number one is customer relationship management. So, better information about our customers, both across the retail as well as the wholesale platform. Second is customer capability. So, increasing what a customer can do, not only within a branch, but on their mobile device, as well as on the Internet. And finally, data; data overall. Just using data better in the company for the benefit of the bank as well as the customer.”

US Bank (USB) CEO Rich Davis hoping for one or two more interest rate hikes this year

“We only expect one or two more interest rate increase in the second half of the year in order for us to accomplish what we pretty much telegraphed to all of you. And if it doesn’t, it won’t be Armageddon, but it would be something we hope to get.”

Economic environment in the second quarter looks strong to them

“So we already know what quarter two is starting to look like, and it’s feeling pretty robust. And it’s very much the same things have you seen. Commercial is still strong and growing at that same clip, particularly M&A transactions or balance restructurings by corporate customers. We have got nice growth in home equity. I know that’s a very rare thing, but we continue to grow our home equity portfolio I think against the comps to the other banks. Auto continues to grow. Credit card continues to grow. So we are on all cylinders on loans. Mortgages particularly are growing nicely as they – they didn’t a year ago. So we are feeling good across the board.”

Purposefully not growing the commercial real estate book as much as competitors

“One more thing, Jon, I should have added. I didn’t talk about commercial real estate. That’s flat for us. It’s been flat for us. We are different there too. A lot of the banks are growing that a lot. I said in the prior calls that we want to be very watchful on commercial real estate and we are being – we could be wrong. We could be missing some of the market growth. There’s some pockets of good strength and we are in them.”