US Bancorp 2Q17 Earnings Call Notes

Andy Cecere

Strong growth in middle market

“the areas of growth continue to be in few — middle market is doing exceptionally well, that’s in excess of 2% on a linked quarter basis and we continue to see that accelerating or being about that level in future quarters, that’s doing well. As Terry and I both mentioned, we saw some growth in the second half of the second quarter in the large corporate wholesale part of the category. And then a lot of leasing as Terry mentioned, very high quality but given the great platform relationships we had that shows some growth. So those are areas that I would say are our principal areas of focus.”

Terry Dolan

Will likely be more competition for deposits as the Fed pulls liquidity out

“I do think that as — or we think as excess liquidity comes out of the market you could expect to see and you will expect to see more competition with respect to deposits, I would also expect that the long end of the curve on a relative basis would be a little bit higher; as a result some of their activities — that have [indiscernible] from a deposit standpoint is most likely to come on the wholesale side of the equation.”

We remain cautious in commercial mortgage markets where environment has created unfavorable conditions

“Commercial real estate lending reflects our prudent approach to certain CRE segments such as multi-family and retail given current market conditions. We did have opportunities for growth in construction lending. However, remain cautious in commercial mortgage markets where the competitive environment has created unfavorable conditions from a risk and return standpoint.”

US Bancorp FY 1Q17 Earnings Call Notes

Andy Cecere – President and Chief Executive Officer

Us economy continues to improve

“The U.S. economy continues to improve. Interest rates are finally in an upward trajectory and consumer sentiment reflects optimism for potential actions by the new administration. So, there is a lot of change and potential opportunity on the macro front, much of which could be to the benefit of the banking industry. ”

Commercial loan growth sluggish but customers optimistic

” I believe we are well positioned for this next phase of the cycle. During the first quarter of 2017, commercial loan growth was sluggish across the industry. Our large corporate customers tell us that they are optimistic about the future, but are awaiting more clarity regarding potential changes in tax and regulatory reform, infrastructure spend and trade policies. Additionally, some of our clients are actively accessing the capital markets, which pulls some financing from the bank lending arena or result in reduced line utilization. However, we expect commercial loan growth to be better in the second quarter versus the first and we expect more robust commercial loan growth in the second half of the year.”

Second quarter should be stronger

“Sure. So first of all, our starting point is a little higher versus where we ended the fourth quarter. Secondly, our pipelines are stronger. As Terry mentioned, a lot of our corporate clients were accessing the Capital Markets, so that did put a bit of a damper on loan growth. But the seasonality on home equity, what we are seeing on auto and what’s going on with the corporate loan growth tells me that the second quarter is going to be stronger than the first quarter, but probably not as strong as what we achieved some quarters last year, but I do see acceleration here in quarter two.”

US Bancorp 4Q16 Earnings Call Notes

U.S. Bancorp’s (USB) CEO Richard Davis on Q4 2016 Results

Richard Davis transitioning

“You know, I hit my 10 year anniversary as the CEO of the bank last month and many years before that I conferred with the board and our senior leaders and told them that I had a couple of thoughts that attended to that notion, that at 10 years I think it’s the right time for a transition. I think that’s for any company of any type and it seem that we are about three years away.”

The right way to do a transition

“Marty, you nailed it, that’s exactly why the transition is we think best practice because it affords me chance to work with the board and make sure that Andy is got the time and energy to work with the management team and to work on the issues. I will not be in the day-to-day management of the company because that’s also a best practices to stay out of running the company, but to help him with the board side of it. And I’ll be an ambassador of company, I’ll do whatever he needs me to do, I can go places for him if he needs me to. I am not going to go on TV a lot, I am not going to talk about as the ex-U.S. Bank CEO, I am not going to do that because the voice has to be his and the current management team. ”

We’re planning for two rate hikes, June and December

“And Ricky, they are not equal because if we get the June one, another December, we’re there. We get the December and not the June much harder. So – and I know there is a lot of work out [ph] that have a June, September, December, we’re just using June, December projections right now.”

Financial services probably not top of the admin’s list starting off. We’re going to do a lot of the stuff anyways

“The answer is yes. I wouldn’t be this year and I’ll say I’m going to be prognosticator here. But based on what I understand, the administration that’s going to take office in a few days. The number one issues are health care reform, taxes and infrastructure and somewhere in the top five might be financial services, but it’s not the top three, a lot of financial services issues I think will be dealt with in the early part of the year but with some implications later. So that’s why I said earlier on DOL for instance, as we never made a bet on whether something would happen that would cause us to need to slow down because we want to be ready. We would do it anyway. So I think Erika the best thinking is that the understanding of what implications and lower regulation might happen will be known probably in the second half of the year and benefited in sometime in ’18, but I’ll also tell you but for things like an unusual consent order or an event like DOL transition, I think this bank has peaked on those costs.”

Compliance personnel not going back to where it was

“Our compliance costs in the entire company are now in terms of FTE, they are over 7000 people of our 70,000 and that’s up more than twice what it was a few years ago. That’s a little high because of these issues I just mentioned, but it’s not going to go back to where it was, it’s going to stay much higher because that’s the cost of running a high-quality bank.”

I have another calling in life

“I indicated that Andy is the perfect candidate, he is sitting right here next to me, lets give him the signal, lets give him the time table and lets keep them. And thirdly, I do have another calling in life to do something entirely different, which I don’t know what it is because I never felt permitted to look until the amount was passed and today will be my first day look into the future, along with my wife, but a very strong view that we want one more thing in life to accomplish and its going to be entirely outside the banking industry. So that’s the reason and the rumors of my bad health or early demise are greatly exaggerated, I feel quite good today”

We’re disappointed that there’s optimism but no action yet

“Economy being better is actually trumps all of that, a really good economy, reflection of what our customers feel and when that economy kicks and we hope it does that’ll be more important than anything. But were disappointed as you might be to hear it, we are like canaries at mind, we can see balance sheets, we can see customer behavior, optimism is high, but actions are not present yet. So we’re going to wait and see on that on. And then tax reform might at a big one that benefits us and our customers, as I said earlier, based on my understanding of the budget process it’s probably going to be a late year issue.”

Davis’ last comments

“And this is my last call, 41 of them. So I just want to tell you guys how much I appreciate as a class of investors and analysts you had been fair and thoughtful and balanced and you treated this company very well and I appreciate that very much.”…

“So to end an sport note because that’s how I try to think of my life, this is rather like a great relay race and we’re on the backside of track and Andy and I are running together now because he’s about to pick up the baton, he is got the perfect cadence, I’ve got the perfect speed. Our hands come together, the baton hands off and we’re off to another race and that exactly how you see it.”

Andy Cecere

A lot of optimism but not a lot of action still

“John, I’ll start and then I’ll hand it to Bill for a little bit more detail. So first I will tell you that there’s more optimism and positive commentary for a lot of our business customers. But we haven’t seen a significant change in utilization or actually take down of credit yet. So while the talk is there, the actual action is not yet shown itself. We do see a steady growth in middle market, small business, and a higher corporate loan growth, and auto is strong as is the mortgage activity. But again, because re-financings are down we will expect that to diminish. But again, the key point I would make is, we’re not seeing huge changes. In fact, it’s relatively flat in terms of the overall utilization rate”

P.W. Parker

Commercial real estate is late stage

Yes, what is Andy is referring there is commercial real estate, we do see some of those markets as being sort of late stage credit cycle. If you look back, we had fairly robust growth in our construction, real estate construction book and that’s slowing now, its even slowing with you know our client base, they are being more cautious. Multifamily is an area that if you look at the forecast, there are forecast, its pretty broad-based of potential rent declines in a lot of the major cities.

Terry Dolan

Would expect half or 60% of tax break to go to bottom line

“But to keep it simple, if we saw a tax – a corporate tax rate decline of 10%, we would expect our effective tax rate to benefit or go down by about half of that or about 60% of that. So think about five percentage points to 6 percentage points in that range, that’s essentially what we would expect to see the change in our effective tax rate and its because of the various dynamics associated with how tax credits work.”

Tax is really probably more of a late 17, 18 issue

“By the way, I am going to a tax benefits unless you guys know something I don’t, it’s really has to go with the budget process. So this is probably more a late ’17, ’18 issue, much as we all want to be immediate. And I think that’s one of the reasons customers were also a customer of others are holding back on some final decision. So we see what and when things happen in taxes is one of them.”

US Bancorp 3Q16 Earnings Call Notes

U.S. Bancorp’s (USB) CEO Richard Davis on Q3 2016 Results

We can grow revs even in a low rate environment

“Our industry continues to face challenges from the low interest rate environment. However, we remain confident that we can continue to grow revenue even as we prudently manage expenses and strategically invest in our businesses to create value for both our customers and for our shareholders.”

3Q was a pause in C&I lending

” we think quarter 3 represents a pause in C&I lending, meaning that it was strong in quarter 2 and we expect it to recover in quarter 4, in part based on what we believe is the vagaries of quarter 3, where we had some of the Brexit activities move things up into quarter 2 and perhaps some of the uncertainty around election and other things moving things into quarter 4. But we see that returning, nonetheless.”

Anticipating 2017 continued improvement

“We like C&I, we like CRE, we like all consumer categories; but we see actually a little slightly stronger 2017 than 2016 based on nothing more than the fact that the world gets better a little bit, slowly but surely and because we’re taking market share. I haven’t talked about market share in a number of quarters, because I know it’s a hollow category when all banks are doing well and everybody talks about it, but you know, we really are — $28 billion in deposits in one year, the kind of loan growth we’ve had consistently, 10% commercial loan growth year-over-year, we’re taking market share”

Selling isn’t bad

“As long as we have something they want and it’s for services rendered and fees benefited, we’ll be happy to provide that. I want to make sure it’s clear, though, for this industry, selling is not bad. It’s not bad anywhere, as long as you’re selling to people’s needs and you’re making it clear what advantages you have to provide them at the time that they want them. So, yes, it’s tough on the industry. But it still always go back to people love their banker, they like their bank, because they made those choices. They don’t so much like the industry. We’re sadly years away from getting that right. But if every bank and every banker does a better job, despite what happens on occasion in one location or another, we’ve got a fighting chance to bring this thing back.”

This is a noble profession and it’s easier to show when things are healthy as they’re getting today

” when times are good banks are doing more positive things. People are healthier. The economy is moving more quickly. People want us and need us and we can say yes more often. When the world gets a little bit better, we can just say yes more often; we’re more popular and we’re more effective. When times are tough, actually we move on to defense and we’re there to protect people from things that could get them in harm’s way. That’s a less attractive position. People don’t like to watch defensive games either, because it’s low-scoring. At the end of the day, at the very end, it really does matter. So I do think it’s a noble occupation. I’m very proud of what we do and very proud of the people that do it across this country. It’s one of the most important things that we have in America and it’s what makes us unique.”

Regulations are pretty well set no matter who is president

” I think if we’re a nine-inning game, we’re probably in the eighth inning. We know most of the conditions. We know the condition on the field. We know the umpires. We know the fan attitude. We know the weather. We know the ball speed. There’s not a lot here new. And there will be some adjustments to the election, but as you know, most of these positions are not tied directly to the election or directly to the President’s term. They have different term timetables; and think the FDIC and the OCC to name two. So I think the philosophies and the general sense of what regulation looks like for banks is pretty well set. I think we understand most of those rules and what we’re dealing with now is nuances, why certain speeches make so much attention, because we’re trying to read tea leaves and figure out if they changed anything systemic. I don’t think there’s anything major to change.”

The new president is likely to create some variation but perhaps one more than the other

“I also think a new President which is undoubtedly going to happen, has a slight variation one way or the other. I won’t talk about which one I think does which, but one gets a little more uncertain and causes us to stand back a little bit and wait to see how things settle. The other one is a lot more of the same and probably, whether we like it or not, is something we can manage because it’s the devil we know. Either way, I don’t see any circumstances where bank regulation gets easier or lightens. I don’t see a significant place where it gets any tougher or gets a lot stronger.”

Andy Cecere

M&A took a bit of a pause

“And finally M&A activity which was a driver of strong growth in prior quarters, took a little bit of a pause here in the third quarter, either delayed or deferred to future quarters. So those factors all come into play and that’s why we think it was more of a pause and that will come back a little bit as we [indiscernible].”

Are expecting a rate increase in December

. Incorporated into our guidance we’re assuming that the rate hike does occur in the December time frame; and that in and of itself would have a positive impact with respect to margin, probably maybe by a basis point or so. But one of the things that we anticipate, John, is that the cash balances that we saw an increase in, in the third quarter, we think are tied to money market reform. And that is going to have an impact in terms of net interest margin at least probably through the fourth quarter.”

US Bancorp 2Q16 Earnings Call Notes

U.S. Bancorp (USB) Richard Davis on Q2 2016 Results

lower long term interest rates will have an impact on 2H results

“The lower long-term rates will have an impact on our second half results, if the rates remain at these low historic levels. We would that given the current yield curve and expectations that the short-term rates will remain flat for the near-team, that the interest margin — net interest margin will decline on a linked basis in the range of 3 to 4 basis points.”

Still not seeing organic growth we’d like in wholesale, on consumer side all areas are moving slowly but surely

” on the wholesale side, we’re not still not seeing the kind of organic growth we’d like to see, but we are pleased as we said in our comments that we have a fully capable capital markets business in order to take the benefit of what would otherwise be some activities we didn’t use to have in the company when customers moved outside of the lending market and into the capital markets. On the consumer side we’re seeing all areas moving slowly, but surely and nicely, favorably from autos to RVs to credit card to home equity. And then we particularly have good story to tell in the mortgage business as we continue to be a bigger player in that area.”

Positive operating leverage is getting harder

” We’re not giving up on positive operating leverage, but it’s getting a lot harder. And I’d rather just tell you guys that we’re going to stay at the same current level and we’ve been there for a couple of quarters now of efficiency. Because what I’m saying is we already are under a pretty steady and measured expense control program.”

If we can make it through these times, we can manage through just about anything

“As we woke up this morning, you know that the call for interest rate increases is 21% for September, 36% for December. Better than zero worse than it was when we talked last time. So we’re not going to bet on any of that, but to the extent that any of it comes back would be terrific. Also the 10 years above 150 again thank god. That is helpful to us as interest rate increases. And you know there is an equal impact on the income statement based on that. So if we can manage through these very worse time which is continued zero interest rate increases and very, very low tenure. We can manage through just about anything which is how we’re building the lower for longer kind of term around the company.”

Banks do best when corporate America is confident

“I think really turns on the dial for banks is when corporate America is more confident and I don’t mean the original old unconfident we’re always uncertain. But things with a Presidential Election in the offering things like Brexit uncertainties we don’t need any of the things like that to continue to give corporate America a reason to just wait and but for M&A and for restructuring their balance sheet corporate America is not organically doing big things at least not needing banks in that process.”

We’re not seeing things go backward but we’re not seeing the wholesale side of the business piick up in the old fashioned way

“I’m going to say two things that Fed is it has a different lens on this. They are looking at different things and looking usually later than we are. But on a real time basis, which we live in everyday, we are seeing a slow recovery. And it’s a small nuance on a word, but a recession as things are going backwards where people are starting to feel worse and not taking actions that they might otherwise have taken before. We are not seeing that. On the other hand, because we’re balance sheet companies and because we’re highly levered and because half of what we do is in the wholesale business, we’re all, I think, spending a lot of energy talking about how we’re waiting for the wholesale side of the balance sheet to pick up in a real organic, old-fashioned way, and we’re also not seeing that. But they’re not going backwards, so just taking this long, long, long period of time to restructure, evaluate their best options when things do pick up.”

Kathy Rogers

6.5% organic loan growth compared to prior year

“Thanks, Richard. Average loan and deposit growth is summarized on slide seven. Average total loans outstanding grew 1.6% on a linked quarter basis and increased by over $20 billion or 8.1% compared with the second quarter of 2015. Excluding the recent retail card portfolio acquisition and student loans that were carried in the held for sale in the second quarter of 2015 loans grew by 6.5% compared to the prior year.”

Credit problems in energy portfolio declined as loans paid down

“During the second quarter criticized commitments within this portfolio decreased $509 million while nonperforming loans decreased $54 million principally driven by pay down. Finally credit reserve associated with the energy portfolio declined by $45 million, reflective of reduced loans which resulted in an 8.8% credit reserve for our energy portfolio compared to 9.1% in the previous quarter. ”

P. W. Parker

We feel like we’ve got the energy issue behind us at $50 per barrel

“Yeah it’s pretty — very stable really across the board. I mean, if you look at each of the asset classes C&I is surprisingly low in this quarter, we had — we felt we were very got out ahead of the energy issues in the first quarter, and this quarter we had no material energy charge-offs, in fact we have nice recovery on one of our credits. So we feel like we’ve got the energy with $50 a barrel anyway, that we have the energy issue behind us. And if you look at the other asset class, it’s all very stable.”

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.”

 

US Bancorp 1Q16 Earnings Call Notes

Richard K. Davis – Chairman, President & Chief Executive Officer

Compliance costs have nearly tripled in last five years

“I will say, our compliance costs and FTE have really nearly tripled in the last five years. We did that review for our board just yesterday. And I would have said probably two-thirds of that would have been present anyway, consent orders or not.”

The second quarter is feeling robust for loan growth

“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”

Not seeing stress in card or auto in energy focused areas

“And, Paul, we look at secondary and tertiary impacts on particularly those markets, the Gulf Coast and things where we have auto loans, we might have credit cards and things and we see absolutely no impact at all at this early stage of the game. So no one who lives or works down there that has our cars our cards are showing any stress.”

Flattening of yield curve negated benefit of higher short term rates

“The second thing will be that we enjoy interest rate increases or a steeper yield curve. They are also both quite important, right? Because interest rates not moving up will harm some of the projections for the industry, but make sure you guys are watching the slope of the curve too, right? As the high end came up – the moment – the short end came up, the long end came down. And that has the same kind of impact on interest income that you would see on lack of rate movement.”

Interesting discussion of Neel Kashkari as head of MN fed

“our relationship is quite good. We are, by far, their most important client, and we’re, I think, more than half the entire Ninth District. As you all probably know, but I will remind you that the hiring of the President is left to a layman board, particularly, local leaders who have parameters, of course. But they do bring in people that have – in some cases, they are not economists, and Neel Kashkari certainly fits that bill. But he comes in with a zeal and a need to want to open the question again on too-big-to-fail. I have met with him. I knew him in the TARP program. As you recall, we were the last big bank to take TARP. I didn’t want to. We were the first bank to pay it back. I’m glad we did. I had long conversations with him over that period of time. And as soon as he showed up, Dick, here in the first of the year, Andy and I went to meet with him to introduce ourselves in his new role, and we had a very good conversation.” … “I don’t think he’s coming in with his gunsights on U.S. Bank. In fact, I’m sure he’s not. We have not – he’s not invited any banks to his symposiums yet. He hasn’t indicated yet when that will be, but I know we will have that opportunity. You might guess, I have private conversations with him routinely and with his team, so I’m not feeling left out of being able to offer my thoughts on some of his considerations. But at the end of the day, I’m going to take him to his word.”

Kathy Ashcraft Rogers – Vice Chairman & Chief Financial Officer

P. W. Parker – Vice Chairman & Chief Risk Officer

Reserves are 9% of our outstanding energy loans

“We did have continued improvement, particularly in our residential mortgage portfolio, so that did, in part, offset some of the increase to the energy reserves. You can see, we did build the energy reserves to 9.1% of our outstanding loans. We had a pretty conservative price stack that we used during the quarter. So we feel like we have got embedded in those reserves what we will need for the future quarters. So, that’s where we get that stable outlook.”

We have seen some stress in CRE in Houston

“we look at a couple of our markets that are energy dependent, the ones that we’re most focused on are Denver and Houston. Denver, there’s been little to no impact. It’s not that energy dependent anymore. Houston of course is. We do have commercial real estate down there. We also do home building in the state of Texas. So we are watching that carefully. We have seen stress in the office market. That’s obviously slowed in Houston. We do have four properties that we are watching, but it’s not a material amount. We underwrite to our sponsors, our client base, as opposed to the area that they are in. So we feel that we have good secondary support on all the credits that we have in Houston.”

US Bancorp 4Q15 Earnings Call Notes

U.S. Bancorp’s (USB) CEO Richard Davis on Q4 2015 Results

We’re not seeing what’s going on in the rest of the world affecting our customers

“we do primarily business in the domestic United States and we’re very much a consumer small business payments kind of a company, so just by what is going on in the backdrop around the world with the China re-evaluation and what’s happening in oil and some of those areas which we’re not immune to balances and process, we’re not seeing the majority of that on our books or by our customers.”

We’re actually seeing a continued slow but steady improvement every quarter

“So, we’re actually seeing a continued steady, I’ll say slow but steady improvement every quarter and our customers are reflecting that across the board from the large corporate customers, who are still doing robust M&A transactions to restructuring the portfolio, all the way down to the small businesses which continue to grow for us double-digits based on their interest and setting themselves up for our better consumer wide recovery and just general people who are using banks for their retail services.’

Our plan for this year is one more rate increase in June

“what kind of assumptions we would in our plan, and we actually expected to have two rate increases from the last time I talked to you. We hope for one in December, we expect a one in June. And that is really the amount of the risk we have placed into our plan this year’

2017 will be the earliest that we start to look for deals

“I’ve always said 2017 will be the first time we want to look at where our appetite for bringing on a risk into our company as we simply couldn’t do diligence for and couldn’t possibly imagine that at least elegantly have lined up with our current moment where we can’t do it anyway but we don’t want to anyway, and I wouldn’t be interested. The pricing doesn’t change you can’t get a good enough deals if you don’t know what you’re getting. And I could be wrong but I feel very strongly about that and have for a long time and I would say that as the moments clear let’s say a year or more from now”

It’s been so long since we focused on credit, we’re going to start watching it more closely

“we haven’t really focused on credit in many years and I’m putting it right back at the front runner because I want to start watching trends and we are going to watch competitors and we’re going to watch different buckets and tranches and we are going to learn a lot all of us by what’s about to happen if we start learning about these small moves now don’t look very big that they can be quite tell-tell of what is going to happen so you ask more questions like that because that’s going I think give us a chance to I’ll talk about risk profile and likely future losses”

Andy Cecere

Corporate loan demand has been strong. Consumer has also turned more positive

“I would corporate continues with the strong as you saw year-over-year growth about 9% and strong on a linked quarter basis I think what’s turned a little bit more positive is the consumer side of the equation our two fronts our mortgage activity on balance sheet that jumbles principally continues to be strong and home equity for the first time in a whiles we’re seeing growth in that category and as we dig into that a little bit further I understand what that’s about we are seeing consumers taking home equity and using it for home equity so using it to improve their homes, furnishings and things of that sort so those two categories are strengthening and finally card spend and card balances are also growing so I do think we see continued strength on wholesale with increasing strength on consumer.”

Auto growth should be similar in ’16 to what you saw in ’15

“I would expect the growth to be similar with what we saw off 2015, more focused on the lending side versus the leasing side and with it principally trying auto on the lending side. So, to stress this situation what might have been 110, 120 basis points is maybe down to 100 or right around that area, a lot of that’s because of the aggressive nature of the manufacturers. But I think on a growth prospect a very — prospects for ’16 are going to be very similar to what you saw in ’15.”

We saw a good holiday season in card spending growth

“I wouldn’t say that the energy subsidy is being spent into a large degree so we are seeing steady growth in our card growth as you saw is very good we had a very good Christmas season the holiday season if you compare our contrasted our master card numbers would show up from Black Friday through Christmas Eve would say of 7.9% growth that was just over 10% growth which is better than it was last year but it’s not substantially better so we are good and steady but we are not seeing all the dollars saved on the energy side moving to spend on the consumer side.”

Miscellaneous Earnings Call Notes 12.11.15

Universal Health Services (UHS) Presents at Bank of America Merrill Lynch 2015 Leveraged Finance Brokers Conference

Steve Filton

Behavioral health business is more recession resistant

“if you’re seeking — and you’re seeking acute care treatment, you need a hip implant or you need some sort of ENT surgery et cetera, you may think about the economics of that; you may choose to postpone that because you don’t want to come out of pocket for a co-pay or deductable or because you don’t want to be out of work frankly during a tough economic climate. But if you try to commit suicide or you overdose on drugs and alcohol, you are not going to be in a position to decide whether you should or shouldn’t be admitted to the hospital. That decision is really being made generally by somebody else who is effectively economically insensitive to what your economics of the situation or concerns might be. So, I think that’s another reason why the behavioral business has generally proved to be more, I’ll call it, recession resistant.”

Optimum occupancy in behavioral care is in the low to mid 70s

“occupancy rates and our behavioral facility peaks in the mid 80s, right around 84% in about 2005-2006. What we started to do at that point because we have a view probably the ideal occupancy rate in this business is somewhere in the low to mid 70s. And so, when we were at 85% in about 10 years ago, we’re turning away a lot of patients at that point because obviously if we’re averaging 85%, it means that there’s a lot of days when we’re at 90 and 95 and even a 100% occupancy. It also means that because of some of the constraints that we have, we have put male and female patients; we don’t put adults and children together, we don’t certain diagnoses together. So, as a consequence, it’s difficult for facilities to really run at something close to full occupancy.”


Silicon Laboratories Presents at Credit Suisse Technology, Media & Telecom Conference

Tyson Tuttle

Low power for IoT requires innovation

“if you look at the energy efficiency that’s required. If you’re handset only has 10% battery life left, and I know that when mind says 10% battery life, I’m like looking for a charger. But if you imagine that amount of power needs to power an IoT device for five years. So that’s essentially the amount of energy that’s in the little coin cell and they want that device to sense the environment. Let’s say every few minutes it needs to communicate that when something happens. This type of energy consumption requires a lot of innovation. And if so this is what we are focused on doing.”

From a macro perspective, wireless markets suffering but infrastructure business doing well

“I think a lot of people that we are selling into wireless were suffering, especially in China, we were not exposed to that at least on our infrastructure business, we had a little bit of exposure on the microcontroller side and some of the optical modules that did hold back our growth in IoT in the second half. But on infrastructure we see that it’s pretty solid globally. And this is more of a reflection of core network in data center roll outs.”


Barnes & Noble’s (BKS) CEO Ronald Boire on Q2 2016 Results

Have seen increased traffic so far in Q3

“the challenges were greater than anticipated and reduced traffic as well as conversion. During the second quarter, we implemented a significant number of website fixes to increase traffic, improve the overall user experience and stabilize the site. So far during Q3, we have seen increased traffic and have stabilized the site for the holiday season. We plan to implement additional improvements after the holiday season to further upgrade the overall user experience.”


The Cooper Companies’ (COO) CEO Bob Weiss on Q4 2015 Results

Had a bumpy ride from mid September through the end of November

“August was a good month and things dropped off in October a lot, particularly in the U.S. and some of the problems we ran into in Europe exacerbated the most. We thought we’re in pretty good shape in early September, found out we weren’t in as good shape as we thought by mid-September and had a bumpy ride with our integration if you will in Europe, from mid September until pretty much the end of November. Having said that, we had what we call a very respectable November”


Toronto-Dominion Bank’s (TD) CEO Bharat Masrani On Q4 2015 Results

Mark Chauvin

Are starting to see stress in consumer credit portfolios in energy-impacted provinces, but within expectations

“Next, with respect to our oil and gas exposure, we were not surprised by the level of impaired loan formations this quarter. Ongoing analysis indicates that the oil and gas nonretail credit portfolio continues to perform within expectations, given the current level in near-term outlook for commodity prices in this sector. We are beginning to see signs of deterioration in the oil impacted provinces consumer credit portfolios, which again are well within our earlier expectations. Based on ongoing stress tests conducted against the credit portfolios, I remain comfortable that the potential impact of low energy prices on the bank’s credit losses remains well within the range of a 5% to 10% increase over 2015 levels.”

Seeing a gradual increase in delinquency rates over last 4-5 months in oil impacted provinces

“we have been watching it very closely, especially the impacted provinces, which would be Alberta, Saskatchewan and Newfoundland. And what we are seeing in two categories, being the indirect auto but the non-prime segment primarily and then in the card segment, we have seen a gradual increase in delinquency rates over the last four or five months.”

Customers affected are early indicator, the type of customer that would be more challenged than the typical customer

“So in many respects we look at that as an early indicator because that would be the customer that maybe would be more challenged than the typical customer. Now, I would stress that these two categories are less than 1% of our total book and that we expected to see losses of this level.”


Sprint’s (S) Management Presents at Bank of America Merrill Lynch Leveraged Finance Brokers Conference

Tarek Robbiati — CFO

Wireless data is much cheaper in some other markets than the US

” I think the – look at the U.S. wireless market, it’s the biggest one in the world by value. And the reason why it is the biggest one in the world by value is because we have 300 million people and you have a very, very high ARPU…when you really look at some of their – the size of their bills, it’s quite extraordinary. I mean you compare this with Hong Kong which is a market that I am very familiar with. In Hong Kong you can get very, very decent data packages on 4G networks for less than $5 postpaid, which is quite extraordinary.”


Comcast’s (CMCSA) Management Presents at UBS Global Media and Communications Conference

Mike Cavanagh–CFO

No new comments on wireless plans. We believe the cheapest way to transmit data is to get it to the hardwire as soon as possible

“we have no news on this topic today. What we have decided is that it’s certainly worth at this point triggering the MVNOs that we can work on exploring what kind of offering we could bring and go deeper to learn and experiment. That’s the state of play on the MVNO. And that sits in the context of having been big believers in WiFi. So, you have seen us invest in and continue to invest in the WiFi as an extension of the value of the broadband pipe, which is still the kind of best and cheapest way to transmit data we believe is to get it to the hardwire as soon as possible. So, with the progress we have made on our WiFi product and broadband, we think it makes complete sense to be exploring on – what possibilities the MVNO offering has to add value to our customer relationships. That’s as much as we know. There is no – it will take time to draw any conclusions from what we are now going through.”


Vail Resorts’ (MTN) CEO Robert Katz on Q1 2016 Results

Our labor markets are tight

“think ensuring that we have enough, ensuring that we are providing the right employee experience, attracting enough of the right labor, retaining labor and then a part of that is obviously being able to have housing for everyone that works here, I think it is probably our number one concern right now in terms of ensuring that we can continue to drive success. And so, I mean that’s led us over the last couple of years to continue to invest to make sure that we can do that. I’d say where we feel right now is that our markets are tight. We think it is a challenge.’

Upper income US remained strong

“Colorado in particular is the strong market, continues to be a strong market given the economy here, Utah, the Bay Area and California so that obviously is the big help right there but then I would say we are seeing pretty broad based strength from all of our major destinations across the United States, I would say even places like Los Angeles, like Seattle which are not typically our strongest markets in terms of size, we’re seeing real strength there too”…

“I would say right now I think the domestic, the U.S. economy on the domestic side is very strong, the upper income portion of that remained strong ‘


AutoZone’s (AZO) CEO Bill Rhodes on Q1 2016 Results

DIY auto spending has benefitted from lower gas prices

“I think clearly we are seeing some industry strength currently. I think a part of that has to do with what’s going on with gas prices. And while gas prices initially went down, you didn’t see the initial correlation with miles driven increasing. But in more recent months, starting really strong in this summer, and continuing through September, the latest date that we have available, it’s showing nice strength. Over long periods of time we’ve seen that has a nice correlation with our DIY industry growth.”


Cisco Systems (CSCO) Presents at Barclays Global Technology Brokers Conference

Hilton Romanski

Customers are looking for a hybrid cloud

“what we’re hearing from customers fundamentally is that they want to see the benefits and the economics of public cloud in their private cloud environment. So that would suggest to us that ultimately there is a hybrid cloud solution out there for enterprises where some of those benefits across multiple types of workloads across their own environments that are private as well as those that are being hosted in a public cloud is going to co-exist.”


Dave & Buster’s (PLAY) CEO Steve King on Q3 2015 Results

Couldn’t be happier with how 2015 is shaping up

“we couldn’t be happier in terms of how 2015 is shaping up, while we’ve achieved so far as we look forward to a strong finish in the fourth quarter.”


Halliburton’s (HAL) Management Presents at Wells Fargo 2015 Energy Symposium Brokers Conference

Christian Garcia — Interim CFO

North America looks like it could be marginally better than expected, but international looks marginally worse

“North America does look like it’s going to be marginally better than what we said in the third quarter call and international looks like it’s marginally worse and in total, we’re in line with our expectations as we left the third quarter.”

2016 is clearly going to be another down year but we don’t know the magnitude yet

“2016 is still opaque. E&P the E&Ps have not announced their budgets, but clearly it’s going to be another down year. The question is the magnitude of the decline.”

Argentina had elections that could lead to positive economic reforms

“Argentina just had elections and we think that new president elect will usher in a new era of economic reforms achieved among that would be probably a potential depreciation of their over valid currency which will in the short term provide some little need to some dislocations but I think in the long term would be actually help that economy boot that economy and would invite for investors.'”


HCA’s Management Presents at Opperheimer 26th Annual Healthcare Broker Conference

Bill Rutherford, Chief Financial Officer

Seeing higher turnover of nurses as demand for nurses strong

“We think you know we are seeing higher turnover of recently than we’ve historically had. And we think there is a lot of other supply in the marketplace and demand for nurses. We’ve got a host of efforts around recruiting. We talked about on our call our efforts to hire nurse graduates and putting them in orientation and onboarding them a little bit differently so that they have — the retention is longer for those new nurses.”

See continued strong economies in the majority of our markets

“We see continued strong economies in the majority of our markets and I think that provides really fundamental momentum for the company and those trends don’t appear quickly, nor do they disappear quickly. So, we are optimistic that our market trends, we are seeing has some durability to it in the future.”


Comerica’s (CMA) CEO Ralph Babb on Goldman Sachs U.S. Financial Services Brokers Conference

Energy reserves at 3% of total energy related loans

“if prices remain low for longer, we expect to see continued negative credit migration and losses to emerge yet we believe they will be manageable. We have increased our reserves for energy loans in each of the past four quarters, as a result of an increase in criticized loans and sustained low energy prices. Because investors have been particularly interested in the size of our energy reserve allocation note that at the end of the third quarter, we had reserves amounting to more than 3% of our total energy and energy related loans.”


U.S. Bancorp (USB) Presents at Goldman Sachs US Financial Services Brokers Conference

CFO, Kathy Rogers

Planning for three interest rate increases in the next 12 months including next week

“as we look out into 2016, I do think that we are seeing an economic environment that is somewhat similar to what we saw this year, may be slightly improved. As we think about the interest environment, we are projecting in our plan, a potential for two interest rate hikes next year, and then December 1 of this year; so a total of three if you look out over the course of the next 12 months.”

Not seeing any deterioration of credit outside of energy

“the simple answer is no. We’re really not. Outside of energy, it’s really relatively benign, no significant change.”

We’ve probably gotten to a point where reserves will start building again (but not necessarily because of credit deterioration)

“I think one of the things that you’re going to see is that we are getting to that point in the cycle where many banks, including ourselves, have enjoyed a nice outcome of reserve releases. And I do think we’re coming to the end of the cycle. And I think that you’ll start to see reserves starting to build as we move out into later quarters.”


Lululemon Athletica’s (LULU) Laurent Potdevin on Q3 2015 Results

Start of Q4 has been mixed

“In line with macroeconomic trends, the start of Q4 has been mixed. We saw lower traffic in the final weeks of Q3 and into the first couple of weeks of Q4, with steady improvement in Thanksgiving. Given the current environment, we’re taking a conservative stance with revenue in Q4, while taking the necessary actions to manage inventory and control expenses.”


Moody (MCO) Barclays Global Technology, Media and Telecommunications Conference

Mark Almeida, who is the Head of the Moody’s Analytics Business

November was a good month from an issuance standpoint and December has gotten off to a strong start as well

“November was a good month from an issuance standpoint, and December has gotten off to a pretty good start as well. So I think things have firmed up a bit, since some of the weakness that we saw in the summer time.”


Korn-Ferry’s (KFY) CEO Gary Burnison on Q2 2016 Results

Even in a digital world, it still pays to have people housed in the same location

“I think that creating connectivity of people and clients in an environment of collaboration is incredibly important and although we live in a virtual world, I fundamentally believe that the people need, to the extent possible, need to be housed in the same location.”

Gregg Kvochak

“global demand for our Executive Recruitment services remained strong in the second quarter.”


McGraw-Hill Companies’ (MHFI) CEO Doug Peterson Presents at Goldman Sachs U.S. Financial Services Conference

Issuance is down 30% year to date

“we’ve seen a choppier market, issuance is down during the quarter and year to date overall issuance is down globally about 28% and in the quarter its down again over 30%, 35%, 37%, depending on which element of the markets that you look at. So we’ve seen some volatility in the ratings business.”


Avnet (AVT) Presents at Raymond James Technology & Communications Investors Brokers Conference

Kevin Moriarty, CFO

Our product is service

“Avnet’s product is, our product is service, has been and always will be. Models change the way we get compensated for that service. We need to continue to be nimble and agile to be able to move with that”

We feel pretty good about the environment

“I would characterize the current lead times as stable, short. We haven’t really seen any significant changes in push outs, cancelation rates. So we feel pretty good. EM, we continue to experience growth within our European business. I would characterize the Americas as sluggish overall on the component side.”


ConocoPhillips’s (COP) CEO Ryan Lance on 2016 Capital Budget and Operating Plan

We see dividend as highest priority

“Despite the tough market, our dividend remains the highest priority use of our cash. We view the dividend level as a long-term decision. And we’ve been in the current low price cycle for relatively short period of time”

Capital budget down ~25% from last year, -54% from 2014

“We’re announcing a 2016 capital budget of $7.7 billion that’s $2.5 billion lower than 2015 capital guidance and more than $9 billion lower versus 2014. In setting our budget, we’re flexing capital down appropriately for the price environment without losing opportunities or sacrificing the safety or integrity of our operations.”

Richard Davis at BAML Conference Notes

Richard Davis – Chairman, President and Chief Executive Officer

Our customers don’t have any direct impact from the recent geopolitical tragedies

“the recent tragedies, and geopolitical issues have not and I think you can even see in the stock market either on stock market it didn’t show any major reaction to that. It’s for two reasons one is, because most of our customers don’t see a direct impact to that. And I think number two even maybe more importantly and probably certainly is they’re kind of immune to some of those concerns, because, it hasn’t really brought anyone down yet to a points that’s caused them to change their behaviors”

It’s important that the Fed pierce the veil

“talking to customers and ask them how they’re feeling. And they still feel better every 90 days and I’m going to further the 90 day before. But they’re also looking for an opportunity the permission to move forward and I think that will be with the movement of interest rates I think as of this morning it was 66% likelihood I just left another hotel having run a panel for three of that Presidents Dudley, Mester, and Lockhart and let’s just say they were on record and seem quite positive about the possibility in December as well, which is just four weeks from now. So I think that’s all going to be quite important whether it’s 25 basis points and it’s another six months till the next 25 is quite a less important than they pierce the veil.”

Customers aren’t going to change their borrowing behavior unless rates are at 250 to 300 bps and we’re a long way from that

“every customer I can and often even at phone call I’ll say hey before we leave what level of interest rate rise needs to occur to have you change your behavior or your appetite for what you’re doing today status quo and it’s 250 to 300 basis points and that’s a long way from now.”

The most pent up demand is in home loan and small business

“Two, one is going to home related, and so new home purchases and home equity, where people actually feel they have value in their home does not just not before now undervalued, but they actually have the confidence they can use it and pay it back. The second one is small business.”

Auto loans should stay strong too

“Cars will stay strong for sometime. I still can’t believe it, they keep telling me that cars are 10.5 years old, the cars on the road. I swear, I can sit at any stoplight, I can’t find anybody over 10.5 years old. But they’re out there and they’re buying cars handsomely.”

Next year is going to be entirely political not economic

“This last year is going to be entirely political not economic. So first of all none of these candidates by definition have any power right now in the White House or to inform policy of the cabinet. So that’s first and foremost to note. There will be politically interesting and they’ll have their opinions and what they’ll do with the budget and the deficit and all, but they’re not going to inform policy.”

Interest rates rising and a change in the White house will probably help the American people feel more confident

“if interest rates start to move in the next 12 months consistent with the view that there will be a change in the White House, because there has to no matter what the change those are both two positive elements of distinction that help the American people feel a little bit more confident.”

The consumer is done deleveraging

“The consumer has delevered they’ve done deleveraging. So where they’re now in the saving cycle and I think they were in the – I want it, but I’m not quite sure I can have it yet. But they now have the means to have it.”

I don’t know that we’ll every be done with this regulatory environment

“I don’t know that we’ll ever be done. I just don’t know where the next idea comes from. And I think all we need is one any size bank to have some slip on the topic that would cause a governor to say, wow, that’s a category we didn’t think off.”