US Bancorp (NYSE:USB) Q2 2016 Earnings Conference Call - Final Transcript

Jul 15, 2016 • 09:00 am ET

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US Bancorp (NYSE:USB) Q2 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Welcome to US Bancorp's Second Quarter 2016 Earnings Conference Call. Following a review of the results by Richard Davis, Chairman and Chief Executive Officer and Kathy Rogers, U.S. Bancorp's Vice Chairman and Chief Financial Officer, there will be a formal question-and-answer session. [Operator Instructions] This call will be recorded and available for replay beginning today at approximately noon Eastern Daylight Time through Friday, July 22 at 12 midnight Eastern Daylight Time. I will now turn the conference over to Jen Thompson, Director of Investor Relations for US Bancorp.

Executive
Jen Thompson

Thank you, Melissa and good morning to everyone who has joined our call. Richard Davis, Kathy Rogers, Andy Cecere, Terry Dolan and Bill Parker here with me today to review US Bancorp's second quarter results and to answer your questions. Richard and Kathy will be referencing a slide presentation during their prepared remarks. A copy of the slide presentation as well as our earnings release and supplemental analyst schedules are available on our website at usbank.com. I would like to remind you that any forward-looking statements made during today's call are subject to risk and uncertainty. Factors that could materially change our current forward-looking assumptions are described on Page 2 of today's presentation in our press release, and in our Form 10-K and subsequent reports on file with the SEC. I will now turn the call over to Richard.

Executive
Richard K. Davis

Thanks, Jen and good morning, everyone and thank you for joining our call. I'll begin our review of US Bank's results with a summary of this quarter's highlights on Slide 3 of the presentation. I'm pleased to report that US Bank reported record net income of $1.5 billion for the second quarter of 2016 or $0.83 per diluted common share. The second quarter results include several notable items that together increased earnings per share by $0.01. These notable items include $180 million of equity investment income, primarily the result of our membership in Visa Europe, which was recently sold to Visa, Incorporated. Additionally, we recognized $110 million in accruals related to legal and regulatory matters, and a $40 million charitable contribution. I'm very pleased with our second quarter results where we once again delivered industry leading profitability and posted record results for revenue, net income, and earnings per share on both a reported as well as a core basis.

Record revenues were driven by growth in average linked quarter loans of 1.6% as expected and continued strength in our fee businesses. While we saw a reduction in our linked quarter net interest margin as expected, we did report modest linked quarter growth in net interest income and strong growth in net interest income on a year-over-year basis. Total average deposit growth also remains strong at 7.6% versus the previous year and included net income growth -- net new income account growth of 2.8%. Credit quality was stable for the second quarter as expected. The net charge off ratio was unchanged at 48 basis points compared to the previous quarter and the previous year, where