US Bancorp (NYSE:USB) Q3 2016 Earnings Conference Call - Final Transcript

Oct 19, 2016 • 09:00 am ET

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US Bancorp (NYSE:USB) Q3 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Welcome to U.S. Bancorp's Third Quarter 2016 Earnings Conference Call. Following a review of the results by Richard Davis, Chairman and Chief Executive Officer, and Terry Dolan, 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 Wednesday, October 26, at 12 midnight Eastern Daylight Time.

I will now turn the conference call over to Jen Thompson of Investor Relations for U.S. Bancorp.

Executive
Jen Thompson

Thank you, Melissa, and good morning to everyone who has joined our call. Richard Davis, Terry Dolan, Andy Cecere, and Bill Parker are here with me today to review U.S. Bancorp's third quarter results and to answer your questions.

Richard and Terry 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'd 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 and our press release, and in our Form 10-K and subsequent reports on file with the SEC.

I'll now turn the call over to Richard.

Executive
Richard Davis

Thanks, Jen. Good morning, everybody, and thanks for joining our call. I'd like to begin our review of U.S. Bank's results with a summary of the quarter's highlights on Page 3 of the presentation.

U.S. Bancorp reported net income of $1.5 billion for the third quarter of 2016, or a record $0.84 per diluted common share. I'm very pleased with the third-quarter results. Industry-leading profitability was supported by solid loan and deposit growth and broad-based core revenue growth.

As a reminder, our prior-quarter results included notable items including a Visa gain of $180 million in noninterest income, and $150 million related to litigation accruals and a charitable contribution in noninterest expense. There were no notable items to report in the third quarter.

So, for the remainder of this call, we will discuss the results on a core basis excluding the notable second-quarter items I just described, as this is how we believe the investment community looks at our results.

Slide 4 provides you with a five-quarter history of our profitability metrics, which continue to be among the best in the industry. In the third quarter, our return on average common equity was 13.5% and our efficiency ratio was 54.5%.

Turning to Slide 5, the Company reported total net revenue of $5.4 billion in the third quarter. Excluding notable items in the second quarter of 2016, this represents an increase of 2.3% on a linked-quarter basis. Our revenue growth was primarily driven by loan growth of 1.1% and strength in a number of our fee-based businesses, including mortgage banking and Payment Services. The industry continues to face headwinds from the low rate environment and a flatter yield curve.