US Bancorp (NYSE:USB) Q4 2019 Earnings Conference Call - Final Transcript
Jan 15, 2020 • 09:00 am ET
[Operator Instructions] And your first question comes from the line of John Pancari from Evercore. Go ahead please. Your line is open.
Good morning, John.
Just want to talk a little bit about the operating leverage expectation. I mean we got your comments around the quarter, but for full year '20, I know you had previously indicated that it could be a challenge to attain positive operating leverage for the full year given the rate backdrop, etc. Wanted to get your updated thoughts on that if you see that there is a chance you can get -- you could see positive operating leverage and what type of magnitude will that -- could you see?
Terrance R. Dolan
Yeah. John, thanks. And as a reminder, we had a goal of achieving positive operating leverage in 2019. We did that on a core basis for the full year. When we think about 2020, our objective is to target positive operating leverage and we expect our expense growth to continue to remain in those low-single digits. So I think we have a number of levers that we continue to look at and pull in terms of optimization, continue with our physical assets, optimization of the branch system, our back office activities and a number of different things. So that's our goal, that's our objective at this particular point in time. Now that said, as you said in your question, 2020 is more difficult year, simply because of the revenue outlook. And I think part of being able to achieve it is going to be really based upon what happens with respect to interest rates etc. So that's kind of how we're thinking about it.
Okay, great. Thanks. And then in terms of your -- some of the headwinds that had impacted your fee progression, I know there was the accounting change that impacted as well as there is couple of other items. Can you just talk about where do you expect underlying momentum to build in the fee businesses as you look at 2020?
Terrance R. Dolan
Yeah. So when we end up looking at fee income, I think there's a number of different things that we end up looking at. I think the credit card revenue is stronger, again mid single digits as we think about next year and that particular line item was impacted by both an accounting item in 2018 as well as pretty slow first quarter in which we had talked about. I think merchant acquiring continues to accelerate and get strong and we expect mid-single digits there and then the CPS revenue. While we saw a decline in the fourth quarter because of a little slower commercial spending, that has come back in the first several weeks of the year and so our expectation in that category is kind of mid single-digits as well. Deposit service charges has been a drag this year because of the sale of the ATM business in 2018. Also that kind of normalizes at least flat in 2020.