美國合眾銀行 (USB) 2025 Q4 法說會逐字稿

Welcome to the US Bancorp fourth quarter 2025 earnings conference call. Following a review of the results, there will be a formal question-and-answer session. (Operator Instructions). This call will be recorded and available for replay beginning today at approximately 11:00 AM Central Time.

I will now turn the conference over to George Anderson, Director of Investor Relations for US Bancorp.

Thank you, Julianne, and good morning, everyone. In our boardroom today, I'm joined by our Chief Executive Officer, Gunjan Kedia; and Vice Chair and CFO, John Stern. In a moment, Gunjan and John will be referencing a slide presentation together with their prepared remarks.

A copy of the presentation, our press release and supplemental analyst schedules can be found on our website at ir.usbank.com. Please note that any forward-looking statements made during today's call are subject to risks and uncertainty.

Factors that could materially change our current forward-looking assumptions are described on page 2 of today's earnings presentation, our press release and in reports on file with the SEC. Following our prepared remarks, Gunjan and John will be happy to take any questions that you have.

I will now turn the call over to Gunjan.

Thank you, George, and good morning, everyone. I will begin on slide 3. This quarter, we delivered strong earnings per share of $1.26, an increase of approximately 18% year over year on an adjusted basis.

Net interest income this quarter increased 3.3% year over year, supported by strong consumer deposit growth. Fee revenue grew 7.6% year over year with broad-based strength across most of our fee businesses. For both the fourth quarter and the full year, we posted record net revenues of $7.4 billion and $28.7 billion, respectively. More specifically, in the fourth quarter, total net revenue grew 5.1%, and we delivered meaningful positive operating leverage of 440 basis points as adjusted. John will provide more details on our financial performance in his opening remarks.

Moving to slide 4. Our clear focus this year has been on restoring investor confidence in our ability to deliver strong and more consistent financial results for the second consecutive quarter, more focused execution on our three key priorities resulted in us operating within all of our medium-term target ranges. On slide 5, we highlight steady progress against our expense management priority. Fourth, signature productivity programs have helped us deliver nine straight quarters of largely stable expenses. This has meaningfully contributed to our ability to deliver positive operating leverage of 370 basis points for the full year of 2025.

Our expense initiatives continue to generate sustainable productivity in our operations and will remain foundational disciplines going forward. In 2026, we will make strategic investments necessary to drive our growth, particularly in technology, sales and marketing. As such, we expect revenue growth to be a stronger driver of continued positive operating leverage for the year.

Slide 6 highlights our strong fee growth and improving mix for the full year fee income represented 42% of total net revenues for the company and grew 6.7% year over year. A highly diversified mix of fee revenue businesses is a core differentiator for our franchise. Our organic growth strategy has focused on the principle of interconnected product solutions that have created unique value propositions and deeper relationships that are 15 million clients. In '26, we will remain highly focused on executing the initiatives that we launched in 2025. In addition, we are excited to close on our acquisition of BTIG and capture the considerable revenue synergies offered by that combination.

On slide 7, we recap the strategic rationale for this bolt-on acquisition. We've had a 10-year partnership with BTIG and have completed 350 deals or more together in that timeframe. Last week, after we announced, I heard from many of our clients who applauded this next step in our partnership, which gives us confidence around the cultural fit between our two organizations and our ability to build an extraordinary capital markets franchise that can support an even broader array of client needs. We look forward to updating you on our progress there at the future analyst conference.

Let me turn to slide 8. We briefly spotlight our Global Fund Services business, we generated strong fee revenue growth for the company this year. GFS is a highly capital-efficient business that serves our institutional clients in particular, private capital and asset managers across the US and Europe.

The products offered by GFS attract high-quality operational deposits, money market assets under management and capital markets business such as foreign exchange. BTIG capabilities will further support growth in this business. As you can see from the chart on the left, GFS total net revenue has grown at a healthy 11% CAGR since 2021 and grew at 12% in 2025.

We have some unique product capabilities for start-up and first-time ETFs and have onboarded nearly half of all new US ETF launches in 2025. The underlying drivers of performance within this business are continuing to gain momentum. As ETF stay in favor with investors for their cost efficiency and recent favorable regulatory changes, and we continue to innovate in areas like digital assets and derivative-based ETF products. Moving to slide 9.

Our payments transformation is a strategic and long-term priority for the company. Today, a payments product is often times the first and the most frequent engagement with clients, especially with Gen Z, embedded interconnected payments capabilities are fundamental to retaining, deepening, and growing our future client franchise.

The chart on the left shows the steady strengthening of growth rates for our payments businesses as we execute our transformation. With our payments leadership team now fully in place, we have hit a stride on execution. In '26, we expect to sustain momentum on our transformation and add additional focus on the small business segment for both card and merchant.

Turning to slide 10. Net interest income and margin are both improving. We delivered record consumer deposits this quarter. The effectiveness of products like Bank Smartly, more sophisticated pricing capabilities, and a significant overhaul of skills, training, digital tools, and incentives, together with investments in our branches drove our performance.

Additionally, commercial real estate loans also showed modest growth after 11 quarters of decline. Today, our balance sheet is poised for continued NII growth. On the loan side, we will drive commercial and credit card loans to deepen client relationships. On the deposit side, we'll drive consumer and operational deposits to improve our funding mix.

Turning to slide 11. Operating within our medium-term target ranges has resulted in industry-leading EPS growth as adjusted in 2025. Even with more modest buybacks as compared with the industry.

Let me now turn the call over to John, who will take you through more details of the quarter.

Thank you, Gunjan, and good morning, everyone. This was another strong quarter for us driven by continued new business momentum and an improving macroeconomic environment.

If I could turn your attention to slide 12, I'll start with some highlights for the quarter, followed by a discussion of fourth quarter earnings trends. As Gunjan mentioned, we reported earnings per common share of $1.26 and achieved record net revenue of $7.4 billion this quarter.

Revenue growth benefited from improved spread income and all fee categories performed well. Key credit quality metrics improved both sequentially and on a year-over-year basis. As of December 31, our tangible book value per common share increased 18.2% on a year-over-year basis.

slide 13 provides our key performance metrics. This quarter, we delivered a return on tangible common equity of 18.4%, a return on average assets of 1.19%, and an efficiency ratio of 57.4%, all improvements on a year-over-year basis.

slide 14 provides a balance sheet summary. Total average deposits increased 0.7% linked quarter to $515 billion as we continue to emphasize growth in our consumer and relationship-based deposits. Noninterest-bearing deposits increased both sequentially and year over year as we gained traction across several institutional fee businesses like Treasury Management and Global Corporate Trust.

Our percentage of noninterest-bearing to total average deposits remained stable at approximately 16%. Average loans totaled $384 billion, up 1.4% from the prior quarter on an accelerating year-over-year growth in our focus areas of commercial and credit card loans, which grew 10.1% and 5.7%, respectively. On an ending basis, these loans now represent approximately 48% of total loans for the bank compared to approximately 45% last year. The ending balance on our investment portfolio was as of December 31 remained at $171 billion. Turning to slide 15.

Net interest income on a fully taxable equivalent basis totaled $4.3 billion, an increase of 1.4% on a linked-quarter basis, primarily driven by favorable deposit mix shift. Net interest margin increased 2 basis points sequentially to 2.77% as we look to achieve greater margin expansion in the medium term.

Slide 16 highlights fee revenue trends within noninterest income. Total fee income was approximately $3.05 billion, an increase of 7.6% on a year-over-year basis, with broad-based growth across our payments, institutional and consumer fee businesses. For the full year, fee income increased 6.7% compared to the prior year. In 2025, we benefited from high single-digit growth in our institutional fee businesses, continued strength within impact finance and stronger payments revenue.

Turning to slide 17. Noninterest expense totaled approximately $4.2 billion, up 0.7% linked quarter as FDIC expense favorability was partially offset by severance charges.

Slide 18 highlights improved asset quality trends. This quarter, our ratio of nonperforming assets to loans and other real estate was 0.41% at December 31, an improvement of 2 basis points linked quarter and 7 basis points year over year. The net charge-off ratio improved to 0.54%, a 2 basis point decrease sequentially, while our allowance for credit losses of $7.9 billion represented 2.03% of period end loans.

Turning to slide 19. As of December 31, our common equity Tier 1 capital ratio was 10.8% or 9.3%, including AOCI.

On slide 20, we provide a comparison of our fourth quarter and full year results to our previous guidance. For the fourth quarter, net interest income, fee revenue, and noninterest expense all exceeded our previous guidance. Taken together, this resulted in another quarter of meaningful positive operating leverage for the company. For the full year, revenue growth of 4% hit the midpoint of our full year guidance expectations while positive operating leverage meaningfully outperformed our full year 2025 outlook.

Moving to slide 21. I'll now provide full year and first quarter 2026 forward-looking guidance. Starting with the full year of 2026. We expect total net revenue growth to be in the range of 4% to 6% compared to the prior year. We expect to deliver positive operating leverage of 200 basis points or more for the full year.

Our guidance excludes the impact of the BTIG acquisition, which is expected to contribute $175 million to $200 million of fee revenue per quarter. We have provided some additional details on page 30 of the appendix.

Let me now provide first quarter 2026 guidance. Net interest income growth on a fully taxable equivalent basis is expected to be in the range of 3% to 4%, compared to the first quarter of 2025. Total fee revenue growth is expected to be in the range of 5% to 6% compared to the first quarter of 2025 and we expect total noninterest expense growth of approximately 1% compared to the first quarter of 2025.

Turning to slide 22. We continue to operate within our medium-term target ranges. Our consistent execution against these ranges will remain a key focus entering 2026, and we have a high degree of confidence in our ability to strengthen our performance and build on these results over time.

Let me now hand it back to Gunjan for closing remarks.

Thank you, John. We are wrapping up 2025 with a significant leadership transition behind us and strong momentum going into 2026.

The banking industry will likely see meaningful shifts in capital, supervision, digital assets, AI, and novel banks in the coming years. Our scale, business mix, and culture position us for success. We remain focused on executing our priorities to drive organic growth, high returns, productivity, and strong risk management.

Finally, I would like to offer a special thanks to many of you for your well wishes for Minneapolis, where we are headquartered. With all the challenges this community is facing, we remain focused on our clients and our teams.

With that, we will now open the call for your questions.

(Operator Instructions) Scott Siefers, Piper Sandler.

John was -- to start with you. Could you please speak to how you might think about the pace of share repurchase as this year plays out, just given you're increasing the capital ratio for the 10% CAT II target. You, of course, dipped your toe back in at the end of last year, but just would love to hear your thoughts on the go forward.

Sure, Scott. In terms of share repurchases, we've made a tremendous amount of progress on our capital build over the last several years. And we obviously have business momentum behind us. And of course, our first priority is going to be client and loan growth as we move forward with obviously then a focus on capital return to our shareholders.

But knowing all that, our intention is to grow our share repurchase amount starting this quarter in a gradual way. We'll likely go from $100 million or so to $200 million and then the commitment to glide into our 75% payout target that we have over time.

Terrific. Okay. Good. And then just sort of a broader question, given all the noise regarding whether it's credit card rate caps and then newer chatter regarding the Credit Card Competition Act, can you speak to how you all are thinking about how -- I guess how USB is thinking about these possible responses -- how are these -- granted, they're all sort of in flight, but what are you all thinking about at this point?

Scott. Our estimate is that 90%-plus of our clients will see a detrimental impact if there was an across-the-board 10% rate cap on credit cards. The impact to 50% of the clients will be crushing as it will be for the economy. We have observed that just in the last few days, the conversation around the rate cap has shifted more productively to options for customers to help them in the short term.

So just as a reminder, our shield credit card offers 24 months of 0% APR for consumers. And in fact, most card issuers have some product of that sort. So we think that's a productive conversation, and we are thinking of ways to increase communications, financial, education, to try and make sure people know what options they have. But that's sort of the momentum.

The CCCA, as you asked, has come and gone many times. They are very credible reasons why that would be very costly for many small merchants and not achieve the goal intended. So at this point, we continue to observe it, but it is not a meaningful planning thing that we are focused on.

John Pancari, Evercore ISI.

Just wonder a bit around the revenue growth expectation of 4% to 6% for 2026. I appreciate the color you gave around the first quarter in terms of the spread income versus the fee growth expectation. Can you possibly help us and kind of how that -- I think about how that could play out for the full year in terms of some of the balance sheet dynamics in terms of the growth expectations and your margin outlook?

And then the same thing on the fee side. How should we think about the breakout of that total revenue when you look at '26?

Sure. It's John. Thanks, John. So the way we think about the revenue growth this year, obviously, we gave you the 4% to 6% on that side of the thing. But given the momentum that we have and what we see today, we think that mid-single-digit growth is appropriate for both net interest income and fee revenue growth.

So maybe just to break it out a little bit. So on net interest income, as an example, we expect that to strengthen over time. We have 3% to 4% here in the first quarter. But with the increase in loan pipelines that we see as well as NIM expansion as that continues, we do expect that to grow.

And then fees, we expect that to have a more consistent approach and performance as we look through the course of the year. of course, that's going to be led by many of our key businesses like trust, capital markets, impact finance, and payment.

So overall, we see a lot of momentum in the businesses. We've had several good quarters here in a row and our job is now to continue to execute on the strategy.

Got it. All right. And then Gunjan, you mentioned that revenue rather than expenses maybe a bigger driver of the expected positive operating leverage in 2026. And if revenue doesn't cooperate, can you discuss the flexibility that you still may have to achieve the 200 basis points plus in positive operating leverage? Like what are your levers? And do you have flexibility around the strategic investments that you emphasized.

John, the short answer is yes. Our productivity and expense management is being created in a very fundamental way. You'll remember that for six years, we have been investing very heavily in digital capabilities. Nearly all back-end platforms have been upgraded, and that creates a lot of productivity once you start getting the operations aligned -- you add to it the AI boost we are seeing in big expense pool. So we are very confident about expense management.

We have aggressive plans to invest back in the business just to drive the revenue growth, especially fee revenue growth and businesses like capital markets and payments that attract more expenses. But we have a lot of ability to flex that. Those are not long-term investments, things like sales and marketing are quarterly investments. So we are very committed to our meaningful positive operating leverage, and we expect it to come from revenue. But if something happens in the macroeconomic environment, we have levers on expenses.

John McDonald, Truist.

I was wondering, John, if you could expand a little bit about your outlook balance sheet growth in 2026? And any mix shifts or trade-offs that you want to highlight between loans -- within loans and also loans to earning assets. You had given a forecast last year -- early last year about balance sheet growth by the end of the year and had some mix shifts. So I just wanted to get an update on that.

Sure. Yes. So largely, the -- I think you're talking about the slide that we had in the first quarter of last year, talking about our asset growth and things like that. I think that still holds. We still feel like that range is the appropriate range for our balance sheet.

Maybe just to go into some of the pieces -- we do expect loan growth to be stronger this year, probably more in the 3% to 4% loan growth area led by commercial and card again.

But we also see that commercial real estate is starting to grow, and we expect that to be help in terms of growth there. We do expect that deposits will continue to grow content with loans. That should be kind of one for one in the way we're looking at it.

And in terms of other assets, I expect the investment portfolio to kind of flex based on if loan growth is faster, we'll probably have fewer investment portfolio and other earning assets. And if it's less than perhaps we kind of keep the balances the same. So if those are going to be kind of we manage through the quarter, we'll kind of go and see how that progresses. But all this is to say that the mix is improving in the balance sheet, and that's going to continue throughout 2026, and that's what gives us confidence in the NIM expansion as well.

Great. And maybe just on that note, you could give us your updated thoughts on the timeline for the NIM expansion to get to 3% over the next year or two, and in addition to that loan mix shift, what are -- just an update on some of the fixed asset reprice drivers.

Sure. Yes. So I think, first of all, there's no change. We -- to our outlook, we still feel there's definitely a path to 3% in 2027. And the drivers of net interest margin are going to be the mix that I just mentioned as well as the fixed asset repricing -- what I would say there on the accessory pricing is that we'll have slightly -- or we'll have more balances that should reprice this year than last year, but it will be likely at a lower spread just because the nature of long-term rates have come down over the course of the year and based on our forecast.

So those are kind of the pieces. And then the deposit mix is going to continue to improve with a focus on consumer deposit growth, which we've been very successful at growing this year as well as commercial deposits that are tied to strong fee categories like treasury management, institutional businesses, and things like that. So that's all, again, a big focus for us as we look into 2026 and continued NIM expansion.

Ebrahim Poonawala, Bank of America.

I guess maybe, John, just following up on the slide 10 on the deposit growth. I just spend some time talking about drivers of deposit growth. You're having the mix towards consumer deposits. What's driving that net-net, is that accretive as we think -- should we continue to think about the mix shifting to the consumer side? And how accretive is that when we think about either deposit margin or the overall margin?

Sure. So on the deposit, a couple of things are going on in terms of the deposit growth. This -- over the course of the year, we saw steady growth in the consumer deposits. And as that slide 10 illustrates where we continue to believe that, that is going to be -- that is accretive, and it is helpful to bring in new and new accounts and clients to the bank typically that are younger, more affluent base that we have.

And this is particularly in our bank smartly product, which is a savings and a card tied together. We've seen very good success in growing that savings product over the course of the year. We find these clients to be stickier, and that's going to be overall over long periods of time, it's going to be very helpful from a funding cost perspective.

The other thing we're focused on, on the commercial side is a reduction in CDs. We reduced our CD count by $6 billion this quarter. We basically -- or we are at the lowest point in CD usage in the last 10 quarters.

So that has been -- that will be helpful going forward to our mix. And our wholesale and institutional balances are going to be really driven by our core institutional and like fund services, corporate trust, treasury management and other middle market and other type of accounts that's going to give us. So the mix is going to be very important for us as we move forward.

Ebrahim, I can just add that we are very intentional about using the balance sheet to drive deeper relationships and fee-based businesses, an expansion in the core client franchise brings a lot of payments and card revenue and merchant revenue at the back end of it. So it's very accretive in the long run and very strategic for us as well.

So the focus is very much on consumer deposits and operational wholesale deposits, which come with expansion of treasury management, investment services and some of the fee-based products. That's one of the reasons we wanted to highlight the Global Fund Services business, while it's $1 billion like business for us, not huge in our portfolio. It's a very important source of operational deposits.

That's helpful. And just a separate question. I guess, I think last quarter, you all established a digital assets organization. Just talk to us. You put out a few press releases, there's a lot of energy around tokenization. Is there a role for USB to play there? And is that a needle mover as we think about either fees or deposit growth outlook for the bank?

Yes. So let me just describe the world here a little bit from our perspective. We are obviously taking it seriously. As an industry shock, that's why we stood up an organization called digital assets and money movement, and it's led by a very seasoned payments executive for us.

We have seen progress in two very distinct areas. The first is on capital markets, where the investment side around cryptocurrency stable coins is leading to demand for core custody type of capabilities. We have almost $12 trillion in assets there. We were very quick to stand up a cryptocurrency custody offer. Last year, we stood up a stable coin custody offer.

Ebrahim, I'll tell you, last year has been a very brisk pace of new ETF launches and a large majority of them have been to take advantage of the digital assets. And we are seeing the revenue model come through in a very real way. And we think that's real and there's momentum. On the bigger conversation of payments, it's more speculative. So we do press releases because there's a lot of interest every time we actually conduct a stable coin transaction with some partner platforms.

We have done many of those, I can't point to a specific revenue-generating use case. The demand specifically from the client base is not very strong or real yet and the revenue model is still to be figured out. But there's enough momentum there, both from a supervisory and commercial side that we expect to be very front footed as this world evolves around payments.

Mike Mayo, Wells Fargo.

Well, you announced the acquisition of BTIG, and I think there's a little confusion. Is that the reason why you're slowing down buybacks? And just more generally, those who covered US Bancorp for a while, and this is over two decades after you spun off Piper and now you're going back into the capital markets business, a little bit more than you're already there. So if you can also just talk about the investments that you'll be making with BTIG business lines, what else that requires?

I imagine this is kind of like a link and leverage deal where you buy a firm and you leverage it over your entire franchise. But I'm not sure the underside of this, what do you expect in terms of capital markets fees other opportunities for balance sheet growth?

Sure, Mike. I'll start on your -- the share repurchase comment, then maybe I'll -- Gunjan will comment on the other side of questions that you had. There's no impact to our buyback. In fact, as I mentioned earlier, we will be increasing our share repurchases from $100 million to $200 million this quarter. And then thereafter, we'll glide into our eventual target of 75% that we've talked about.

And so this transaction is a 12 basis point impact on the CET1 ratio. No more, no less. That's -- that will be the impact, no matter what the earn out or anything else. So we feel really good about the financials, and it's not material to EPS this year, simply because there will be some merger-related costs that will offset any revenues for this or margins. So as we look to the following year, that will shift.

I'll just step back and maybe recap the strategic rationale. Our clients use both balance sheets and capital markets to manage their own balance sheets. We have had a lot of success with the fixed income side of our capital markets business that has grown organically over the last 14 years or so, and it's now grown to about $1.4 billion in revenues for us. So it's a sizable business.

The last gap in our product lineup was the BTIG set of products. We've had a partnership with them for 10 years. And it is true 20 years back, Piper Jaffray was acquired. And just as a reminder, we retained all of the wealth and asset management sides of Piper Jaffray, and those have become sizable businesses for us today with a lot of cultural fit. The capital markets wasn't appropriate for us at the time. It is very much more culturally aligned with what we do, plus we know the property.

On your balance sheet question, I think the issue is we're already deploying a very sizable balance sheet today against our commercial and corporate clients and a broader lineup of fees leverages the balance sheet more. We do not expect the BTIG business in itself to be a big driver of additional sort of balance sheet usage. But otherwise, lots of revenue synergies across IS business across our family office business. And we'll report on that more to you once the deal closes and we give better guidance on what the economics of that deal will be like.

Erika Najarian, UBS.

Yes. First question, period-end assets ended at $692 billion for the year. And I guess this is a two-part question. First is, as you understand it, how do the tailoring proposals or the removal of tailoring proposals and Washington, how would that positively impact sort of that $700 billion crossing. And additionally, as we think about, John, that path is 3%, does that consider the currently more stringent liquidity requirements that you would need to adhere to, if nothing changed on tailoring.

Sure, Erika. Thanks for the question. So on the asset side, yes, we're continuing to grow. Obviously, as you know, it's a four-quarter average of assets that is the deciding factor and how when you trip into Category 2. We're running our business with without any regard to that level, we are growing our loans in constant with the industry.

We want to make sure we're there for our clients. Any rule that happens or change to the tailoring rules over this process will take in stride. We understand there's obviously been chatter about that as focus on -- and the regulatory spheres have talked about those perhaps being reindexed, but we don't know that for sure. So we're -- but in the meantime, we're going to continue to do what we need to do on the growth and supporting our clients through that.

And then in terms of the consideration that you had, and I'm just -- I'm trying to remember your second question, it was on --

On the LCR, the --

LCR. I'm sorry, yes. Thank you. On the LCR, there is no impact to that. We have that fully loaded into our calculus here as we think about the NIM. So as we jump from a more modified to a full LCR that there's no impact, and that's now incorporated into our guidance.

That was very helpful. And just as a follow-up question. Gunjan, during prepared remarks, you talked about faster evolution of the banking industry and also in your responses to the other analyst questions, it seems like you have a very nimble organization in terms of how you're responding to these changes.

And as we think about the investments that you have to make in terms of moving -- continuing to move the company forward is there just enough productivity savings that you can identify where you can continue to invest for the future, whether it's near term like capital markets or medium term, like the digital asset transformation and still deliver on that positive operating leverage of 200-plus that has been a clear message to your investor base?

It's a very thoughtful question. And let me start really by the new investments in AI and stable coin. They are actually very capital-light. There is so much support that is being provided to us from a whole suite of sort of partners who really like our business mix, our payments and capital markets, we are unusual in having sizable capabilities on both of those. And we've organized our data.

As you know, we are on the cusp or Category 2 transition, and that has given us a lot of imperative over the last two or three years to have better data. Collectively, we are a very important partner, so we are getting a lot of support when we do these pilots on stable coins. They are not huge investments yet. However, we stand ready to invest as needed when the market flexes. You have to learn.

You have to have your product set ready. So I would say to you that for some time, at least, you're getting a lot of benefit of industry-wide investments to just scale up our product capability.

The real investments we are making is to support our fee business growth. We are doing bigger deals, they come with more upfront cost payments transformation, if you think about the revenue model of payments, we are looking at acquired but not installed business. We are looking at sales pipelines and the revenue model follows 12 to 18 months after you sold the business. So we are very prepared for that kind of expense inflection, but also creating productivity. So I feel very comfortable with both investing heavily for organic growth and delivering a positive operating leverage.

And again, I always want to remind when you spend $5 billion or $6 billion, upgrading your digital investments, which we did over the last six years, you have a long runway to drive productivity out of them, which we will.

Ken Usdin, Autonomous Research.

Just a follow-up on that last point. So as you've made all these investments, it's nice to see a little bit of improvement year over year in the payments business fees in aggregate. I was just wondering -- just what's the pace of improvement that we could expect as you think about next year and to John's prior point about mid-single-digit growth on the fee side overall. How much does payments play a part of that? If you can kind of just talk through each of the three business areas there.

Sure. Thanks. Appreciate the question. Absolutely, payments as a role in our mid-single-digit call for fees overall. If I take it piece by piece, card, we have a lot of progress with the Smart lead program and other cards that we've introduced into the market. There's a tremendous focus on small business that we are very much focused on internally. So we have a lot of momentum there. expect mid-single-digit growth in this business for the year of 2026.

On the merchant side, as we talked about in our strategy of recent investor conference, we talked about increasing our margins through more distribution and direct model, really being thoughtful about what verticals that we want to be a part of and really focusing on that embedded software and having that be a key component of our growth. And so again, here, we think that mid-single-digit growth for the year is appropriate for this business as well.

And then on the corporate payment side, clearly, we saw improvement this year on a year-over-year basis, but it's still negative growth just given the spend levels on the government side as well as just some caution just on the corporate T&E side of the equation. That will likely continue into the first half of the year, but should overall strengthen as we get through that will -- by the time we exit that, that will also be more in the mid-single-digit range. So overall, mid-single digit for this business is what we should expect, and we're looking forward to executing our strategy.

Okay. Great. And just one follow-up on the credit card side and charge-offs. That loss line has really settled down a little bit. Are we at kind of a new -- and I know there's some seasonality, but what's your expectations for card losses versus where we kind of ended the year and average for '25?

Yes. Thank you. So card, if I think about there's seasonality, so you should expect a little bit higher charge-off rate on card in the first half of the year, just given that seasonality. But overall, if I just kind of look big picture on card '25 versus '26, we expect stability in that charge-off rate based on what we know today.

Gerard Cassidy, RBC.

John, you talked about the commercial loan growth and you talked a bit about commercial real estate. I think you said maybe the first time in 11 quarters, it may have seen a little bit of growth. Can you expand upon that for 2026 along with the commercial loan growth are the 10% year over year is quite nice. Where are you seeing that growth in the C&I portfolio? And can that continue do you think in 2026?

Thanks, Gerard. Short answer is yes on the continuation on the commercial side of the equation. But let me start with the commercial real estate side. since you talked about that. I'll mention that we do expect growth in the commercial real estate line, as you said, are the first growth that we've had in 11 quarters in that line item, which is great to see.

I think what we're seeing here is -- the continuation of the pipeline building, particularly as it relates to multifamily and industrial I think those have been strong areas of growth. And I would also say that paydowns have actually slowed down as well.

Our office numbers, our CRE office has dropped $3 billion over the last three years and at a pretty rapid pace. And so that has started to slow down. So that has been helpful. I'll also say that this growth is not driven by data centers and things like that.

We have less than $1 billion of data centers in our portfolio. And we do select high quality in that sense. So that's kind of the story on commercial real estate.

On the C&I side, we're just seeing growth in a number of different areas. I'd just say it's very broad based. Even though utilization has been pretty flat. But we've seen growth in subscription lines, supply chain, some of the M&A activity is picking up with our clients. And so there's just core growth on that side of the equation.

We've also even going into business banking and SBA seeing very strong growth as well as our expansion markets and middle market. So a combination of all these things, we think, persists into 2026. And so we're looking forward to that growth.

Very good. And Gunjan, one of your peers in asking this question called me a curmudgeon, so I'll try to ask the question a little less negative. But the setup for you folks and your peers is really good this year. investors see that. But being bank people that we are, we're always looking over our shoulders, Aside from the obvious geopolitical risk you guys keep your eye on? Just in case of a surprise comes up that we're not expecting right now?

Well, thank you, Gerard. I will not call you a curmudgeon because we worry about what's coming around the corner as much as you do.

The economic backdrop going into 2026 is broadly constructive. The consumer did very well through the holiday cycle, and that was all ranges of FICO scores and across discretionary or nondiscretionary spending. As you -- as John just described, the delinquencies are coming down, while the employment picture is a little bit muddy, it's still strong, and we are not yet seeing the impact of the one big beautiful bill and some of the new tax provisions like Tipson overtime, et cetera, will come into the consumers' balance sheet. So we expect that to be good.

The sentiment on the corporate side too has moved to sort of more M&A and real CapEx rather than just sort of a pause and replacement CapEx waiting for tariff uncertainty. So I would say the economic backdrop feels like tailwinds rather than headwinds going into the year.

So our attention really is on an unexpected policy changes, in front of us is a very big capital bill in front of us are some real discussions around stable coin bank industry, novel charters. And so I would say our attention is really focused on the policy side with some relief on the economic front.

Betsy Graseck, Morgan Stanley.

I had one question on BTIG. I know we talked about it earlier in the call, but I wanted to get an understanding of how much of the capital call do you think this piece of the business will be?

And just from my vantage point, it feels like it's a little bit less than what the fixed income would be, which you already have. But I'm not sure how much you're looking to lean in and grow what they have and increase the balance sheet items associated with the equity book. So some color there would be helpful.

Sure, Betsy. So maybe just as a starting point for BTIG, they have a very low balance sheet. There's not a lot loans and balance sheet with that. I think as we -- that potentially could be one of the synergies that's not built into our current forecast. We think the synergies are really going to be around areas like our fund services, our capital markets as well as our ICG or our institutional client group.

There could be loans associated with that. But we'll treat that in the context of the entire capital market suite. And so this will be just another component of how we manage and have grown in the capital market space, methodically over the last 15 years. This is another component of that journey. And so we'll grow as the market allows, and we'll be taking into consideration with our risk management framework.

Okay. And is it a self-funded capital call? Or does it pull from other parts of the organization?

Yes. It's -- I mean, it's self-funded. I mean we are -- there's no other parts of the organization. It's all contained here at the bank.

Saul Martinez, HSBC.

I'll ask also on BTIG. This is more of a clarification. John, it's expected to close in the second quarter. You mentioned there are some merger costs embedded in the guidance for PPNR neutral. But -- with that, I guess, can we surmise that it will be PPNR accretive by year-end and into early 2027, especially considering some of the synergies that you just mentioned on -- in your response to Betsy's question.

Yes. Thanks, Saul. The answer is yes. We expect the merger-related costs to happen in the next quarter or two. And so as that occurs, that will keep the -- the EPS will be neutral. And so after that, then we expect to have some -- obviously, we'll have to -- we'll see margin expansion in this business once we get through those costs.

Okay. That's helpful. And then maybe beating a dead horse here would be the question on BTIG, and you kind of addressed this, but it does really change the composition of your capital markets business adding equities. And I think one of your competitors said that this really isn't a business that makes a lot of sense for a large regional bank is that you've given that, at least in their view, it really does require massive scale and there's more suitable for a larger bank I guess what makes you think that these businesses, especially equity makes sense for US Bancorp and that you -- why are you confident that you'll be successful in extracting value with that business under your umbrella?

Yes. Thanks for the question. I think I'll start and Gunjan, can add on here. But our view is that this -- these businesses, we added because we had an opportunity here with a partner that we know, a known quantity that fits into our risk management. But also importantly, it's what our clients have been asking for.

We have had very good reach out from clients across the board that have wanted to have us participate more in their financing, have us participate more in their broader activities, but have not been able to give that to us freely in terms of the full spread and wallet share that they would have liked or intended to do. So this is something that's really going to -- it's something that our clients have asked for. It fits well within our risk management profile that has been built up internally here over the last several years. And so it is a great fit for us.

I'll add, Saul, that you have to look at our track record in growing the fixed income book, which not all regionals have been able to do. So everybody has a different strategy here. Our confidence in leaning in heavily into the capital markets comes not just on the client conversations, but also from the real success we have seen just holding our own, the market is not uniform.

There's a lot of need for family offices for middle-market clients that are unique that require high touch. And so we think at our size, we definitely have the ability to carve out a very nice business given the size of a balance sheet here.

Steven Chubak, Wolfe Research.

So I wanted to start off with one on Global Fund Services. And I appreciate the additional disclosure that you provided in the slides, you noted you're seeing strong growth in GFS. You outlined the strength of the ETF servicing capabilities. I was hoping you could speak to the competitive landscape in that area.

How much of the growth that you've seen since '21 is tied to organic efforts versus some of the rate and market tailwinds that have transpired and just how that informs what you believe is a sustainable growth rate or outlook over the medium term relative to the mid-single-digit guidance that you offer at the firm level?

Steven, thank you for that. Let me start. GFS has a very niche specific set of products for highly complex small boutique type of firms around private capital, private credit -- so you have to play the game right.

We have done this for now many, many years, and there's a very sustainable competitive path for this business going forward. We do like to highlight smaller businesses that don't get airtime. Just to teach you last quarter, we just gave you some visibility to our Impact Finance business. we see this being a real engine of growth as the whole world of investments, overall growth.

Obviously, when you have good strong equity markets, you do slightly better in other times, you do slightly worse, but the core organic growth and market share gains here are very real.

That's great. And for my follow-up, just on deposit mix. Looking at noninterest-bearing deposits, you saw solid growth, 4% sequential increase on average recognizing some of that is going to be seasonal. But do you feel we've reached a sustained inflection in noninterest-bearing deposits? And within the NII guidance for the full year, what are you assuming for deposit remixing and shrinkage in time deposits as well as betas with some of the upcoming rate cuts?

Sure. Thanks. I appreciate that. In terms of noninterest bearing, yes, we have grown both sequentially and on a year-over-year basis. That year-over-year basis has not been achieved in quite some time. So -- it was very nice to see that.

And we do expect that to continue into 2026. So in our call here for growth on both loan and deposit, I would anticipate it's both a mix of interest-bearing and noninterest-bearing deposits with roughly the mix probably being in the same area that it is today is kind of how we think about it. In terms of deposit mix and rates and things like that, I'm just going to kind of go back to we're focused very much on growing our consumer business as well as these key areas that are going to help us grow in our fee revenues, the treasury management areas, the institutional businesses and several and select corporate clients. So that's going to be our focus as we think about deposits this upcoming year.

Matt O'Connor, Deutsche Bank.

I was hoping you could give a quick update on your branch strategy. Your branch count, I think, is down about 4%, 5% versus a year ago. I think you talked about kind of not being that interested in bank deals. So kind of bringing that all together in lieu of some other banks may be announcing branch expansion strategies. Just talk about the brand strategy and again, if there's any change on the M&A dating.

Matt, thank you. Let me begin. So just for historical context, US Banc had a very, very heavy presence in in-store branches. And before our digital tools, that's what provided servicing access to people over the weekends and after hours. You don't need that anymore.

So a vast majority of our branch closures is really the small servicing units. What we're building instead is multi-client hubs that have many products represented in more hub-like branches. We invest about $200 million in our branches. We find that to be a very effective channel continuing to be a very effective channel. So our strategy, though, is to try and get to top five market share in the places that we are in and create sort of modern interconnected branches in those areas.

So for example, in Denver, we just finished the renovation of all our branches into the new format. So we are continuing to lean in on branches as a source of growth and client service, it's just our starting point was slightly different. So we have to close all these sort of in-store branches and then rebuild from that point onwards.

And your second question, there's no change in our strategy. We are very focused on our organic growth opportunities and seeing a lot of momentum there.

Okay. That's all helpful. And then so if we strip out the in-store branches, any numbers on kind of the remaining French network? And then from your perspective, like how much more refurbishing or retrofitting is there still to do for the traditional branches?

Sure. So on how much to do, the $200 million is going to be kind of a consistent always-on approach to remodeling to adding and branches and things of that variety. So -- we've had several hundred branches remodeled this year. We expect to have that occur next year as well, and that will be just a continuation of our strategy that Gunjan just laid out.

Matt, it's very much always on because you refresh these formats over and over again. So it's not sort of one and done. But the message here really is we are investing very much in our branch. It's an important channel for us.

Chris McGratty, KBW.

John, when you look at your top five goal for market share and across your footprint, the metro markets, where would you not be where you need to be? Where do you need to invest a little bit more to get the market share?

In terms of -- are you speaking more on the consumer side or on the commercial side? On the consumer side?

Yes.

Sure. So Gunjan just laid out the Denver area, we've certainly been making investments here in our hub here in headquarters here in Minneapolis. Nashville, Arizona areas, of course, in California, given the Union acquisition, where we've where we've combined where locations were very close to each other and obviously took the premier spot or refurbish those areas.

So we are -- what we're doing is really we're refurbishing and we're building branches in areas where there's high growth in those MSA areas. So not every area is, of course, the same. So you have to go kind of market by market. but that's been the course of our strategy over the last couple of years.

Great. And my follow-up would be on just consumer checking account growth, I've gotten a lot of attention this quarter. You guys had good consumer deposit growth in the quarter. Can you share any statistics about the checking account growth over the past year or two that would give you optimism this could continue?

Yes. So I think the important thing is really, I mean, accounts are good, of course, and we watch that. But it's really about the balances is what we're really focused on. And so our consumer amounts were up 2.5% or $7 billion or so this past year. Not many peers grew consumer deposits. This year, it's a very it's a very competitive market.

And I think what's important for us is we've developed a very nice set of products that can meet a number of different clients. And we have pricing capability tools that we've been building over the last several years that have helped us in this regard as well. So the combination of all that is really, I think, is what is giving us strength in that consumer number as well as our capability digitally to compete anywhere across the country. So it doesn't have to be just our footprint that is necessarily the case. So all those are leading factors to where -- why we think the consumer growth will continue.

I just add that the branch performance has inflected very nicely to with all of the investments that we have made or the tools that we've put in the hands, all the AI-powered next best solutions. Collectively, that has created a fair amount of momentum, and we've been building towards those capabilities all of 2025 and beginning to show up in our results here.

There are no further questions at this time. Mr. Andersen, I turn the call back over to you.

Thank you, and thank you to everyone who joined our call this morning. Please contact the Investor Relations department if you have any follow-up questions. You may now disconnect.

This concludes today's conference call. You may now disconnect.