美国合众银行

U.S. Bancorp reported strong second-quarter earnings. The bank's organic fee income growth was 9.9% year over year, excluding the $98 million contribution from the BTIG acquisition, which closed on June 1.

Why it matters: The bank's loan growth continued to improve in the second quarter, up 7% year over year, driven by broad-based growth in commercial lending, commercial real estate, and credit cards. Although data center investments are an important driver for US GDP growth, U.S. Bancorp does not have too much oversized exposure to this theme, and management noted that the general commercial client's sentiment improved compared with a year ago. Management also mentioned that deposit rates could come up in the second half of 2026 should loan demand continue to be strong, which is in line with our prior expectations and consistent with peer regional banks that have reported this cycle.

The bottom line: As we incorporate the latest results and updated guidance, we expect to increase our $62 fair value estimate for wide-moat-rated U.S. Bancorp by around a mid-single-digit percentage. We assess shares as fairly valued after our contemplated valuation update. We expect to increase our fee income growth forecast for the bank, reflecting its strong 30% growth in organic capital markets fees in the first half of the year, along with the inclusion of BTIG. This revenue upgrade would be partially offset by higher expense growth, as capital market fee income carries a much higher expense component compared to retail and commercial banking revenues.

Coming up: U.S. Bancorp also plans to increase its annual branch investment budget to $300 million from $200 million, shifting its focus from refurbishing older branches to densifying its branch footprint in the Southwest. If the bank succeeds in executing its branch densification efforts, it could get more retail deposit market share and improve its revenue share in newer markets.

The bank upgraded its total revenue guidance to up 5% to 7%, excluding the contribution from BTIG, mostly driven by its broad-based fee income growth in payment, corporate trust, and organic capital market fees. The BTIG guidance for the remainder of 2026 looks quite conservative to us, with a quarterly revenue contribution of around $200 million compared to its June revenue of $98 million. That said, capital market fees could be very volatile. More importantly, the bank aspires to improve the margin of BTIG to around 20% from its current 14%-15%, and targets to increase its capital market revenue mix to around 10% from the current 7%. While we see some potential synergy from cross-selling BTIG products to U.S. Bancorp's existing clients, we do not plan to include that in our base case forecast and think the 10% revenue share target is quite ambitious, given that revenue synergies are generally hard to achieve.

We maintain our $65 fair value estimate for U.S. Bancorp after updating our interest rate projections. Our base case scenario now includes a 0.25% increase in the federal-funds rate in December 2026 as well as the 0.25% hike in September 2026, and we expect the Federal Reserve to start cutting short-term interest rates in the second half of 2027. More importantly, our long-term rate assumptions remain unchanged. We note U.S. Bancorp is not as rate sensitive as some of the smaller regional banks under our coverage. We still expect the bank to grow its net interest income at a CAGR of 3.2% from 2025-30. Our $65 fair value estimate is equivalent to 2.2 times the company's tangible book value as of the end of June 2026, and 1.9 times TBV excluding AOCI.

For 2026, we expect commercial lending, commercial real estate, and credit cards to be the major drivers of loan growth, with total loan growth of around 5.6%, compared with 3.0% in 2025. We expect the bank's net interest margin to expand to 2.78% in 2026, up from 2.72% the prior year, as it continues to benefit from fixed-asset repricing. We expect net interest income to grow 5.3% in 2026. Over the longer term, we expect loan growth between 3.3% and 3.7%, with a normalized NIM forecast of around 2.71%. Taken together, we now expect the bank's NII to grow at a CAGR of 3.4% from 2025-35.

Turning to fee income, we expect growth of around 10.9% in 2026, driven mainly by capital markets and investment management, partially offset by headwinds from the loss of some European distribution partners in merchant processing fees. Over the long term, we forecast normalized fee income growth of around 3.2%.

On expenses, the bank's strong discipline has led to two consecutive years of core expense decline, excluding merger-related charges and core deposit intangible amortization. Our 2026 expense growth forecast is 5.6%, mostly driven by the inclusion of BTIG and the bank's higher branch investment budget of $300 million, up from $200 million. Over the long run, we expect annual expense growth of around 3%, with the efficiency ratio normalizing around 58.3%, in line with management's mid- to high-50s target through the cycle.

We expect the 2026 net charge-off ratio to be 59 basis points of average loans, slightly higher than 56 and 57 basis points in 2025 and 2024, respectively, as we incorporate the Amazon.com co-branded small business card portfolio. Our long-term normalized net charge-off ratio forecast for the bank is 61 basis points.

We think the bank can achieve its high-teens ROTCE target in the short term, but necessary investments into the business and credit normalization should push its return lower over time. On a normalized basis, we project a return on tangible common equity of 16.2%, compared with our estimated 8.9% cost of equity.

We believe U.S. Bancorp has a Morningstar Economic Moat Rating of wide because it possesses durable cost advantages and switching costs consistent with our bank moat framework. The bank has consistently earned returns on tangible equity superior to peers and in excess of our estimated cost of equity of 8.9%. U.S. Bancorp has the fourth-largest deposit market share within its footprint. The bank is also one of the largest US issuers of credit cards and debit cards, one of the largest domestic merchant processors, and one of the largest corporate trust providers. The bank is the largest US regional bank and is not subject to a global systemically important bank surcharge, unlike money-center banks, which gives it a structural return advantage from holding relatively less capital. While each segment generates strong returns on its own, we see additional advantages from economies of scope when combining them under one banking roof. We are confident that the bank will consistently earn returns that are comfortably above its 8.9% cost of equity through the cycle.

We believe bank moats are derived primarily from two sources: cost advantages and switching costs. We see cost advantages coming from three primary factors: a low-cost deposit base, excellent operating efficiency, and conservative underwriting. Regulatory costs must also be considered.

U.S. Bancorp has a slightly higher cost of deposits than the other banks we cover, and this is mostly due to its relatively more expensive corporate trust deposits. We estimate that the bank has about 12% of deposits tied to its corporate trust business and often sit at the high end of deposit-funding costs. Excluding corporate trust-related deposits, U.S. Bancorp's core deposit franchise is among the best among its peers, as the bank has one of the highest deposit market share scores across metropolitan statistical areas in our US bank coverage. Due to the lower mix of noninterest-bearing deposits and slightly higher cost of interest-bearing deposits, U.S. Bancorp’s overall cost of funding is slightly higher than its regional peers but its scale, operating efficiency, and fee income franchises matter more.

U.S. Bancorp has historically been a more efficient operator under our coverage. We believe its topnotch deposit market share demonstrates the bank’s strength in traditional banking businesses. Its scalable fee-income businesses, such as payments and corporate trust, also allow the bank to generate little or no incremental costs from additional volume, given its fixed cost base. The bank has one of the most comprehensive product offerings and a large distribution scale, which also leads to economies of scope, enabling the bank to lower relative customer acquisition costs. We also believe scale will be even more important and the largest banks are more likely to benefit from tech spending in terms of efficiency in the future. With its annual tech spending around $3.2 billion, we are confident that the bank can keep up the level of investments while still maintaining its operating efficiency edge.

In terms of credit costs, U.S. Bancorp also has a conservative underwriting culture. During the 2008 financial crisis, quarterly net charge-offs peaked at 2.5% of loans, while many peers saw 3% or more, sometimes for multiple quarters. This was despite having a higher proportion of its books exposed to credit cards. U.S. Bancorp never reported an unprofitable quarter throughout the crisis. U.S. Bancorp’s performance during the pandemic also demonstrates the bank’s conservative culture, and we believe this conservatism would probably put the bank in a good place during the next downturn.

Lastly, regulatory costs matter both at the industry level and for U.S. Bancorp specifically. The US banking system has improved over the last decade, with capital levels at all-time highs and stronger postcrisis regulation. Despite intense competition, the largest banks by assets have earned higher returns on equity for decades and still do. Our long-run outlook is positive given the US' stable democracy, steady GDP growth, and reserve currency status. U.S. Bancorp is not large enough to be a global systemically important bank (GSIB), avoiding the most burdensome rules, but as a Category III bank still faces the Federal Reserve's annual stress tests, liquidity coverage rules, and supplementary leverage ratio. We view the March 2026 Basel III endgame proposal and 2025 stress test changes as mostly positive. Category II rules would trigger if trailing 12-month average assets exceed $700 billion, expected around 2027 on organic growth. We believe that the bank should handle the transition well. One of the most important changes under Category II bank status is that U.S. Bancorp will have to include accumulated other comprehensive income, or AOCI, in common equity Tier 1 capital. The bank already had an adjusted CET1 ratio (adjusting for AOCI) of 9.4% at the end of June 2026, above its 7.1% regulatory minimum.

We view U.S. Bancorp as having outstanding attributes that support the bank's ability to earn a moat through switching costs. Its nonbanking fee income comes mostly from payment, wealth and asset management, corporate trust, and fund administration fees. For each of these businesses, scale tends to matter. While its scale in both payment and corporate trust trails the largest players, having these products certainly sets the bank apart from other regional banks and adds a nice additional capability set that can be integrated and utilized across the bank's other business units. The bank has one of the highest fee income over net revenue ratios (over 40% in 2025) and fee income over total assets ratios among US regional banks, demonstrating the bank’s capabilities to monetize its customer relationships.

U.S. Bancorp's corporate trust business should benefit from the growth of digital assets.

The bank's partnership with State Farm and Edward Jones could provide additional revenue growth, a catalyst that differentiates it from its peers.

U.S. Bancorp is the largest megaregional bank in the United States, which gives it greater scale without the additional regulatory burden of being a GSIB.

In the event of a recession, the bank would face lower balance-sheet growth and higher credit costs.

The bank might not be investing enough into its core banking business with its cost control.

U.S. Bancorp’s earnings could face pressure if a longer-term rate cap on credit card rates is implemented.