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U.S. Bancorp (USB) Q3 FY26 earnings call: guidance and Q&A

Earnings call· Sep 2026 (Q3 FY26)· Oct 15, 2026

Source: earnings call transcript

Executive summary

U.S. Bancorp Q3 FY26 — Record Revenue and Strong Operating Leverage

U.S. Bancorp delivered a strong third quarter, marked by record revenue and significant positive operating leverage, driven by strategic execution across its diversified business mix. The company saw robust loan and deposit growth, alongside an expanding net interest margin, and is focused on strengthening net interest income and margin through asset and funding mix optimization. Management expressed confidence in capital generation and the ability to resume share repurchases in the near term, while continuing to invest in growth initiatives and digital capabilities.

Highlights

5

  • Record net revenue of approximately $8 billion, up 8.7% year-over-year.

  • Diluted EPS of $1.34, up 10% year-over-year (or 16% excluding reserve build).

  • Achieved 240 basis points of positive operating leverage (440 bps excluding BTIG).

  • Net interest margin expanded 5 basis points sequentially to 2.84%.

  • Total fee income increased 14.9% year-over-year, with Capital Markets growing 69%.

Concerns

3

  • AOCI-adjusted CET1 ratio declined 30 basis points to 9.1% due to RWA growth and higher treasury rates.

  • Nonperforming assets declined 1.6% linked quarter, but reserve build impacted EPS by $0.07.

  • Mortgage revenue is expected to be impacted by higher rates in Q4, with limited year-on-year growth.

Guidance & targets

CategoryTargetConfidence
Net interest income growth
6% to 7%
high materiality
High
Total fee revenue growth
13% to 14%
high materiality
High
Noninterest expense growth
approximately 8%
medium materiality
High
Total net revenue growth
8% to 9%
high materiality
High
Positive operating leverage
approximately 300 basis points
high materiality
High
Net interest margin trajectory
increase by a similar amount
high materiality
High
Capital Markets revenue contribution
8% to 10% or more of total company revenue
high materiality
High
Share repurchases
resume over the next quarter or two
high materiality
High
Net interest margin target
3%
high materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Payments
Transformation efforts continued to gain traction, with total payments revenue growing 6.5% year-over-year.
—6.5%——
Capital Markets
Reflects a full quarter contribution from the BTIG acquisition and strong growth across legacy capital markets, particularly in commodities, foreign exchange, and impact finance.
Legacy Capital Markets growth: 10%
$226M69%——
Corporate Payments
Strong year-on-year growth driven by new business and increased corporate and government spending, benefiting from market share gains and tailwinds from fuel price increases in fleet and freight businesses.
—19%——
Treasury Management
Continuing to see nice growth, with ongoing investments in payable and digital channels and capabilities.
—mid-single-digit——
Small Business Banking
Contributes meaningfully to company revenue and is an invaluable source of stable, well-priced deposits. Launched several major initiatives including Amazon co-brand partnership, expanded Business Essentials, and new banking teams in expansion markets. Will be an important priority into 2027.
Small businesses served: >2 million
————

USB operating KPIs by quarter

USB operating KPIs stated on its earnings calls, by fiscal quarter
KPI Dec 2024 Q4 FY24 Mar 2025 Q1 FY25 Sep 2025 Q3 FY25 Dec 2025 Q4 FY25 Mar 2026 Q1 FY26 Jun 2026 Q2 FY26This call Sep 2026 Q3 FY26Change vs prior quarter
Common equity tier 1 ratio (CET1)
10.6% On the bottom right of the slide, you can see that our CET1 capital ratio increased 10 basis points from the prior quarter to 10.6%. Source: earnings call transcript
10.8% Our CET1 capital ratio increased 20 basis points to 10.8% this quarter as we continue to balance ongoing capital accretion with modest share repurchases. Source: earnings call transcript
10.9% As of September 30, our common equity Tier 1 capital as a percentage of risk-weighted assets was 10.9%, a 20 basis point increase linked quarter. Source: earnings call transcript
10.8% As of December 31, our common equity Tier 1 capital ratio was 10.8% or 9.3%, including AOCI. Source: earnings call transcript
10.8% As of March 31, our common equity Tier 1 capital ratio was 10.8%, or 9.3% including AOCI. Source: earnings call transcript
10.8% As of June 30, our common equity Tier 1 capital ratio was 10.8% or 9.4%, including AOCI. Source: earnings call transcript
10.8% CET1 ratio remained stable at 10.8% and tangible book value per share was up 5.4% year-over-year. Source: earnings call transcript
0 pt
Return on tangible common equity (ROTCE)
18.3% On an adjusted basis, we delivered an 18.3% return on tangible common equity and an improved efficiency ratio of 59.9% in the fourth quarter. Source: earnings call transcript
17.5% In the first quarter, we reported earnings per share of $1.03 and delivered a return on tangible common equity of 17.5%. Source: earnings call transcript
18.6% As the slide illustrates, each of our key profitability and efficiency ratios improved this quarter, highlighted by a return on average assets of 1.17% and a return on tangible common equity of 18.6%. Source: earnings call transcript
18.4% 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. Source: earnings call transcript
17% Disciplined balance sheet management and strong returns drove a return on tangible common equity of 17%, while return on average assets was 1.15% this quarter. Source: earnings call transcript
18.7% We delivered strong returns, which includes a return on tangible common equity of 18.7% and a return on average assets of 1.26%. Source: earnings call transcript
—+1.7 pt
Common equity tier 1 ratio (CET1) Including AOCI—
8.8% Our CET1 ratio, including AOCI, was 8.8%. Source: earnings call transcript
—
9.3% As of December 31, our common equity Tier 1 capital ratio was 10.8% or 9.3%, including AOCI. Source: earnings call transcript
9.3% As of March 31, our common equity Tier 1 capital ratio was 10.8%, or 9.3% including AOCI. Source: earnings call transcript
9.4% As of June 30, our common equity Tier 1 capital ratio was 10.8% or 9.4%, including AOCI. Source: earnings call transcript
9.1% Adjusting for AOCI, the CET1 ratio declined 30 basis points to 9.1%. Source: earnings call transcript
-0.3 pt
Net interest margin ——
2.75% This quarter, we generated a very meaningful 530 basis points of positive operating leverage, a return on average assets of 1.17% and a net interest margin of 2.75%. Source: earnings call transcript
2.77% Net interest margin increased 2 basis points sequentially to 2.77% as we look to achieve greater margin expansion in the medium term. Source: earnings call transcript
2.77% Net interest margin was flat linked quarter at 2.77% as core loan growth and stable deposit pricing were offset by elevated mortgage prepayments and somewhat tighter credit spreads. Source: earnings call transcript
2.79% Net interest margin improved 2 basis points sequentially to 2.79%. Source: earnings call transcript
2.84% Loans grew 1.0% and deposits grew 2.2% sequentially, while the net interest margin expanded 5 basis points to 2.84%. Source: earnings call transcript
0 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

ProductTypeDetails
USB DC stablecoinlaunch
Amazon co-brand partnershipexpansion
Business Essentials suite of productsexpansion

Deals & partnerships

BTIG Acquisition of BTIG to strengthen Capital Markets capabilities.

The acquisition of BTIG was closed in June and contributed significantly to fee revenue in the third quarter. The combined businesses are working to broaden client services and deepen wallet share.

Amazon Co-brand partnership for small business credit cards.

The Amazon co-brand partnership for small business credit cards was onboarded this quarter, contributing to loan growth and expanding reach with small businesses.

Risks & headwinds

Impact of higher rates on mortgage business Q4 FY26

Limited or low year-on-year growth

Commercial real estate (CRE) exposure

Not called out as an issue, but an area to watch

Mitigation:Underwriting includes cushion for rate moves; well understood and managed.

Regulatory uncertainty (Basel III Endgame) Q4 FY26

Potential for new rules to impact RWA and capital demands

Mitigation:Actively monitoring; not relying on benefits for capital plans; prepared for Cat II transition.

AI cash sorting by personal AI agents Near-term

Not observed yet

Mitigation:Logistics are complicated; customer base is digitally savvy with high adoption of digital tools for deposit price discovery and optimization; strategy focuses on value propositions beyond just deposit price.

What to watch in Q4 FY26

Net interest margin (NIM) sequential increase

Q4 FY26
Current 5 bps
Target Similar amount

Why it matters

NIM expansion is a key driver of NII growth and overall profitability, reflecting effective balance sheet management in a changing rate environment.

We currently expect net interest margin to increase by a similar amount in the fourth quarter.

Find out whether USB delivers this. Inve re-checks your case every morning.

Q&A highlights

What are the key drivers for the NII outlook, including loan growth, deposit trends, and how rising rates impact NIM, fixed asset repricing, and deposit betas?

Management expects similar strong loan and deposit growth in Q4, aided by the Amazon card book and consumer/small business deposits. NIM is expected to increase by a similar amount in Q4 due to improving funding and asset mix. The bank is shifting to asset sensitivity, with floating-rate loans now 36% of earning assets. Fixed-rate assets repricing at a 125 bps improvement, and deposit betas are assumed to pick up at 50% from the last rate hike.

“In terms of loans, we've been shifting more into C&I, commercial real estate and card, all predominantly floating rate assets, as you know. And then in the investment portfolio, that has been coming down and we've been doing more in cash. So we have been shifting there a bit.”

asked by John McDonald · answered by John Stern

2 min read 6 chapters

Detailed narrative

Strategic Priorities and Operating Leverage

U.S. Bancorp delivered strong Q3 FY26 results, driven by execution against its three strategic priorities: revenue growth, disciplined productivity, and payments transformation. The company achieved 240 basis points of positive operating leverage, or 440 basis points excluding the BTIG acquisition, and improved its efficiency ratio and return on average assets year-over-year. This performance was supported by record net revenue of approximately $8 billion and diluted EPS of $1.34, up 10% year-over-year.

Fee Income Diversification and Capital Markets Growth

Fee income continued to grow nicely, contributing 44% of total revenue, reflecting the diversified and deep fee complex. The BTIG acquisition, closed in June, contributed $226 million of fee revenue in Q3, driving Capital Markets growth of 69% year-over-year. The company expects Capital Markets to grow to 8% to 10% or more of total company revenue over the next 3 to 5 years through organic growth, deepening client wallet share, and adding product capabilities.

Net Interest Income and Margin Expansion

Net interest income (NII) on a fully taxable equivalent basis increased 5.6% year-over-year and 2.3% linked quarter, driven by relationship-based loan and deposit growth, improving earning asset and funding mix, and fixed asset repricing. The net interest margin (NIM) expanded 5 basis points sequentially to 2.84%. Management anticipates NIM to increase by a similar amount in Q4 and sees a path to 3% NIM in 2027, supported by asset sensitivity and disciplined deposit pricing.

Balance Sheet Trends and Capital Management

Average loans grew 1.0% sequentially and 8.0% year-over-year, primarily in C&I, credit card, and commercial real estate. Average deposits grew 2.2% sequentially and 2.9% year-over-year, with strong consumer and investment services growth. The CET1 ratio remained stable at 10.8%, though the AOCI-adjusted CET1 declined 30 basis points to 9.1% due to RWA growth and higher treasury rates. The company expects capital ratios to build and plans to resume share repurchases in the next one to two quarters, maintaining a 70-75% payout ratio.

Small Business and Corporate Payments Strategy

U.S. Bancorp is expanding its consumer and small business franchise, leveraging its scaled platform and launching initiatives like the Amazon co-brand partnership and new banking teams. Small business banking is a priority for 2027, providing stable, well-priced deposits. In corporate payments and treasury management, which represent approximately 6% of company revenues, the bank is investing in interoperability across traditional rails and emerging technologies like stablecoins, having launched its first USB DC stablecoin pilot.

Credit Quality and Macro Outlook

Credit quality metrics remained healthy, with linked-quarter nonperforming assets declining 1.6% and net charge-offs decreasing 2 basis points to 51 basis points. The credit card portfolio is growing without compromising underwriting standards, with FICO bands marginally improving. While higher rates are a watch item, the company has not seen significant changes in consumer or commercial credit trends, though commercial real estate remains an area of focus.

Summary of the company's earnings call. Not investment advice.