VALUATION HIGHLIGHTS

1. Wholesale Banking & Wealth Management constitutes 75% of the Trefis price estimate for U.S. Bancorp's stock.
2. Consumer Banking constitutes 15% of the Trefis price estimate for U.S. Bancorp's stock.
3. Card & Payment Services constitute 10% of the Trefis price estimate for U.S. Bancorp's stock.

WHAT HAS CHANGED?

Latest Earning

U.S. Bancorp reported third-quarter earnings that beat expectations, driven by record revenue and loan growth. Net income rose to $2 billion, or $1.22 per share, while revenue grew 6.8% to $7.33 billion, with net interest income up 2% and non-interest income climbing 14%.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of U.S. Bancorp's value that present opportunities for upside or downside to the current Trefis price estimate for U.S. Bancorp:

Card & Payments Services

• Merchant Transactions: Our forecast for the number of merchant transactions assumes that the number will show a gradual growth of 4% annually. In case the transactions grow at 10%, there could be a 4% upside to the Trefis price estimate for U.S. Bancorp's stock.

Wholesale Banking

• Net Interest Margin on Wholesale Loans: The interest margin on wholesale loans improved from 4% in 2020 to 5.3% in 2024 due to subsequent rate hikes. Going forward, we expect the figure to improve over the forecast period.

BUSINESS SUMMARY

U.S. Bancorp is a financial services company that offers lending and depository services, cash management, foreign exchange, trust, and investment management services. Additionally, it offers customers credit cards, merchant and ATM processing, mortgage banking, insurance, brokerage, and leasing services. U.S. Bancorp is the seventh-largest bank in the United States by assets.U.S. Bancorp's branches are mostly concentrated in the Midwest and the Western areas of the U.S. The bank offers financial products and services for corporations, small businesses, governments, financial institutions, and private and business clients in the U.S.

SOURCES OF VALUE

Credit Cards Payment Division

The Credit Cards, Debit Cards, and Payment Division is a major source of value for U.S. Bancorp. The bank is one of the largest providers of Visa corporate and purchasing card services. Its wholly-owned subsidiary, Elavon, provides merchant processing services within the U.S. as well as in Canada and parts of Europe. However, the non-U.S. operations of the company are not very significant.U.S. Bancorp also has a significant presence in the prepaid card market and is one of the frontrunners in the mobile payments sector, as one of the top banks involved in the VISA Digital Wallet program.

Wholesale Banking

This refers to U.S. Bancorp's commercial banking and treasury services operations. At the end of 2024, the division had about $145 billion in outstanding loans. The division's key characteristics are the low-risk profile of loans handed out (evidenced by low loan provision figures) and high operating margins.

KEY TRENDS

Increasing adoption of prepaid cards and mobile payment solutions

Governments and private employers are increasingly turning to prepaid cards as a cost-effective method of distributing welfare and employee benefits. U.S. Bancorp provides prepaid card services to 100 government programs in 31 U.S. states. Prepaid cards are expected to enhance the non-interest revenues for U.S. Bancorp, as this segment of the market is not covered under the upcoming regulations on banks that seek to limit charges on credit and debit card services. Mobile payment solutions could also boost the company's revenues, as there is a potential to earn higher revenues from these niche services.

High deposit and loan growth

U.S. Bancorp has reported the highest growth rate in deposits received as well as in outstanding loans compared to its peers over recent years. The increase in deposits has largely been seen in low-cost deposits, which is leading to higher net interest margins for the bank. Higher deposits and loans will also translate into increased non-interest income going forward.