Financial services giant U.S. Bancorp (NYSE: USB) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 6.8% year on year to $7.3 billion. Its non-GAAP profit of $1.22 per share was 9% above analysts’ consensus estimates.

Is now the time to buy USB? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

U.S. Bancorp’s third quarter was characterized by broad-based strength in fee-generating businesses and steady improvement in credit quality. Management highlighted that fee income grew across payments, institutional, and consumer segments, while strategic investments in process automation contributed to improved operating leverage. CEO Gunjan Kedia credited the company’s performance to a diversified balance sheet and ongoing risk management, stating, “Our highly diversified balance sheet and foundational risk management capabilities delivered improved credit quality and stronger capital and liquidity levels this quarter.”

Looking ahead, U.S. Bancorp’s guidance is anchored by expectations of continued net interest margin expansion, growth in fee income, and disciplined expense management. CFO John Stern outlined the path to further margin gains, citing fixed asset repricing, targeted loan mix shifts, and ongoing deposit growth as key levers. Management acknowledged that macroeconomic factors could affect the speed of margin improvement, noting, “The speed at which we gain to that 3% margin is going to depend on the curve... deposit competition and how we execute,” and expressed confidence in the company’s ability to deliver positive operating leverage in the coming quarters.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to organic fee growth, improved cost efficiency, and strategic focus on payments transformation, while highlighting momentum in consumer deposits and impact finance.

• Fee income diversification: Fee revenue grew 9.5% year over year, with payments, institutional, and consumer businesses all contributing. This broad-based growth was supported by new business momentum and stronger client relationships, which management views as a durable source of revenue.
• Payments transformation progress: The company made notable strides in card issuing and merchant processing, with CEO Gunjan Kedia pointing to new card acquisitions and a robust pipeline in merchant services. Upcoming deep dives into these businesses are expected to detail further strategies.
• Consumer deposit growth: U.S. Bancorp increased its share of consumer deposits to over 52% of the total, aided by interconnected products like BankSmartly and expanded branch efforts. Management emphasized these deposits are both stable and favorably priced, supporting long-term funding needs.
• Expense discipline and productivity: The company’s signature productivity programs and process automation led to improved efficiency ratios and positive operating leverage. Management noted that expense management remains a focus, even as investments are made to fuel organic growth.
• Impact Finance expansion: Strength in the Impact Finance segment, bolstered by the Union Bank acquisition, drove double-digit compound growth in tax credit syndication and environmental finance. Management expects continued momentum as recent policy changes and California market exposure support further gains.

Drivers of Future Performance

Management expects future growth to be driven by margin expansion, sustained fee income gains, and prudent expense control, while acknowledging macroeconomic and competitive uncertainties.

• Net interest margin trajectory: Management sees a clear path toward 3% net interest margin by 2027, driven by fixed asset repricing, a shift toward higher-yielding commercial and card loans, and careful deposit mix management. However, the pace of improvement will depend on interest rate trends and competitive dynamics in deposit markets.
• Fee income stability and expansion: Broader adoption of interconnected product offerings and deeper client relationships are expected to support mid-single-digit fee growth. Management cited ongoing investments in payments and cross-selling as positive drivers, though seasonal trends and market volatility could affect short-term results.
• Expense control and operating leverage: U.S. Bancorp plans to maintain positive operating leverage through disciplined expense management and continued rollout of productivity programs. Management highlighted that investments in growth areas are being balanced with efficiency initiatives, aiming to support both profitability and topline expansion.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be monitoring (1) the pace of net interest margin improvement and the impact of evolving interest rate trends, (2) continued execution in payments transformation and updates on key card and merchant initiatives, and (3) sustained growth in consumer deposits and fee-generating businesses. The performance of Impact Finance and the company’s ability to balance organic growth with expense control will also be critical indicators of strategic success.

U.S. Bancorp currently trades at $45.90, down from $46.49 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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