U.S. Bancorp (NYSE:USB) reported record third-quarter net revenue of approximately $8 billion and diluted earnings per share of $1.34, representing year-over-year growth of about 10%, as fee income growth, higher net interest income and positive operating leverage supported results.
Chairman and Chief Executive Officer Gunjan Kedia said the bank’s net revenue increased 8.7% from a year earlier, while disciplined productivity generated 240 basis points of positive operating leverage. Payments revenue rose 6.5%, and fees again accounted for 44% of total revenue.
Revenue growth supported by BTIG, payments and net interest income
Vice Chair and Chief Financial Officer John Stern said revenue increased 6.4% year over year when adjusted for BTIG and securities losses. The company closed its acquisition of BTIG in June, and the acquired business contributed $226 million in third-quarter fee revenue.
Capital markets revenue increased 69% from a year earlier, reflecting BTIG’s full-quarter contribution and approximately 10% growth in legacy capital-markets operations. Kedia said U.S. Bancorp expects capital markets to account for 8% to 10% or more of company revenue over the next three to five years, supported by organic growth, deeper client relationships and additional product capabilities.
Total fee income increased 14.9% year over year, with broad-based growth across most categories. Stern said corporate payments revenue rose about 19%, driven primarily by new business and increased spending by corporate and government clients. Treasury management revenue continued to grow in the mid-single digits, he said.
The bank said merchant processing revenue may remain around flat growth for the next couple of quarters, while mortgage-related revenue could be affected by higher rates in the fourth quarter. Stern also said “other” revenue included more unusual gains during the third quarter and is expected to normalize to roughly $125 million to $150 million.
On the net interest income side, fully taxable equivalent net interest income rose 5.6% from a year earlier and 2.3% sequentially. Net interest margin expanded five basis points from the prior quarter to 2.84%, driven by loan yields and the repricing of fixed-rate assets. Stern said the company expects a similar margin increase in the fourth quarter.
Loan, deposit and credit trends remain constructive
Average loans increased 8% year over year and 1% sequentially, led by commercial and industrial lending, credit cards and commercial real estate. The Amazon Small Business credit card portfolio contributed approximately $900 million of average loans and $1.7 billion of period-end loans during the quarter.
Stern said the bank expects continued loan growth in the fourth quarter, citing strong pipelines. Underlying commercial and industrial loan growth was healthy, he said, though certain non-depository financial institution balances ran off after some prospective deals did not meet the bank’s return thresholds. Kedia said the company has seen modest slowing in commercial real estate and continued muted residential mortgage activity, but described C&I demand as robust and broad-based.
Average deposits grew 2.9% from a year earlier and 2.2% sequentially, aided by record consumer deposits and growth in relationship-based business deposits. Deposit costs increased seven basis points sequentially, including about two basis points from the September Federal Reserve rate increase, while total funding costs rose only one basis point as the funding mix improved.
Management said it expects deposit betas to begin at about 50% following further rate increases. Stern said U.S. Bancorp has been shifting its balance sheet toward greater asset sensitivity, with floating-rate loans representing 36% of earning assets at quarter-end, compared with 32% four years earlier. About $10 billion of fixed-rate assets reprice each quarter, he added, at an estimated 125-basis-point improvement.
Credit quality remained healthy, according to the company. Nonperforming assets declined 1.6% from the previous quarter, while net charge-offs fell two basis points to 51 basis points. Stern said the company had not seen meaningful deterioration among consumer borrowers or commercial clients despite higher rates, although commercial real estate remains an area being monitored.
Capital position and shareholder distributions
U.S. Bancorp’s common equity Tier 1 ratio was 10.8% at Sept. 30, unchanged from the prior quarter. Its AOCI-adjusted CET1 ratio was 9.1%, down 30 basis points, reflecting risk-weighted asset growth, higher Treasury rates and wider credit spreads. Tangible common equity remained stable at 6.6%.
Stern said the company generated roughly 33 basis points of capital during the quarter after dividends, but paused share repurchases amid strong loan demand, the Amazon portfolio onboarding and rate-related capital effects. He said the company expects capital ratios to build and is positioned to resume repurchases over the next one or two quarters, depending on loan growth, interest rates and regulatory developments.
Kedia said the bank is prepared to transition to Category II regulatory requirements and that its expectation to restart buybacks does not depend on potential relief from Basel III endgame rules.
Updated 2026 outlook and strategic investments
For the fourth quarter, U.S. Bancorp expects fully taxable equivalent net interest income growth of 6% to 7% year over year, fee revenue growth of 13% to 14%, and noninterest expense growth of about 8%, or closer to 4% excluding BTIG.
For full-year 2026, the company raised its net revenue growth outlook to 8% to 9%, or 6% to 7% excluding BTIG, from prior guidance of 5% to 7%. It also expects about 300 basis points of positive operating leverage for the year, or about 400 basis points excluding BTIG, compared with prior expectations of 200 and 300 basis points, respectively.
Kedia said productivity efforts, including AI initiatives, have contributed to operating efficiency, though she characterized AI as one of several productivity levers rather than the sole driver. The bank remains measured in deploying client-facing AI applications because of privacy and customer-confidence considerations, she said.
The company is also expanding consumer and small-business capabilities through branch densification, client centers, brand marketing and product initiatives. Kedia said U.S. Bancorp launched the Amazon co-brand partnership, expanded its Business Essentials offering and added banking teams in expansion markets during the quarter.
In corporate payments, the company launched a pilot of its USBDC stablecoin during the quarter. Kedia said current client interest is largely exploratory rather than reflecting robust demand, with discussions concentrated in corporate payments and focused on potential benefits such as around-the-clock availability and cross-border transactions.
About U.S. Bancorp (NYSE:USB)
U.S. Bancorp is a financial services holding company headquartered in Minneapolis, Minnesota, and the parent company of U.S. Bank National Association. The company provides banking, lending, payment, investment, and wealth management services to individuals, businesses, government entities, and institutional clients.
Through U.S. Bank, its principal subsidiary, U.S. Bancorp offers checking and savings accounts, credit cards, mortgages, consumer and business loans, commercial banking, treasury management, investment services, and financial planning.
