Beta Finch - U.S. Bancorp - USB - EN

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ALEX: Welcome to Beta Finch, your AI-powered earnings breakdown, where we take the transcripts so you don't have to. I'm Alex.

JORDAN: And I'm Jordan. Alex, before we get into it—U.S. Bancorp just posted a pretty strong quarter.

ALEX: They did, and we're going to dig into all of it. But first, our standard reminder: this podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions.

JORDAN: Solid. Okay, so let's talk numbers. U.S. Bancorp—ticker USB—reported Q3 2026 results on October 15th, and the headline is record net revenue of about $8 billion.

ALEX: Right, and diluted EPS came in at $1.34, up roughly 10% year-over-year. CEO Gunjan Kedia and CFO John Stern were both pretty upbeat on the call.

JORDAN: What stood out to me was the operating leverage number—240 basis points positive, and excluding the BTIG acquisition, it's actually 440 basis points. That's a big efficiency win.

ALEX: Yeah, and revenue growth of 8.7% year-over-year outpaced expense growth of 7.1%. So they're growing the top line faster than costs, which is exactly what you want to see from a bank focused on productivity.

JORDAN: Let's talk about BTIG, because that's clearly a big strategic piece here. U.S. Bancorp closed that acquisition back in June, and it already contributed $226 million in fee revenue this quarter.

ALEX: And management's ambition here is pretty bold—they want capital markets to grow from about 8% of total company revenue to 10% or more over the next three to five years.

JORDAN: Legacy capital markets also grew 10% on its own, and combined with BTIG, total capital markets revenue was up 69% year-over-year. That's a really strong combination quarter.

ALEX: Let's shift to the balance sheet side, because this is where things get interesting for income investors. Net interest margin expanded 5 basis points sequentially to 2.84%, and management expects a similar bump in Q4.

JORDAN: And there's a longer-term thesis here too—CFO John Stern talked about a path to a 3% NIM at some point in 2027. The engine behind that is this ongoing shift toward asset sensitivity. Floating-rate loans now make up 30% of earning assets, up from just 22% four years ago.

ALEX: That's a meaningful shift. Basically, they're leaning into commercial and industrial loans, commercial real estate, and credit cards—all more floating-rate in nature—while being more measured on fixed-rate stuff like residential mortgage and auto.

JORDAN: Speaking of credit cards, can we talk about the Amazon small business co-brand partnership? That's a new one.

ALEX: Yeah, this quarter they onboarded it, and it already added about $900 million to average loans and $1.7 billion to period-end loans. That's going to be a nice tailwind heading into Q4 since they'll get the full quarter's impact.

JORDAN: And it fits into this broader small business push—they're serving more than 2 million small businesses now, they brought in Jessica Alba as a brand ambassador for that segment, and they're clearly treating this as a strategic priority heading into 2027.

ALEX: Let's get into guidance, because management actually raised it this quarter. For full-year 2026, they now expect total net revenue growth of 8% to 9%, up from the prior 5% to 7% range.

JORDAN: And operating leverage guidance moved up too—now approximately 300 basis points for the full year, or 400 basis points excluding BTIG. That's up from the previous 200 to 300 basis point guide. So they're not just beating expectations, they're raising the bar for themselves.

ALEX: Now, let's hit some of the more interesting Q&A moments, because there were a few. One thing that jumped out—analysts pressed hard on share buybacks. USB paused repurchases recently, and CFO John Stern explained that was

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