U.S. Bancorp (NYSE:USB) Q3 2023 Earnings Call Transcript

John Stern: Yes. The function of the curve really changed as the — we saw the curve flatten out quite a bit this quarter. What I’d say on that is we have a number of securities that obviously are fixed rate that have longer durations to them or longer average lives. And so — and then we have a number of — with our — the security portion of swaps, that has very, very low duration. It’s three months or so because of how it’s swapped the floating rate index. So in addition to that, we’ve — as we’ve added on, some of the security book, we have about $8 billion or so of — when we did some of the auto repack transaction in the fourth quarter of last year as well as the second quarter of this year. That is very short as well in addition to some of the floating rate securities within that book.

So, that — it’s kind of more of a barbell approach, which gives you the duration of it, which just gives us a value change for a move in interest rates. But in terms of the burn-down, that will depend in part about how the shape and the type of securities that are within the book.

Matt O’Connor: Okay. That’s helpful. Obviously, less relevant now given the Fed’s decision, but still something we’re all tracking.

Andy Cecere: Thanks, Matt.

John Stern: Thanks, Matt.

Operator: And next, we can go to Ken Usdin with Jefferies. Please go ahead.

Ken Usdin: So just one more follow-up on the Category II news, I just want to make sure we’re super clear. So this $700 billion stop being a bind forever? Or obviously, you don’t have to cross on the prior potential timeframe. But to the prior question, just wondering, you said there’s — you don’t have an asset cap. So does that mean that Category II is now a non-thing for U.S. Bank going forward in any time period? Or when you cross naturally, do you still get on the natural clock of having to comply? Just wondering how that fits in with the news you got yesterday.

Andy Cecere: So, we’re bound, Ken, by the current rule set, which is after four quarters of an average of $700 billion then you would go to Category II, or the new Basel III rule set, which is yet to be finalized, as you said. But the current rule set is what we’re bound on. So $700 million still is important, but what we’re seeing is given where we think asset growth will be, given our continued optimization in certain categories, given our focus on high-return businesses, we do not see that as a hurdle to growth.

Ken Usdin: Understood. Okay. That’s what I wanted to clarify.

Andy Cecere: You bet.

Operator: And with no further questions, I’ll hand the call back over to George Andersen.

George Andersen: Thanks Brad. Thank you, everyone, for listening to our earnings call. Please contact the Investor Relations department, if you have any follow-up questions.

Operator: This does conclude the conference for today. Thank you for participating. You may now disconnect.