U.S. Bancorp (USB) Q3 2026 earnings review
U.S. Bancorp raises its outlook but buys back no shares
U.S. Bancorp's lending and fees both grew, but the broker it bought in June added sales and almost no profit. Revenue rose 9% to a record, chief executive Gunjan Kedia said. Profit per share climbed 10% despite a reserve for a purchased card portfolio, because loans grew 8% and credit losses fell.
| Revenue growth without BTIG | 5.7% 8.7% as reported |
|---|---|
| Profit per share | $1.34 +9.8% from a year ago; +16% without the card-book reserve |
| Net interest margin | 2.84% +0.05 percentage points from last quarter |
| Full-year revenue outlook | Raised 8% to 9% growth, from 7% to 9% |
⚖️ Verdict: 🟢 Bullish
The story got better because the bank raised its plan: lending income should rise 6% to 7% next quarter, above this quarter's pace, and the full-year revenue outlook moved up. The bad news: it bought back no shares, because the card purchase and a jump in bond yields used up capital, and BTIG's costs ate most of its revenue.
The question now is whether the margin on lending keeps widening while deposits cost more. Either higher yields on the card book and on maturing loans keep lifting it, or deposit costs catch up, as they began to this quarter. The fourth-quarter net interest margin will tell.
🐂 Bull Case
The Fourth-Quarter Plan Points Above This Quarter's Pace
U.S. Bancorp sets its outlook one quarter at a time, and this one moved up. The bank now expects net interest income, the difference between what it earns on loans and pays on deposits, to rise 6% to 7% in the fourth quarter from a year earlier.
That is faster than the 5.6% it delivered this quarter and above the 4% to 6% it had planned for the third. The full-year revenue outlook rose as well, and the version that excludes BTIG rose by the same step, so the raise rests on the bank's own lending and fees, not only on the acquired broker.
By our math the plan has revenue growing about 9% in the fourth quarter. Growth outside BTIG would pick up to near 7%, from under 6% this quarter. The company credits the purchased card book, loans and bonds rolling onto higher yields, and higher market rates, so part of the step comes from a rate move the bank does not control.
What to watch: fourth-quarter net interest income against the 6% to 7% range, reported in January. A result at or above the range would show lending income can accelerate on its own, not only against an easy target.
Fees Grow 8% Even Without BTIG
Fees rose 14.9% from a year ago, mostly because of BTIG, the equities broker and investment bank the lender bought in June. Without BTIG, fees still grew 7.6%, and the growth was spread across several businesses rather than concentrated in one.
- Trust and investment management, fees for managing clients' money: up 9.9%
- Corporate payments and treasury management, fees companies pay to move cash: up 12.3%
- Capital markets without BTIG: up 10%, slower than in the first half
This matters because the bank's medium-term target for fee growth is mid-single digits, so it runs above that before counting the acquisition. The fourth-quarter plan, by our math, holds fees outside BTIG near 7%, so the pace holds rather than rises.
What to watch: capital markets revenue without BTIG next quarter, in the non-GAAP tables. A reading below this quarter's 10% would mean the slowdown from the first half is still running.
Credit Costs Fell Without the Card-Book Charge
The bank set aside $654 million for loan losses, 14.5% more than a year ago. But $135 million of that was the initial reserve on a small business credit card portfolio it bought in the quarter, a one-time charge rather than a sign of worse credit.
Without that charge the provision fell 9% by our math, and credit costs fell on nearly every measure, which the company attributes to "improvement in the economic outlook and favorable credit performance".
- Provision as a share of revenue, without the charge: 6.5%, from 7.8% a year ago
- Net charge-offs, loans the bank gave up on: 0.51% of loans, from 0.56%
- Credit card write-offs: 3.29%, from 3.80%, which the bank calls "consistent with seasonality"
- Profit per share without the charge: $1.41, up 16%
Lower credit costs lift profit without any revenue growth, because the provision is as large as the whole technology and communications bill. The one exception is commercial real estate, where write-offs rose to 0.31% of loans from 0.10% last quarter, so not every book improved.
What to watch: the fourth-quarter net charge-off ratio, with no purchase charge to strip out. A reading below 0.51% would show credit keeps improving as the bought card book ages.
🐻 Bear Case
Deposits Cost More for a Second Quarter
The main risk to the bank's profit has been that loans grow faster than deposits, forcing it to pay up for funding. This quarter deposits grew faster than loans, 2.2% against 1.0% from the previous quarter. The lender used the money to cut short-term borrowings by $16 billion.
The price of those deposits rose, however. U.S. Bancorp paid 1.88% on all its deposits, up from 1.81% last quarter, and that is the second rise in a row. Interest paid to depositors took one percentage point more of revenue than last quarter, by our math.
The margin still widened, to 2.84%, because loan yields rose more, helped by the purchased card book and higher market rates. So the concern did not go away; the bank outran it. The fourth-quarter outlook argues against the concern too, because the plan needs the margin to keep widening to deliver 6% to 7% income growth.
What to watch: the net interest margin next quarter against 2.84%. A margin that stops widening while deposit costs rise would mean the 3% margin the company has said it is working toward moves further out.
BTIG Brings Revenue but Little Profit So Far
"We reported a full quarter of BTIG results, which drove an increase of 69.3% year-over-year in capital markets revenue," chief executive Gunjan Kedia said. BTIG is the equities broker and investment bank the lender bought in June. Take it out and capital markets revenue grew 10%, the company said.
- BTIG revenue: $226 million, against a plan of about $200 million
- BTIG costs: $213 million, including "$22 million of merger-related integration and intangible amortization costs"
- BTIG pre-tax profit, by our math: $13 million, a 6% margin, or 15% before those charges
The bank bought BTIG to add fees at a 15% to 20% margin, and the revenue is ahead of plan while the margin is not. Merger charges run into early 2027, so BTIG lifts revenue now and profit later.
What to watch: BTIG's costs against its revenue next quarter. A margin still under 10% once merger charges fade would mean the bank paid for earnings the broker does not yet produce.
The Bank Bought Back No Shares This Quarter
U.S. Bancorp had doubled its buybacks to $200 million a quarter in the first half of the year. In the third quarter it repurchased no shares, and cash returned to shareholders fell to $847 million, all of it dividends, from $1,017 million the quarter before.
The reason was capital. Risk-weighted assets, the measure that sets how much capital a bank must hold, rose $12 billion, partly because the lender took on a large co-brand card partnership in one step, the company said. At the same time a jump in bond yields deepened the loss on its securities, and the capital ratio that counts that loss fell to 9.1% from 9.4%.
The presentation calls these "Unusual demands on capital in the third quarter not expected to recur" and repeats a "Long-term commitment to 70-75% capital deployment". But tangible book value per share fell 2.3% in the quarter, and the bank still raised its dividend, so the buyback was the one item it chose to drop.
What to watch: shares repurchased in the fourth quarter, in the share-count table of the next release. A second quarter at zero would mean the capital demands were not a one-off and the payout commitment slips into 2027.
Risks this quarter didn't answer
Five standing concerns got a partial reading or none, so they stay open. Chief executive Gunjan Kedia said the payments business delivered "combined revenue growth of 6.5% year-over-year", but the parts of it under pressure did not grow.
- Merchant processing, the fees for handling card payments for shops: revenue fell 0.4% from a year ago, the third slowdown in a row; the European partner losses flagged in July run for two more quarters.
- Consumer and small business banking: segment revenue fell 0.5% as mortgage fees dropped 13.9%; the new business cards and bankers have not shown up in revenue yet.
- Loans to non-bank lenders: the bank disclosed a $50 billion book with a criticized rate below 1%; commercial write-offs ran 0.22% of loans, up from a year ago but down two quarters running.
- Payments regulation: the card-network fee settlement has its final hearing on November 16, and the materials do not mention it.
- Capital rules: no update on the move to Category II treatment, which would count securities losses; the bank's own target is "~10% Cat II pro forma" against 9.1% today.
👓 Other Themes
New Small Business Cards and a Stablecoin Pilot
U.S. Bancorp launched two small business credit cards, Business Essentials and Business Essentials Plus, with "unlimited 2% cash back on eligible purchases", and completed a live cross-border payment using USBDC, its own dollar-backed stablecoin, on the Stellar blockchain. Neither shows in revenue yet. Small business already brings 10% of revenue, with fees up 9%, so the cards deepen an existing base rather than open a new one.
Higher Bond Yields Helped Income and Hurt Equity
Five-year Treasury yields rose 0.86 percentage points in the quarter, the company said, and that cut two ways. Higher rates lifted lending income as loans and bonds rolled onto better yields, one reason the lender gave for the rise from last quarter. The same move deepened the accumulated losses it carries in equity, mostly on bonds, by $2.4 billion to $9.5 billion, which is why book value per share fell.
💲 Other KPIs
Problem loans kept falling: down 20% from a year ago, to 0.32% of loans. The decline has run five quarters, mostly from the bank resolving commercial and office loans, the company said. Loans 90 days late but still paying held at 0.18% of the book.
Deposits grew 2.9% from a year ago and 2.2% from last quarter, the fastest pace in a year. The mix moved toward cheaper money: savings accounts rose 26%, while time deposits, the pricier certificates, shrank. Kedia reported "another quarter of record consumer deposits", the fourth in a row.
The efficiency ratio, costs as a share of revenue, fell to 55.9% from 57.1% last quarter, the lowest in the five quarters shown. Without BTIG it was 54.8%, the company said. The medium-term target is the mid-to-high 50s, so the bank now sits at the better end of its own range.
🔮 Guidance
New. The plan has net interest income, the bank's lending profit, rising 6% to 7% from a year earlier, faster than this quarter's pace. By our math that is about $4.59 billion at the middle of the range, up 2.3% from this quarter. The step matches the one between the second and third quarters. The company credits the purchased card book, assets rolling onto higher yields and higher market rates.
New. Fees should rise 13% to 14% from a year earlier, or about $3.46 billion at the middle of the range by our math. That sits below this quarter's $3.55 billion, so the plan assumes some give-back from a record quarter. Without the roughly $200 million from BTIG, fee growth would be about 7%, close to this quarter's pace outside the acquisition.
New. Costs should rise about 8% from a year earlier, to roughly $4.57 billion by our math. That is 1.6% above this quarter. Most of the rise is BTIG, which was not in last year's base; without its $213 million of costs the increase would be about 3%. The bank held this quarter's costs below its own plan, which was also about 8%.
Raised. The range is now 8% to 9% growth, from 7% to 9%. The version without BTIG rose the same way, to 6% to 7%, so the raise is not only the acquisition. With nine months at 7.9%, the full-year range leaves the fourth quarter at roughly 8% to 12% growth by our math. It is the second raise this year; the year began at 4% to 6%, before BTIG.
Raised. Operating leverage is the gap between revenue growth and cost growth. The plan now has revenue outgrowing costs by about 3 percentage points this year, from about 2 before. Without BTIG, the plan is about 4 points. This quarter delivered 2.4 points as reported and 4.4 without BTIG, so the full year needs the fourth quarter near this quarter's pace. The plan started the year at 2 points or more.
❓ Key Questions
Will share buybacks resume in the fourth quarter?
The bank bought back no shares after $200 million a quarter in the first half and calls the capital demands a one-off. A date and a size would show whether the 70–75% payout commitment holds for 2026.
How much fourth-quarter interest income comes from the purchased cards?
The 6% to 7% plan mixes a bought card book, higher rates and ordinary loan growth. Separating them would show how fast lending income grows without acquisitions.
What margin does today's yield curve deliver by late 2027?
The margin reached 2.84% after four quarters of small gains. The bank has spoken of 3%; a figure for the current curve, with no further steepening, would show whether that date is realistic.
When will BTIG earn the 15% to 20% margin it was bought for?
BTIG made $13 million before tax on $226 million of revenue this quarter, by our math. A quarter-by-quarter path for merger charges and the mix of trading versus advisory revenue would show how cyclical that base is.
How much deposit-cost increase sits in the fourth-quarter plan?
Deposit costs rose for a second quarter while the margin still widened. The assumed rate on deposits behind the 6% to 7% plan would show how much room the margin has if competition for savings rises.