U.S. Bancorp Releases Dodd-Frank Act Stress Test Results

Rhea-AI Summary

U.S. Bancorp (NYSE: USB) reported its results for the Federal Reserve's Dodd-Frank Act Stress Test (DFAST). The 2024 stress test results project a preliminary stress capital buffer (SCB) of 3.1% for October 1, 2024, to September 30, 2025. This SCB, combined with the Basel III Common Equity Tier 1 (CET1) capital minimum of 4.5%, requires a CET1 ratio of at least 7.6%. As of March 31, 2024, U.S. Bancorp's CET1 ratio was 10.0%, reflecting robust capital levels.

The company plans to increase its quarterly common stock dividend by 2%, from $0.49 to $0.50 per share, starting in the fourth quarter of 2024, pending Board approval. Share repurchases remain suspended, with future evaluations contingent on regulatory capital requirements and Board approval.

CEO Andy Cecere highlighted that the stress test results affirm U.S. Bancorp's strong capital position and readiness to manage economic downturns. Detailed DFAST results are available on the company's website.

Positive

• U.S. Bancorp projects a preliminary stress capital buffer (SCB) of 3.1%.
• The company's CET1 capital ratio was 10.0% as of March 31, 2024.
• Plans to increase the quarterly common stock dividend by 2%, from $0.49 to $0.50 per share, starting in Q4 2024.

Negative

• Share repurchases remain suspended, with evaluations dependent on future regulatory capital requirements.

Insights

Financial Analyst

The recent Dodd-Frank Act Stress Test results for U.S. Bancorp highlight the company's robust capital position. The stress capital buffer (SCB) of 3.1% indicates that, under severe economic downturn scenarios, U.S. Bancorp is expected to maintain strong capital adequacy. When added to the Basel III Common Equity Tier 1 (CET1) ratio minimum of 4.5%, the bank is required to keep a CET1 ratio at or above 7.6% during the specified period.

U.S. Bancorp's current CET1 ratio stands at 10%, reflecting a healthy buffer above regulatory requirements. This strong capital position enhances the bank's ability to manage risk and absorb potential losses, which is particularly reassuring given the current economic uncertainties.

Dividend Increase: The proposed 2% increase in the quarterly dividend from $0.49 to $0.50 per share is a positive signal to investors, indicating the company's confidence in its financial stability and ability to generate sustainable earnings. However, the suspension of common stock repurchases, except for those related to stock-based compensation, suggests a cautious approach to capital distributions given potential regulatory changes.

For retail investors, these stress test results underscore the financial resilience of U.S. Bancorp. The continued strong capital ratios and prudent management of capital actions are key factors supporting the bank's long-term stability and potential for consistent dividend payouts.

Market Research Analyst

The results from U.S. Bancorp's stress test underscore a few key points relevant to the broader financial market. The bank's strong capital position, as evidenced by a CET1 ratio of 10%, places it well above the regulatory minimum. This should instill confidence among investors regarding the bank's ability to endure economic stress and maintain operational stability.

The 3.1% stress capital buffer (SCB) is crucial, as it informs the required capital levels U.S. Bancorp needs to maintain during economic downturns. This SCB, combined with the CET1 minimum requirement, provides a clear framework on the bank's financial health and regulatory compliance. Such transparency is vital for market participants analyzing the bank's risk profile.

Furthermore, the planned dividend increase, albeit modest, is a positive indicator of the bank's earnings health and shareholder focus. However, the pause on share repurchases hints at a cautious stance towards capital allocation amid evolving regulatory landscapes. Investors should interpret these actions as a balanced approach to navigating regulatory requirements while providing returns to shareholders.

Overall, these measures reflect U.S. Bancorp's strength in capital management and its readiness to tackle potential financial stresses, which should bolster investor confidence and support stock valuation stability in the long run.

MINNEAPOLIS--(BUSINESS WIRE)-- U.S. Bancorp (NYSE: USB) commented on the results of the Federal Reserve’s Dodd-Frank Act Stress Test (DFAST) conducted in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Based on its 2024 stress test results, the company expects to be subject to a preliminary stress capital buffer (SCB) of 3.1 percent, for the period beginning October 1, 2024, and ending on September 30, 2025. The Federal Reserve has stated that it expects to finalize the SCB for all firms by August 31, 2024. The SCB, when added to the Basel III Common Equity Tier 1 (CET1) capital to risk-weighted assets ratio minimum of 4.5 percent, requires the company to maintain a CET1 ratio at or above 7.6 percent through this period.

All U.S. Bancorp regulatory ratios continue to reflect strong capital levels and are in excess of “well-capitalized” requirements. The company’s CET1 capital to risk-weighted assets ratio using the Basel III standardized approach was 10.0 percent as of March 31, 2024.

U.S. Bancorp’s planned capital actions include a 2 percent increase of a quarterly common stock dividend from $0.49 to $0.50 per share, subject to approval by U.S. Bancorp's Board of Directors, effective in the fourth quarter of 2024.

The company’s common stock repurchases, except for those done exclusively in connection with its stock-based compensation programs, currently remain suspended. The company will evaluate its share repurchases in connection with the potential capital requirements given proposed regulatory capital rules and related landscape. Any additional capital distributions remain subject to the approval of U.S. Bancorp’s Board of Directors and compliance with regulatory requirements.

“The results of this year’s stress test demonstrate that we are well-capitalized, have a healthy balance sheet and remain prepared to manage potential industry stress and withstand a severe economic downturn,” said Andy Cecere, Chairman and CEO of U.S. Bancorp.

In addition, the company has published its company-run DFAST results, which are available on the company’s website at www.usbank.com under “About Us,” “Investor Relations,” “Financials,” “Supporting documents” and “Dodd-Frank Act Stress test results.”

The company’s DFAST results may differ from those calculated and published by the Federal Reserve Board largely due to, but not limited to, differences in models, methodologies, assumptions and applicable capital and accounting rules.

About U.S. Bancorp

U.S. Bancorp, with more than 70,000 employees and $684 billion in assets as of March 31, 2024, is the parent company of U.S. Bank National Association. Headquartered in Minneapolis, the company serves millions of customers locally, nationally and globally through a diversified mix of businesses including consumer banking, business banking, commercial banking, institutional banking, payments and wealth management. U.S. Bancorp has been recognized for its approach to digital innovation, community partnerships and customer service, including being named one of the 2024 World’s Most Ethical Companies and Fortune’s most admired superregional bank. To learn more, please visit the U.S. Bancorp website at usbank.com and click on “About Us.”

Forward-Looking Statements

This press release contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, U.S. Bancorp’s SCB requirement and capital action plans. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those set forth in forward-looking statements.
Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date hereof, and the Company undertakes no obligation to update them in light of new information or future events.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240628787404/en/

Investor contact:

George Andersen, U.S. Bancorp Investor Relations

george.andersen@usbank.com

612.303.3620



Media contact:

Jeff Shelman, U.S. Bancorp Public Affairs and Communications

jeffrey.shelman@usbank.com

612.303.9933

Source: U.S. Bancorp

FAQ

What is U.S. Bancorp's projected stress capital buffer from the 2024 DFAST results?

U.S. Bancorp's projected stress capital buffer from the 2024 DFAST results is 3.1%.

What is U.S. Bancorp's CET1 capital ratio as of March 31, 2024?

As of March 31, 2024, U.S. Bancorp's CET1 capital ratio is 10.0%.

When will U.S. Bancorp's stress capital buffer be finalized?

The stress capital buffer for U.S. Bancorp is expected to be finalized by August 31, 2024.

Is U.S. Bancorp increasing its quarterly dividend?

Yes, U.S. Bancorp plans to increase its quarterly common stock dividend by 2%, from $0.49 to $0.50 per share, starting in the fourth quarter of 2024, pending Board approval.

Are U.S. Bancorp's share repurchases currently active?

No, U.S. Bancorp's share repurchases remain suspended, with future evaluations dependent on regulatory capital requirements and Board approval.

Where can I find U.S. Bancorp's DFAST results?

U.S. Bancorp's DFAST results are available on the company's website under 'Investor Relations' and 'Dodd-Frank Act Stress Test results.'