Q2 2026 US Bancorp Earnings Call

July 16, 2026

Speaker #1: Welcome to the US Bancorp Q2 2026 earnings conference call. Following a review of the results, there will be a formal Q&A session. If you would like to ask a question, please press star, star, then 1 on your phone.

Operator 1: Welcome to the U.S. Bancorp Q2 2026 Earnings Conference Call. Following a review of the results, there will be a formal question and answer session. If you would like to ask a question, please press star-star, then one on your phone. If you wish to withdraw your question, please press star, then one again. This call will be recorded and available for replay beginning today at approximately 10:00 AM Central Time. I will now turn the conference over to Brian Monni, Director of Investor Relations for U.S. Bancorp.

Operator: Welcome to the U.S. Bancorp Q2 2026 Earnings Conference Call. Following a review of the results, there will be a formal question and answer session. If you would like to ask a question, please press star-star, then one on your phone. If you wish to withdraw your question, please press star, then one again. This call will be recorded and available for replay beginning today at approximately 10:00 AM Central Time. I will now turn the conference over to Brian Monni, Director of Investor Relations for U.S. Bancorp.

Speaker #1: If you wish to withdraw your question, please press star, then 1 again. This call will be recorded and available for replay beginning today at approximately 10:00 a.m. Central Time.

Speaker #1: I will now turn the conference over to Brian Money, Director of Investor Relations for U.S. Bancorp.

Speaker #2: Thank you, Krista, and good morning, everyone. Today, I'm joined by our Chairman and Chief Executive Officer, Gunjan Kedia, and Vice Chair and Chief Financial Officer, John Stern.

Brian Monni: Thank you, Krista, and good morning, everyone. Today I'm joined by our Chairman and Chief Executive Officer, Gunjan Kedia, and Vice Chair and Chief Financial Officer, John Stern. In a moment, Gunjan and John will be referencing a slide presentation together with their prepared remarks. A copy of the presentation, our press release, and supplemental analyst schedules can be found on our website at ir.usbank.com. Please note that any forward-looking statements made during today's call are subject to risk and uncertainty. Factors that could materially change our current forward-looking assumptions are described on page two of today's earnings presentation, our press release, and reports on file with the SEC. Following our prepared remarks, Gunjan and John will be happy to take questions that you have. I will now turn the call over to Gunjan.

Brian Mauney: Thank you, Krista, and good morning, everyone. Today I'm joined by our Chairman and Chief Executive Officer, Gunjan Kedia, and Vice Chair and Chief Financial Officer, John Stern. In a moment, Gunjan and John will be referencing a slide presentation together with their prepared remarks. A copy of the presentation, our press release, and supplemental analyst schedules can be found on our website at ir.usbank.com. Please note that any forward-looking statements made during today's call are subject to risk and uncertainty. Factors that could materially change our current forward-looking assumptions are described on page two of today's earnings presentation, our press release, and reports on file with the SEC. Following our prepared remarks, Gunjan and John will be happy to take questions that you have. I will now turn the call over to Gunjan.

Speaker #2: In a moment, Gunjan and John will be referencing a slide presentation together with their prepared remarks. A copy of the presentation, our press release, and supplemental analyst schedules can be found on our website at ir.usbank.com.

Speaker #2: Please note that any forward-looking statements made during today's call are subject to risks and uncertainties. Factors that could materially change our current forward-looking assumptions are described on page 2 of today's earnings presentation, in our press release, and in our reports on file with the SEC.

Speaker #2: Following our prepared remarks, Gunjan and John will be happy to take any questions that you have. I will now turn the call over to Gunjan.

Speaker #3: Thank you, Brian, and welcome to our team. Good morning, everyone. Beginning on slide 3, this quarter we delivered earnings per share of $1.35, an increase of approximately 22% year over year.

Gunjan Kedia: Thank you, Brian, and welcome to our team. Good morning, everyone. Beginning on slide three, this quarter, we delivered earnings per share of $1.35, an increase of approximately 22% year over year. Record net revenue of $7.7 billion highlights the strength of our diversified business mix and improved execution. Results in the quarter reflect strong progress against our three strategic priorities. Revenue growth accelerated to 10.1% year over year. Expense discipline remains a hallmark for us, with 400 basis points of positive operating leverage this quarter. Our payments transformation is differentiating us and driving innovative client value propositions, especially for the Gen Z and younger generations. Importantly, we delivered these results while maintaining strong returns, credit performance, and capital levels. John will provide more details on our financial performance in his opening remarks. Turning to slide four.

Speaker #3: Record net revenue of $7.7 billion highlights the strength of our diversified business mix and improved execution. Results in the quarter reflect strong progress against our three strategic priorities: revenue growth accelerated to 10.1% year over year; expense discipline remains a hallmark for us, with 400 basis points of positive operating leverage this quarter.

Speaker #3: Our payments transformation is differentiating us and driving innovative client value propositions, especially for Gen Z and younger generations. Importantly, we delivered these results while maintaining strong returns, credit performance, and capital levels.

Speaker #3: John will provide more details on our financial performance in his opening remarks. Turning to slide 4, fees rose to 44% of total revenue this quarter.

Gunjan Kedia: Fees rose to 44% of total revenue this quarter, with both scale and quality of our fee mix driving high returns, stable earnings, and enduring relationships. This is an important priority for us. While fee growth drives higher expenses, productivity initiatives helped improve our efficiency ratio and increased return on average assets. Moving to slide five. The successful completion of the BTIG acquisition marks a significant milestone in our strategic build-out of capital markets. In its first month as part of U.S. Bancorp, BTIG generated approximately $98 million of revenue, marking the strongest monthly revenue performance in BTIG's history and outpacing our earlier expectations from the deal. As integration progresses, we expect to capture more long-term strategic benefits of the combination. Our aim is to grow capital markets to more than 10% of total company revenue over time.

Speaker #3: With both the scale and quality of our fee mix driving high returns, stable earnings, and enduring relationships, fee growth has steadily accelerated, and this is an important priority for us.

Speaker #3: While fee growth drives higher expenses, productivity initiatives helped improve our efficiency ratio and increased return on average assets. Moving to slide 5, the successful completion of the BTIG acquisition marks a significant milestone in our strategic build-out of capital markets.

Speaker #3: In its first month as part of U.S. Bancorp, BTIG generated approximately $98 million of revenue, marking the strongest monthly revenue performance in BTIG's history and outpacing our earlier expectations from the deal.

Speaker #3: As integration progresses, we expect to capture more long-term strategic benefits from the combination. Our aim is to grow capital markets to more than 10% of total company revenue over time.

Speaker #3: On slide 6, our payments franchise remains an important source of diversification and client engagement across the company. Total payments services revenue increased 5.7% year over year, compared with 4.7% growth in the prior-year quarter.

Gunjan Kedia: On slide six, our payments franchise remains an important source of diversification and client engagement across the company. Total payment services revenue increased 5.7% year over year, compared with 4.7% growth in the prior year quarter. While merchant processing growth slowed during the quarter, card issuing continued to perform well, and corporate payments saw a strong rebound driven by core demand and new business installations. We are increasingly managing these products holistically at the client segment level and investing to be competitive as this space evolves. Turning to slide seven. Our consumer franchise is a source of strength for the company and an important driver of long-term relationships and lower-cost deposits. Given the increased interest we have seen in this space recently, we are spotlighting the strategy for the consumer franchise.

Speaker #3: While merchant processing growth slowed during the quarter, card issuing continued to perform well, and corporate payments saw a strong rebound, driven by core demand and new business installations.

Speaker #3: We are increasingly managing these products holistically at the client segment level and investing to be competitive as this pace evolves. Turning to slide 7, our consumer franchise is a source of strength for the company and an important driver of long-term relationships and lower-cost deposits.

Speaker #3: Given the increased interest we have seen in this space recently, we are spotlighting this strategy for the consumer franchise. We serve nearly 13 million consumers through a combination of digital and physical distribution, with approximately 18% residing outside of our traditional branch footprint today.

Gunjan Kedia: We serve nearly 13 million consumers through a combination of digital and physical distribution, with approximately 18% residing outside of our traditional branch footprint today. In addition, we serve approximately seven million customers through our card co-brand, Elan, and partner platforms. Our core products benefit greatly from this expanded scale. 42% of our consumer clients are now multi-service, up approximately 2 percentage points over the past 2 years. These relationships are more durable, generate higher return, and strengthen engagement over our franchise. Slide eight highlights the core strategies of our consumer franchise. We are seeing strong momentum from differentiated offerings like Bank Smartly, which we introduced in 2024, with balances across Smartly checking and savings now exceeding $84 billion. We have more recently introduced a similar interconnected product suite for small business called Business Essentials.

Speaker #3: In addition, we serve approximately 7 million customers through our card co-brand, Elan, and partner platforms. Our core products benefit greatly from this expanded scale.

Speaker #3: Forty-two percent of our consumer clients are now multi-service, up approximately 2 percentage points over the past two years. These relationships are more durable, generate higher returns, and strengthen engagement across our franchise.

Speaker #3: Slide 8 highlights the core strategies of our consumer franchise. We are seeing strong momentum from differentiated offerings like Bank Smartly, which we introduced in 2024, with balances across Smartly checking and savings now exceeding $84 billion.

Speaker #3: We have more recently introduced a similar, interconnected product suite for small business called Business Essentials. Our branch expansion is focused on densifying our presence in approximately 10 markets within our footprint that have high rates of household formation.

Gunjan Kedia: Our branch expansion is focused on densifying our presence in approximately 10 markets within our footprint that have high rates of household formation. We expect our annual investment in branches to increase from approximately $200 million historically to $300 million annually. Importantly, these strategies are delivering strong results and have now driven a third consecutive quarter of record consumer deposits. Let me now turn the call over to John.

Speaker #3: We expect our annual investment in branches to increase from approximately $200 million historically to $300 million annually. Importantly, these strategies are delivering strong results and have now driven a third consecutive quarter of record consumer deposits.

Speaker #3: Let me now turn the call over to John.

Speaker #2: Thanks, Gunjan, and good morning, everyone. This was another strong quarter for us as we continue to execute against our strategic priorities. We delivered meaningful revenue and fee growth, significant positive operating leverage, and improved profitability metrics that are well within our medium-term target ranges.

John Stern: Thanks, Gunjan. This was another strong quarter for us as we continue to execute against our strategic priorities. We delivered meaningful revenue and fee growth, significant positive operating leverage, and improved profitability metrics that are well within our medium-term target ranges. If you turn to slide nine, I will start with some highlights, followed by a discussion of trends for Q2. We reported earnings per common share of $1.35 and generated record net revenue of $7.7 billion, representing 10.1% growth year-over-year. This quarter, we continued to see strong loan growth in areas like C&I, commercial real estate, and card, reflecting steady client activity across the franchise. Meanwhile, fee income growth accelerated across most line items. Notably, this includes one month of BTIG, however, fee growth was still approximately 10% excluding BTIG. Average total assets increased 0.9% linked-quarter to $695 billion.

Speaker #2: If you turn to slide 9, I'll start with some highlights, followed by a discussion of trends for the second quarter. We reported earnings per common share of $1.35 and generated record net revenue of $7.7 billion, representing 10.1% growth year over year.

Speaker #2: This quarter, we continued to see strong loan growth in areas like C&I, commercial real estate, and card, reflecting steady client activity across the franchise.

Speaker #2: Meanwhile, fee income growth accelerated across most line items. Notably, this includes one month of BTIG; however, our fee growth was still approximately 10%, excluding BTIG.

Speaker #2: Average total assets increased 0.9% linked quarter to $695 billion. Key credit quality metrics improved both sequentially and year over year, reflecting a stable economic backdrop and the continued fortitude of our clients.

John Stern: Key credit quality metrics improved both sequentially and year-over-year, reflecting a stable economic backdrop and the continued fortitude of our clients. As of 30 June, our tangible book value per common share eclipsed $30 and increased more than 13% on a year-over-year basis. Slide 10 provides our key performance metrics. ROA, ROTCE, efficiency ratio, and NIM all improved both sequentially and year-over-year as results of a disciplined execution. We delivered strong returns, which includes a return on tangible common equity of 18.7% and a return on average assets of 1.26%. The efficiency ratio improved to 57.1%. Slide 11 provides a balance sheet summary. Total average deposits grew 2.4% year-over-year and were flat linked-quarter. Consumer deposits reached another record this quarter, driven by our Smartly flagship product. The offset was typical seasonality in our wholesale and investment services businesses.

Speaker #2: As of June 30th, our tangible book value per common share eclipsed $30 and increased more than 13% on a year-over-year basis. Slide 10 provides our key performance metrics.

Speaker #2: ROA, ROTCE, efficiency ratio, and NIM all improved both sequentially and year over year as a result of disciplined execution. We delivered strong returns, which include a return on tangible common equity of 18.7% and a return on average assets of 1.26%.

Speaker #2: The efficiency ratio improved to 57.1%. Slide 11 provides a balance sheet summary. Total average deposits grew 2.4% year-over-year, and were flat quarter-over-quarter.

Speaker #2: Consumer deposits reached another record this quarter, driven by our Smartly flagship product. The offset was typical seasonality in our wholesale and investment services businesses.

Speaker #2: Average loans totaled $405 billion, up 7.1% from the prior year quarter and 3.0% from the prior quarter. Growth was broad-based in strategic categories such as C&I, credit card, and commercial real estate, which brings ancillary fees with them.

John Stern: Average loans totaled $405 billion, up 7.1% from the prior year quarter and 3.0% from the prior quarter. Growth was broad-based in strategic categories such as C&I, credit card, and commercial real estate, which brings ancillary fees with them. Turning to slide 12. Net interest income on a fully taxable equivalent basis totaled $4.4 billion, an increase of 7.5% on a year-over-year basis above the range we had previously guided to, driven by stronger loan dynamics during the quarter. On a sequential basis, net interest income increased by $96 million, or 2.2%, driven by loan growth, recent investment portfolio repositioning, and ongoing benefits from fixed asset repricing. Net interest margin improved two basis points sequentially to 2.79%. Slide 13 highlights fee revenue trends within non-interest income. Total fee revenue accelerated during the quarter, reflecting broad-based strength across our businesses.

Speaker #2: Turning to slide 12, net interest income on a fully taxable equivalent basis totaled $4.4 billion, an increase of 7.5% on a year-over-year basis. This was above the range we had previously guided to, driven by stronger loan dynamics during the quarter.

Speaker #2: On a sequential basis, net interest income increased by $96 million, or 2.2%, driven by loan growth, recent investment portfolio repositioning, and ongoing benefits from fixed asset repricing.

Speaker #2: Net interest margin improved 2 basis points sequentially to 2.79%. Slide 13 highlights fee revenue trends within noninterest income. Total fee revenue accelerated during the quarter, reflecting broad-based strength across our businesses.

Speaker #2: Total fee income increased 13.2% year over year, driven by strong performance in capital markets, trust and investment management, payments, and other institutional fee businesses.

John Stern: Total fee income increased 13.2% year over year, driven by strong performance in capital markets, trust, and investment management, payments, and other institutional fee businesses. In June, BTIG contributed approximately $98 million of capital markets fee revenue. Excluding BTIG, fee revenue grew 9.9% year over year. Capital markets revenue excluding BTIG increased approximately 31% year over year, reflecting strong client activity across foreign exchange, syndications, and corporate bond underwriting. Moving to slide 14. Non-interest expense totaled approximately $4.4 billion and included approximately $84 million related to BTIG. Excluding BTIG, expenses grew roughly 1.9% sequentially and 3.9% versus the prior year. The increase in core expense primarily reflected continued investments in technology and marketing, as well as higher incentive compensations associated with this quarter's strong revenue performance. These increases were partially offset by ongoing expense discipline across the franchise. Turning to slide 15.

Speaker #2: In June, BTIG contributed approximately $98 million of capital markets fee revenue. Excluding BTIG, fee revenue grew 9.9% year over year. Capital markets revenue, excluding BTIG, increased approximately 31% year over year, reflecting strong client activity across foreign exchange, syndications, and corporate bond underwriting.

Speaker #2: Moving to slide 14, non-interest expense totaled approximately $4.4 billion and included approximately $84 million related to BTIG. Excluding BTIG, expenses grew roughly 1.9% sequentially and 3.9% versus the prior year.

Speaker #2: The increase in core expense primarily reflected continued investments in technology and marketing, as well as higher incentive compensation associated with this quarter's strong revenue performance.

Speaker #2: These increases were partially offset by ongoing expense discipline across the franchise. Turning to slide 15, this quarter highlights our ability to improve profitability while continuing to grow the franchise.

John Stern: This quarter highlights our ability to improve profitability while continuing to grow the franchise. Over the past several quarters, we have meaningfully improved profitability, significantly reducing our efficiency ratio from its recent peak. We remain committed to meaningful positive operating leverage as we fully integrate and normalize BTIG. While disciplined expense management remains an important contributor, we are increasingly seeing revenue growth become a larger driver of earnings growth. That combination of improving top-line momentum and ongoing expense discipline resulted in a year-over-year EPS growth of more than 20% this quarter. We remain confident in our ability to sustain strong profitability while continuing to invest for future growth. Slide 16 highlights our credit quality performance, which continues to improve. Our ratio of non-performing assets to loans and other real estate of 0.33% improved five basis points from the previous quarter and 11 basis points from a year ago.

Speaker #2: Over the past several quarters, we have meaningfully improved profitability, significantly reducing our efficiency ratio from its recent peak. We remain committed to meaningful positive operating leverage as we fully integrate and normalize BTIG.

Speaker #2: While disciplined expense management remains an important contributor, we are increasingly seeing revenue growth become a larger driver of earnings growth. That combination of improving top-line momentum and ongoing expense discipline resulted in year-over-year EPS growth of more than 20% this quarter.

Speaker #2: We remain confident in our ability to sustain strong profitability while continuing to invest for future growth. Slide 16 highlights our credit quality performance, which continues to improve.

Speaker #2: Our ratio of non-performing assets to loans and other real estate of 0.33% improved 5 basis points from the previous quarter and 11 basis points from a year ago.

Speaker #2: The second quarter net charge-off ratio was 0.53%, decreasing 3 basis points sequentially. Meanwhile, our allowance for credit losses remained steady at $8 billion.

John Stern: The Q2 net charge-off ratio was 0.53%, decreasing three basis points sequentially. Meanwhile, our allowance for credit losses remains steady at $8 billion, or 1.94% of period and loans. Turning to slide 17. As of 30 June, our common equity Tier 1 capital ratio was 10.8%, or 9.4%, including AOCI. Strong earnings generation this quarter supported capital distributions, strong loan growth, and 12 basis points of impact from the BTIG acquisition this quarter. On slide 18, we provide a comparison of our Q2 results to our previous guidance, provide Q3 guidance, and update our full year 2026 outlook. Excluding BTIG, Q2 net interest income and fee revenue exceeded previous guidance, while non-interest expense came in as expected. Turning to forward-looking guidance for the Q3 and full year 2026, both of which are inclusive of BTIG and recently announced partnerships.

Speaker #2: Or 1.94% of period-end loans. Turning to slide 17, as of June 30th, our common equity Tier 1 capital ratio was 10.8%, or 9.4% including AOCI.

Speaker #2: Strong earnings generation this quarter supported capital distributions, strong loan growth, and 12 basis points of impact from the BTIG acquisition this quarter. On slide 18, we provide a comparison of our second-quarter results to our previous guidance.

Speaker #2: We are providing third quarter guidance and updating our full year 2026 outlook. Excluding BTIG, second quarter net interest income and fee revenue exceeded previous guidance, while non-interest expense came in as expected.

Speaker #2: Turning to forward-looking guidance for the third quarter and full year 2026, both of which are inclusive of BTIG and recently announced partnerships. For the third quarter, we expect net interest income growth of 4% to 6% on a fully taxable equivalent basis, compared to the third quarter of 2025.

John Stern: For the Q3, we expect net interest income growth of 4% to 6% on a fully taxable equivalent basis compared to the Q3 2025. Total fee revenue growth in the range of 12% to 14% compared to the Q3 2025, with contribution from BTIG of roughly $200 million per quarter in the H2. Non-interest expense growth of approximately 8% compared to the Q3 2025. Excluding BTIG, we would expect our core expense growth to be approximately 3.5%. Additionally, we expect to recognize approximately $160 million of reserve build related to the Amazon Small Business portfolio purchase, which we anticipate will close in mid-August.

Speaker #2: Total fee revenue growth is expected to be in the range of 12 to 14 percent compared to the third quarter of 2025, with contribution from BTIG of roughly $200 million per quarter in the back half of the year.

Speaker #2: Non-interest expense growth of approximately 8% compared to the third quarter of 2025. Excluding BTIG, we would expect our core expense growth to be approximately 3.5%.

Speaker #2: Additionally, we expect to recognize approximately $160 million of reserve build related to the Amazon Small Business Portfolio purchase, which we anticipate will close in mid-August.

Speaker #2: For the full year 2026, we now expect total net revenue growth of 7 to 9 percent, compared to the prior year, or in the range of 5 to 7 percent, excluding BTIG.

John Stern: For the full year 2026, we now expect total net revenue growth of 7% to 9% compared to the prior year, or in the range of 5% to 7%, excluding BTIG, up from our prior range of 4% to 6%. We expect to deliver approximately 200 basis points of positive operating leverage this year and more than 300 basis points excluding the impact from BTIG. Moving to slide 19. Q2 results represented another consecutive quarter operating within all of our medium-term target ranges. We are encouraged by the momentum across the franchise and remain confident in our ability to continue to build on these results to deliver consistent, sustainable returns over time. Let me now hand it back to Gunjan for closing remarks.

Speaker #2: Up from our prior range of 4 to 6 percent. We expect to deliver approximately $200 basis points of positive operating leverage this year and more than $300 basis points excluding the impact from BTIG.

Speaker #2: Moving to slide 19, second quarter results represented another consecutive quarter operating within all of our medium-term target ranges. We are encouraged by the momentum across the franchise and remain confident in our ability to continue to build on these results to deliver consistent, sustainable returns over time.

Speaker #2: Let me now hand it back to Gunjan for closing remarks.

Speaker #1: Thank you, John. As we look ahead, our focus remains on sustaining the strong return profile of the company while accelerating growth. With resilient fundamentals, strong execution momentum, and an increasingly interconnected franchise, we believe we are well positioned for the next phase of profitable growth and long-term value creation.

Gunjan Kedia: Thank you, John. As we look ahead, our focus remains on sustaining the strong return profile of the company while accelerating growth. With resilient fundamentals, strong execution momentum, and an increasingly interconnected franchise, we believe we are well-positioned for the next phase of profitable growth and long-term value creation. With that, we will now open the call for your questions.

Speaker #1: With that, we will now open the call for your questions.

Speaker #3: Thank you. We will now begin the question and answer session. As a reminder, if you would like to ask a question, please press star, then the number 1 on your telephone keypad.

Operator 2: Thank you. We will now begin the question and answer session. As a reminder, if you would like to ask a question, please press star, then the number one on your telephone keypad. We will pause for just a moment to compile that roster. We do ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue. Your first question comes from Erika Najarian with UBS Financial. Please go ahead.

Operator: Thank you. We will now begin the question and answer session. As a reminder, if you would like to ask a question, please press star, then the number one on your telephone keypad. We will pause for just a moment to compile that roster. We do ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue. Your first question comes from Erika Najarian with UBS Financial. Please go ahead.

Speaker #3: We'll pause for just a moment to compile that roster. We do ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue.

Speaker #3: And your first question comes from Erica Nazarian with UBS Financial. Please go ahead.

Speaker #4: Hi, good morning. Thank you for taking my questions. Gunjan and John, I fully appreciate the revenue upgrade. I'm wondering if you could unpack maybe the path from 4 to 6, to 5 to 7, and perhaps separate the discussion with regards to the net interest income trajectory.

Erika Najarian: Hi. Good morning. Thank you for taking my questions. Gunjan and John, I fully appreciate the revenue upgrade. I am wondering if you could unpack maybe the path from 4% to 6%, to 5% to 7%, and perhaps separate the discussion with regards to the net interest income trajectory, particularly how you are viewing net interest margin from here with deposit costs coming up a little bit in the quarter. I am going to pause there because that is already a lot.

Speaker #4: Particularly, how you're viewing net interest margin from here, with deposit costs coming up a little bit in the quarter. So, I'm going to pause there because that's already a lot.

Speaker #2: Oh, sure. Good morning, Erica. Thanks for the question. Let me just start. We do expect, as I mentioned, the full-year revenue guide to go up to 7% to 9%, or 5% to 7% excluding BTIG, which is better than where we started the year, when we mentioned 4% to 6%.

John Stern: Oh, sure. Good morning, Erika. Thanks for the question. Let me just start. We do expect, as I mentioned, the full-year revenue guide to go up to 7% to 9%, or 5% to 7% excluding BTIG which is better than where we started the year when we mentioned 4% to 6%. That just reflects a lot of broad-based growth that we just commented on in our opening comments there. You mentioned net interest income, maybe just to talk through that a bit. We've started the year expecting mid-single digits. I would continue to expect mid-single digits on net interest income. Just given the momentum that we've had in the H1 of the year, I would just say that we expect to be north of 5% for the full year. Obviously, a lot can happen.

Speaker #2: And that just reflects a lot of broad-based growth that we just commented on in our opening comments there. You mentioned net interest income and maybe just to talk through that a bit, we've started the year expecting mid-single digits.

Speaker #2: I would continue to expect mid-single digits on net interest income. Just given the momentum that we've had in the first half of the year, I would just say that we expect to be north of 5 percent for the full year, but obviously, a lot can happen. I think, in terms of net interest income and net interest margin in particular, we do expect that to grow.

John Stern: I think in terms of net interest income and net interest margin in particular, we do expect that to grow over the course of the year, and that's reflected in the guide. The deposits, we think that nothing's really changed on that front from a competitive nature standpoint. We still feel really good about where we're moving here.

Speaker #2: Over the course of the year—and that's reflected in the guide and the deposits—we think that nothing's really changed on that front from a competitive nature standpoint.

Speaker #2: So, we still feel really good about where we're moving here.

Speaker #4: And just as a follow-up, I've already fielded investor questions on positive operating leverage. It feels a bit silly to even ask this, but I've been getting asked about the squiggly "200" versus the "200 plus."

Erika Najarian: Just as a follow-up, I've already fielded investor questions on positive operating leverage. It feels so silly to even ask this, but I've been getting asked about this squiggly 200 versus the 200 plus. Anyway, I guess just to frame it for us, from your prepared remarks, it sounds like the fee generation ex BTIG is better, right? Clearly that comes with it higher expenses. Also, it seems like consensus has to frame BTIG with that higher efficiency ratio. I guess, is that a fair read of how positive operating leverage is tracking? It's because fees are driving the upside and thereby that comes with it with expenses. Further, just to sort of slip another one in, the $98 million in a month is clearly better than the 200.

Speaker #4: But anyway, I guess just to frame it for us, from your prepared remarks, it sounds like the fee generation ex-BTIG is better, right?

Speaker #4: And clearly, that comes with higher expenses. And also, it seems like consensus has to frame BTIG with that higher efficiency ratio. So, I guess, is that a fair read of how positive operating leverage is tracking?

Speaker #4: It's because fees are driving the upside, and that comes with expenses. And further, just to—sorry to sort of slip another one in—the $98 million in a month is clearly better than the $200 million.

Speaker #4: Given the ECM sort of largesse that's happening in the industry, do you expect the pacing of BTIG contribution to be closer to $300 million this year?

Erika Najarian: Given the ECM sort of largesse that's happening in the industry, do you expect the pacing of BTIG contribution to be closer to $300 million this year?

Speaker #2: Sure, a lot to unpack there, but I think maybe I'll start on—you talked about positive operating leverage, just to start. And I would say that we're firmly committed to positive operating leverage.

John Stern: Sure. A lot to unpack there. I think maybe I'll start. You talked about positive operating leverage just to start. I would say that we're firmly committed to positive operating leverage. That is something we have been said repeatedly since the Investor Day back in 2024. We've obviously have been focusing more and more on fees, you see that in the guide. We do expect our fees overall to be low teens from a full-year perspective. Just likely over 4 points of that is going to be on the BTIG side of the equation. I think in terms of the squiggly line, as you call it, versus the 300 basis points or more that we signaled. With BTIG, within that $200 million that we anticipate per quarter, we assume a 15% contribution margin.

Speaker #2: That is something we have been said repeatedly since the investor day back in 2024. We've obviously have been focusing more and more on fees, and you see that in the guide.

Speaker #2: We do expect our fees overall to be in the low teens from a full-year perspective. And just slightly over four points of that is going to be on the BTIG side of the equation.

Speaker #2: I think in terms of the squiggly line, as you call it, versus the 300 basis points, or more, that we signal—with BTIG, within that $200 million that we anticipate per quarter, we assume a 15 percent contribution margin.

Speaker #2: There's also about $60 million of integration costs that will likely come in—that's embedded in that—we'll call out, obviously, as we move forward.

John Stern: There's also about $60 million of integration costs that will likely come in that's embedded and that we'll call out obviously as we move forward. We're firmly positioned for positive operating leverage, and I think from a BTIG perspective, we're really excited about that acquisition and the new team that we have there. We do expect the contribution margin to improve over time.

Speaker #2: But we're firmly positioned for positive operating leverage. And I think from a BTIG perspective, we're really excited about that acquisition and the new team that we have there.

Speaker #2: But we do expect the contribution margin to improve over time.

Speaker #1: I'll just add, Erica, that we're very comfortable with our expense and productivity runway on our programs. And like John said, very committed to a healthy, positive operating leverage on the core.

Gunjan Kedia: I'll just add, Erika, that we are very comfortable with our expense and productivity runway on our programs. Like John said, very committed to a healthy positive operating leverage on the core. Just a reminder here that between BTIG and the Amazon deal, we are installing more than $1 billion of run rate revenue over a very short period of time, and there's a fair amount of one-time cost that we are absorbing within the 300 plus BOL as well. Just a reassurance that we are both committed to it and very confident in our plans there.

Speaker #1: Just a reminder here that between BTIG and the Amazon deal, we're installing more than $1 billion of run-rate revenue over a very short period of time.

Speaker #1: And there's a fair amount of one-time cost that we are absorbing within the $300-plus BOL as well. So, just to reassure you, we are both committed to it and very confident in our plans there.

Speaker #4: Thank you.

Erika Najarian: Thank you.

Speaker #3: Your next question comes from the line of John Pencary with Evercore ISI. Please go ahead.

Operator 2: Your next question comes from the line of John Pancari with Evercore ISI. Please go ahead.

Operator: Your next question comes from the line of John Pancari with Evercore ISI. Please go ahead.

Speaker #1: Good morning, John.

Gunjan Kedia: Morning, John.

John Pancari: You've put up some good numbers on the fee side, and you've acknowledged that fee growth has steadily accelerated, and we certainly saw upside this quarter in card and corporate payments. I know in corporate payments you acknowledged the rebound that you're seeing. Can you maybe just give us a little bit more color given this, what is that growth rate that you believe is likely as for the overall fee component for the year? Also maybe can you talk through what are you seeing as the greatest drivers of this accelerating growth in the fee trend that is materialized and that you expect to continue to play out? What are the biggest contributors? Thanks.

Speaker #5: You've put up some good numbers on the fee side, and you've acknowledged that fee growth has steadily accelerated. We certainly saw upside this quarter in card and corporate payments.

Speaker #5: And I know in Corporate Payments, you acknowledged the rebound that you're seeing. Can you maybe just give us a little bit more color? Given this, what is that growth rate that you believe is likely?

Speaker #5: For the overall fee component, for the year, can you also maybe talk through what you are seeing as the greatest drivers of this accelerating growth in the fee trend that has materialized and that you expect to continue to play out?

Speaker #5: What are the biggest contributors? Thanks.

Speaker #2: Yeah, sure. So I think, John, thanks. The biggest drivers—and we've seen a nice turn on the corporate payment side—you called that out.

John Stern: Yeah, sure. I think, John, thanks. The biggest drivers, and we've seen a nice turn on the corporate payment side, you called that out. I think we've alluded to this at the beginning of the year. We mentioned that we see a lot of one, but not yet installed business, that is certainly the case here. We're experiencing that. We have a lot of what used to be headwinds in this business this year at this time are now tailwinds. I think that along with the new business is helping. I would say then on the card side, we're also seeing the same thing. We've been seeing a lot of great account growth. The fee revenue has been steadily increasing. We're going to get the Amazon book loaded here in mid-August, we anticipate.

Speaker #2: I think we've alluded to this at the beginning of the year. We mentioned that we see a lot of won, but not yet installed, business.

Speaker #2: And that is certainly the case here. We're experiencing that. And so, a lot of what used to be headwinds in this business at this time last year are now tailwinds.

Speaker #2: And so I think that, along with the new business, is helping. And I would say then, on the card side, we're also seeing the same thing.

Speaker #2: We've been seeing a lot of great account growth. Fee revenue has been steadily increasing. We're going to get the Amazon book loaded here in mid-August.

Speaker #2: We anticipate, and so we think there's just a lot of momentum on the fee side of the equation there.

John Stern: We think there's just a lot of momentum on the fee side of the equation there.

Speaker #1: And John, I'll add, this is a very important part of our strategy. It's defining the future of our banking franchise. As we closed this quarter, we were at 44% fee revenue.

Gunjan Kedia: John, I'll add, this is a very important part of our strategy. It's a defining feature of our banking franchise. We closed this quarter, we were at 44% fee revenue. That gives us enormous stability, both of earnings and depth in our relationship. We are building this four-legged stool of fees, which are very well-diversified. It's the capital markets that's become very significant now. The payments franchise, which was always great. The trust and investment franchise has grown very nicely for us and has lots of tailwinds right now with the capital markets. The traditional consumer fees. We expect that the fee complex overall will outpace NII, at least in the near term, very healthy growth across the board on all fee categories. By design and strategy, we're very focused on that part of the business.

Speaker #1: That gives us enormous stability, both in earnings and depth in our relationships. And we are building this four-legged stool of fees, which are very well diversified.

Speaker #1: So it's the capital markets that's become very significant now, the payments franchise, which was always great. The trust and investment franchise has grown very nicely for us and has lots of tailwinds right now with the capital markets.

Speaker #1: And then the traditional consumer fees. So we expect that the fee complex overall will outpace our NII, at least in the near term. Very, very healthy growth across the board on all fee categories.

Speaker #1: And by design and strategy, we're very focused on that part of the business.

Speaker #5: So based on that, Gunjan, how would you characterize the year-over-year growth expectation on the fee side? I know you said it should outpace, but anyway, can you help us with that?

John Pancari: Based on that, Gunjan, how would you characterize the year-over-year growth expectation on the fee side? I know you said should outpace, but any way you can help us with that?

Speaker #2: Sure. Yeah. I mean, we expect full-year, low teens on the fee side of the equation. And that's going to include about four points—a little over four points—will be BTIG driven. And again, we assume $200 million per quarter on the back half of the year.

John Stern: Sure. We expect full year low teens on the fee side of the equation. That's going to include about 4 points, a little over 4 points will be BTIG driven. That's we assume $200 million per quarter on the back half of the year. Inclusive, obviously, of the $100 that they did in June. That's how we think about it. As Gunjan said, it's strength in the capital markets, investment services, and payments that are really going to drive it.

Speaker #2: And then inclusive, obviously, of the 100 that they did in June. So that's going to be—that's kind of how we think about it.

Speaker #2: And as Gunjan said, it's strength in the capital markets, investment services, and payments that are really going to drive it.

Speaker #5: Yeah, thank you. And I know you gave that low teens detail before, but lastly, just around loan-to-book, I wanted to see if you can give us a bit more detail on what you're seeing there, as trends came in pretty solid for the quarter.

John Pancari: Thank you. I know you gave that low teen detail before. Lastly, just around loans at the end. I want to see if you can give us a bit more detail on what you're seeing there as trends came in pretty solid for the quarter. Thanks.

Speaker #5: Thanks.

Speaker #2: On loans, sure. Yeah, so on loan growth, it was a very strong quarter for us. The pipelines continue to look very good, particularly on the commercial and commercial real estate side.

John Stern: On loans? Sure. On loan growth, a very strong quarter for us. The pipelines continue to look very good, particularly on the commercial and commercial real estate side. Commercial real estate saw some nice uptick this quarter. We continue to see that improve. It's in virtually all the categories that we talked about last quarter. Pretty much every category in the commercial side is green from a growth standpoint. Everything from large corporates down to small business and SBA loans and things of that variety. I know we talked about mid-single digit growth last time at this time, but we anticipate to be through that. Of course, we have the Amazon, the billion and six that we, as I mentioned, that will come online in the August timeframe.

Speaker #2: Commercial real estate saw a nice uptick this quarter. We continue to see that improve, and it's in virtually all the categories that we talked about last quarter.

Speaker #2: Pretty much every category on the commercial side is green from a growth standpoint — everything from large corporates down to small business and SBA loans, and things of that variety.

Speaker #2: So, I know we talked about mid-single digit growth at this time last year, but we anticipate being through that now. And then, of course, we have the Amazon—the $1.6 billion—that, as I mentioned, will come online in the April timeframe.

Speaker #2: August timeframe, excuse me.

Speaker #5: Got it. All right. Thanks for taking my questions, John.

John Pancari: Got it. All right. Thanks for taking my questions, John.

Speaker #2: Thank you.

John Stern: Thank you.

Speaker #3: Your next question comes from the line of John McDonald with Truist Securities. Please go ahead.

Operator 2: Your next question comes from the line of John McDonald with Truist Securities. Please go ahead.

Operator: Your next question comes from the line of John McDonald with Truist Securities. Please go ahead.

Speaker #1: Good morning, John.

Gunjan Kedia: Morning, John.

Speaker #5: Thanks. Good morning. Thank you. Could you give us some color, John, on what you saw in terms of deposit trends this quarter, and how you're thinking about the back half of the year in terms of deposit growth, costs, and mix?

John McDonald: Thanks. Good morning. Thank you. Could you give us some color, John, on what you saw in terms of deposit trends this quarter, and how you're thinking about the back half of the year in terms of deposit growth, costs, and mix?

Speaker #2: Sure. So, maybe just to start with the quarter, this is a pretty typical second quarter for us. I would say, over long periods of time, on the commercial side, we always see seasonal outflow.

John Stern: Sure. Maybe just to start with the quarter. This is a pretty typical Q2 for us, I would say, over long periods of time. On the commercial side, we always see seasonal outflow, and that's a reflection of just the tax seasonality. We anticipated that we would have lower balances on the commercial side. We did see nice growth on the consumer side, and that's by design. We've been very much focused on growing our consumer deposits. As I look ahead, clearly as we look at the trends here starting in Q3, we've already made good progress on deposit growth. A lot of that just comes back over the course of late Q2 and into Q3 for us. I would expect as loan growth continues to go, deposit growth will grow with some sort of parity there.

Speaker #2: And that's a reflection of just the tax seasonality. And so we anticipated that we would have lower balances on the commercial side. We did see nice growth on the consumer side, and that's by design.

Speaker #2: We've been very much focused on growing our consumer deposits. As I look ahead, clearly, as we look at the trends here starting in the third quarter, we've already made good progress on deposit growth.

Speaker #2: A lot of that just comes back over the course of late second quarter and into third for us. So I would expect, as loan growth continues to go, deposit growth will grow with some sort of parity there.

Speaker #2: And so, and then I think from a deposit rate standpoint—I think you mentioned that as well—we're up a couple of basis points this quarter.

John Stern: From a deposit rate standpoint, I think you mentioned that as well. We're up a couple basis points this quarter. In terms of how we're looking at it going forward, that rate is going to be dependent on just how strong loan growth is. I think the stronger the loan growth is, potential rates might go up on that deposit side. We just anticipate some of that in our guidance as well. Those are kind of the puts and takes right now as I think about deposits.

Speaker #2: In terms of how we're looking at it, going forward, that rate is going to be dependent on just how strong loan growth is. I think the stronger the loan growth is, the more potential rates might go up on that deposit side.

Speaker #2: We just anticipate some of that in our guidance as well. So those are kind of the puts and takes right now, as I think about deposits.

Speaker #5: Okay. And then, just following up on that, could you remind us of the broader drivers of the NIM expansion story and your thoughts on getting into that 3 percent range next year that you've talked about on the NIM?

John McDonald: Okay. Just following up on that, could you remind us of the broader drivers of the NIM expansion story and your thoughts on getting into that 3% range next year that you've talked about on the NIM?

Speaker #2: Yeah, sure. Absolutely. We continue to see a path on the 3 percent journey here at some point in 2027. Not much has changed, really, since I think last time we talked here.

John Stern: Yeah. Sure, absolutely. We continue to see a path on the 3% journey here at some point in 2027. Not much has changed really since I think the last time we talked here some time ago. It was good to see the NIM go up this quarter. We expect that to continue to progress. The positives, of course, are going to be on the asset mix side as well as just the continual fixed repricing. I think, John, what it's going to come down to in terms of the speed in which we go that way is going to be on the deposit side of the equation, as I just mentioned some points there, but also the slope of the curve. Obviously, there's some talk of rate hikes and things like that. The hikes in and of themselves are not consequential.

Speaker #2: Some time ago, it was good to see the NIM go up this quarter. We expect that to continue to progress. The positives, of course, are going to be on the asset mix side, as well as repricing. I think, John, what's going to come down to, in terms of the speed in which we go that way, is going to be on the deposit side of the equation.

Speaker #2: As I just mentioned, some points there, but also the slope of the curve. Obviously, there's some talk of rate hikes and things like that.

Speaker #2: And the hikes in and of themselves are not consequential. It's more about the shape of the curve after that, and that's what we're going to be focused on as we move forward.

John Stern: It's more, what's the shape of the curve after that? That's what we're going to be focused on as we move forward.

Speaker #5: Okay, great. Thank you.

John McDonald: Okay, great. Thank you.

Speaker #3: Your next question comes from the line of Ibrahim Punawala with Bank of America. Please go ahead.

Operator 2: Your next question comes from the line of Ebrahim Poonawala with Bank of America. Please go ahead.

Operator: Your next question comes from the line of Ebrahim Poonawala with Bank of America. Please go ahead.

Speaker #1: Good morning, Ibrahim.

Gunjan Kedia: Morning, Ebrahim.

Speaker #2: Morning.

John Stern: Morning.

Ebrahim Poonawala: Morning. I guess one just big picture question on slide 19. We look at Your returns for Q2 and for H1, like ROA, ROTCE, ROE in the midpoint of the guidance. Just talk to us because obviously all banks want to use a strong revenue backdrop to invest in the business. We think about just if we can pick on the return on assets at 1.26, the higher end of the guidance 135, how do you think about it? Do you think this should move towards that 135, or are you happy operating at this midpoint?

Speaker #4: Morning, morning. I guess maybe one just big picture question. On slide 19, when we look at your returns for the second quarter, and for the first half—like ROA, ROTC, ROA in the midpoint of the guidance—maybe just talk to us.

Speaker #4: I mean, obviously, all banks want to use a strong revenue backdrop to invest in the business. When you think about—just if we can pick on the return on assets at 1.26, the higher end of the guidance, 1.35—how do you think about it?

Speaker #4: Do you think this should move toward that 135, or are you happy operating at this midpoint?

Speaker #2: Hey, Ibrahim, thank you. First of all, we're pleased with where we’re at at this part of the journey. It’s good to see that we’re well established in our medium-term targets.

John Stern: Hey, Ebrahim, thank you. First of all, we are pleased with where we are at at this part of the journey. It is good to see that we are well established in our medium-term targets that we had talked to you about back in 2024. Yes, of course, our hope is, and expectation is to continue to improve. That is where we want to go. We started at the beginning of the year or late last year, actually at the lower end of the range. Not just ROA, but some of these other metrics as well. Our continual push is to continue to improve these metrics as we progress.

Speaker #2: That we had talked to you about back in 2024. Yes, of course, our hope and expectation is to continue to improve. I mean, that's where we want to go. We started at the beginning of the year, or late last year actually, at the lower end of the range.

Speaker #2: Not just ROA, but some of these other metrics as well. Our continual push is to continue to improve these metrics as we progress.

Speaker #1: Ibrahim, we think about it in waves. We publish these medium-term targets at Investor Day in 2024. So the first goal was to get into the ranges across the board.

Gunjan Kedia: Ebrahim, we think about it in waves. We published these medium-term targets at Investor Day in 2024. The first goal was to get into the ranges across the board. The metrics have been very thoughtfully selected to balance growth, productivity, and returns, which is how we think about the metrics. The first thing we made progress on was capital. You will remember we were very low on capital coming out of the Union Bank acquisition. We are feeling very good about that, very ready for a Category 2 transition that is upcoming. Expenses was the next thing that we were able to very quickly make a difference on, then fee revenue growth. Right now we are very focused on NII expansion, which will help the ROA. Broadly speaking, move towards the right on the ranges is the way we are managing the bank.

Speaker #1: The metrics have been very thoughtfully selected to balance growth, productivity, and returns, which is how we think about the metrics. The first thing we made progress on was capital.

Speaker #1: You'll remember we were very low on capital coming out of the Union Bank acquisition. We are feeling very good about that—very ready for a Category II transition.

Speaker #1: That's upcoming. Expenses were the next thing that we were able to very quickly make a difference on, then feed revenue growth. And right now, we are very focused on NII expansion, which will help the ROA.

Speaker #1: So, broadly speaking, moving towards the right on the ranges is the way we are managing the bank.

Speaker #4: Got it. And maybe just on the capital front, maybe if we can revisit in terms of timing, means you've talked about wanting to get to a 10 percent adjusted CT1 before we see a ramp-up in buybacks.

Ebrahim Poonawala: Got it. Maybe just on the capital front, maybe if we can revisit in terms of timing. You have talked about wanting to get to a 10% adjusted CET1 before we see a ramp-up in buybacks. Is that still the case? Beyond that, are there additional BTIGs out there in terms of small tuck-in deals that would make sense?

Speaker #4: Is that still the case? And beyond that, are there additional BTIGs out there, in terms of small tuck-in deals, that would make sense?

Speaker #2: I'll start with the capital question. I mean, yeah, we've made tremendous progress over the last couple of years. We've grown capital over 30 percent just in those last two years.

John Stern: I will start with the capital question. We have made tremendous progress over the last couple of 2 years. We have grown capital over 30% just in those last 2 years, we think we are on the last lap certainly of capital build right now. Our first priority is going to be supporting loan growth. That is something that we clearly did this time along with BTIG, we are pleased to see our capital levels actually flatten and at the same time making progress in our Category 2. Ebrahim, I would say that we would anticipate to increase the buybacks and glide into that 70% to 75% range, which we are very committed to, as we approach approximately that 10% level. This quarter we had $200 million of repurchases that was flat versus the prior quarter, we had a lot of loan growth in the BTIG acquisition.

Speaker #2: And we think we're on the last lap, certainly, of capital build. Right now, our first priority is going to be supporting loan growth. That's something that we clearly did this time, along with BTIG.

Speaker #2: And so we're pleased to see our capital levels actually flatten, and at the same time, making progress in our category two. And Ibrahim, I would say that we would anticipate increasing the buybacks and gliding into that 70 to 75 percent range, which we're very committed to.

Speaker #2: As we approach that 10 percent—approximately that 10 percent level—this quarter we had $200 million of repurchases. That was flat versus the prior quarter, but we had a lot of loan growth.

Speaker #2: And the BTIG acquisition. So if we continue to see those sorts of opportunities, we'll pause share repurchase, or keep it at these particular levels.

John Stern: if we continue to see those sorts of opportunities, we'll pause for share repurchase or keep it at these particular levels. We intend to glide up into that level.

Speaker #2: But we intend to glide up into that level.

Speaker #1: And Ibrahim, on your second question, are there other BTIGs? We do steadily look at a lot of smaller bolt-on deals. It would not be our expectation that we would need to do a bolt-on in capital markets.

Gunjan Kedia: Ebrahim, on your second question, are there other BTIGs? We do steadily look at a lot of smaller bolt-on deals. It would not be our expectation that we would need to do a bolt-on on capital markets. BTIG brought equity trading and advisory businesses to complement our FIC business. We have a complete offering now. It's about 7% of our total revenue. That puts us roughly in line with our regional peers, with a lot of headroom relative to G-SIBs. We think we have a nice platform to grow organically and get to the 10% revenue, which would really give us sort of the right portfolio mix. The broader question on the bolt-on, our thought process always is to create a very accretive, financially attractive way of creating localized scale in one or two of our products.

Speaker #1: BTIG brought equity trading and advisory businesses to complement our FIC business. So we have a complete offering now. It's about 7% of our total revenue.

Speaker #1: That puts us roughly in line with our regional peers, but with a lot of headroom relative to GSIBs, so we think we have a nice platform to grow organically. Getting to the 10 would really give us sort of the right portfolio mix.

Speaker #1: But the broader question on the bolt-on—our thought process always is to create a very accretive, financially attractive way of creating localized scale in one or two of our products.

Speaker #1: And we do look at those, and again, I think of them very much as organic growth because these are sort of tuck-in deals. I hope that answers your question.

Gunjan Kedia: We do look at those, and again, I think of them very much as organic growth because these are sort of tuck-in deals. I hope that answers your question.

Speaker #4: Yep, super clear. Thank you so much.

Ebrahim Poonawala: Yep. Super clear. Thank you so much.

Speaker #3: Your next question comes from the line of Mike Mayo with Wells Fargo. Please go ahead.

Operator 2: Your next question comes from the line of Mike Mayo with Wells Fargo. Please go ahead.

Operator: Your next question comes from the line of Mike Mayo with Wells Fargo. Please go ahead.

Speaker #1: Good morning, Mike.

Gunjan Kedia: Morning, Mike.

David Brown: Hi. I think the key phrase here is fee complex. You keep mentioning fees in many different ways. What's the output of all your plans here? Like fees over 50% or up to 50%? As a component of that, how do you plan to get that capital markets number higher, investing in legacy U.S. Bancorp or BTIG relates to cards. By the way, is Amazon in the guide for the year and then corporate payments? What's really the plan for the fee complex as a whole, and how does that overlay with your existing business relationships?

Mike Mayo: Hi. I think the key phrase here is fee complex. You keep mentioning fees in many different ways. What's the output of all your plans here? Like fees over 50% or up to 50%? As a component of that, how do you plan to get that capital markets number higher, investing in legacy U.S. Bancorp or BTIG relates to cards. By the way, is Amazon in the guide for the year and then corporate payments? What's really the plan for the fee complex as a whole, and how does that overlay with your existing business relationships?

Speaker #5: Hi. I think you meant I think the key phrase here is be complex. You keep mentioning fees in many different ways. And what's the output of all your plans here?

Speaker #5: Fees over 50 percent or up to 50 percent? And then, as a component of that, how do you plan to get that capital markets number higher—investing in legacy U.S. Bancorp or BTIG as it relates to cards?

Speaker #5: In terms of, by the way, is Amazon in the guide for the year, and then corporate payments? So, what's really the plan for fee, the fee complex as a whole?

Speaker #5: And how does that overlay with your existing business relationships?

Speaker #1: Well, thank you, Mike. I do call it the fee complex, don't I? Because the quality and the mix is an important part of our— we don't want to be a single-sort-of-business name.

Gunjan Kedia: Thank you, Mike. I do call it the fee complex, don't I? Because the quality and the mix is an important part of our. We don't want to be a single business name. The four categories are very diversified with each other, and they are underpinned by some faster-growing markets. We would aspire to be in the higher 40s as a total percentage. We were at 45 at one point. If we can keep our efficiency ratio to the 55, 57 range and grow fees at that level, I think it makes for a very enduring franchise. That's not just financially. We think about fees as the hooks that create enduring relationships that also bring high-quality deposits, both on the consumer side and the corporate side.

Speaker #1: The four categories are very diversified from each other, and they are underpinned by some faster-growing markets. We would aspire to be in the high 40s as a total percentage.

Speaker #1: We were at 45 at one point. And if we can keep our efficiency ratio in the mid-55 to 57 range and grow fees at that level, I think it makes for a very enduring franchise.

Speaker #1: And that's not just financially. We think about fees as the hooks that create enduring relationships. They also bring high-quality deposits, both on the consumer side and the corporate side.

Speaker #1: So the intent here is not just the business portfolio, but the consumer relationship being very deep and multi-product. So the strategies are all anchored around each of those four big pillars.

Gunjan Kedia: The intent here is not just the business portfolio, but the consumer relationship being very deep and multi-product. The strategies are all anchored around each of those four big pillars, having enough nourishment and enough investments to grow alongside the bank. I'll let John Stern answer the questions on the outlook for CPS then.

Speaker #1: Having enough nourishment and enough investments to grow alongside the bank. And I'll let John answer the questions in the outlook for CPS.

Speaker #2: Yeah, I would just maybe add to that, Gunjan. We talk a lot here about leveraging the balance sheet and the growth that we have—either in the loan book, et cetera—to help with the fee categories, whether that is capital markets or investment services.

John Stern: I would just maybe add to that, Gunjan Kedia. We talk a lot about here leveraging the balance sheet, the growth that we have, either in the loan book, et cetera, to help with the fee categories, whether that is capital markets or investment services. That's why the fee complex is so important. We have a lot of different products that we can apply to clients that have balance sheet usage for us. We're really leveraging that component. Yes, the Amazon component is in the guide. We talked about $75 million to $85 million of revenue. A majority of that is in net interest income, so there'll be some split between NII and fees on that. Of course, just as a reminder, we anticipate $160 million reserve build that will occur with the closing that we anticipate to be mid-August.

Speaker #2: That's why the fee complex is so important. We have a lot of different products that we can apply to clients that have balance sheet usage for us.

Speaker #2: And so we're really leveraging that component. And yes, the Amazon component is in the guide. We had talked about $75 to $85 million of revenue.

Speaker #2: The majority of that is in net interest income, so there will be some split between NII and fees on that. And then, of course, just as a reminder, we anticipate a $160 million reserve build that will occur with the closing, which we anticipate to be in mid-August.

Speaker #5: And then, as far as how you intend to go from 7 to 10 percent in capital markets as a percentage of revenues, would you be hiring more people through BTIG, or is it through legacy U.S. Bancorp or other means?

David Brown: As far as how you intend to go from 7% to 10% in capital markets as a percentage of revenues, will you be hiring more people through BTIG, or is it through legacy U.S. Bancorp or other means? Do you have in the back of your mind maybe you will find a small bolt-on?

Mike Mayo: As far as how you intend to go from 7% to 10% in capital markets as a percentage of revenues, will you be hiring more people through BTIG, or is it through legacy U.S. Bancorp or other means? Do you have in the back of your mind maybe you will find a small bolt-on?

Speaker #5: Or do you have in the back of your mind, maybe we'll find a small bolt-on?

Speaker #1: Well, thank you for that. Yes, you did ask that. We are not anticipating a small bolt-on needed to get to the 10-ish percent.

Gunjan Kedia: Well, thank you for that. Yes, you did ask that. We are not anticipating a small bolt-on needed to get to the ten-ish percent. This is organic growth from just leveraging the relationship and the product capabilities on both sides. What we are seeing, Mike Mayo, even in the first month, and we're just getting started here, is the balance sheet that is already being deployed has room to earn some fee revenue just from the relationships we have. BTIG is being invited into the relationships we already have. The organic growth does not really anticipate a massive expansion of headcount or it's just cross-selling and getting a fair share of the fee revenue from the book, from a balance sheet that has been deployed against the commercial side.

Speaker #1: This is organic growth from just leveraging the relationship and the product capabilities on both sides. What we are seeing, Mike, even in the first month—and we're just getting started here—is the balance sheet that is already being deployed.

Speaker #1: There is room to earn some fee revenue just from the relationships we have. So BTIG is being invited into the relationships we already have. The organic growth does not really anticipate a massive expansion of headcount; it's just cross-selling and getting our fair share of the fee revenue.

Speaker #1: From the book, from our balance sheet that has been deployed against the commercial side. So that's the plan. And we have some confidence that gets us to about 10% of the total revenue.

Gunjan Kedia: That's the plan, and we have some confidence that gets us to about 10% of the total revenue.

Speaker #5: All right. Thank you.

David Brown: All right. Thank you.

Mike Mayo: All right. Thank you.

Speaker #1: Thank you, Mike.

Gunjan Kedia: Thank you, Mike.

Speaker #3: Your next question comes from the line of Ken Euston with Autonomous Research. Please go ahead.

Operator 2: Your next question comes from the line of Ken Usdin with Autonomous Research. Please go ahead.

Operator: Your next question comes from the line of Ken Usdin with Autonomous Research. Please go ahead.

Speaker #1: Good morning, Ken.

Gunjan Kedia: Morning, Ken.

Speaker #6: Good morning. Hi, good morning. I was just wondering if I could clean up a couple of these acquisition-related math things. So first of all, I guess on BTIG, you mentioned you've got the $60 million of restructuring—that's all in the second half.

David Brown: Morning.

John Stern: Morning.

David Brown: Hi. Good morning. I was just wondering if I could just clean up a couple of these acquisition-related math things. First of all, I guess on BTIG, you mentioned you've got the $60 million of restructuring. That's all in the H2. Will that be the end of it? You see kind of like an improvement in the incremental margin post the end of the year as we go forward?

Ken Usdin: Hi. Good morning. I was just wondering if I could just clean up a couple of these acquisition-related math things. First of all, I guess on BTIG, you mentioned you've got the $60 million of restructuring. That's all in the H2. Will that be the end of it? You see kind of like an improvement in the incremental margin post the end of the year as we go forward?

Speaker #6: And will that be the end of it? So you see kind of an improvement in the incremental margin post the end of the year as we go forward?

Speaker #2: Yeah, Ken, that's right. So, $60 million would be just the merger-related items that we would anticipate this year. There would be a tail or so, probably early '27.

John Stern: Yeah, Ken, that's right. $60 million would be just the merger-related items that we would anticipate this year. There'll be a tail or so, probably early 2027. We'll update you as we progress. Yes, the contribution margin we anticipate being the remainder of this year, kind of that 15% for this business. We anticipate that to build out. I have 20% in my head or how we're thinking about it right now, and with hopeful room for improvement, but that's how we're progressing.

Speaker #2: We'll update you as we progress. But yes, the contribution margin—we anticipate it being, for the remainder of this year, kind of at that 15 percent for this business.

Speaker #2: But we anticipate that to build out. I have 20% in my head for how we're thinking about it right now, and with hopeful room for improvement.

Speaker #2: But that's how we're progressing.

Speaker #6: And on BTIG, so they just did a $300 run rate in June, as you mentioned—almost $100. But you're only building in $200 into the forward guide from here.

Ken Usdin: On BTIG, they just did a $300 run rate in June, as you mentioned.

John Stern: Yeah.

Ken Usdin: Almost 100, you're only building in 200 into the forward guide from here. Was there something extraordinary? Obviously, Q2 wasn't-

Speaker #6: Was there something extraordinary? Obviously, second quarter wasn't extraordinary for capital markets. I was just wondering if you could help us understand what’s the right run rate for that capital markets line?

John Stern: Yeah

Ken Usdin: extraordinary for capital markets. I was just wondering, maybe you could just help us understand, what's a right run rate for that capital markets line once we kind of get to the right place and fully run rate type of thing?

Speaker #6: Once we kind of get to the right place and fully reach that run rate type of thing.

Speaker #2: Yeah, well, a couple of things. Just to be clear, $200 million per quarter is what we anticipate. I think there's some seasonality in the third and fourth quarters. They had a record month in June.

John Stern: Yeah. Well, a couple things. Just to be clear, 200 per quarter is what we anticipate. I think there's some seasonality in Q3 and Q4. They had a record month in June. A lot of transactions. Could it go higher than 200? It could. Capital markets fees can swing and things of that nature. We'll see how that goes. Going back, I would just point back to Gunjan's comments she just made on we're 7% of revenue right now, anticipating to get to 10. I think that's the right trajectory. We expect strong growth. I mean, organically, the capital markets grew 30%, both Q1 and Q2. I don't anticipate being that strong in the back H2 of the year, it's still going to be strong.

Speaker #2: A lot of transactions. Could it go higher than 200? It could. But capital markets, fees can swing, and things of that nature. So, we'll see how that goes.

Speaker #2: Going back, I would just point back to Gunjan's comments you just made on—we're at 7% of revenue right now, anticipating getting to 10%.

Speaker #2: I think that's the right trajectory. We expect strong growth. I mean, organically, the capital markets grew 30% in both the first and second quarters.

Speaker #2: I don't know if—I don't anticipate being that strong in the back half of the year, but it's still going to be strong. And based on everything we see, and based on the new business and all the different pieces that we've been building on our legacy products—not to mention the BTIG synergies that we anticipate.

John Stern: Based on everything we see and based on the new business and all the different pieces that we've been building on our legacy products, not to mention the BTIG synergies that we anticipate. That's what gives us all that positivity and momentum that we think for this business.

Speaker #2: So that's what gives us all that positivity and momentum that we think for this business.

Speaker #6: Okay. And then the third one—thanks for mentioning the 75 to 85 on Amazon. I just want to make it clear again: that's an annualized number.

Ken Usdin: Okay. The third one, thanks for mentioning the $7,585 on Amazon. Just want to make clear again, that's an annualized number, and would you expect that to be fully run rated in Q4?

Speaker #6: And would you expect that to be fully run-rated in the fourth quarter?

Speaker #2: Yeah, that's a per quarter. Number. And that would be then so we would anticipate getting a approximately half of that for the third quarter.

John Stern: Yeah. That's a per quarter number, and that would be then, so we would anticipate.

Ken Usdin: Per quarter.

John Stern: approximately half of that for Q3, and then that would be fully in for Q4.

Speaker #2: And then that would be fully in for the fourth quarter.

Speaker #6: Okay, so that's a quarterly—so, more like $300-ish on an annual perspective.

Ken Usdin: Okay. That's a quarterly, so more like 300-ish on an annual perspective.

Speaker #2: Yeah, that's right. So, to link all these things together—Gunjan mentioned adding a billion. So if we think about $200 million per quarter, and $75–85 million for Amazon, that's going to be north of a billion in revenues that we're installing based on these acquisitions, which we're excited about.

John Stern: Yeah. That's right.

Ken Usdin: Okay. Got it.

John Stern: Back to link all these things together, Gunjan mentioned adding $1 billion. If we think about 200 per quarter and 75, 85 for Amazon, that's going to be north of $1 billion for revenues that we're installing based on these acquisitions, which we're excited about.

Speaker #6: Got it. Yep, that's what I wanted to get through. Thank you, John.

Ken Usdin: Got it. Yep. That's what I wanted to get through. Thank you, John.

Speaker #5: Great.

John Stern: Great.

Speaker #3: Your next question comes from the line of Gerard Cassidy with RBC Capital Markets. Please go ahead.

Operator 2: Your next question comes from the line of Gerard Cassidy with RBC Capital Markets. Please go ahead.

Operator: Your next question comes from the line of Gerard Cassidy with RBC Capital Markets. Please go ahead.

Speaker #1: Good morning.

Gunjan Kedia: Morning.

Speaker #6: Hi, Gunjan.

Gerard Cassidy: Hi, Gunjan.

John Stern: Good morning.

Speaker #7: Good morning. Hi. Hi, John. Can you guys share with us the build-out of the consumer branches that you mentioned, Gunjan? I think you said you're going to spend $300 million, up from $200 million?

Gerard Cassidy: Hi, John. Can you guys share with us the build-out of the consumer branches that you mentioned, Gunjan? I think you said you're going to spend $300 million up from $200 million. How much of that is for new branches versus just rehabbing existing branches? Second, how long does it take when you do build a new branch in your markets, does it take to reach breakeven and then to a profitability level that you're satisfied with?

Speaker #7: How much of that is for new branches versus just rehabbing existing branches? And then second, how long does it take when you do build a new branch in your markets?

Speaker #7: How long does it take to reach break-even, and then to a profitability level that you're satisfied with?

Speaker #1: Yeah, thank you, Gerard. We spotlighted that business because, having really worked on our expenses and fees last year, we are now very focused on the consumer deposit franchise in particular.

Gunjan Kedia: Thank you, Gerard. We spotlighted that business because having sort of really worked on our expenses and fees last year, we are very focused now on the consumer deposit franchise in particular. These consumer relationships are increasingly driving card and our wealth business as well because we've gotten quite good at it. It's a very important part of our strategy as we look forward, hence the higher investment into the branches. It's not a one-time step up. It's just something we have been gradually leaning into. For context, for the last 10-ish years now, we have been reshaping our branch network to go from what it was, which was a lot of tier 3 markets, smaller service branches, many of them in in-store locations, to modern technology-enabled multi-product hubs in attractive tier 2-like markets. That's been the journey all along.

Speaker #1: And these consumer relationships are increasingly driving card in our wealth business as well, because we've gotten quite good at it. So, it's a very important part of our strategy as we look forward.

Speaker #1: And hence the higher investment into the branches. It's not a one-time step-up; it's just something we have been gradually leaning into. For context, for the last 10-ish years now, we have been reshaping our branch network to go from what it was—which was a lot of tier-three markets, smaller service branches, many of them in in-store locations.

Speaker #1: To modern, technology-enabled, multi-product hubs in attractive, tier-two-like markets. So, that's been the journey all along. We are at a point when the refurbishment part of our branch network is largely done.

Gunjan Kedia: We are at a point when the refurbishment part of our branch network is largely done. We are now leaning into new builds and a new growth focus. Our first set of focus is on densifying within our region. The returns on that investments are very quick because the brand is known. The customers are going back and forth from those geographies. We tend to arrive at our sort of attractive target numbers very quickly. When you inch out to brand-new locations, it's a slightly longer runway. That's why we look for a strategy where we've already planted a flag through our client centers. Those are important aspects for us as well. The client center houses our wealth teams, our commercial teams, our mortgage teams, increasingly small business. They're also anchored around some of our partnership relationships.

Speaker #1: So we are now leaning into new builds and a new growth focus. Our first area of focus is on densifying within our region. The returns on that investment are very quick because the brand is known and customers are going back and forth between those geographies.

Speaker #1: So we tend to arrive at our sort of attractive target numbers very quickly. When you inch out to brand new locations, it's a slightly longer runway.

Speaker #1: That's why we look for a strategy where we have already planted a flag through our client centers, and those are important aspects for us as well.

Speaker #1: The client center houses our wealth teams, our commercial teams, our mortgage teams, and increasingly, our small business teams. They are also anchored around some of our partnership relationships.

Speaker #1: So we would expect that, for the next few years, the focus will be on the densification. The returns are very good there on the investments, and then the inch-outs are most strategic in nature.

Gunjan Kedia: We would expect that for the next few years, the focus will be on the densification. The returns are very good there on the investments. The inch outs are more strategic in nature.

Speaker #6: I see. And Gunjan, have you identified the number of branches per year, over the next two or three years, that you might be building?

Gerard Cassidy: I see. Gunjan, have you identified the number of branches per year over the next two or three years that you might be building?

Speaker #2: Yeah, I mean, Gerard, we anticipate accelerating that. Part of this as well is we've been spending some time on how to drive the cost down of branch build-out and how we do it faster, so that's all going to be incorporated.

John Stern: Yeah, Gerard, we anticipate accelerating that. Part of this as well is we've been spending some time in how to drive the cost down of branch build-out, how we do it faster. That's all going to be incorporated. We don't have a specific number in mind. It's going to ramp, though, as we continue here. The densification, as Gunjan mentioned, that's kind of our first priority as the refurbishments have largely taken hold. Obviously we'll have refurbishments ongoing. That's just kind of the care and feeding of the network that we want to make sure that we do. Also, it's important that we have the product set with the Smartly Suite and the products we have now and the pricing models that we have associated with it.

Speaker #2: We don't have a specific number in mind that's going to ramp, though, as we continue here. The densification, as Gunjan mentioned, that's kind of our first priority.

Speaker #2: As the refurbishments are largely taking hold—and obviously, we'll have refurbishments ongoing—that's just kind of the care and feeding of the network that we want to make sure that we do.

Speaker #2: But also, it's important that we have the product set. With the Smartly suite and the products we have now, and the pricing models that we have associated with it, we have an area where we can equip the frontline branch folks with the tools to help us grow and drive down that break-even time.

John Stern: We have an area where we can equip the frontline branch folks with the tools to help us grow and drive down that breakeven time, which is what we're really focused on.

Speaker #2: Which is what we're really focused on.

Speaker #6: Very good. And then, as a follow-up question—and this is maybe tough to answer—we see in this country the benefits of the build-out of AI, both in data centers and all the capital expenditures that are being done.

Gerard Cassidy: Very good. Then as a follow-up question, this is maybe tough to answer. We see in this country the benefits of the build-out of AI, both in data centers and all the capital expenditures that are being done. Have you guys been able to look at your second derivative exposures or what the benefits are that you might be seeing? John, I think you touched on your commercial loan growth was quite good across the different size companies. We've been asking on these calls, what kind of impact is this having on the numbers, not just in lending, BTIG is probably volumes we saw with the big investment banks. The trading volumes were phenomenal in this quarter, and a lot of it had to do with the hyperscalers and the semiconductor stocks.

Speaker #6: Have you guys been able to look at your second derivative exposures, or what the benefits are that you might be seeing, John? I think you touched on your commercial loan growth—it was quite good across the different sized companies.

Speaker #6: But we've been asking on these calls, what kind of impact is this having on the numbers—not just in lending, but BTIG, it's probably volumes we saw with the big investment banks. The trading volumes were phenomenal in this quarter.

Speaker #6: And a lot of it had to do with the hyperscalers and the semiconductor stocks. So, have you guys been able to, or have you started to look at what kind of presence this new industry is having on your business?

Gerard Cassidy: Have you guys been able to, or have you started to look at what kind of presence is this new industry having on your business? Should it ever slow down, what it might do to the impact on some of the growth you are experiencing?

Speaker #6: And should it ever slow down, what might it do to the impact on some of the growth you're experiencing?

Speaker #2: Yeah, that's a good question, Gerard. I think from a—I think there's more direct impact with the capital markets space. But I'll tell you, we're not—the very biggest headlines, we may not be as involved in, but there's a number of just activities that are going on with our clients across.

John Stern: Yeah. That is a good question, Gerard. I think there is more direct impact with the capital market space. I will tell you, the very biggest headlines, we may not be as involved in. There is a number of just activities that are going on with our clients across. I think I understand the AI, the build of all that, and how that certainly is helping the US GDP. I think the way we talk to our clients, they are growing their businesses, and it is in all areas. It is in food and beverage, it is in media and technology, it is in power. Some of that clearly has more tangential to the AI build, but others are not. I just think people are feeling very optimistic. They want to grow their business, and we are here to support them. I think those are the broad themes we think about right now.

Speaker #2: I think I understand the AI, the build of all that, and how that certainly is helping the U.S. GDP. But I think the way we view—or the way we talk to—our clients, they are growing their businesses and it's in all areas.

Speaker #2: It's in food and beverage, it's in media and technology, it's in power. So, I mean, some of that clearly is more tangential to the AI build, but others are not.

John Stern: It is in food and beverage, it is in media and technology, it is in power. Some of that clearly has more tangential to the AI build, but others are not. I just think people are feeling very optimistic. They want to grow their business, and we are here to support them. I think those are the broad themes we think about right now.

Speaker #2: So, I just think there are people feeling very optimistic. They want to grow their business, and we're here to support them. I think those are the broad themes we're considering right now.

Speaker #1: I would just add, Gerard, for us, the data center loans in particular are not very large in terms of our balance sheet. The sentiment rebound from the pause with tariffs last year has been the story we've heard, certainly in the middle American footprint that we've had.

Gunjan Kedia: I would just add, Gerard, for us, the data center loans in particular are not very large in terms of on our balance sheet. The sentiment rebound from the pause with tariffs last year has been the story. We have heard it certainly in the Middle American footprint that we have had. A lot of people who had paused last year to say, Where is all of this going? are seeing a very resilient consumer and a lot of demand, and beginning to lean into that in a fair way. It is more broad based and healthier loan growth and loan demand than just a concentrated AI trade. You are right, we do try to look through the motivations behind the loan demand, and it is quite healthy right now.

Speaker #1: A lot of people who had paused last year to say, "Where is all of this going?" are seeing a very resilient consumer and a lot of demand.

Speaker #1: And beginning to lean into that in a fair way. So it's more broad-based and healthier loan growth and loan demand than just a concentrated AI trade.

Speaker #1: And you're right, we do try to look through the motivations behind the loan demand, and it's quite healthy right now.

Speaker #6: Thank you. I appreciate the color.

Gerard Cassidy: Thank you. I appreciate the color.

Speaker #5: Your next question comes from the line of Manan Gosalia with Morgan Stanley. Please go ahead.

Operator 2: Your next question comes from the line of Manan Gosalia with Morgan Stanley. Please go ahead.

Operator: Your next question comes from the line of Manan Gosalia with Morgan Stanley. Please go ahead.

Speaker #7: Hi, good morning. Good morning. So you mentioned that deposit rates might go up a little bit as loan growth is stronger. I guess the question is, is there a difference in how proactive you want to be here?

Gunjan Kedia: Good morning, Manan.

Gerard Cassidy: Hi. Good morning.

John Stern: Hi. Good morning.

Gerard Cassidy: Good morning.

Manan Gosalia: Good morning.

Gerard Cassidy: Good morning. You mentioned that deposit rates might go up a little bit as loan growth is stronger. I guess the question is there a difference in how proactive you want to be here? We're hearing from several banks that loan growth has been a little stronger than expected. Your loan growth outlook from here is pretty good. Rates have been fairly volatile. We're going to get less forward-looking color from the Fed. I guess, is there anything different that you're doing here that you weren't doing at the start of the year, maybe in terms of promo balances, marketing incentives to just get ahead of what could be a little bit more volatility on the deposit side?

Manan Gosalia: Good morning. You mentioned that deposit rates might go up a little bit as loan growth is stronger. I guess the question is there a difference in how proactive you want to be here? We're hearing from several banks that loan growth has been a little stronger than expected. Your loan growth outlook from here is pretty good. Rates have been fairly volatile. We're going to get less forward-looking color from the Fed. I guess, is there anything different that you're doing here that you weren't doing at the start of the year, maybe in terms of promo balances, marketing incentives to just get ahead of what could be a little bit more volatility on the deposit side?

Speaker #7: We're hearing from several banks that loan growth has been a little stronger than expected. Your loan growth outlook from here is pretty good. Rates have been fairly volatile.

Speaker #7: We're going to get less forward-looking color from the Fed. I guess, is there anything different that you're doing here that you weren't doing at the start of the year, maybe in terms of promo balances, marketing, incentives, to just get ahead of what could be a little bit more volatility on the deposit side?

Speaker #2: Yeah, thanks for the question, Manan. I think, largely speaking, our strategy on deposits has been—and remains—on track. The consumer deposits, excuse me, the consumer deposits, we continue to focus on.

John Stern: Yeah. Thanks for the question, Manan. I think largely speaking, our strategy on deposits remains on track. The consumer deposits we continue to focus on. We've had three quarters there in a row of record deposit growth on the consumer franchise. The commercial side was a little light seasonally this quarter, but we anticipate that to continue to go up. I would say from our seat, the commercial deposits will help fill any gap that we need from a loan growth perspective. The pricing on the commercial side is well understood by us. Whereas the consumer side, added tools and added models to help, again, our front-line folks in the network really can help us price that appropriately. We always see different pockets of pricing in different geographies and things like that. That sort of episodes happen all the time.

Speaker #2: We've had three quarters in a row of record deposit growth from the consumer franchise. The commercial side was a little light seasonally this quarter, but we anticipate that to continue to go up. I would say, from our seat, that commercial deposits will help fill any gap that we need from a loan growth perspective.

Speaker #2: So, on the pricing on the commercial side as well—understood by us—whereas on the consumer side, we've added tools and added models to help. Again, our frontline folks in the network really can help us price that appropriately.

Speaker #2: And so we always see different pockets of pricing in different geographies and things like that, but those sorts of episodes happen all the time.

Speaker #2: And so I don't think there's anything here any different than any other environment. So I would say, largely, our strategy is intact.

John Stern: I don't think there's anything here any different than any other environment. I would say largely our strategy is intact.

Speaker #7: Got it. Okay, perfect. And then maybe just a follow-up to Gerard's question. Can you remind us which geographies you're focused on in terms of branch expansion, and I guess what level of densification you expect to reach in these new markets?

Manan Gosalia: Got it. Okay, perfect. Maybe just a follow-up to Gerard's question. Can you remind us which geographies you're focused on in terms of branch expansion? I guess what level of densification you expect to reach in these new markets? Is there a specific branch share number or rank or something you're targeting in the new markets you're expanding in?

Speaker #7: Is there a specific branch share number or rank, or something you're targeting, in the new market you're expanding in?

Speaker #1: Yes, thank you. Manan, we are looking to be more than 8% of the branch count, which gets you into a sweet spot to be the top four depositor in the region, which is what our goal is.

Gunjan Kedia: Yes. Thank you, Manan. We are looking to be more than 8% of the branch count, which gets you into a sweet spot to be the top four depositor in the region, which is what our goal is. Obviously, to be up higher than that as well. At that number, it's pretty good. Right now, our focus very much has been on the Southwest. We've been growing out our Arizona footprint. Nashville, and our surrounding Tennessee markets have been very good for us. Everything else is not a book state focus necessarily, but for example, parts of Utah are very high growth, even in and around Boise. We are very surgical about how we think about permits that are being filed many years into advancement, where the shopping is growing. We have a very good sense of where household formation is higher.

Speaker #1: Obviously, we'd like to be higher than that as well, but at that number, it's pretty good. Right now, our focus very much has been on the Southwest.

Speaker #1: We've been growing out our Arizona footprint. Nashville and our surrounding Tennessee markets have been very good for us. And then everything else is not a big state focus necessarily, but, for example, parts of Utah are very high growth, even in and around Boise.

Speaker #1: So we are very surgical about how we think about permits that are being filed. Many years into advancement, where the shopping is growing. And so we have a very good sense of where household formation is higher.

Speaker #1: And I must say that since COVID, we have seen many areas within our footprint really revive, both in terms of affluence and in terms of younger generations moving in.

Gunjan Kedia: I must say that since COVID, we have seen many areas within our footprint really revive in terms of affluence and in terms of younger generations moving in. All of those, the quality of the household formation is very important to us, too. Those are the 10-ish markets that are just the focus right now to get it above a certain branch density.

Speaker #1: And all of those, the quality of the household formation is very important to us too. So, those are the Tennessee markets that are just the focus right now to get it above a certain branch density.

Speaker #7: Great, thank you.

Manan Gosalia: Great. Thank you.

Speaker #5: Your next question comes from the line of Chris McGrady with KBW. Please go ahead.

Operator 2: Your next question comes from the line of Chris McGratty with KBW. Please go ahead.

Operator: Your next question comes from the line of Chris McGratty with KBW. Please go ahead.

Speaker #8: Oh, good morning. Thanks for the question. John, on the fixed-rate asset repricing—any update, given the curve moved from what you said last quarter? And maybe remind us?

Chris McGratty: Good morning. Thanks for the question. John, on the fixed rate asset repricing, any update given the curves moved from what you said last quarter? Maybe remind us the pick-up on both the loan and security side. Thanks.

Speaker #8: They pick up on both the loan and security side. Thanks.

Speaker #2: Sure. Yeah. So I think what's been going on is, as we've been getting bigger, the volumes have picked up in terms of the amount.

John Stern: Sure. Yeah. I think what's been going on as we've been getting bigger, the balance volumes have picked up in terms of the amount. I think that we have more like $10 to $11 billion per quarter that really come through in terms of repricing. You can think of about three to four to that is on the investment portfolio versus the balance being on the loan side. I would say we're kind of in that 100 to 125 basis point. It depends on what's rolling off and what the rate is at the time of coming on, and that's obviously very fluid. It's been helpful. The Fed funds versus five-year Treasury is around 60 bips or so, and that's been hanging in there. We obviously watch the forwards, and we know that that forward curve is flattening as you look out.

Speaker #2: I think that we have more like $10 to $11 billion per quarter that really come through in terms of repricing. You can think of about $3 to $4 billion of that is on the investment portfolio, versus the balance being on the loan side.

Speaker #2: I would say we're kind of in that 100 to 125 basis point range. And it depends on what's rolling off and what the rate is at the time of coming on.

Speaker #2: And that's obviously very fluid, but it's been helpful. The Fed funds versus five-year Treasuries is around 60 bps or so, and that's been hanging in there.

Speaker #2: We obviously watched the forwards and we know that the forward curve is flattening as you look out. But to the extent that it stays around here, we feel really good that hopefully we can keep at that level or expand as we move forward.

John Stern: To the extent that it stays around here, we feel really good that hopefully that we can keep at that level or expand as we move forward.

Speaker #8: Okay, great. Thanks for that. And given the positive commentary on loan growth, and the focus on the deposit and the branches that we've been talking about, is there any scenario where you might consider a depository acquisition over the medium term?

Chris McGratty: Okay, great. Thanks for that. Given the positive commentary on loan growth and the focus on the deposit, the branches that we've been talking about, is there any scenario where you might consider a depository acquisition over the medium term? I know the message has been no recently.

Speaker #8: I know the message has been 'no' recently.

Speaker #1: Yeah, good one. Nothing has really changed about how we're very targeted with our organic build on the deposit quality and the customer franchise quality.

Gunjan Kedia: Yeah. Good morning. Nothing has changed really. We're very targeted with our organic build on the deposit quality and the customer franchise quality. Yes, nothing has changed about our stance, really focused on the organic growth aspects here.

Speaker #1: So yes, nothing has changed about our stance; we're really focused on the organic growth aspects here.

Speaker #8: Great, thank you.

Chris McGratty: Great. Thank you.

Speaker #1: Thank you, Chris.

Gunjan Kedia: You're welcome, Chris.

Speaker #5: Your next question comes from the line of Saul Martinez with HSBC. Please go ahead.

Operator 2: Your next question comes from the line of Saul Martinez with HSBC. Please go ahead.

Operator: Your next question comes from the line of Saul Martinez with HSBC. Please go ahead.

Speaker #6: Hi, Saul.

Gunjan Kedia: Hi, Saul.

Speaker #8: Hey, good morning. Hello.

Saul Martinez: Hey, good morning.

John Stern: Morning.

Saul Martinez: Hello. Good morning. I apologize in advance. I'm going to get into the weeds on some of the numbers with some of these questions again. On your NII guidance, that does include Amazon, $75 million, $85 million a quarter. Half a quarter, that's about one percentage point of benefit in terms of the year-on-year growth. Four to six is organically maybe three to five. If I look at it on a sequential basis, kind of implies flattish to about up 2%, which isn't really suggestive of much NIM expansion. I'm just curious, given everything else you guys are talking about and good underlying trends, loan growth, controlled deposit cost, fixed asset repricing, whether there's an element of conservatism in this guide. I'm just curious how you think about all that.

Speaker #2: Good morning.

Speaker #8: Good morning. I apologize in advance—I'm going to get into the weeds on some of the numbers with some of these questions again.

Speaker #8: But on your NII guidance, that does include Amazon—$80 million, $35 to $85 million a quarter. Half a quarter, that's about 1 percentage point of benefit in terms of the year-on-year growth.

Speaker #8: So, 4 to 6 is organically maybe 3 to 5. And if I look at it on a sequential basis, it kind of applies flattish to about up 2%, which isn't really suggestive of much new expansion.

Speaker #8: So I'm just curious, given everything else you guys are talking about—and good underlying trends: loan growth, controlled deposit costs, fixed asset repricing—whether there's an element of conservatism in this guide. I'm just curious how you think about all that.

Speaker #2: Sure, thanks. Just want to reiterate that the $75 to $85 is a total revenue number. A majority of that is going to be NII.

John Stern: Sure. Thanks. Just want to reiterate that the $75 million to $85 million is a total revenue number.

Saul Martinez: Okay.

John Stern: A majority of that is going to be NII. I know I said majority, but it's probably, I would say two-thirds is going to be NII to one-third fee is going to be roughly what it is. That can move. That maybe helps there a little bit. Of course, in Q3, we gave you a guide for 4 to 6. That includes a half a quarter assumed for the Amazon. There's pieces of it before it kind of ramps up fully in Q4. That's why we anticipate, as I mentioned earlier, our trajectory of NIM and net interest income kind of growing throughout the course of the year, in part due to the Amazon. Of course, we have momentum in other places. The loan growth, as we've talked about, is positive. I just answered a question on the fixed asset repricing.

Speaker #2: So, it's probably—I know I've said 'majority'—but it's probably, I would say, two-thirds is going to be NII to one-third fee. That's going to be roughly what it is, but that can move.

Speaker #2: So that maybe helps there a little bit. Of course, in the third quarter, we gave you a guide for $4 to $6. And that includes half a quarter assumed for the Amazon.

Speaker #2: So there's pieces of it before it kind of ramps up fully in the fourth quarter. That's why we anticipate, as I mentioned earlier, our trajectory of NIM and then interest income kind of growing throughout the course of the year, in part due to the Amazon, but of course, we have momentum in other places.

Speaker #2: The loan growth, as we've talked about, is positive. I just answered a question on the fixed asset repricing. Those are the positive items, obviously, that will continue to manifest.

John Stern: Those are the positive items, obviously, that will continue to manifest. It's the things that we're watching, and is the deposit side as well as the shape of the curve. Those are kind of the things that can move, we'll watch that obviously very closely.

Speaker #2: It's the things that we're watching, and it's the deposit side as well as the shape of the curve. Those are kind of the things that can move, and we'll watch that, obviously, very closely.

Speaker #8: Okay, that's helpful. Then, just to go back to the BTIG numbers and follow up on some of the questions there—just want to make sure I have them straight here.

Saul Martinez: Okay. That's helpful. Just to go back to the BTIG numbers and follow up on some of the questions there. Make sure I have them straight here. $200 million a quarter and then $100 million in June. That's about $500 million. You have $60 million of integration costs built into that and the 15% margin. That margin is net, my understanding is net of those integration costs, which would imply with $60 million on $500 million that's a big number that the sort of a cleaner margin on this is much higher, mid 20% kind of margin. Am I thinking about that right? You also said 20% was what you had in your head, but it does imply on a 15% margin with $60 million of integration costs, it would imply that the margin is much higher than that.

Speaker #8: So 200 a quarter, and then 100 in June. So that's about $500 million. You have $60 million of integration costs built into that. And the 15% margin—that margin is net.

Speaker #8: My understanding is net, which would imply $60 million on $500 million. That's a big number. The sort of cleaner margin on this is much higher—mid-20% kind of margin.

Speaker #8: Am I thinking about that right? Because you also said 20% was what you had in your head, but it does imply, at a 15% margin with $60 million and integration costs, it would imply that the margin is much higher than that.

Speaker #2: Yeah, I think so. Just to clarify, the 60 is kind of outside of the 15% contribution. So for the 200, I'd multiply that by 85% to get the expense rate.

John Stern: Yeah. Thanks, Saul. Just to clarify, the $60 million is kind of outside of the 15% contribution.

Saul Martinez: Okay.

John Stern: The $200 million, I'd multiply that by 85% to get the expense rate, and that's kind of our core operating model at this particular juncture. I would anticipate $60 million or so, $30 million or so per quarter here in Q3 and Q4. There might be some trailing components of that in Q1. We'll see as we kind of progress. In terms of the contribution margin, that 15% is a good core base run rate. That's why we gave it to you in that sense. Obviously over time, we look to improve that, as I mentioned.

Speaker #2: And that's kind of our core operating model at this particular juncture. I would anticipate $60 million or so, $30 million or so per quarter here in the third and fourth quarter.

Speaker #2: There might be some trailing components of that in the first quarter. We'll see as we kind of progress. But in terms of the contribution margin, that 15% is a good core base run rate.

Speaker #2: That's why we gave it to you in that sense. And then, obviously, over time, we look to improve that, as I mentioned.

Speaker #8: Okay, got it. Thank you so much.

Saul Martinez: Okay. Got it. Thank you so much.

Speaker #2: Yeah.

Speaker #5: Your next question comes from the line of David Shivarini with Jefferies. Please go ahead.

John Stern: You bet.

Operator 2: Your next question comes from the line of David Chiaverini with Jefferies. Please go ahead.

Operator: Your next question comes from the line of David Chiaverini with Jefferies. Please go ahead.

Speaker #2: Hi, thanks for taking the questions. I wanted to ask about slide 6. You highlight the payments businesses and note good trends overall, but you do show merchant processing—the middle chart—showing a slowdown.

John Stern: Morning.

Gunjan Kedia: Morning.

Chris McGratty: Morning.

John Stern: Morning.

Gunjan Kedia: Morning.

John Stern: Wanted to ask on slide six, you highlight the payments businesses. Good trends overall, but you do show the merchant processing, the middle chart showing a slowdown. You cited the softness

David Chiaverini: Wanted to ask on slide six, you highlight the payments businesses. Good trends overall, but you do show the merchant processing, the middle chart showing a slowdown. You cited the softness

Speaker #2: You cited the softness in Europe. Anything else that's driving that? And what's the outlook for the merchant processing business going forward?

David Chiaverini: In Europe, anything else that's driving that? What's the outlook for the merchant processing business going forward?

Speaker #3: Yeah, good morning. Thank you. As I said, on the merchant side, yes, certainly Europe had an impact on the business. We just saw slowness, post-war impacts, that gave us that sort of thing.

John Stern: Yeah. Good morning. Thank you. On the merchant side, yes, certainly Europe had an impact on the business. We just saw slowness, post-war impacts that gave us that sort of thing. However, we also had loss of some non-strategic distribution partners over there, and that we will feel that impact for the next three quarters or so. I think our growth rate will be while the European macro component will come back, the distribution component or the partner aspect will hang for a few quarters. This is just part of the transformation, as Gunjan has talked about, is a very big priority for us. While we anticipate perhaps lower growth rates in the near term here for merchant, we do expect the other parts of the payment complex to improve. All the cards are doing very well, as we've talked about.

Speaker #3: However, we also had the loss of some non-strategic distribution partners over there, and we will feel that impact for the next three quarters or so.

Speaker #3: So I think our growth rate will be—while the European macro component will come back, the distribution component or the partner aspect will hang for a few quarters.

Speaker #3: And that's just part of the transformation, as Gunjan has talked about. It's a very big priority for us. And so while we anticipate perhaps lower growth rates in the near term here for merchant, we do expect the other parts of the payment complex to really improve.

Speaker #3: All the cards are doing very well, as we've talked about. Corporate, retail, and small business are doing quite well.

John Stern: Corporate, retail, and small business are doing quite well.

Speaker #4: And I would just add, for the total payment business—which is quite sizable for us, about 23% of our total revenue this quarter—the revenue grew very healthily.

Gunjan Kedia: I would just add for the total payment business, which is quite sizable for us, about 23% of our total revenue this quarter. The revenue grew very healthily. It was 5.7%, so well within our mid-single digit expectations from a medium-term target standpoint, and quite strengthened from last year. Last year, we were really looking at the corporate side dragging because of slowness in corporate and government spend, and they have come back very much. The diversification benefits are real, but we absolutely feel confident in the mid-single digit number for the overall payments complex and on the better side of that range as we go forward.

Speaker #4: It was 5.7%, so well within our mid-single-digit expectations from a medium-term target standpoint, and quite strengthened from last year. Last year, we were really looking at the corporate side dragging because of slowness in corporate and government spend.

Speaker #4: And they have come back very much. So the diversification benefits are real, but we absolutely feel confident in the mid-single-digit number for the overall payments complex, and on the better side of that range as we go forward.

Speaker #2: Great, thanks for that. And then, shifting to a housekeeping question on Amazon, how much in one-time costs, if any, related to Amazon are embedded in the expense guide?

David Chiaverini: Great. Thanks for that. Then shifting to a housekeeping question on Amazon. How much in one-time costs, if any, related to Amazon are embedded in the expense guide?

Speaker #3: Yeah, we've embedded some of that already in our run rate, and so there have been some costs, some of the other expense, and so on and so forth that you're seeing.

John Stern: Yeah. We've embedded some of that already in our run rate, there has been some costs, some of the other expense, and so on and so forth that you're seeing, that's already been largely embedded. There might be some other ongoing, that's all embedded into our guide that we've been talking about.

Speaker #3: But that's already been largely embedded. There might be some other ongoing, but that's all embedded into our guide that we've been talking about.

Speaker #2: And are you able to quantify that impact or no?

David Chiaverini: Are you able to quantify that impact or no?

John Stern: There's probably $20 to 30 million or so this quarter, and there's been a little bit prior to that. It hasn't been worth mentioning, as it's been pretty immaterial.

Speaker #3: It's—there's probably $20 to $30 million or so this quarter, and there's been a little bit prior to that, but it hasn't been worth mentioning as it's been pretty immaterial.

Speaker #2: Very helpful. Thank you.

David Chiaverini: Very helpful. Thank you.

Speaker #5: Your next question comes from the line of Vivek Juneja with J.P. Morgan. Please go ahead.

Operator 2: Your next question comes from the line of Vivek Juneja with JPMorgan. Please go ahead.

Operator: Your next question comes from the line of Vivek Juneja with JPMorgan. Please go ahead.

Speaker #4: Good morning.

Gunjan Kedia: Morning.

John Stern: Morning.

Speaker #6: Hi.

Speaker #2: Good morning.

Speaker #6: Good morning. Thank you. Question on BTIG. What are your plans for expanding that in terms of growing its panoply of products or capabilities, such as research, sales, etc.? Also, what are your plans, and what have you factored in, in terms of adding to risk and controls and regulatory oversight, given that it's now part of a bank umbrella and it's a very widespread franchise, all the way from Norway to Australia and Hong Kong?

Vivek Juneja: Morning. Thank you. A question on BTIG. What are your plans for expanding that in terms of growing its panoply of products or capabilities, such as research, sales, et cetera? Also, what are your plans and what have you factored in in terms of adding to risk and controls and regulatory, given that it's now part of a bank umbrella and it's a very widespread franchise all the way from Norway to Australia and Hong Kong?

Speaker #4: Yeah, thank you, Vivek. Broadly speaking, our sense is their product capabilities are helpful to the franchise, and the focus is on leveraging those within our existing client base rather than building the franchise out.

Gunjan Kedia: Yeah. Thank you, Vivek. Broadly speaking, our senses, their product capabilities are helpful to the franchise, and the focus is on leveraging those within our existing client base rather than building the franchise out over time. The product build is not a big part of our immediate plans. The risk and control overlays are very important, and they're already in place because we've anticipated this deal for some time. We were building those out here earlier in the year, and from day one, all of that infrastructure is fully in place at this point.

Speaker #4: Over time, the product build is not a big part of our immediate plans. The risk and control overlays are very important, and they're already in place because we've anticipated this deal for some time.

Speaker #4: So we were building those out here earlier in the year, and from day one, all of that infrastructure is fully in place at this point.

Speaker #6: Thank you.

Vivek Juneja: Thank you.

Speaker #5: Your next question comes from the line of Matt O'Connor with Deutsche Bank. Please go ahead.

Operator 2: Your next question comes from the line of Matt O'Connor with Deutsche Bank. Please go ahead.

Operator: Your next question comes from the line of Matt O'Connor with Deutsche Bank. Please go ahead.

Speaker #4: Hi, Matt.

Gunjan Kedia: Hi, Matt.

Speaker #6: Good morning.

Matt O'Connor: Good morning.

Speaker #2: Yeah.

John Stern: Yep.

Speaker #6: Hi. I know period imbalances can be a little quirky, but you had a big increase in cash, lower securities—maybe from the restructuring—and then a big increase in short-term borrowings. Is that the BTIG deal?

Matt O'Connor: Hi. I know period end balance sheets can be a little quirky, but you had a big increase in cash, lower securities, maybe from the restructuring, then a big increase in short-term borrowings. Is that the BTIG deal? Something else going on? Or just kind of quarter-end oddities?

Speaker #6: Is there something else going on, or is it just kind of quarter-end oddities?

Speaker #3: Yeah, it's more the latter. Matt, thanks for the question. June 30 and December 30 are very intense, high-activity periods for our clients, especially given our investment services businesses and things of that nature.

John Stern: Yeah. It's more the latter, Matt. Thanks for the question. 30 June and 30 December are very intense height activities for our clients, especially given our investment services businesses and things of that variety. While obviously ending balance sheets are important, I always stress to investors that the averages are the best place to look. You do have some elevation there. However, I would say on the investment portfolio because of the sale, we had $1.6 billion of sales this quarter as we did there. I do anticipate that the investment portfolio will kind of keep at this level or so as we kind of have been trading the securities book balances for more loan balances, which we think is a healthy thing to do from a balance sheet perspective.

Speaker #3: So while, obviously, ending balance sheets are important, I always stress to investors that the averages are the best place to look. So you do have some elevation there.

Speaker #3: However, I would say, on the investment portfolio, because of the sale, we had $1.6 billion of sales this quarter, as we did there.

Speaker #3: I do anticipate that the investment portfolio will kind of stay at this level or so, as we have been trading the securities book.

Speaker #3: Balances for more loan balances, which we think is a healthy thing to do from a balance sheet perspective.

Speaker #6: Okay, that's helpful. And then, just separately, kind of a more big picture question on the Amex, or the Amazon deal that came from Amex.

Matt O'Connor: Okay. That's helpful. Then just separately, kind of a more big picture question on the Amex or the Amazon deal that came from Amex. I guess, what's the kind of opportunity over time here? It's $1.6 billion. It seems like a pretty meaningful refresh, switching over to Mastercard. I assume Amazon picked you over where they've been kind of for a reason, and I would assume optimism to grow it. Just talk about, is this a book that can grow 5%, 10%, or we're going to walk in in a couple of years and it's just significantly bigger for kind of obvious reasons?

Speaker #6: I guess, what's the kind of opportunity over time here? It's $1.6 billion. It seems like a pretty meaningful refresh. Switching over to MasterCard, I assume Amazon picked you over where it had been for a reason, and I would assume there's optimism to grow it.

Speaker #6: So just to talk about, is this a book that can grow 5–10 percent, or are we going to look in a couple of years and it's just significantly bigger for kind of obvious reasons?

Speaker #4: Yeah, thank you. It's a very strategic deal for us—certainly economically very, very attractive—but it introduces us to the small business segment around a partner that has a longstanding reputation of growing quite robustly.

Gunjan Kedia: Yeah. Thank you. It's a very strategic deal for us, certainly economically very attractive. It introduces us to the small business segment around a partner that has a long-standing reputation of growing quite robustly. Their vision for this product set and this partnership is to do anything they can to support a very large ecosystem of small businesses around their platform. They think expansively about how to provide financial services to them. Very keen on exploring our Business Essentials, Smartly-like product platform to figure out how card and banking and some amount of ancillary services, even around the payments can be fully provided to the base. We expect that this will be a visionary set of product development and, of course, we hope the book will grow. We don't have experience with this yet. We'll convert it, and then we'll get a sense of how it grows.

Speaker #4: Their vision for this product set and this partnership is to do anything they can to support a very large ecosystem of small businesses around their platform.

Speaker #4: They think expansively about how to provide financial services to them, very keen on exploring our business essentials smartly—like product platforms—to figure out how card and banking, and some amount of ancillary services even around the payments, can be fully provided to the base.

Speaker #4: So we expect that this will be a visionary set of product development. And of course, we hope the book will grow, but we don't have experience with this yet.

Speaker #4: We'll convert it, and then we'll get a sense of how it grows. It joins a pretty robust co-brand platform for us, which is providing a lot of scale to our existing products.

Gunjan Kedia: It joins a pretty robust co-brand platform for us, which is providing a lot of scale to our existing products. We reuse almost all parts of the business. We are anticipating it'll create a strategic platform that will be leveraged with our own small businesses and perhaps with our other deals. More to come. Once we experience the book, we experience the nature of the relationship, we'll know more next earnings quarter.

Speaker #4: We reuse almost all parts of the business, so we are anticipating that it will create a strategic platform that can be leveraged with our own small businesses, and perhaps with other deals as well.

Speaker #4: But more to come. Once we experience the book, we experience the nature of the relationship. We'll know more next earnings quarter.

Speaker #6: Okay, so more than just kind of targeting the credit card balances. I mean, have you thought about also going after the kind of primary small business checking accounts or accounts?

Matt O'Connor: Okay. More than just kind of targeting the credit card balances.

Gunjan Kedia: Yeah.

Matt O'Connor: Have you thought about also going after the kind of primary small business checking accounts or accounts? Is that part of the thought process when you say traditional banking as well?

Speaker #6: Is that part of the thought process when you say traditional banking as well?

Speaker #4: It is because we've had a partnership platform with State Farm that we then improved with Edward Jones, which brings banking and credit card together.

Gunjan Kedia: It is because we've had a partnership platform with State Farm, then we improved with Edward Jones, that brings banking and credit card together in a branded name for the partner. That's the platform that we are now enhancing for the small business because it was built for consumer. We know how to do it. All the operational processes around how do you bank a credit card and a banking customer out of a footprint through digital means are all now in place. We've had two, three years of experience running that. The expansion of the partner platform to small business could be sort of a strategy we grow out over time. Very exciting.

Speaker #4: In a branded name for the partner. And that's the platform that we are now enhancing for small business, because it was built for consumers.

Speaker #4: So we know how to do it. All the operational processes around how you bank a credit card and a banking customer out of our footprint through digital means are all now in place.

Speaker #4: We've had two or three years of experience running that. So, the expansion of the partner platform to small business could be sort of a strategy we grow out over time.

Speaker #4: Very exciting.

Speaker #6: Okay. Okay, that sounds good. Thank you.

Matt O'Connor: Okay.

Gunjan Kedia: Yeah.

Matt O'Connor: Okay. Makes sense. Thank you.

Speaker #5: There are no further questions at this time. Mr. Money, I'll turn the call back over to you.

Operator 2: There are no further questions at this time. Mr. Mani, I'll turn the call back over to you.

Operator: There are no further questions at this time. Mr. Mani, I'll turn the call back over to you.

Speaker #3: All right, thank you to everyone who joined our call this morning. Please contact the Investor Relations department if you have any follow-up questions. Krista, you may now disconnect.

Brian Monni: All right. Thank you to everyone who joined our call this morning. Please contact the investor relations department if you have any follow-up questions. Krista, you may now disconnect.

Brian Mauney: All right. Thank you to everyone who joined our call this morning. Please contact the investor relations department if you have any follow-up questions. Krista, you may now disconnect.

Operator 2: Ladies and gentlemen, this does conclude today's call, and you may now disconnect.

Operator: Ladies and gentlemen, this does conclude today's call, and you may now disconnect.

Q2 2026 US Bancorp Earnings Call

Request DemoDemo

US Bank

Earnings