U.S. Bancorp Earnings Call Nuggets: Higher Period-End Loans and Mortgage Production
Higher Period-End Loans
Jon Arfstrom – RBC Capital Markets: Question for you on loan growth, good average loan growth, but it looks like the period-end loans are maybe even a little bit higher, little bit better and curious if there is anything notable about the growth and if you’ve noticed any change in sentiment of the borrowers, maybe positive or negative early on in the year?
Richard K. Davis – Chairman, President and CEO: It’s pretty much the same story, I think the fiscal cliff uncertainty caused the very last couple of weeks to be a bit a muted but if you take quarter four and look in the quarter one, I think at the end of day you’re going to see pretty sustainable range of that 4% to 6% annualized. We came in at the high end of that range in quarter four. I think we’re on track for the high-end of that for quarter one, but I wouldn’t jump outside of that range based on what I am seeing. I don’t think that people cares much about the debt ceiling and the debate that will occur later in the quarter as they do about the bottom line to their pay check as they did about the fiscal cliff. But I don’t think it’s still a fairly uncertain environment and people (first of the year) are jumping on anything new.
Jon Arfstrom – RBC Capital Markets: Then you touched on it, but maybe if you could provide us a little more color on how you are thinking about capital allocation on 2013? You talked about returning more money to shareholders, but just kind of walk us through your thought process?
Andrew Cecere – VC and CFO: This is Andy. Our goal has always been a 60% to 80% return, the combination of dividends and buybacks. We’re within that range in 2012. We would expect and we plan to be within that range in 2013, that’s how we submitted the CCAR and as I have discussed, we’ll hear back somewhere towards the end of March regarding the results.
Jon Arfstrom – RBC Capital Markets: Richard you said more, I believe was the phrase in your comments.
Richard K. Davis – Chairman, President and CEO: Yeah, I did. So we’re in the lower end of that 60% to 80% range. It’s our goal to get – move further into that range. That (debt) will get to 80%. In part the reason for that is we’re still investing in the company. You guys are allowing us to do that and I think we’re getting good returns for those investments. But the CCAR results will be a known in a couple of months and we put in a request that we think is very fair and reasonable and will help us move that deeper into the 60% to 80% range.
Paul Miller, Jr. – FBR Capital Markets: On your mortgage production side, do you break out what you do for retail versus wholesale?
Andrew Cecere – VC and CFO: We don’t break that out, but let me give you a couple of facts, Paul, just to maybe round out some of the story. Right around 69% of our production was refinance activity and a gain on sale margins that you see are down a bit, but I think an important fact too is the application, because we book the majority of our revenue at app and our net apps or our gross apps both of them were down about 6.7%. Now, some of that can be attributed to the seasonality factor that occurs in the fourth quarter, particularly around the holiday season. We still expect the first half of the year to be relatively strong from a mortgage perspective, but the fourth quarter was down a bit principally due to seasonality.
Paul Miller, Jr. – FBR Capital Markets: When you’re saying gain on sale margins are down slightly, was it mainly – was that also due to seasonality? Or is that more of a – did you do more wholesale versus retail in the quarter?
Andrew Cecere – VC and CFO: Probably a combination of little bit of both and if I do my gain on sale from the perspective of ABS, it’s down maybe 10 or 15 basis points.
Paul Miller, Jr. – FBR Capital Markets: Then on your loan growth, are you seeing any – I mean, I don’t – Wells Fargo talked about seeing a lot of C&I and whatnot in the late part of the – and in December as people are trying to get some things done before the fiscal cliff, did you see the same thing? Or could you add some color around that?
Richard K. Davis – Chairman, President and CEO: Not really. I wouldn’t have brought it out, I knew you’d ask and the M&A activity was higher at years in for all the reasons that people are trying to time and sequence their activities before a fiscal cliff possibility, but not notable. To us it was not a real impact. As I said, everything kind of slowed down at the very end of the year. That happens anyway, but to a more of a screeching halt, just because people are waiting to see what happened and there is a bit of that recovery in the first few weeks, as Jon’s question might have (indiscernible). But if you take the two quarters in total, I don’t think you’ll see any distinction about that fiscal cliff when it’s all said and done. For us, I’d like to give you a color on loan differences by geography or loan type or customer and it really isn’t much different than the last couple of quarters we’ve had in 2012. So for us it’s a lot more of the same – I guess the recession was ended 14 quarters ago, as I’ve told, as probably doesn’t feel to all of us, but whatever recovery we’ve been under, it continues to be slow and we’re feeling the exact same thing, just a little bit better every month, every quarter but it’s so small you have to go back and add it together just to notice that. So we’re seeing that same phenomenon and not much to report.
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