Press Release

DBRS Morningstar Revises U.S. Bancorp’s Trend To Negative; Confirms Long-Term Issuer Rating at ‘AA’

Banking Organizations
July 19, 2023

DBRS, Inc. (DBRS Morningstar) confirmed the ratings of U.S. Bancorp (USB or the Company), including the Company’s Long-Term Issuer Rating of AA and Short-Term Issuer Rating of R-1 (middle). At the same time, DBRS Morningstar confirmed the ratings of its primary banking subsidiary, U.S. Bank National Association (the Bank). The trends for all Long-Term ratings have been revised to Negative from Stable. The trends on all short-term ratings remain Stable. The Intrinsic Assessment (IA) for the Bank is AA (high), while its Support Assessment remains SA1. The Company’s Support Assessment is SA3 and its Long-Term Issuer Rating is positioned one notch below the Bank’s IA.

The Negative trend considers the increasingly challenging operating environment, including a more costly and competitive funding environment, and the expectation that funding costs and asset quality metrics will likely worsen from their current levels, pressuring earnings. Additionally, unrealized securities losses and the acquisition of MUFG Union Bank, National Association (MUB) have weakened the Company’s tangible capital position to the low-end of peers.

The ratings confirmation reflects USB’s very strong franchise that is underpinned by a scaled and well-diversified mix of businesses, including top-tier market share positions in regional and national wholesale banking, as well as global payments and securities services. The ratings also consider the Company’s consistent profitability metrics, its sound funding and liquidity profile and proven conservative credit culture. We also expect normalizing credit trends within the Company’s loan portfolio, given our view that current asset quality metrics remain at unsustainably low levels. Additionally, the acquisition of MUB enhances USB’s market share in West Coast markets, and most notably in California where the Company’s deposit market share ranking increases to fifth from tenth. Additionally, the acquisition also provides the opportunity for significant costs savings and earnings accretion. In DBRS Morningstar’s view, the combination does not add incrementally to credit risk as both companies have a strong lending track record. However, as with all acquisitions, there are integration risks, especially for an acquisition of this size.

Given USB’s very high rating level and Negative trend, an upgrade of the ratings is unlikely. The trend would likely revert back to Stable if USB is able to notably improve tangible capital levels and readily absorb additional costs anticipated with enhanced regulatory requirements. Conversely, an inability to improve capital levels or return to industry leading core profitability metrics would lead to a ratings downgrade. Additionally, an increase in risk appetite or a pronounced deterioration in asset quality would also result in a ratings downgrade.


Franchise Combined Building Block (BB) Assessment: Very Strong
USB’s diverse banking and financial services franchise is underpinned by its strong operating platform, including a branch network with over 2,200 banking offices in 26 states, primarily in the Midwest and West. The Company ranks as the fifth largest commercial bank in the U.S. by assets and deposits. Additionally, USB is one of the largest U.S. corporate trustees. The Company also maintains a sizable global market position in payment services, including merchant processing, credit and debit card, as well as corporate payment products.

On December 1, 2022, USB completed the acquisition of MUB from Mitsubishi UFJ Financial Group. Overall, we view the acquisition as incrementally improving the franchise strength of USB through better scale and an enhanced presence in affluent markets.

Earnings Combined Building Block (BB) Assessment: Strong / Good
The Company’s highly diversified franchise has historically delivered industry-leading returns. USB’s earnings benefit from a substantial level of fee income that is not overly reliant on markets or the level of interest rates. Additionally, we consider the Company’s disciplined expense management as a cultural strength, allowing it to balance short-term objectives with long-term investments that, in our view, positions USB to compete effectively. Following the MUB acquisition, the Company has identified approximately $900 million in annualized cost savings, representing approximately 40% of MUB’s cost base, and expects to incur integration costs of approximately $1.2 billion (pre-tax). USB has not reflected any revenue synergies in its assumptions although these could be substantial, as the Company rolls out its more comprehensive product mix, including wealth management offerings, to MUB’s demographically attractive customer base.

Risk Combined Building Block (BB) Assessment: Very Strong / Strong
USB’s superior risk profile is supported by its conservative culture, consistent and disciplined underwriting standards, as well as a granular loan portfolio that is diversified among various industries and regions and lacks material risk concentrations in volatile sectors. The Company is mostly a prime-based lender in its retail portfolios and investment grade equivalent in commercial portfolios, with limited leveraged lending. Additionally, commercial real estate lending is relationship-based with consistent loan underwriting and its exposure to office CRE, at approximately 2% of total loans is manageable. With the acquisition of MUB, USB’s exposure to CRE and residential real estate, especially in California increased. However, we expect that USB will manage down this exposure over time, if necessary.

Funding and Liquidity Combined Building Block (BB) Assessment: Very Strong / Strong
USB maintains a strong level of on-balance sheet liquidity and has a robust deposit franchise that fully funds the loan portfolio, with a loan to deposit ratio of 77% at the end of 1Q23. USB typically benefits from a flight to quality in times of industry stress. Additionally, USB also has ready access to a variety of additional sources of liquidity.

Capitalization Combined Building Block (BB) Assessment: Strong / Good
USB has historically been an active capital manager and generally maintains capital levels somewhat below many global peers, although comfortably above regulatory minimums. DBRS Morningstar views the Company’s capitalization as sound, given its historically robust and predictable capital generation and conservative credit risk management. However, the MUB acquisition, as well as pending higher capital regulatory requirements, has pressured capital levels with USB reporting a Common Equity Tier 1 (CET1) capital ratio of 8.5% at the end of 1Q23. To build capital, in addition to its strong internal capital generation, the Company suspended its share repurchase program and has undergone some balance sheet optimization exercises. Following the latest round of Federal Reserve stress testing the Company’s preliminary stress capital buffer remained at 2.5%.

Further details on the Scorecard Indicators and Building Block Assessments can be found at

There were no Environmental/ Social/ Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at (July 4, 2023).

All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations:
(June 22, 2023). In addition DBRS Morningstar uses the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings: (July 4, 2023) in its consideration of ESG factors.

The primary sources of information used for this rating include Morningstar, Inc. and Company Documents. DBRS Morningstar considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed credit ratings:

The last rating action on this issuer took place on July 20, 2022 when all ratings were confirmed and the trend remained Stable.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are under regular surveillance.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see

Lead Analyst: John Mackerey, Senior Vice President, North American Financial Institutions – Global FIG
Rating Committee Chair: Michael Driscoll, Managing Director, Head of North American FIG – Global FIG
Initial Rating Date: 04 April 2005

For more information on this credit or on this industry, visit

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