Morningstar DBRS Confirms U.S. Bancorp's Long-Term Issuer Rating at AA (low), Stable Trend

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on U.S. Bancorp (USB or the Company), including its Long-Term Issuer Rating at AA (low) and Short-Term Issuer Rating at R-1 (middle). At the same time, Morningstar DBRS confirmed the credit ratings on its primary banking subsidiary, U.S. Bank National Association (the Bank), including its Long-Term Issuer Rating at AA. The trends for all credit ratings remain Stable. Morningstar DBRS also confirmed the Bank's Intrinsic Assessment (IA) at AA and its Support Assessment at SA1, reflecting internal support provided by the parent. The Company's Support Assessment remains SA3, meaning that timely systemic support is not expected. The Company's Long-Term Issuer Rating is positioned one notch below the IA.

KEY CREDIT RATING CONSIDERATIONS
The credit rating confirmations and Stable trends reflect the Company's robust franchise, which 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 credit ratings also consider the Company's sound funding and liquidity profile and proven credit culture. With tougher regulatory capital requirements expected, Morningstar DBRS believes USB will continue to increase its capital levels through earnings retention while limiting share repurchases.

The Bank's IA of AA is at the midpoint of the IA Range. Morningstar DBRS view USB's credit fundamentals and performance as commensurate with those of similarly rated peers.

CREDIT RATING DRIVERS
A return to sustained industry-leading profitability metrics while maintaining a similar risk profile would result in a credit rating upgrade. Conversely, a sustained reduction in profitability metrics or a pronounced deterioration in asset quality would result in a credit rating downgrade.

CREDIT RATING RATIONALE
Franchise Combined Building Block Assessment: Very Strong / 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 cards, and corporate payment products.

Earnings Combined Building Block Assessment: Strong / Good
USB's earnings benefit from a substantial level of fee income that is not overly reliant on markets or interest rates. Additionally, Morningstar DBRS considers the Company's disciplined expense management as a cultural strength, although the Company's efficiency ratio is higher than historical levels. For Q1 2025, USB reported a net income of $1.7 billion, equating to a return on average assets and return on average common equity of 0.81% and 10.00%, respectively.

Risk Combined Building Block Assessment: Strong
USB's risk profile is supported by its conservative culture, consistent and disciplined underwriting standards, and a loan portfolio that is diversified by industry and region and lacks material risk concentrations in volatile sectors. The Company is mostly a prime-based lender in its retail portfolios and is investment-grade equivalent in its commercial portfolios, with limited leveraged lending. Additionally, commercial real estate lending is relationship-based with consistent loan underwriting, and its exposure to office properties, at approximately 1% of total loans, is highly manageable. Asset quality metrics, while normalizing, remain sound, including a nonperforming assets ratio of 0.45% and net charge-off ratio of 0.59% in Q1 2025. Additionally, at 2.07% as of March 31, 2025, the allowance for credit losses to period-end loans is strong.

Funding and Liquidity Combined Building Block 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 75% at the end of Q1 2025. 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 that readily exceed the level of uninsured deposits. Morningstar DBRS notes that the Company had available liquidity of approximately $290.0 billion as of March 31, 2025, including a borrowing capacity at the Federal Home Loan Bank and the Federal Reserve Bank of $176.0 billion.

Capitalization Combined Building Block Assessment: Strong
Morningstar DBRS views the Company's capitalization as sound, given its historically robust and predictable capital generation and conservative credit risk management. However, expected higher capital requirements, including the inclusion of AOCI in the regulatory requirements, has USB to build capital levels. USB reported a CET1 capital ratio of 10.8% as of March 31, 2025, up from 10.0% at the end of Q1 2024. Capital has been boosted through earnings retention as well as balance sheet optimization initiatives. Additionally, the Company's stock buyback activity has been muted. Approximately $4.7 billion of authorized repurchases remain under the September 2024 $5.0 billion stock repurchase plan.

Further details on the Scorecard Indicators and Building Block Assessments can be found at https://dbrs.morningstar.com/research/456858.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Morningstar DBRS notes that this Press Release was amended on July 7, 2025, to incorporate the disclosure on the last rating action.

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

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (May 23, 2025) https://dbrs.morningstar.com/research/454637. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The primary sources of information used for these credit ratings include Morningstar, Inc. and company documents. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings 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.

Morningstar DBRS 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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website https://dbrs.morningstar.com/understanding-ratings

These credit ratings are 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 credit rating action on this issuer took place on June 25, 2024, when the long-term credit ratings of U.S. Bancorp and its subsidiaries were downgraded.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are monitored.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

Lead Analyst: John Mackerey, Senior Vice President, Sector Lead,
Rating Committee Chair: Timothey O'Brien, Managing Director
Initial Rating Date: April 4, 2005

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

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