Andrew J. Cecere, U.S. Bancorp Chairman, President, and CEO
IR Director & Senior Vice President George Andersen, U.S. Bancorp
Senior Executive VP and CFO of U.S. Bancorp is John C. Stern.
Tension Vice-Chair and Chief Administrative Officer of US Bancorp is Robert Dolan.
Ebrahim Huseini Poonawala is the Head of North American Banks Research and the MD of United States Equity Research at BofA Securities’ Research Division.
Erika Najarian is an analyst in the research division of UBS Investment Bank.
Head of U.S. Bank Equity Strategy and Large Cap Bank Analyst at RBC Capital Markets’ Research Division is Gerard Sean Cassidy, MD.
John Eamon McDonald, Senior Analyst at Autonomous Research US LP, specialising on US large-cap banks
John G. Pancari is the Senior MD and Senior Equity Research Analyst in the Research Division of Evercore ISI Institutional Equities.
Senior Equity Research Analyst and MD Kenneth Michael Usdin works in the Research Division of Jefferies LLC.
Matthew Derek O’Connor, MD, Research Division, Deutsche Bank AG, Equity Research
Michael Lawrence Mayo, MD, is the Senior Bank Analyst and Head of U.S. Large-Cap Bank Research at Wells Fargo Securities, LLC’s Research Division.
Robert Scott Siefers, MD, is Senior Research Analyst in the Research Division of Piper Sandler & Co.
Welcome to the conference call for the third quarter of 2023 earnings of U.S. Bancorp. (Guidelines for Operators) We’ll record this conversation and make it accessible for playback starting at around 9:00 a.m. Central Time today.
George Andersen, Senior Vice President and Director of Investor Relations of U.S. Bancorp, will now take over the conference call.
Our Chairman, President, and Chief Executive Officer Andy Cecere, our Vice Chair and Chief Administrative Officer Terry Dolan, and our Senior Executive Vice President and Chief Financial Officer John Stern are with me today. Andy and John will be referencing a slide presentation in their prepared comments. Our website, usbank.com, has copies of the presentation, our results announcement, and more analyst schedules.
Please be aware that there is risk and uncertainty associated with any forward-looking statements made during the conversation today.
Many factors, including those included on Page 2 of today’s presentation, our press release, our Form 10-K, and future reports on file with the SEC, have the potential to substantially alter our current forward-looking assumptions.
Andy, Terry, and John will accept your questions after our prepared statements. Andy will now take over the call.
George. Greetings to everybody, and I appreciate you taking the call this morning. I’ll start with Slide 3. We reported $0.91 in profits per share for the third quarter, which included $0.14 in noteworthy items relating to merger and integration expenses per share. With those noteworthy exceptions, we produced $1.05 in earnings per share for the quarter. The linked quarter and year-over-year rise in fee revenue, which was made possible by our purchase of Union Bank, as well as the solid underlying business activity and strengthening client relationships, were the main highlights of the third quarter results.
We are seeing the cost synergies from Union Bank that we had anticipated, and we are continuing to find business-wide operational improvements while carefully managing core expenses. Our Common Equity Tier 1 capital ratio as of September 30 was 9.7%, up 60 basis points from the previous quarter. It was at this similar point before we acquired Union Bank.
On a linked-quarter basis, the total average deposits climbed by 3%, or $15 billion. This quarter, credit quality has continued to normalise as anticipated, and we reinforced the balance sheet even further by increasing our loan loss reserve by $95 million to reflect the changing credit landscape.
On October 16, in light of our capital initiatives and balance sheet reduction, the Federal Reserve fully released us from certain Category II obligations made in conjunction with the Union Bank purchase. Consequently, we are now bound by the current capital regulations or, in the event that they are implemented, the identical transition regulations concerning increased capital needs under the Basel III endgame plan as all other Category III banks. According to the proposal, this would commence in the third quarter of 2025 and include a 3-year transition time for the AOCI regulatory capital adjustment and the enlarged risk-based approach. In my final remarks, I will go into additional detail about the effects of these actions.
Slide 4 presents the reported and adjusted income statement data, concluding with average balances and other significant metrics.
Important performance data are shown on Slide 5. Our return on tangible common equity was 21%, and our return on average assets was 1.04%, excluding noteworthy factors. Although net interest margin fell 9 basis points to 2.81% this quarter, as anticipated, we still believe that the NIM will bottom in the fourth quarter as the current rate-hiking cycle comes to an end.
Now let’s go to Slide 6. Our business approach has the advantage of balancing our fee and spread income streams, which lowers profits volatility over the course of a business cycle. The growth in noninterest income was about 12% year over year.
We keep making investments in our digital capabilities to improve our distribution and grow our payments ecosystem within the payment services sector. To enable tech-led growth across industries, increased emphasis on partnerships and integrated capabilities will be maintained.