New York, February 22, 2018 -- Moody's Investors Service, ("Moody's") has
placed the long-term ratings of U.S. Bancorp and
its subsidiaries (USB), including its bank subsidiary, U.S.
Bank National Association (U.S. Bank), on review for
downgrade. U.S. Bancorp is rated A1 for senior unsecured
and subordinated debt. U.S. Bank is rated Aa1 for
long-term deposits and A1 for issuer and senior unsecured debt
ratings. The bank's baseline credit assessment (BCA) of aa3
and counterparty risk assessment of Aa2(cr) are also under review.
The bank's short-term ratings of Prime-1 for short-term
deposits and senior debts were affirmed and are not under review.
On Review for Downgrade:
..Issuer: U.S. Bancorp
....Long Term Issuer Rating, Placed
on Review for Downgrade, currently A1, outlook changed to
Rating Under Review from Stable
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently A1, outlook changed
to Rating Under Review from Stable
....Senior Unsecured MTN, Placed on
Review for Downgrade, currently (P)A1
....Senior Unsecured Shelf, Placed on
Review for Downgrade, currently (P)A1
....Subordinate, Placed on Review for
Downgrade, currently A1
....Subordinate MTN, Placed on Review
for Downgrade, currently (P)A1
....Subordinate Shelf, Placed on Review
for Downgrade, currently (P)A1
....Junior Subordinate Shelf, Placed
on Review for Downgrade, currently (P)A2
....Pref. Shelf, Placed on Review
for Downgrade, currently (P)A2
....Pref. Shelf Non-cumulative,
Placed on Review for Downgrade, currently (P)A3
....Pref. Stock Non-cumulative,
Placed on Review for Downgrade, currently A3 (hyb)
..Issuer: U.S. Bank National Association
....Long Term Deposit Rating, Placed
on Review for Downgrade, currently Aa1, outlook changed to
Rating Under Review from Stable
....Long Term Issuer Rating, Placed
on Review for Downgrade, currently A1, outlook changed to
Rating Under Review from Stable
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently A1, outlook changed
to Rating Under Review from Stable
....Senior Unsecured Bank Note Program,
Placed on Review for Downgrade, currently (P)A1
....Subordinate Bank Note Program, Placed
on Review for Downgrade, currently (P)A1
....Long Term Counterparty Risk Assessment,
Placed on Review for Downgrade, currently Aa2(cr)
.... Adjusted Baseline Credit Assessment,
Placed on Review for Downgrade, currently aa3
.... Baseline Credit Assessment, Placed
on Review for Downgrade, currently aa3
..Issuer: Firstar Realty LLC
....Pref. Stock Non-cumulative,
Placed on Review for Downgrade, currently A3 (hyb)
..Issuer: U.S. Bancorp (Old)
....BACKED Subordinate, Placed on Review
for Downgrade, currently A1
..Issuer: USB Capital IX
....Pref. Stock Non-cumulative,
Placed on Review for Downgrade, currently A3 (hyb)
..Issuer: USB Realty Corp.
....Pref. Stock Non-cumulative,
Placed on Review for Downgrade, currently A3 (hyb)
..Issuer: Elavon Financial Services DAC
....BACKED Long Term Issuer Rating,
Placed on Review for Downgrade, currently A1, outlook changed
to Rating Under Review from Stable
....BACKED Long Term Deposit Rating,
Placed on Review for Downgrade, currently Aa2, outlook changed
to Rating Under Review from Stable
Affirmations:
..Issuer: Elavon Financial Services DAC
....BACKED Short Term Issuer Rating,
Affirmed P-1
....BACKED Short Term Deposit Rating,
Affirmed P-1
..Issuer: U.S. Bancorp
....Commercial Paper, Affirmed P-1
..Issuer: U.S. Bank National Association
....Short Term Counterparty Risk Assessment,
Affirmed P-1(cr)
....Short Term Deposit Rating, Affirmed
P-1
....Commercial Paper, Affirmed P-1
....ST Bank Note Program, Affirmed (P)P-1
..Issuer: U.S. Bank National Association,
Canada Br.
....Commercial Paper, Affirmed P-1
Outlook Actions:
..Issuer: Elavon Financial Services DAC
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: U.S. Bancorp
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: U.S. Bank National Association
....Outlook, Changed To Rating Under
Review From Stable
RATINGS RATIONALE
Moody's review is the result of USB's announcement of agreements
and monetary penalties with several regulatory agencies regarding previously
disclosed deficiencies in its Bank Secrecy Act/anti-money laundering
(BSA/AML) compliance program. Settlements were reached with the
Office of the Comptroller of the Currency, the Federal Reserve Board,
the Financial Crimes Enforcement Network, and the U.S.
Department of Justice. In total, U.S. Bancorp
will pay $613 million to regulators.
Moody's said that the regulators cited several past control failures
and breakdowns in USB's compliance risk reporting, which call
into question the rating agency's own assumption that USB's
risk management is superior to peers'. Additionally,
the total amount of the penalties was above Moody's expectation,
although modest in the context of USB's earnings and capital.
Moody's review will consider the extent to which USB's risk
governance remains a comparative strength relative to its large bank peers
and justifies its high BCA. The BSA/AML issue stains what had been
USB's relatively clean track record in avoiding risk management
failures and regulatory sanctions in the past decade. Moody's
will consider USB's changes to board processes and oversight and
the ability to guide management in identifying and mitigating potential
future risk. The review will also focus on USB's enterprise-wide
risk governance and likelihood that further missteps could be discovered
outside of BSA/AML, particularly with regard to asset quality and
operational risks. This includes potential other legal vulnerabilities
considering that any other violations of federal law, even in an
unrelated matter, could be deemed a violation of the deferred prosecution
agreement.
Factors that Could Lead to an Upgrade
USB's ratings could be affirmed if Moody's concludes that
USB has superior enterprise risk governance and management relative to
peers and that it is likely to maintain above-average and consistent
financial metrics.
Factors that Could Lead to a Downgrade
USB's long-term ratings could be downgraded if the rating
agency concludes that USB's enterprise risk governance and management
has not been enhanced enough to distinguish it relative to peers.
A sustained weakening in asset quality, capital or profitability
metrics would also be negative.
The principal methodology used in these ratings was Banks published in
September 2017. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Rita Sahu
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
