New York, March 16, 2021 -- Moody's Investors Service ("Moody's") has placed
the long-term ratings and assessments of U.S. Bancorp
and its subsidiaries (USB), including its bank subsidiary,
U.S. Bank National Association, 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) is aa3. The bank's short-term
ratings of Prime-1 for deposits and counterparty risk were affirmed
and are not under review.
"The review for downgrade will focus on USB's expected future performance
relative to peers, as it rebounds from the last several quarters
as the coronavirus-pandemic challenges abate", said
Rita Sahu, Vice President - Senior Credit Officer.
"USB currently is Moody's highest rated bank on a standalone basis.
This position has been achieved with the expectation that the bank will
outperform peers through cycles. But, this performance gap
has narrowed during the last year", Ms. Sahu added.
A complete list of affected ratings and entities can be found at the end
of this press release.
RATINGS RATIONALE
With its aa3 BCA, USB is Moody's highest-rated bank globally
on a standalone basis. Moody's assessment has been based
on USB's consistent revenue generation, steady operating efficiency,
strong underwriting standards and low concentration risk, which
in combination have historically contributed to outperformance relative
to most US and global banking peers. The average BCA of Moody's
rated banks is a3 in the US and baa3 globally, both significantly
lower than USB's aa3.
The review for downgrade was prompted by the narrowing margin of superiority
in USB's performance relative to peers over the last several years,
which until early 2020 was a very benign operating environment for banks
in the United States. At the same time, USB's capitalization
has declined, in tandem with US bank peers, though USB's
capital target of a common equity tier 1 ratio of 8.5% is
among the lowest amongst Moody's rated US banks. During the
review, Moody's will assess USB's stress capital resilience,
which historically has enabled USB's leaner capital position and
been a key driver of its above average rating. This includes the
capital generation resulting from USB's diversified revenue mix,
with significant fee income, and its strong operating efficiency.
Moody's noted that USB's operating efficiency has deteriorated
with the competitive need for continual technology and digital investments
along with some coronavirus-related expenses. The review
will consider how expense control and revenue diversity will influence
USB's long-term profitability relative to peers. Moody's
will also assess whether USB's risk profile is more likely to on
average produce significantly lower credit costs relative to its lower-rated
peers.
Moody's views USB's governance as a key credit strength.
USB has demonstrated exemplary stewardship with a very strong risk governance
and concentration limit framework, which along with its business
line diversity, has supported a positive assessment of the company's
corporate behavior.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The BCA and long-term ratings could be confirmed if Moody's
views that USB's asset quality, profitability, and stress
capital resilience will be significantly better than its lower-rated
peers over the long-term, which could be demonstrated by
the expectation of outperformance compared to peers as USB rebounds from
the effects of the coronavirus pandemic.
The BCA and long-term ratings could be downgraded if Moody's
views that USB's performance is not likely to be materially better
relative to peers.
On Review for Downgrade:
..Issuer: U.S. Bancorp
....LT Issuer Rating, Placed on Review
for Downgrade, currently A1, Ratings Under Review from Negative
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Downgrade, currently (P)A1
....Subordinate Medium-Term Note Program,
Placed on Review for Downgrade, currently (P)A1
....Pref. Stock Non-cumulative,
Placed on Review for Downgrade, currently A3(hyb)
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently A1, Ratings Under
Review from Negative
....Subordinate Regular Bond/Debenture,
Placed on Review for Downgrade, currently A1
....Pref. Shelf, Placed on Review
for Downgrade, currently (P)A2
....Pref. Shelf Non-cumulative,
Placed on Review for Downgrade, currently (P)A3
....Senior Unsecured Shelf, Placed on
Review for Downgrade, currently (P)A1
....Junior Subordinate Shelf, Placed
on Review for Downgrade, currently (P)A2
....Subordinate Shelf, Placed on Review
for Downgrade, currently (P)A1
..Issuer: Firstar Realty LLC
....Pref. Stock Non-cumulative,
Placed on Review for Downgrade, currently A3(hyb)
..Issuer: U.S. Bancorp (Old)
....Backed Subordinate Regular Bond/Debenture,
Placed on Review for Downgrade, currently A1
..Issuer: U.S. Bank National Association
....Adjusted Baseline Credit Assessment,
Placed on Review for Downgrade, currently aa3
....Baseline Credit Assessment, Placed
on Review for Downgrade, currently aa3
....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
....LT Counterparty Risk Assessment,
Placed on Review for Downgrade, currently Aa2(cr)
....LT Counterparty Risk Rating (Local Currency),
Placed on Review for Downgrade, currently Aa3
....LT Counterparty Risk Rating (Foreign Currency),
Placed on Review for Downgrade, currently Aa3
....LT Issuer Rating, Placed on Review
for Downgrade, currently A1, Ratings Under Review from Negative
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently A1, Ratings Under
Review from Negative
....LT Bank Deposits, Placed on Review
for Downgrade, currently Aa1, Ratings Under Review from Negative
..Issuer: Elavon Financial Services DAC
....Backed LT Issuer Rating, Placed
on Review for Downgrade, currently A1, Ratings Under Review
from Negative
....Backed LT Bank Deposits, Placed
on Review for Downgrade, currently Aa2, Ratings Under Review
from Negative
..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)
Affirmations:
..Issuer: U.S. Bancorp
....Commercial Paper, Affirmed P-1
..Issuer: U.S. Bank National Association
....ST Bank Note Program, Affirmed (P)P-1
....Commercial Paper, Affirmed P-1
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
....ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
....ST Counterparty Risk Rating (Foreign Currency),
Affirmed P-1
....ST Bank Deposits, Affirmed P-1
..Issuer: Elavon Financial Services DAC
....Backed ST Issuer Rating, Affirmed
P-1
....Backed ST Bank Deposits, Affirmed
P-1
..Issuer: U.S. Bank National Association,
Canada Br.
....Commercial Paper, Affirmed P-1
Outlook Actions:
..Issuer: U.S. Bancorp
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Firstar Realty LLC
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: U.S. Bancorp (Old)
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: U.S. Bank National Association
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Elavon Financial Services DAC
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: USB Capital IX
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: USB Realty Corp.
....Outlook, Changed To Rating Under
Review From No Outlook
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
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, CFA
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