Shareholder Letter

Building momentum in an evolving landscape

As a company, we have spent the past several years addressing the rapid and dynamic changes confronting our industry and the world at large. Many of the trends we anticipated in our strategic planning were exacerbated or accelerated due to the COVID-19 pandemic, and we saw a greater shift toward digital and holistic money movement solutions, as well as an increased demand for speed and convenience in banking. These evolving expectations and behavioral shifts toward digital capabilities continue for the industry.

Yet as we look back over several years of change, our commitment to serving customers and helping them navigate uncertain economic times has remained constant. In 2020 and 2021, we helped customers navigate the uncertainty of the pandemic. Today, we are helping them in an environment of high inflation and rising interest rates.

Our approximately 77,000 U.S. Bank employees – including those staffing our more than 2,000 branches, our service centers and our offices across the globe – have played an important role for our customers. Their dedication has been impressive, and I want to express my deep gratitude and appreciation for how they have performed.

“We have already seen progress in key areas, which will continue throughout 2023 and beyond.”

As we move into a new chapter of our history, we are confidently moving forward and building momentum in an evolving and more competitive landscape while navigating an unpredictable world. We have gained a greater ability to build digital capabilities at scale. Our mix of digital plus human banking is a key differentiator. Our acquisition of MUFG Union Bank makes us a much stronger competitor in the fast-growing California and West Coast markets. We are also preparing for a wide range of economic scenarios so we can continue to deliver industry-leading financial results, which has been our hallmark for decades.

It helps to consider how far we have come as we think about what is next. Just five years ago, we were focused on enhancing our product set, optimizing our branch network, enhancing our digital capabilities, and driving data and analytics at scale. We have made progress in each of these areas. Our attention now is on building on those strengths and leveraging that foundation to do more to drive growth and define a better and more differentiated customer experience.

We also are relying on our legacy of financial and risk discipline to help us achieve our goals. Although we have weathered the pandemic and the associated ebbs and flows of a challenging economic environment, there are strong factors at play that require attention. Inflation, supply chain demands and pressures, a competitive talent landscape, the threat of global recession, and a dynamic regulatory environment show us we need to play both offense and defense. To accelerate growth, we must prioritize our investments, choose our no-regrets moves, and determine what we need to alter or stop to ensure we are focused on the right things.

“We are evolving our talent strategy to address changing expectations, needed skills, and norms about how work is best accomplished.”

In this type of environment, transformation must be more than a business buzzword. We need to be willing to change, decisive in our actions, and expedient in our steps. Part of that is evident in our multi-year, broad-scale continuous improvement approach toward growth. We have already seen progress in key areas, which will continue throughout 2023 and beyond. This is happening while we continue to enhance capabilities through important acquisitions such as talech, Bento and PFM Asset Management, and building our core banking scale through acquisitions like Union Bank.

The Union Bank acquisition allows us to be much more competitive and a more relevant player in California and along the West Coast, and after nearly 15 months of planning, we closed on the transaction in December. The hard work to integrate thousands of employees and millions of customers is underway now, and I continue to be impressed by the caliber of talent in both organizations and how everyone is singularly focused on doing what is right and what will make us a stronger company together. This is a transaction that is provides opportunity across a wide spectrum of constituents: Union Bank customers will have more access to digital capabilities and products and services than they previously had; we will serve more communities in California than ever before; and we will welcome new employees to our team from Union Bank.

“We have a tremendous opportunity ahead of us to make real, lasting and meaningful change that will position us to compete effectively now and long into the future.”

As we enter 2023, we will continue to do three things. First, transform with purpose – making bold moves to drive growth over the long term. Next, we will run our operations effectively and efficiently – delivering on our promise to customers and leveraging the advances we have made in our technology to evolve in the markets we serve. Finally, we will maintain discipline so we can preserve our financial excellence and assess from a risk perspective what we will and will not do to achieve growth. In this environment, especially, we will continue to optimize the position of our balance sheet to most effectively manage capital with a focus on profitable growth. Similarly, we will rely on our risk appetite that has guided us successfully for many years and continue to pressure test assumptions to ensure they will serve us in changing times.

We also will continue to evolve our customer acquisition strategy. We enhanced our go-to-market model and simplified our organization to drive greater effectiveness and efficiency last year. We are evolving our talent strategy to address changing expectations, needed skills, and norms about how work is best accomplished. We are refining our marketing, digital and analytics approaches to better enable customer growth, and we are expanding our payments and business banking ecosystem to capitalize on the opportunity in that space. Further, we are building on our investments in technology transformation and a migration to the cloud to accelerate our work.

Beyond our refined talent strategy, we remain focused on diversity, equity and inclusion, which is particularly evident in our Access Commitment™ work. We will drive our commitment to environmental, social and governance (ESG) matters and position us to contribute positively to the overall health of our industry, customers and communities. This all will connect to our risk discipline, as we continue to focus on ways to drive growth responsibly and with both the short-term and long-term in mind. It also will complement and support the efforts we will implement through our Community Benefits Plan that was put in place as part of our Union Bank acquisition.

We have a tremendous opportunity ahead of us to make real, lasting and meaningful change that will position us to compete effectively now and long into the future. The decisions we make today are shaping our success, and we have a terrific team that is focused on reaching our full potential and serving customers to the best of our ability. We appreciate your continued trust and investment as shareholders in our company.

Sincerely,

Andy Cecere