U.S. Bancorp (USB) Earnings Call Transcript & Summary

Good morning. Next up, we have U.S. Bancorp. U.S. Bancorp serves millions of customers locally, nationally and globally through a diversified mix of businesses. Total assets at the end of September, just a touch over $600 billion. Good things take time because on October 19, U.S. Bank received all the regulatory approval to close on the acquisition of MUFG's -- Union Bank's core regional banking franchise from MUFG. That will add 1 million consumer customers, 190,000 small business customers on the West Coast and USB will be #5 in terms of market share with deposits in California. With us today, we've got Terry Dolan, who is the Vice Chair and CFO of U.S. Bank. He's held that role since 2016, joined the company back in 1998, previously served in a couple of roles, including Vice Chair of Wealth Management and Investment Services. And then on his left is Gunjan Kedia. She is the Vice Chair of Wealth Management and Investment Services at U.S. Bank. She joined the company back in 2016, previously was at State Street and Bank of New York. Revenue -- excuse me, net income in her line of business increased 48% or 49% year-to-date based on third quarter results. So we'll start with the presentation and then move over to Q&A.

On Page 2, the only thing I need to read. I'll remind you that today, we may make forward-looking statements that are subject to risk and uncertainty, and I'll refer to you of safe harbor statements for further information. It's my pleasure to introduce U.S. Bank to some of you who may not know the company. We have national franchise for most of our businesses. What you're seeing on the left here in the red is really a branch footprint, which is not in all 50 states. But most of our other businesses like auto lending or mortgage or small business, commercial are all national franchises. We also have 3 businesses that are quite global in nature, concentrated really in Western Europe, and that's our payments business, our Corporate Trust business and our Global Fund Services. So that's our company. What you're seeing here is a simple revenue mix across 4 lines of businesses. The 2 on the left are what you would consider more traditional banking businesses. It's a consumer bank and it's a corporate bank. The 2 on the right, though, are quite different from many other banks, from a portfolio mix standpoint. On the top is Payment Services. And then the Wealth Management and Investment Services, which I have the pleasure to read, is now about 18%. These 2 businesses on the right are also very fee-based businesses and certainly global businesses, so different from the traditional routes of U.S. Bank. So let me then turn my attention to the Wealth Management and Investment Services businesses. These are a collection of 4 businesses, all thing investments, trust, wealth management fall in this business unit. The largest part of our unit is wealth management. You would see that quite. It's a very familiar business for most banks. This franchise is relatively young compared to the history of the bank. The bank is about 160 years old. This business was really set up in its current form about 15, 20 years back. We have doubled in size since 2015. And our range is very complete. We start with the first investor who might have their first $1,000 to invest in a robo-advisory type of digital offering, and we go all the way up to a family office and Ascent is our ultra-high net worth business model. In between, we served the affluent customer through license advisers that sit in our branches, along with our banking teams and we have a very nice, high net worth trust business as well. Our products set there is very complete from banking, credit, investments, trust, tax services, financial advice. And what is new, you've heard us talk about it a lot. A lot of the services are now being delivered digitally and with human advice together. So that's our top left wealth business. Corporate Trust is the second largest business outside of perhaps this room and our businesses, very few people understand what Corporate Trust is. But any time a company or an entity does a bond issuance is you're required to have a paying agent and a corporate trust agent. So that's what we do. We are very, very significant in this space. We have #1 or #2 market share in every segment that we serve and about 1/3 to sometimes 50% of the market. This business along with our fund services business is a very significant deposit gatherer for us. About $100 billion of U.S. Bank's deposits come from these businesses, and they have a very strong operational underpinning because these are -- many times, these are frictional cash deposits that come because we are doing administrative services. And both of those businesses, Corporate Trust and Global Fund Services are quite global in nature. Our baby business is asset management. You'll remember about 10 years back, U.S. Bank sold most of their equity asset management funds. So what we concentrate on is really cash and cash equivalent assets. You're seeing here, asset management is 5%. It's actually twice that because half the revenue is booked through other businesses. That's just how we record it. We just completed late last year the acquisition of PFM that has bought some very nice capabilities. Also a fee business, also very, very high margin, very high return business, very complementary to the rest of the work we do. Like Terry said, and thank you, Terry, we are a very nice growth engine for U.S. Bank. On the top right, you are just seeing a snapshot of our revenue growth from 2015 onwards. We haven't reported fourth quarter. So you're seeing the third quarter result. And just to sort of orient your eyes, it's about $3 billion for the 3 quarters of this year compared to about $2.4 billion, and steadily about 9.9% revenue CAGR over this time period. So the rest of the time, I just really want to explain to you what a formula is for how we are steadily growing the business. One thing is that the revenue model of the investment business is largely anchored around financial assets. And despite the current carnage in the market, if you just zoom out, you do see a very steady 7% to 11% financial asset growth globally. And most of what we do is underpinned by that. So there is sort of a very nice dynamic even before we get into some of the strategic levers that we pull to grow the business. The other thing I would say, you're not seeing it entirely in the page is about 2/3 of these businesses are fee revenue businesses, although we do have a growing loan book from a wealth management business and the deposit business. So third quarter, we were about 18% of the bank. In 2015, we were about 11% of the bank. So that's sort of our positioning within the portfolio. It really, really helps our businesses to be owned by U.S. Bank and the portfolio of sister companies that help us out. As many of you know who followed this set of businesses, we compete with very, very large players in our spaces compared to the size we have, but we have some unique advantages that U.S. Bank brings. And today, I'm going to talk about 3 of them. One is distribution. It's a very, very loyal base. There's 20 million customers at U.S. Bank, almost all our services are applicable to some, and I'm going to talk about how we use that. We've become very creative about integrating products across for a very unique customer value proposition. And the most powerful thing really is the strength of the balance sheet at U.S. Bank. The nature of the businesses I'm talking about are not always owned by a bank. Many of them are privately held companies, many of them have trust models. So the uniqueness is not relative to other banks, but the competitor set that we see here. So distribution. Distribution is both expensive and quite painful and quite complex and difficult to set up. And that is sort of the advantage we have. I'll just give you a couple of stories around what I mean by the partnerships, the distribution partnerships. The most obvious is a person comes in to a branch network. And 10 years later, they have money to invest. They have fallen in love with the brand, they trust the company, and we have a very natural referral to the wealth management business. 80% of new wealth later in a stage of a person's life is created because they sell a business. That's just the nature of how American economy, and a lot of businesses are selling just because of demographic trends. So our commercial franchise, which is middle market and a small business franchise, are very nice referral sources for us to when a liquidity event happens. Payments. Our payments business is a very digitally focused and a very marketing machine because they are credit cards. When we, for example, set up our automated investor instead of standing up our own marketing, we do QR code inserts in some of their mail drops because an investor who sees that can just scan it and it takes them straight to our investment vehicle. So that's kind of an example of the marketing leverage that we get. Our government practice is very, very big, and it is distributed across the country, small municipalities that are kind of hard to sell to if you're selling up -- setting up an individual salespeople. We have these connections in our branch network. So if you think of a property like PFM that we purchased, they have great product sets that they sell to local and municipal government entities. They have their own sales force, but it's a very multiplicative effort when their products is now distributed through our government entity relationship management teams. So a lot of distribution advantage here. We have been on a tear on product development. Some of it has been to catch up, and some of it has been to lead prop. So let me take a couple of examples to give you the power of the franchise. We have a very nice capital markets business in our corporate bank. They have foreign exchange trading capabilities. We are now up to $10 trillion in custody and administration assets. Very easy connection points to let them do some routine transactions on the foreign exchange piece, and that's been a nice source of revenue for us. Luxembourg, we launched in the 9-month period with no fuss. Normally, that's quite a difficult thing, but our payments organization already had a very well-functioning bank out of Dublin, and we just added on a license to this. Our latest endeavor was cryptocurrency custody that started and ended rather quickly. We can provide cryptocurrency custody. It's just really on pause pending some regulatory clearing, but that was a very nice collaboration with payments and our digital team as well. The balance sheet, which is sort of my favorite sort of secret sauce in how we run our business. The deposit growth comes from the administrative services that we generally provide to all our businesses. But the power of these deposits is multiplied by the net interest margin that U.S. Bank enjoys. Now if you cover banks, you would say what's unusual about that. But here, we are competing with corporate trust franchises and IS franchises that often do not enjoy the kind of NIM that we enjoy, such as the business model is very powerful and just the value of the deposits that we are able to extract by being part of the fourth largest bank here. Our loan book, I will say, was almost negligible 10 years back because we didn't focus on it. And today, we are about $22 billion. This is largely our Wealth Management business growing very nicely at about 12% or 13%. Acquisitions are the final way we have been growing the business, about 20, 22 acquisitions over the last 15 years. Last year was a very active year for us. We integrated 3 properties, PFM was the largest of them and right now, we are very busy with Union. Union is a very, very nice wealth franchise. Very affluent customer base in customer, and it will add very nicely to our wealth business as well. And I know Terry is going to touch on Union a little bit more, so I won't pause on it. So let me just conclude my remarks here with how we are thinking of continuing the growth journey going forward, what are our priorities. Very, very proud of our teams and our business partners that help us get all this being done. You've heard Andy, our CEO, talk very consistently about our aspiration to be digitally forward, digitally front. We have made huge progress there, and being very good at our product capabilities and our digital capability will continue to be a driver. Our DNA is exceptional client service, and that is a lot of hard work and attention to little things. That continues to be a priority for us. And then delivering One U.S. Bank. We have made huge progress in how we leverage each other's clients, but just to give you 1 statistic. Today, we serve about 8% of the bank's affluent clients. We will never be at 100% because not every person who has affluence looks for financial advice, but we should be at about 15%. So here, without even trying to step outside of the franchise, we could double our wealth business by doing this well. Balance sheet, M&A support are all part of sort of leveraging the power of the franchise together. So thank you for letting me tell my story for a few minutes. And with that, Terry, let me pass it on to you.

Thanks, Gunjan. And congratulations on your leadership within the Wealth Management Investment Services. The business has grown very nicely over the last several years. So thank you for that. So I'm just going to spend a couple of minutes talking about Union Bank, finally got that past the goal. And we are very, very excited, obviously, to finally get to the regulatory approval process because the things we have been working on over the course of last year, we finally get to put into action. We're very excited about it. Let me just strategically talk a little bit about Union Bank. Union Bank provides meaningful scale to the U.S. Bank organization kind of going forward, just as a kind of a step function. Think about it representing roughly about a 20% step function in terms of assets, liabilities and the organization overall. We think that there's some significant opportunities in terms of cost synergies that will come along with the Union Bank transaction. We're estimating that to be about $900 million. That's still very much on track and doable based upon kind of where we expect that business. And if you think about our $8 billion purchase price, achieving the $900 million of the cost savings fundamentally pays for it. And so just by putting the companies together, a lot of those cost synergies will come from getting rid of third-party vendors and putting together the systems and all those sorts of things that will come as a part of the transaction. And then when we put together the deal, we had estimated that the EPS accretion would be about 6% in that first year and 8% thereafter. Once we achieve kind of the full cost synergies, that is still very much on track. And the return associated with the transaction, we would expect the IRR associated with the Union Bank transaction to be at that 20% plus level. So we're very excited about it from that particular perspective. Other things maybe strategically is that we're -- it gives us kind of a step function with respect to California. California is a very attractive market. We'll go from about 10th in the marketplace to 4th or 5th in deposit size. And so that's a big and significant change. And then we have the opportunity to be able to deploy a lot of products and services to that customer base that we think also will generate a lot of value, which just as maybe a reminder, we did not incorporate any revenue synergies into the economics of the transaction. So we're -- when we're talking about the internal rates of return and the value of the business, we think that there's lots of opportunity. So let me just talk a little bit about that. When you think about Union Bank, as Gunjan said and others we've talked about in the past, about 1 million consumer customers, 200,000 roughly business banking clients. A nice addition to both our corporate and commercial banking business as well as to Gunjan's businesses as well. And we think that there is really opportunity from a revenue synergy standpoint across all of those lines of businesses in a whole variety of different sort of product sets and digital capabilities. I like to think of from a digital capability standpoint, the Union Bank customers will step into a time machine at the point of system conversion and from a digital point of view, really move about 5 years into the future or more. And with respect to our mobile, digital capabilities, the things that we do in terms of our mortgage business, all those sort of things, I think that, that creates opportunity for us to be able to deepen the relationship on the consumer side and for them to be able to utilize the services and the capabilities that we have, such as co-browsing. On the payments business, the card penetration rate, as an example, is relatively low. We think that there is a significant opportunity to be able to expand on that. And of course, our capabilities with respect to merchant acquiring, real-time payments and other things on the payment side. If you think about the 200,000 business banking customers that we've been talking about strategically, our focus around business banking and creating that payments ecosystem, we have the ability to be able to introduce our talent capabilities and our combined sort of business banking capabilities to these customers and to be able to grow it. Gunjan talked about the wealth management business opportunities, which we think are important and significant. It's a market that is very affluent. And then on the commercial and corporate banking side of the equation, being able to introduce our capital markets capabilities, things like foreign exchange and derivative transactions and all the different types of things to that customer base, I think will be significant. Let me just wrap up by just kind of telling you where we're at from an acquisition. In mid-October, we finally got the regulatory approval, again, very excited about that. We've kind of unleashed the teams with respect to moving forward. Our expectation is that we will close December 1. And the reason between the regulatory approval and the closing date is that they have to go through the process of separating their particular business, and they also have to, under Japanese law, provide client notifications that are roughly a 30-day sort of window. So that's the reason for the timing with respect to close. Our expectation from a system conversion standpoint is that we will convert the majority of systems over the Memorial Day weekend and then collapse the 2 banks together through a bank merger at that particular point in time. So again, things on track, ready to go. The teams are moving forward, and we're just very excited to finally be at this particular stage. So with that, I think we'll open it up to questions.

Just a couple of questions to kick things off. First off, on the Investment Services side, you have very large competitors. What's allowed you to compete at your scale, and do you think you'll be able to maintain your market share and grow going forward?

Thank you, Terry. You do have to be quite intentional and strategic about not being undisciplined in growing. So we definitely can compete. The balance sheet strength and the distribution leverage of the bank really equalizes the scale difference, I would say. But we are also very focused on just U.S. and Western Europe. And markets like Asia and some businesses like pure custody that are quite dilutive, we would not sort of enter in. So we really do very complex work that gets paid at the higher end for sort of Western Europe and U.S. markets. So that's our formula.

Terry, on the call, you mentioned your money market balances can be a good source of funds as interest rates rise. Can you kind of walk us through how that works, please?

Yes. So I mean this is one of the benefits, I think, of Gunjan's business with respect to Union Bank -- with respect to U.S. Bank. And there's -- as we have kind of talked about in the past, it is a deposit gathering sort of business. It has lots of relationships that generate and -- where customers have a lot of liquidity. And we have the opportunity because of the fact that we have this money market business within the Wealth Management Investment Services to be able to provide that product -- whether it's on balance sheet or off balance sheet with respect to being able to provide them liquidity or liquid asset investment sort of services in that space. So if you think about it in a rising rate environment, when you have pressure on deposits and you think about the Federal Reserve starting to quantitative tighten, there's going to be a lot of pressure with respect to deposits. And our competitive set, when they see those pressures, they fundamentally need to go to the wholesale market and look at that sort of cost of funds. We have the ability from -- simply from deposit pricing to be able to provide an alternative on balance sheet to customers that may have those funds sitting in our money market. So if you think about it, if it's in the money market, we get the revenue through fees. If we decide from a pricing standpoint, it makes sense. If we need to, from a funding perspective, we can bring that back on balance sheet by working with clients, again, probably paying a little bit more with respect to the deposit price. But certainly, the alternative is a lot less than going out into the wholesale market. And so it just provides us with a lot of flexibility and a source of funding at that point in time.

Terry, I'll just add, all of these are very transparent conversations with very, very sophisticated asset managers on the other side.

Absolutely.

So they understand the dynamic of how we offer them the right cash options here.

Yes. They're making a trade-off with respect to, "Do I want to have instant liquidity by having it in a deposit account or do I want to have relatively strong liquidity sitting in a money market fund or do I invest in treasuries," which they sometimes will as well. But it's very transparent. It's sophisticated investors. They're making trade-offs with respect to both price and the ability to get access to their cash immediately.

And then how should we think about growth within Wealth Management and Investment Services? And are you open to more acquisitions?

I keep this man very close to my -- yes, we are very -- we see a lot of acquisition opportunities in this space, and they come in bite-sized chunks. So these are small private administrators that are going public. I suspect that for the next 12 to 18 months, we will be very busy just integrating Union Bank. It may not be sort of an active pipeline. But in the fullness of time, acquisitions will be a very important part of our growth. They tend to be more investment services focused, although what we are seeing more recently, like the cash asset management could be a space and larger and larger lift outs of teams, which is how -- which we have started to do quite a lot. So they're not quite acquisition, but they're acquiring teams on the wealth side.

I see a lot of hands in the audience. So maybe we could start the Q&A.

Yes. Gunjan, on your Slide 5 of your 4 main businesses, you mentioned how large they are and their growth rates. You may not be able to specifically talk about their pretax margins, but could you at least prioritize and rank order the most profitable of those 4? I think it was -- was it 5? Was it one before that? And then also, like the direction, as we look forward, I would assume that there's going to be some margin pressure, but perhaps I'm wrong.

Yes. So I do think we report publicly at least the Wealth and the IS side, and they're not remarkably different. Although the source of the margin is slightly different. When we had the -- in 2020, when the rates came down, you saw a real compression in the IS businesses, but less so in the Wealth businesses because the markets were flourishing and you're seeing slightly different. Our efficiency ratio in this set of businesses is maybe 5 points higher than sort of the bad -- like so in the high 50s, low 60s rather than sort of -- so about 5 points higher is roughly. And we have very effortless positive operating leverage in these businesses. They are very scalable businesses. So I know that's a question that we get all the time on operating leverage.

Yes. The other thing that I would just add is that in some respects, when the equity markets are going well and wealth management is -- the markets are strong, one side of that business does very well. In a rising rate environment, companies are oftentimes restructuring their balance sheet. And so corporate trust has the opportunity to be able to excel during that particular point in time. And then if you think about it, if you look at the entire mix, the entire mix is very much a deposit gathering business. And in horizon, when rates are moving up and rates are high, the value of deposits is very strong. And so it's an important business, and it does differentiate us.

Terry, I'm trying to get my math to equal here. So A plus B equals C. And the C is that Union, it's still 8% accretive. We got that. The B, the merger synergies are still $900 million. And the A is Union Bank is performing better than you originally expected. So if A is higher and B and C are still the same, I can't get my equation to equal. One theory would be maybe U.S. Bancorp has a self-imposed asset cap so you can stay below the next bucket. Is there something going wrong with that? Or what -- where am I wrong with my math? And just the simple question is, do you feel better or worse about U.S. Bancorp and Union Bank than you did before?

Well, I feel better, certainly. I mean if I think about the dynamics, certainly, in terms of accretion related to the mark and all those sorts of things, I think that, that will be generally positive relative to maybe the economics that we had put together earlier. The capital levels probably will be a little bit lower, though simply because of the day 1 mark. Now, I tell you that, that mark comes back into income and accretes back into capital relatively fast. I think, Mike, it's a little bit early because they're still in the process of separating the assets and liabilities based upon what we think we negotiated. And while that was very tight, we still have to kind of see how that plays out. We have to see where interest rates ultimately end up. There's just a lot of moving parts yet. So it's a little bit early for us to add to the A plus B plus C sort of equation.

One follow-up. What percent of fee revenues does Union Bank have relative to U.S. Bancorp because that seems to be a big part of the revenue story with Union Bank?

Yes. It's more -- today, in the environment, it's more balance sheet driven than it is fee driven. And from a revenue synergy standpoint, we certainly believe that there's more opportunity there.

Two different questions. Let me pick up on the Union Bank, one, first, Terry, for you. How much at this point are you thinking of that accretion is coming from purchase accounting accretion, which has turned to be a more positive number? Any rough numbers? Anything you can guide us to?

Yes, probably, again, a little bit early simply because we don't know exactly where that mark is going to be. The accretion is probably a little bit stronger than what we had anticipated when we put the deal together, clearly. But with rates going up 20 basis points, down 20 basis points and everywhere else, I hate to kind of put a foothold in the ground at this particular point in time. But once we get through closing, we'll have a better sense in terms of exactly what that looks like, and we'll provide more information.

A question for you, Gunjan, a separate one. What are you seeing in terms of pricing trends in your fund services and corporate trust, especially given the labor intensity of what you do? You talked about complexity, et cetera.

Yes. So they're quite different on 2 sides. On the fund services side, when you think about the core vanilla custody like mandates, you do find certainly in a rising rate environment when deposits are worth a lot. That equation is very transparent. So you'll see a little bit more negotiations. On the Corporate Trust side, especially on the corporate, we do not sort of feel that kind of pressure. And just to give you a sense of why. You have a CLO manager trying to get a deal done. We are such a miniscule part of the overall equation, what they really want to speed. They want us to be able to turn this deal around before the investment opportunities go. So we have had a very consistent campaign to improve our pricing just because the labor trends are very real. We are a very sort of labor-intensive market. And the market is bearing it with not joy, but grace on the margins.

Well, they're also very much willing to pay for customer and client service. And we -- in the marketplace, we do very well. And I think that we -- from a pricing perspective, we're able to enjoy that.

Yes. This is in Corporate Trust. I think the Fund Services is a slightly different sort of -- and the pricing pressure is less on the complex side. It is really -- we feel it the most when the work is very generic.

I'm getting to the finish line, obviously, with the acquisition. So I'm just curious, I know that S&P and Moody's put U.S. Bancorp on negative outlook in tandem with the announcement of the merger. So now that everything has been approved, do you expect those outlooks to be resolved? And of course, does it also change your appetite for M&A in the future, given all of the headwinds that you experienced over the past year or so?

Yes. Well, maybe let me address the second question first. Clearly, our focus is going to be on integrating Union Bank over the course of the next 6 to 12 months. And that's going to be our primary focus. With respect to the negative outlook, it's very traditional when you enter into a transaction like this for the credit rating agency. They seem to put you in a negative outlook for a period of time. And the primary reason why they do that is because of the integration risk that is just recognized when you go through a transaction like this. So our expectation is we're going to be able to successfully integrate the bank, and then we'll see where the credit rating agencies go from there. But usually, once you get through that integration process, they reevaluate.

Every quarter, you guys produce a business line schedule that shows the P&L for your different businesses, wealth management, investment services being one. Is that how you manage the businesses and compensate the executives? And the reason I ask that is because it seems like those statements are being restated every year or every other year. And then the second sort of related question is, this year, it seemed like you dumped a bunch of assets into the Wealth Management division. And so most of the growth has been from NII, not from fee. So can you talk a little bit about that?

Gunjan, can you start with the second part?

Yes, I can start with the second part. So if you look through the fee growth, you would see a number between 6% and 10%, depending on the market and it's a very steady fee growth to just this last year because the rates have risen so much, we lost a lot of NII in 2020 and '21. Money market waivers is the only other thing that is actually interest rate driven, but shows up in fees. And so we were transparent about letting you see that. But if you back all of that out, our fee revenue growth outside of transfers, all of the transfers in between the lines of business we do take into account when we are showing new growth rates here.

Yes. And coming back to your first question, I think you get the gold star because I've been at U.S. Bank for 24 years in the controller role and now in the CFO role. I think you're the first person that's ever asked me a question with respect to the segment reporting. So I'll give you that. Yes, it is tied definitely to how we end up measuring the success of the business and how we end up compensating, and it has to be because that's the way that the SEC rules work. The restatements occur simply because of the fact that we always recalibrate it to the plan and our expectations for that particular year. We try not to give the lines of businesses the benefit of rising rates that have happened in the past. We're always trying to measure them based upon their success from January 1 going forward. And so we oftentimes will go through restatements of those historical numbers in order to sync them up with the interest rate environment and all those sorts of things. So I know it can be a little bit confusing.

Terry, so you talked about the capital hit from the deal could be a little bit greater. I think your comment on the call was about 140 basis point hit to CET1, bringing it down about 8.3%. And you indicated, I think you would have to work back to your target of -- or work back to 9% perhaps before buybacks could resume. Any change to that expectation in the 4 quarter time frame that you thought that you regenerate that capital?

No change with respect to the expectation. And you're right, we're at 9.7%, and we expect that it's going to be around 8.3% at the time of closing. Because of movements in interest rates and all sorts of things that have been occurring at that particular point in time as well as the loan growth that we've been experiencing. So there's a couple of different dynamics in terms of kind of why we're going to be at 8.3%. And the offset to that is that a big driver behind that day 1 sort of impact is the mark-to-market. And so the mark-to-markets actually will accrete back into capital and through earnings over a relatively short period of time. So if you think about over a 2.5, 3-year sort of time frame, it tends to be pretty fast, just simply because of the mix of the assets. And so that's how we -- in addition to just earnings growth that we would expect it to get back to about 9% within about a 4-quarter sort of a time frame, and that's still our expectation at this point.

So no change in that 8.3% expectation?

No.

I had a couple of questions about the fund administration within the Global Fund Services. First, I occasionally hear as an investor and as a client from fund admin firms that they want to cross-sell other services because it is so mission-critical to the funds. Was wondering what your strategy is and success is trying to do that if that is part of your efforts? And then separately, with regard to digital assets. On the custody, I assume that was the sub-custodial Nidec relationship you were talking about. Do you need like some sort of overarching regulatory approval? Or do you need a new relationship? And then just finally, on Fund Admin, do you provide services for digital assets because a lot of clients want one admin and some provide those services and some don't. And I just wondered where you were in that.

Thank you. So the fund industry does give you the opportunity to cross sell. What you're seeing within the lines of business reporting here is the administration and custody and the deposits that come with it. But these funds also are big users of credit, either lines of credit for capital calls, and you'll see that recorded in our corporate bank business, but it's a very nice business for us. It also generates a fair amount of revenue for foreign exchange, and you see that in our capital markets business not here. And securities lending, those programs are actually part of my business. So there's a range of ancillary services that come from these. On digital assets, what we offer today is a subcustodian arrangement through Nidec. So we are not transacting any digital currency through our system. We're just holding an asset priced by a third party. We are able to do administrative services, which we'd allowed. The regulatory guideline is very unclear on the approval, but we are required to not get formal approval, but we are required to get some kind of an approval. And right now, they're kind of on hold. So to be honest with you, most of the activity and road maps around digital currency services, they're just pending regulatory clarity for banks.

Which regulators are involved in that process?

So the SEC has guidelines on the accounting standards that basically make it impossible to do custody of the assets. The OCC has the regulatory nod and then the Federal Reserve has some other criteria. They're all involved in it. They're all involved in, very interested.

Given the growth that you've experienced in your business and the fact that there's still growth to be had there, is there any near-term aspirations that you have? How you could account for your portion of the revenue mix? In that right now, you've got 18%. Do you have any near-term aspiration for your business?

I don't -- we don't think of it in terms of the percentage, in terms of the aspiration. But if you look at the underlying trends of the assets and our capabilities, these set of businesses should grow about 6% to 8% in the fullness of time. Last year was a very big growth year because the rates came back. The year before was a flat year because the rates had gone down. But if you just look at the underpinning of the financial markets and how, it's a high single-digit growth set of businesses. Is that fair?

Unfortunately, we're out of time, but thank you, U.S. Bank.

Thank you.

Thank you.