lehman brothers 2006 financial services...

1

Jerry A. GrundhoferChairman and CEO

May 18, 2006

Lehman BrothersLehman Brothers2006 Financial Services 2006 Financial Services

ConferenceConference

2

This presentation contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These statements often include the words “may,” “could,” “would,” “should,”“believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” “potentially,”“probably,” “projects,” “outlook” or similar expressions. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and many factors could cause actual results to differ materially from those anticipated, including changes in general business and economic conditions, changes in interest rates, legal and regulatory developments, increased competition from both banks and non-banks, changes in customer behavior and preferences, effects of mergers and acquisitions and related integration, and effects of critical accounting policies and judgments. Refer to the sections entitled “Risk Factors” and “Corporate Risk Profile” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, which you should read carefully, for further discussion of these and other risks. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them in light of new information or future events.

Forward-looking Statements

3

Executing For LongExecuting For Long--term Success term Success

10% Plus EPS Growth

20% Plus ROE

Reducing Credit and Earnings Volatility

Providing High-Quality Customer Service

Investing For Future Growth

Targeting 80% Return of Earnings to Shareholders

4

Diluted Earnings Per ShareDiluted Earnings Per Share

2.42

2.18

1.92

$1.25

$1.50

$1.75

$2.00

$2.25

$2.50

2003 2004 2005

14.3%

13.5%

11.0%

Year-Over-Year Growth10% Plus

EPS Growth

1Q06 = $0.63

1Q05 = $0.57

+ 10.5%

5

23.3%22.5%21.4%

19.1%

2.23%2.21%2.17%1.98%

12.0%

15.0%

18.0%

21.0%

24.0%

27.0%

2003 2004 2005 1Q06

RO

E

1.20%

1.60%

2.00%

2.40%

2.80%

3.20%

RO

A

ROE ROAGAAP reported

ProfitabilityProfitability

20% PlusROE

6

ProfitabilityProfitability

2.23%

1.98%

2.17%2.21%

3.97%4.25%

4.49%

3.80%

1.75%

1.90%

2.05%

2.20%

2.35%

2.50%

2003 2004 2005 1Q06

RO

A

3.50%

3.80%

4.10%

4.40%

4.70%

5.00%

NIM

ROA NIM

7 Excluding securities gains (losses) net

Revenue MixRevenue Mix

40.8%41.2%41.3%41.6%42.6%

44.3%44.6%44.7%45.1%

46.7%46.8%47.2%48.3%

35.0%

38.0%

41.0%

44.0%

47.0%

50.0%

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06

Fee Income / Total Revenue

8


Peer Banks are BAC, BBT, CMA, FITB, KEY, NCC, PNC, RF, STI, WB, WFC and WMFull year 2005, Source: company reports

Peer CompositeU.S. Bancorp

Net Interest IncomePayment RevenueTrust & InvestmentManagement

Service ChargesMortgageInv Bking / Trading/ Equity Invest

All Other

54% 56%

3%7%

10%

8%

17%5%

8%

10%

4%6%

11%

1%

PaymentsFocus

9

Revenue Per ShareRevenue Per Share

7.136.67

6.35

6.9%

5.0%

3.9%

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

2003 2004 20050.0%

2.0%

4.0%

6.0%

8.0%

10.0%

USB RPS USB Growth

Excluding securities gains (losses) net

1Q06 = $1.83

1Q05 = $1.70

+ 7.6%

10

Efficiency RatioEfficiency Ratio

44.3%

49.8%

53.4% 53.6%

57.3% 57.4% 58.2%59.4% 60.1% 60.9%

62.9%64.3%

67.6%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

USB BAC BBT FITB WFC CMA WM NCC STI WB KEY RF PNC

Full Year 2005Full Year 2005

Source: company reports

11

Low Net ChargeLow Net Charge--offs Volatilityoffs Volatility

.33 .45

.46 .44 .55 .52 .53

.68 .79

.95

1.16 1.101.02

.16

0.00

0.30

0.60

0.90

1.20

1.50

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06

.61

4Q05 charge-off ratio increased 16 bps due to $56 million of bankruptcy related charge-offs

Percent

ReducingCredit

Volatility

12 Restated diluted EPS from continuing operations

Low Earnings VolatilityLow Earnings Volatility

.63 .62 .62

.60

.57 .56 .56

.54

.52

.50

.48 .47

.46

0.40

0.45

0.50

0.55

0.60

0.65

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06

ReducingEarningsVolatility

13

62

64

66

68

70

72

74

2005

U.S. Bank

Bank ofAmericaWellsFargoJPMorganChase

In 4Q 2005, U.S. Bank engaged ACSI in the same measurement system used in their independent survey of Retail BanksScored very well against key peer competitors – Bank of America, Wells Fargo and JPMorgan Chase On track with the “ACSI Retail Bank Industry Average” of 75%

4th Quarter 2005 Results:The American Customer Satisfaction Index (ACSI)

Focusing on Customer ServiceFocusing on Customer Service

High-QualityCustomerService

14

0

125

250

375

500

625

2001 2002 2003 2004 2005 1Q06

($ in

mill

ions

)

Revenue Enhancing Cost Reduction Infrastracture All Other

Invested Over $2 Billion in Last 5 Years

Investing for the FutureInvesting for the Future

Investingfor Future

Growth

398339

361

600

437

146

15

Earnings Distributed to Earnings Distributed to ShareholdersShareholders

11%

62% 40%

107%

51%50%46%44%

0.0%

35.0%

70.0%

105.0%

140.0%

175.0%

2003 2004 2005 1Q06

Dividends Share Repurchase

90%

55%

108%

80% Returnof Earnings

158%

16

Tier 1 Capital RatioTier 1 Capital Ratio

8.9%9.1%8.6% 8.2%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2003 2004 2005 1Q06

Tier 1 Capital Ratio Target

As of period end

Target8.5%

17

Total RiskTotal Risk--Based Capital RatioBased Capital Ratio

13.6%13.1%

12.5%13.1%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

2003 2004 2005 1Q06

Total Risk-Based Capital Ratio Target

As of period end

Target12.0%

18

U.S. Bancorp Dividends U.S. Bancorp Dividends Per SharePer Share

0.18 0.210.27

0.33

0.46

0.65

0.75 0.780.85

1.02

1.23

$0.00

$0.25

$0.50

$0.75

$1.00

$1.25

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0.18 0.210.27

0.33

0.46

0.65

0.75 0.780.85

1.02

1.23

$0.00

$0.25

$0.50

$0.75

$1.00

$1.25

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: FactSetPeer Banks are BAC, BBT, CMA, FITB, KEY, NCC, PNC, RF, STI, USB, WB, WFC and WM

Peer BankRank = #1

CAGR = 21.2%

19

(Through 4/28/06)

U.S. Bank 6.3% 17.5% 17.2%

S&P 500Commercial Bank Index 9.9% 16.1% 17.1%

S&P 500 Index 5.6% 15.4% 14.7%

1 Year4/29/05 – 4/28/06

3 Year4/30/03 – 4/28/06

YTD12/30/05 – 4/28/06

Total Shareholder ReturnTotal Shareholder Return

Source: FactSet, 3 year TSR annualized

20

Total Shareholder Return Total Shareholder Return 10 Year10 Year

$100

$225

$350

$475

$600

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

USB S&P Commercial Bank Index S&P 500 Index

$100

$225

$350

$475

$600

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

USB S&P Commercial Bank Index S&P 500 Index

$611$611

A $100 investment in U.S. Bancorp in 1995 A $100 investment in U.S. Bancorp in 1995 was worth $611 at yearwas worth $611 at year--end 2005end 2005

$337$337

$238$238

Source: FactSet, 12/31/95 = 100Peer Banks are BAC, BBT, CMA, FITB, KEY, NCC, PNC, RF, STI, USB, WB, WFC and WM

Peer BankRank = #1

CAGR19.8%

21

Investing in High Return Investing in High Return BusinessesBusinesses

Payment Services

Merchant Payment ServicesRetail Payment SolutionsCorporate Payment SystemsTransaction Services

Private Client, Trust and Asset Management

Private Client GroupCorporate Trust ServicesInstitutional Trust & CustodyFAF AdvisorsU.S. Bancorp Fund Services

22


Mix as of full year 2005, excluding securities gains (losses) net

Revenue MixBy Business Line

ConsumerBanking

46%

Private Client& Trust

Payments21%Wholesale

Banking19%

Other 3%

11%

Fee Income MixBy Business Line

ConsumerBanking

33%Payments

36%

Private Client& Trust

17%

WholesaleBanking

13%

Other 1%

23 $ in millions

Payment Services Payment Services

590573579

547

486

632

681

733 734752

450

500

550

600

650

700

1Q05 2Q05 3Q05 4Q05 1Q06

Fee

Inco

me

550

600

650

700

750

800

Rev

enue

Fee Income Revenue

1Q06 vs 1Q05Fee Income + 21.4% Total Revenue +19.0%

24

Payment ServicesPayment Services

1Q06

Revenue MixBy Business Unit

RetailPaymentSolutions

52%

MerchantProcessing

30%

CorporatePayment

12%

TransactionServices

6%


Fee Income78%

Net InterestIncome

22%

25

Retail Payment SolutionsRetail Payment Solutions

5,000

6,000

7,000

8,000

9,000

10,000

1Q03 1Q04 1Q05 1Q06

Cha

rge

Volu

me

Credit Card Charge Volume Growth

+ 8.1%

+ 7.9%

+ 14.5%

$ in millions

26

Retail Payment SolutionsRetail Payment Solutions

2,000

3,000

4,000

5,000

6,000

7,000

1Q03 1Q04 1Q05 1Q06

Tran

sact

ion

Volu

me

Debit Card Transaction Growth

+ 21.3%

+ 22.3%

+ 22.7%

$ in millions

27

Merchant ProcessingMerchant Processing

100,000

200,000

300,000

400,000

500,000

600,000

1Q03 1Q04 1Q05 1Q06

Tran

sact

ion

Volu

me

(000

's)

Merchant Transaction Growth

+ 18.3%

+ 52.1%

+ 10.7%

28

Merchant ProcessingMerchant ProcessingBuilding Transaction Processing Capabilities in Europe

United Kingdom

Spain

Denmark

Poland

Estonia

France

Spain

Ireland Netherlands

NorwaySweden

GermanyBelgium

Austria

Italy

Denmark

Existing eCx footprint

New countries - CCA acquisition

29

Corporate PaymentsCorporate Payments

3,000

4,000

5,000

6,000

7,000

8,000

1Q03 1Q04 1Q05 1Q06

Cha

rge

Volu

me

Card Charge Volume Growth

+ 18.6%

+ 16.4%

+ 9.0%

$ in millions

30

Corporate PaymentsCorporate Payments

Full year 2005

Charge VolumeBy Product

Revenue IncomeBy Product

PurchasingCard21%

CorporateCard25%

PurchasingGovernment

28%

PowerTrack15%

Fleet11%

PurchasingCard19%

CorporateCard28%

PurchasingGovernment

29%

PowerTrack8%Fleet

16%

31

Transaction ServicesTransaction Services

• 38,515 ATM’s driven

• 2nd largest bank-owned ATM fleet

• 3rd largest third-party ATM processor

• 3rd largest Surcharge Free ATM Network

• Processor of ATM/Debit/Credit transactionfor 21 percent of all banks in the U.S.

32 $ in millions

Private Client, Trust andPrivate Client, Trust andAsset ManagementAsset Management

307

268260259

253

352364

370

385

431

230

250

270

290

310

330

1Q05 2Q05 3Q05 4Q05 1Q06

Fee

Inco

me

320

345

370

395

420

445

Rev

enue

Fee Income Revenue

1Q06 vs 1Q05Fee Income +21.3%Revenue +22.4%

33

Private Client, Trust andPrivate Client, Trust andAsset ManagementAsset Management

1Q06

Revenue MixBy Business Unit

PrivateClient42%

Corp Trust29%

AssetMgmt10%

InstitutionalTrust

Fund Services

10%


Fee Income71%

9%

Net InterestIncome

29%

34

Client focus model

Planning Services

Brokerage

Insurance

Business Banking Investment

Management

Mortgage

Personal Trust

Private Banking

Outside Advisors

Team Leader

ClientClient

Private Client GroupPrivate Client Group

35

Private Client GroupPrivate Client Group

563

620

681

500

540

580

620

660

700

2003 2004 2005

($ in

mill

ions

)

Total Revenue9.8%

10.1%

1Q06 = $176

1Q05 = $163

+ 8.0%

36

Corporate Trust ServicesCorporate Trust Services

303

321

358

275

300

325

350

375

400

2003 2004 2005

($ in

mill

ions

)

Total Revenue

11.5%

6.2%

1Q06 = $125

1Q05 = $82

+ 52.4%

37

Tax-Exempt Debt Trustee Rank – 1Q06No. of Mkt Share

Rank Trustee Issues on Issues1 U.S. Bancorp 218 27.5%2 Bank of NY 126 15.9%3 Well Fargo 107 13.5%4 JP Morgan 90 11.3%5 Deutsche Bank 27 3.4%

ABS/MBS/CDO Rank – 1Q06Proceeds MktShr

Rank Trustee (US $MM) on $1 U.S. Bancorp 98,709.1 26.6%2 Deutsche Bank 81,645.7 22.0%3 JP Morgan 56,198.3 15.1%4 Bank of NY 54,598.2 14.7%5 Wells Fargo 30,936.7 8.3%

Corporate Trust ServicesCorporate Trust Services

38

• Adds significant scale to U.S. Bancorp’s current business

• Makes U.S. Bancorp premier player among mid-tier custodians

• Meaningful cost take-out opportunity

• Wachovia to enter into referral agreement post-close with U.S. Bancorp

• Geographically complementary to current business

• Potential for revenue enhancements

Offers product expansion opportunities with insurance companies, registered investment advisors, public funds and corporations

Institutional Trust & CustodyInstitutional Trust & Custody

Acquisition of Wachovia’s Institutional Custody business

39

Global Assets Under Custody – 2005Rank Trustee Assets ($B)1 JP Morgan 11,2002 Bank of NY 10,9003 State Street 10,7004 Citigroup 8,6005 Mellon 3,9086 Northern Trust 2,9007 Investors B&T 1,9308 Brown Brothers 1,3409 U.S. Bancorp 831

Institutional Trust & CustodyInstitutional Trust & Custody

Bolsters Market Position in Custody

40

• Provides services for third-party mutual fundsTransfer Agency/Shareholder Servicing

Custody

Fund Accounting

Fund Administration and Compliance

Distribution, tax and partnership accounting

Consulting and marketing

• Target market: Entities with fewer than 500,000 accounts and assets less than $25 billion

• One of the top 5 full service, 3rd party providers of mutual fund services

Fund ServicesFund Services

41

Fund ServicesFund Services

103

119

141

85

100

115

130

145

160

2003 2004 2005

($ in

mill

ions

)

Total Revenue

18.0%

15.8%

1Q06 = $39

1Q05 = $33

+ 18.2%

42

Asset ManagementAsset Management

130.4134.0

137.8

100.0

110.0

120.0

130.0

140.0

150.0

2003 2004 2005

($ in

bill

ions

)

Amounts reported reflect end of year balances reported on a one month lag

Assets Under Management

43

Award-winning mutual funds

“Best Overall” is for three-year, risk-adjusted performance among 31 large U.S. fund groups for the period ended Dec. 31, 2004. “Best Mixed Equity” is for three-year, risk-adjusted performance among 32 large fund groups using a combination of stocks and bonds to achieve consistent return as of Dec. 31, 2004.

Past performance is no guarantee of future results. Each fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about First American Funds, and it may be obtained by calling First American Investor Services at 800.677.FUND or visiting firstamericanfunds.com. Read the prospectus carefully before investing.Mutual fund investing involves risk; principal loss is possible. Investing in certain funds involves special risks, such as those related to investments in small- and mid-capitalization stocks, foreign, debt and high-yield securities, and funds that focus their investments in a particular industry. Please refer to the prospectus for more details pertaining to these risks. Lipper determined the large fund group awards by averaging the decile rank of the three-year Consistent Return scores for all of the firm's funds within the asset class, and the eligible group with the lowest average decile rank received the award for that asset class. In case of a tie, the group with the lower average percentile rank received the award. Large fund groups with at least five equity, five bond, or three mixed equity portfolios that received Consistent Return scores as of Dec. 31, 2004, are eligible for a fund group award in the respective asset class. Large fund groups with at least five equity, five bond, and three mixed equity portfolios that received Consistent Return scores as of Dec. 31, 2004, are eligible for an overall fund group award. Although Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Lipper. Users acknowledge that they have not relied upon any warranty, condition, guarantee, or representation made by Lipper. Any use of the data for analyzing, managing, or trading financial instruments is at the user's own risk. This is not an offer to buy or sell securities.FAF Advisors, Inc., serves as the investment advisor to First American Funds. First American Funds are distributed by Quasar Distributors,LLC, an affiliate of the investment advisor.

Asset ManagementAsset Management

44

Executing For LongExecuting For Long--term Success term Success

10% Plus EPS Growth

20% Plus ROE

Reducing Credit and Earnings Volatility

Providing High-Quality Customer Service

Investing For Future Growth

Targeting 80% Return of Earnings to Shareholders

45

Jerry A. GrundhoferChairman and CEO

May 18, 2006

Lehman BrothersLehman Brothers2006 Financial2006 Financial

Services ConferenceServices Conference

lehman brothers 2006 financial services...

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