US Bancorp will continue its strategy to “lead” in innovation, as more budget heads to research and development.

Richard Davis, president and chief executive officer of US Bank, said yesterday that the bank’s innovation strategy will continue apace.

Davis told investors that, when it comes to innovation, “in this environment you want us to … be the leaders or fast followers and work with a lot of other companies and expertise that we might not necessarily have ever had in our legacy.”

Davis was asked what the company would do with the increase in capital it is generating beyond the 65% of capital that it returned to investors in the form of dividends and share buybacks. Davis responded that 20% of capital will go to R&D — and that means the R&D budget is increasing, too. Specifically, net income at USB grew 3.3% in 2013.

We like the 20% left for ourselves because we expect to be an acquirer, we expect to take opportunities when something comes along, particularly in trust or payment and I’ll say there’s a great deal of innovation and R&D that we’re spending money on that, much of which will eventually come to bear fruit, some of it will prove that we’ll learn what doesn’t work.

It is difficult to determine exactly how much USB spends on R&D. Noninterest expense at USB actually fell 1.7% last year to $10.3 billion, but “technology and communications” spending increased 3.3% to $848 million. We believe at least some of USB’s R&D budget is baked into that number.

“I think right now where we are is a good indicator of where we’ll be for 2014,” Davis added in regards to USB’s capital allocation.