U.S. Bank focused on completing its integration of Union Bank in the second quarter, after acquiring the New York-based bank in December. 

The $590 billion U.S. Bank gained 1.2 million Union Bank customers since finishing its conversion in May, according to the bank’s Q2 earnings supplement. Half of these new users were digitally active within a month.  

“Union Bank customers are adopting our digital capabilities more quickly than expected,” said U.S. Bank Chief Executive Andrew Cecere during the bank’s earnings call Wednesday. “Our teams are working diligently to leverage the value of overlaying all of our products and services to Union Bank customers.”  

THE BIG PICTURE: U.S. Bank’s net revenue rose 19.7% year over year to $7.1 billion from $6 billion, driven by increasing interest income due to rising rates and new revenue streams resulting from the acquisition, according to the supplement. 

While the high-interest environment offered a revenue opportunity, the bank’s credit loss provisions also skyrocketed 164% YoY to $821 million, up from $311 million last year.    

Despite a 22.7% increase in noninterest expense due in large part to costs incurred during the acquisition, the bank is “even more confident today of the strategic and financial merits of this deal,” Cecere said. 

BY THE NUMBERS: Other results for U.S. Bank in Q2 included:   

• Noninterest income grew 7% YoY to $2.7 billion from $2.5 billion;  
• Tech spend increased 24.6% YoY to $522 million from $419 million; and  
• Merchant processing income grew 12.7% sequentially to $436 million, up from $387 million, driven by a 10% YoY increase in tech-led merchant processing. 

FLASHBACK: During the quarter, U.S. Bank launched its Commerical Rewards Card with travel and expense management platform TravelBank, according to a U.S. Bank release. 

The card solution, which launched in June, helps middle-market companies automate expense management, according to the release. U.S. Bank acquired TravelBank in 2021. 

NOTEWORTHY: The bank is upgrading the Union Bank customer base to its interest-bearing Bank Smartly checking accounts, according to Chief Financial Officer Terry Dolan.  

“This change will provide customer retention benefits without a material impact on our net interest margin,” he said.  

FUTURE LOOK: U.S. Bank is looking to increase margins by cross-selling to its newly acquired Union Bank customers, according to Cecere. About 80% of Union Bank’s former consumer small business customers use only one service, and credit card penetration among former customers is around half of most legacy banks, Cecere said.  

“We have a lot of opportunities to deepen relationships and in a very capital-efficient way, given the broad product set that we have,” Cecere said. 

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