management said July15 that Brexit could prove a mild positive for the bank while net interestmargin remains under pressure. Additionally, executives said they do not seesigns of a recession and concerns over commercial real estate will be mitigatedby the bank's conservative approach.
Speakingduring their second-quarterearnings call, executives said the bank's primary exposure to theU.K. comes from its merchant acquiring business, which could actually get aboost from the nation's decision to leavethe European Union.
"There'sa lot of prognosis that there will be a lot more travel and business spendingover in the U.K., which is a net positive for us given our portfolio mix. … So,we're seeing Brexit as fairly neutral to nonmaterial to maybe even a little bitmore positive," Chairman and CEO Richard Davis said on the call.
However,it appears the low-rateenvironment will continue to drag on U.S. Bancorp's earnings. Managementsaid they expect the bank's net interest margin to decrease by 3 basis pointsto 4 basis points in the third quarter. Michael Mayo, an analyst with CLSA,noted that the bank's bet against further declines in the 10-year Treasury ratehas not panned out but that the bank has been able to drive some loan growth.Davis said in response that the loan growth figures should be lasting.
"Iwish I'll be here 10 years from now to confirm it, but we are taking marketshare. Swear to god, honest engine, we are taking market share. We have beenfor years," Davis said.
Separately,analysts asked about some broader concerns, such as signs of a bubble incommercial real estate and talk of a recession in the U.S. economy. Managementsaid they plan to stick religiously to their conservative approach on CRE.
"We'renot going to get greedy at a time like this on terms or on underwriting,"Davis said.
Asfor recession concerns, which have been mentioned by Federal Reserve ChairJanet Yellen, executives said they continue to see a slow recovery.Particularly on consumer health, management said all signs point to acontinuingly modest recovery with no signs of a recession.
"Consumersare starting to spend again," Davis said. "They're saving at a levelthat's more comfortable. They're using their credit cards, and they're payingthem back on time and getting rewards for it. … As for the word recession beingbandied about lately by a lot of parties, we don't see it."