US Bank 2005 Annual Report Download - page 58

charge-offs declined by $12 million in 2005, compared to income of $12 million, compared with the prior year, was
2004, primarily resulting from ongoing collection efforts attributable to increases in retail and commercial credit card
and risk management activities. Nonperforming assets balances and customer late fees, partially offset by
within Consumer Banking were $341 million at corporate card rebates and the margin impact of higher
December 31, 2005, and $353 million at December 31, non-earning assets. Noninterest income increased
2004. Nonperforming assets as a percentage of end-of- $300 million (15.9 percent) in 2005, compared with 2004.
period loans were .47 percent at December 31, 2005, and The increase in fee-based revenue was driven by strong
.56 percent at December 31, 2004. Refer to the ‘‘Corporate growth in credit and debit card revenue, corporate payment
Risk Profile’’ section for further information on factors products revenue, ATM processing services revenue and
impacting the credit quality of the loan portfolios. merchant processing revenue. Credit and debit card revenue
increased primarily due to higher customer transaction
Private Client, Trust and Asset Management provides trust, volumes and rate changes from a year ago. Corporate
private banking, financial advisory, investment management payment products revenue increased primarily due to
and mutual fund servicing through five businesses: Private growth in sales volume, card usage, rate changes and the
Client Group, Corporate Trust, Asset Management, recent acquisition of a small aviation card business. ATM
Institutional Trust and Custody and Fund Services. Private processing services revenue increased primarily due to the
Client, Trust and Asset Management contributed expansion of the business through the acquisition of a small
$484 million of the Company’s net income in 2005, or an ATM processing company in the second quarter of 2005.
increase of $90 million (22.8 percent), compared with 2004. Merchant processing revenue increased due to increases in
The growth was primarily attributable to strong revenue merchant sales volume and business expansion in European
growth in this business line. markets.
Total net revenue increased $130 million (9.5 percent) Noninterest expense increased $196 million
in 2005, compared with 2004. Net interest income, on a (18.6 percent) in 2005, compared with 2004, primarily due
taxable-equivalent basis, increased $91 million to higher compensation and employee benefit costs for
(25.1 percent) in 2005, compared with the prior year, due processing associated with increased credit and debit card
to 10.7 percent growth in average deposits and the transaction volumes, higher corporate payment products
favorable impact of rising interest rates on the funding and merchant processing sales volumes, higher ATM
benefit of customer deposits. The increase in total deposits processing services volumes due to the ATM business
was attributable to growth in noninterest-bearing deposits acquisition and higher merchant acquiring costs resulting
and time deposits, principally in Corporate Trust. from the expansion of the merchant acquiring business and
Noninterest income increased $39 million (3.9 percent) in increases in transaction volume year-over-year.
2005, compared with 2004, driven by improved equity The provision for credit losses increased $22 million in
market conditions and account growth. 2005, compared with 2004, due to higher net charge-offs.
Noninterest expense decreased $7 million (1.0 percent) The unfavorable change in credit losses was primarily
in 2005, compared with 2004, primarily due to reductions driven by additional charge-offs related to new bankruptcy
in operating losses and net shared services, partially offset legislation. As a percentage of average loans outstanding,
by higher personnel-related costs. net charge-offs were 3.37 percent in 2005, compared with
The provision for credit losses decreased $5 million in 3.42 percent in 2004.
2005, compared with 2004. The decrease was due to a
reduction in net charge-offs. Net charge-offs as a percentage Treasury and Corporate Support includes the Company’s
of average loans outstanding were .10 percent in 2005, investment portfolios, funding, capital management and
compared with .21 percent in 2004. asset securitization activities, interest rate risk management,
the net effect of transfer pricing related to average balances
Payment Services includes consumer and business credit and the residual aggregate of those expenses associated with
cards, stored-value cards, debit cards, corporate and corporate activities that are managed on a consolidated
purchasing card services, consumer lines of credit, ATM basis. Treasury and Corporate Support recorded net income
processing and merchant processing. Payment Services of $439 million in 2005, or a decrease of $221 million,
contributed $715 million of the Company’s net income in compared with 2004.
2005, or an increase of $59 million (9.0 percent), compared Total net revenue decreased $534 million (60.3 percent)
with 2004. The increase was due to growth in total net in 2005, compared with 2004, primarily due to a decrease
revenue, partially offset by increases in total noninterest in net interest income. Net interest income was
expense and the provision for loan losses. $409 million, or 5.8 percent of consolidated net interest
Total net revenue increased $312 million (12.7 percent) income, in 2005 compared with $959 million, or
in 2005, compared 2004. The 2005 increase in net interest
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