US Bank 2003 Annual Report Download - page 26

Noninterest Income Noninterest income in 2003 was other pricing enhancements. Corporate payment products
$5.3 billion, compared with $5.2 billion in 2002 and revenue and ATM processing services revenue were higher
$4.7 billion in 2001. The increase in noninterest income of in 2003, primarily reflecting growth in sales and card usage
$102.3 million (2.0 percent) in 2003, compared with 2002, during the year. Merchant processing services revenue was
was driven by strong growth in payment services revenue, lower in 2003 by $5.9 million (1.0 percent), compared with
trust and investment management fees, deposit service 2002, primarily due to lower processing spreads resulting
charges, treasury management fees, mortgage banking from pricing changes that occurred in late 2002 and
revenue and investment products fees and commissions changes in the mix of merchants. Merchant acquiring sales
attributable to both organic growth and acquisitions. volumes increased by 7.1 percent relative to the fourth
Partially offsetting the increase in noninterest income in quarter of 2002. The Company’s mix of merchants toward
2003 was a year-over-year decrease in net securities gains of smaller retailers and specialty shops often results in a lag in
$55.1 million. Noninterest income in 2002 also included the growth of sales volumes relative to improvements
$67.4 million of gains recognized in connection with the experienced at larger retailers in late 2003. Assuming
sale of two co-branded credit card portfolios. The favorable economic conditions continue to improve, management
impact on noninterest income from acquisitions, which anticipates stronger merchant processing revenue growth in
included Leader, Bay View and State Street Corporate Trust, 2004. The favorable variance in trust and investment
was approximately $122.7 million during 2003. management fees in 2003 of $61.8 million (6.9 percent),
Credit and debit card revenue, corporate payment compared with 2002, was driven by the acquisition of State
products revenue and ATM processing services revenue were Street Corporate Trust, which contributed $83.7 million in
higher in 2003, compared with 2002, by $43.7 million fees during 2003. Treasury management fees grew by
(8.5 percent), $35.6 million (10.9 percent) and $5.3 million $49.4 million (11.8 percent) in 2003, compared with 2002,
(3.3 percent), respectively. Although credit and debit card with the majority of the increase occurring within the
revenue increased year-over-year, revenue growth was Wholesale Banking line of business. The increase in treasury
somewhat muted due to the impact of the settlement of the management fees during 2003 was driven by growth in
antitrust litigation brought against VISA USA and product sales, pricing enhancements and the relatively low
Mastercard by Wal-Mart Stores, Inc., Sears Roebuck & Co. earnings credit rates to customers. The growth was also
and other retailers. This settlement lowered interchange driven by a change in the Federal government’s payment
rates that can be received by members of the associations methodology for treasury management services from
on signature debit transactions beginning in August 2003. compensating balances, reflected in net interest income, to
In 2003, the impact of the VISA settlement was to lower fees during the third quarter of 2003. During 2003,
debit card revenue by $19.4 million relative to 2002. In commercial products revenue declined $78.7 million
2004, the incremental impact will be to lower debit card (16.4 percent), principally reflecting lower commercial loan
revenue by approximately $15.0 million. This change in the conduit servicing fees resulting, in part, from consolidating
interchange rate in the third quarter of 2003, in addition to the Stellar commercial loan conduit. Mortgage banking
higher customer loyalty rewards expenses, however, were revenue had a year-over-year increase of $36.9 million
more than offset by increases in transaction volumes and (11.2 percent) during 2003, principally due to higher
Noninterest Income
2003 2002
(Dollars in Millions) 2003 2002 2001 v 2002 v 2001
Credit and debit card revenue *************************** $ 560.7 $ 517.0 $ 465.9 8.5% 11.0%
Corporate payment products revenue********************* 361.3 325.7 297.7 10.9 9.4
ATM processing services******************************** 165.9 160.6 153.0 3.3 5.0
Merchant processing services *************************** 561.4 567.3 308.9 (1.0) 83.7
Trust and investment management fees******************* 953.9 892.1 887.8 6.9 .5
Deposit service charges ******************************** 715.8 690.3 644.9 3.7 7.0
Treasury management fees****************************** 466.3 416.9 347.3 11.8 20.0
Commercial products revenue *************************** 400.5 479.2 437.4 (16.4) 9.6
Mortgage banking revenue ****************************** 367.1 330.2 234.0 11.2 41.1
Investment products fees and commissions *************** 144.9 132.7 130.8 9.2 1.5
Securities gains, net ************************************ 244.8 299.9 329.1 (18.4) (8.9)
Merger and restructuring-related gains******************** — — 62.2 — *
Other ************************************************* 370.4 398.8 370.4 (7.1) 7.7
Total noninterest income ***************************** $5,313.0 $5,210.7 $4,669.4 2.0% 11.6%
* Not meaningful
24 U.S. Bancorp
Table 4