US Bank 2004 Annual Report Download - page 6

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Fellow Shareholders:
LETTER TO SHAREHOLDERS
I am pleased to tell you that in 2004, U.S. Bancorp
achieved its goals for the year and delivered on its
promises to you.
STRONG FINANCIAL RESULTS WITH
A FOCUS ON REVENUE GROWTH
We reported record net income of $4.2 billion, a
13 percent increase in diluted earnings per share,
and industry-leading returns on assets and equity of
2.17 percent and 21.4 percent, respectively. Credit
quality trends continued to improve as credit losses
decreased signifi cantly from a year ago. And refl ecting
our priority to grow revenue, we achieved solid fee
income growth.
During the coming year, we will act to sustain those suc-
cesses. Revenue growth is our primary focus, particularly
net interest income from improved commercial lending
results. Our consumer lending business continues to grow,
and we have made a number of changes surrounding our
commercial banking and small business banking lines
of business to increase commercial loan growth. We saw
middle market commercial loan balances move upward in
fourth quarter 2004.
We are very disciplined in our acquisitions, focusing
only on those which will enhance revenue growth, create
operating scale, build a more profi table business line or
strengthen a critical competitive advantage. This strategy
has proved very successful, most notably in our payments
business, which reported 10.6 percent net revenue growth
in 2004.
Our capital position remains strong, and we repurchased
93.8 million shares during 2004.
INVESTING FOR GROWTH AND SERVICE
We are investing more in our core businesses to drive
revenue growth. Our investments and expertise in new
technology have delivered a new generation of electronic
options for customers—check imaging, processing,
payments, account management, collections and other
service delivery systems. Of particular note is the expansion
of our merchant processing capabilities in Europe; there
are further details of that expansion on page 16 of this
report. And, we continue to invest in our branch offi ce
network in higher-growth markets. There are further
details of our in-store and traditional branch expansion
program on page 13 of this report.
We continue to support our pledge of guaranteed high
levels of customer service. Investments in delivery and
operational systems allowed us to unify systems, simplify
procedures, streamline processes and increase the ease
of numerous customer transactions and communications.
These investments improved customer service and
increased customer satisfaction and loyalty, contributing
signifi cantly to our ability to attract and retain customers.
We have also improved hiring and training practices,
and service quality is an integral part of our employees’
performance evaluation and incentive programs.
RATING AGENCIES VIEW
U.S. BANK FAVORABLY
We are pleased that on January 18, 2005, Moody’s rating
agency upgraded U.S. Bank’s ratings. Long-term senior
debt at the holding company, U.S. Bancorp, was upgraded
to Aa2 from Aa3 while long-term senior ratings of its
subsidiary bank, U.S. Bank National Association,
were
upgraded to Aa1 from Aa2.
The main driver behind the
2004 was a year that it all came together for U.S. Bancorp.
Service quality levels have never been higher. Financial results
are strong and lead the industry in key measurements. All lines
of business are contributing to revenue and growth.
4 U.S. BANCORP