US Bank 2012 Annual Report Download - page 152

perceive alternative investments, such as the stock market, as
providing a better risk/return tradeoff. When customers move
money out of bank deposits and into other investments, the
Company may lose a relatively low cost source of funds,
increasing the Company’s funding costs and reducing the
Company’s net interest income.
The soundness of other financial institutions could adversely
affect the Company The Company’s ability to engage in
routine funding or settlement transactions could be adversely
affected by the actions and commercial soundness of other
domestic or foreign financial institutions. Financial services
institutions are interrelated as a result of trading, clearing,
counterparty or other relationships. The Company has
exposure to many different counterparties, and the Company
routinely executes and settles transactions with counterparties
in the financial industry, including brokers and dealers,
commercial banks, investment banks, mutual and hedge
funds, and other institutional clients. As a result, defaults by,
or even rumors or questions about, one or more financial
services institutions, or the financial services industry
generally, could lead to losses or defaults by the Company or
by other institutions and impact the Company’s
predominately United States-based businesses or the less
significant merchant processing and trust businesses it
operates in foreign countries. Many of these transactions
expose the Company to credit risk in the event of default of
the Company’s counterparty or client. In addition, the
Company’s credit risk may be further increased when the
collateral held by the Company cannot be realized upon or is
liquidated at prices not sufficient to recover the full amount of
the financial instrument exposure due the Company. There is
no assurance that any such losses would not materially and
adversely affect the Company’s results of operations.
The financial services industry is highly competitive, and
competitive pressures could intensify and adversely affect the
Company’s financial results The Company operates in a highly
competitive industry that could become even more
competitive as a result of legislative, regulatory and
technological changes, as well as continued industry
consolidation which may increase in connection with current
economic and market conditions. This consolidation may
produce larger, better-capitalized and more geographically
diverse companies that are capable of offering a wider array
of financial products and services at more competitive prices.
The Company competes with other commercial banks, savings
and loan associations, mutual savings banks, finance
companies, mortgage banking companies, credit unions,
investment companies, credit card companies, and a variety of
other financial services and advisory companies. In addition,
technology has lowered barriers to entry and made it possible
for non-banks to offer products and services traditionally
provided by banks, and for financial institutions to compete
with technology companies in providing electronic and
internet-based financial services. Many of the Company’s
competitors have fewer regulatory constraints, and some have
lower cost structures. Also, the potential need to adapt to
industry changes in information technology systems, on which
the Company and financial services industry are highly
dependent, could present operational issues and require
capital spending.
The Company continually encounters technological change The
financial services industry is continually undergoing rapid
technological change with frequent introductions of new
technology-driven products and services. The effective use of
technology increases efficiency and enables financial
institutions to better serve customers and to reduce costs. The
Company’s future success depends, in part, upon its ability to
address customer needs by using technology to provide
products and services that will satisfy customer demands, as
well as to create additional efficiencies in the Company’s
operations. The Company may not be able to effectively
implement new technology-driven products and services or be
successful in marketing these products and services to its
customers. Failure to successfully keep pace with
technological change affecting the financial services industry
could negatively affect the Company’s revenue and profit.
Improvements in economic indicators disproportionately
affecting the financial services industry may lag improvements
in the general economy Should the stabilization of the United
States economy continue, the improvement of certain
economic indicators, such as unemployment and real estate
asset values and rents, may nevertheless continue to lag
behind the overall economy. These economic indicators
typically affect certain industries, such as real estate and
financial services, more significantly. Furthermore, financial
services companies with a substantial lending business, like
the Company’s, are dependent upon the ability of their
borrowers to make debt service payments on loans. Should
unemployment or real estate asset values fail to recover for an
extended period of time, the Company could be adversely
affected.
Changes in consumer use of banks and changes in consumer
spending and saving habits could adversely affect the
Company’s financial results Technology and other changes
now allow many consumers to complete financial transactions
without using banks. For example, consumers can pay bills
and transfer funds directly without going through a bank.
This process of eliminating banks as intermediaries, known as
“disintermediation,” could result in the loss of fee income, as
well as the loss of customer deposits and income generated
from those deposits. In addition, changes in consumer
spending and saving habits could adversely affect the
Company’s operations, and the Company may be unable to
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