U.S. Bank doubles down on small-biz growth

Growing its small-business segment will be a top priority for U.S. Bank in 2027, CEO Gunjan Kedia said Thursday, as the lender looks to follow the playbook it has used to grow consumer deposits.

Pointing to frequent discussion around deposit costs, Kedia noted the benefits of the bank’s Smartly product suite, which connects consumer banking and credit cards and has helped improve the $703 billion-asset bank’s deposit base. 

“You’ve seen the funding mix improvements based on that, and that’s exactly the thesis we are taking now to small business,” Kedia said during the Minneapolis-based bank’s third-quarter earnings call. 

Consumer and small-business deposits provide stable funding as U.S. Bank has endeavored to bolster its net interest income and margin this year, Kedia noted Thursday. Third-quarter net interest income rose about 6%, to $4.5 billion, and net interest margin was 2.84%, up 9 basis points year over year, according to the bank’s earnings release. 

The savings offering within the Smartly suite, which allows customers to optimize rewards based on their deposit relationships, has amassed around $55 billion in deposits since its 2024 launch, CFO John Stern said Thursday.

“That has really been the way to go,” Stern said in an interview. “We’ve attempted to replicate that on the small-business side, where we can offer things like checking, merchant [processing] and card.” 

In September, the bank launched two business credit cards that offer relationship boosts tied to balances in deposit accounts and are linked with the bank’s spend management platform.

Bundling those services can differentiate the bank as it seeks to scale, Stern said. In terms of deposit pricing, acquiring small-business deposits can be a bit more advantageous because entrepreneurs tend to be less interested in rate and more interested in money movement and other account capabilities, he said.

The bank’s total cost of deposits was 1.88% in the third quarter, and its non-interest-bearing and managed deposits increased 6% year over year, according to an earnings presentation.

U.S. Bank serves about 2 million small businesses. Average deposits for the segment rose 2% year over year, to $45 billion, average loans jumped 11%, to $18 billion, and the segment generated $223 million in fee income, which was a 9% increase over last year.

Small-business banking represents about 10% of the bank’s revenue, as of the third quarter.

Stern said the bank is angling for more customers at the higher end of small business, and added the bank would like to double the small-business deposit growth it saw this quarter. 

The lender is also adding business bankers in Florida and Georgia, as well as Dallas and Phoenix.  

Bank leaders have worked to drive connections across the bank to fuel growth and deepen client relationships, and that “takes incentive changes, some changes to [organizational] structures, some development of skill sets,” Kedia said Thursday. 

“But we’ve had a lot of momentum there, and will continue to be a very big part of our strategy even into next year,” Kedia noted.

In Q3, the bank also onboarded the Amazon small-business credit card co-brand partnership that it acquired this year. Co-brand products, however, tend to have a different target market than the bank’s proprietary products, Anthony Merola, U.S. Bank’s head of bank brand and small business cards, said last month. 

U.S. Bank reported $2.2 billion in third-quarter net income, on a 9% rise in revenue, to about $8 billion.