U.S. Bank's BTIG buyout and Amazon card deal to yield $1B

U.S. Bancorp closed its roughly $1 billion purchase of investment bank BTIG on June 1, and the immediate financial returns have already surpassed internal projections. The newly acquired subsidiary generated $98 million in revenue during its first month as part of the Minneapolis-based lender. This figure represents BTIG's strongest monthly revenue performance in its history.

"As integration progresses, we expect to capture more long-term strategic benefits from the combination," CEO Gunjan Kedia told analysts on Thursday. The June results "outpaced our earlier expectation from the deal."

The acquisition is a central pillar of U.S. Bancorp's strategy to grow its fee-based income. The $725.9 billion-asset bank is targeting a $200 million quarterly revenue contribution from BTIG. Achieving this benchmark would push capital markets revenue past 10% of the company's total revenue, a notable increase from the current 7%.

Cross-selling strategy

U.S. Bancorp does not plan to rely on expensive headcount expansion or further acquisitions to reach that 10% target. Instead, the bank intends to extract value by introducing BTIG's investment banking services to its massive existing corporate client base.

This pivot toward capital markets aligns with a broader trend among regional banks, which are racing to capture heightened demand for merger-and-acquisition advisory services. Regions Financial, which holds $160.7 billion in assets, recently acquired Alabama-based investment bank Frazier Lanier. Similarly, the $35.3 billion-asset Commerce Bancshares announced a planned acquisition of St. Louis boutique Nolan and Associates in June.

Amazon card transition

Alongside the BTIG integration, U.S. Bancorp is preparing for a high-profile transition in its credit card portfolio. In mid-August, the bank will take over as the issuer of Amazon's Business and Business Prime credit cards from American Express.

Chief Financial Officer John Stern said the Amazon handoff is projected to contribute $75 million in quarterly revenue. Combined with the BTIG acquisition, these two initiatives are expected to generate more than $1 billion in annual revenue for the bank.

Branch expansion and credit risks

Even as it builds out its capital markets and national credit card partnerships, U.S. Bank is investing in its traditional retail footprint. The company plans to expand its branch network in selected high-growth markets, increasing its annual branch spending by $100 million.

However, the bank's lending portfolios are still showing signs of stress. When discussing the trajectory of the company's declining level of problem loans, Stern offered a cautious outlook. "I don't think we've hit the bottom yet," the CFO said.