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How U.S. Bancorp Climbed to the Top of the Bank Industry

By Motley Fool Staff - Apr 6, 2017 at 6:33PM

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The Minneapolis-based bank has emerged as the biggest and most profitable regional bank in the country.

The past decade has been anything but smooth sailing for the banking industry. Hundreds of banks failed during and after the financial crisis. And many of the banks that didn't fail were bruised and battered in the downturn so much that they've spent the last eight years retreating and retrenching as opposed to forging ahead.

U.S. Bancorp (USB 1.24%) is one of the rare exceptions to this. Listen to the following segment of Industry Focus: Financials as The Motley Fool's Gaby Lapera and John Maxfield discuss how the Minneapolis-based bank not only survived the financial crisis but actually thrived as a result of it.

A full transcript follows the video.

This video was recorded on March 27, 2017.

Gaby Lapera: Talking about other people who have had big accomplishments, you did an interview with the U.S. [Bancorp] CEO, Richard Davis. Davis is actually stepping down from his position soon, but it's a really well thought-out, long-planned move, much like everything Davis has done before. But this is a really good time to talk to him, and talk to him about how he saw his role at one of America's best banks.

John Maxfield: Yeah, and if you think about it, to put Richard Davis in perspective, U.S. Bank is the fifth-largest commercial bank in the United States. Why would you dedicate a whole podcast to U.S. Bancorp? If you're in banking, you would know. But if you're not in banking, the big question is, "Why would you do that?" And the answer is twofold. First, Davis, if you just think about the greatest bankers of our generation, you have Robert Wilmers at M&T Bank, you have Jamie Dimon at JPMorgan Chase, you have a guy named William Demchak at PNC Financial, and you have Richard Davis. Richard Davis is literally one of the greatest bankers of the current generation. So, what can we learn from him? We are all investors. What can investors learn about being able to identify not only really good bankers, but also really good banks to invest in?

Lapera: Yeah. A little background on Richard Davis, Davis started at U.S. Bancorp in 2006, 10 years ago, when everything was rosy and great for the banking industry, and it turned around pretty quickly, as I think most listeners know. U.S. Bancorp sailed through the financial crisis without much of a problem. In fact, they managed to take their solidity through the financial crisis and grow and outperform a bunch of other banks, which is a very impressive thing to do, when everyone else around you is failing, for you to be like, "I'm fine, and not only am I fine, but I'm going to do great."

Maxfield: One clarification, in December of 2006 was when he was promoted to CEO. Davis has actually been with U.S. Bancorp for a little bit longer, because he was part of that original group -- there was a transformative merger in 2000 between Firststar and U.S. Bancorp that then created the U.S. Bancorp that we know today. And Richard Davis was kind of the No. 2 guy in that deal, and he finished his ascent through the ranks, and in December 2006 is when he took over. To your point, when he took over, U.S. Bancorp was already one of the most profitable banks in the country, and everything looked absolutely fantastic to them. But it was not too long after that that all dominos started tumbling in the financial crisis. Most banks, over 500 banks, failed during and after the financial crisis. And the banks that didn't fail, a lot of them got picked up for pennies on the dollar by better-positioned banks. And the banks that either didn't fail or didn't get acquired by better-positioned banks really struggled in the financial crisis, and lost a lot of money, like Bank of America and Citigroup. U.S. Bancorp was one of those few banks that didn't fail, wasn't picked up for pennies on the dollar by a competitor, didn't suffer enormous losses, and actually, to your point, emerged from the financial crisis in a stronger competitive position relative to its peers than it entered it.

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