U.S. Bancorp, the top performer in the KBW Bank Index for the past 12 months, posted its 11th straight year-over-year increase in quarterly profit as revenue rose and the amount set aside for bad loans declined.
Second-quarter net income climbed 18 percent to $1.42 billion, or 71 cents a share, from $1.2 billion, or 60 cents, a year earlier, the Minneapolis-based bank said today in a statement. That beat the average estimate (USB:US) of 70 cents from 31 analysts surveyed by Bloomberg.
U.S. Bancorp was one of only three firms in the 24-company KBW index to produce positive returns for shareholders during the quarter. Chief Executive Officer Richard Davis, 54, has credited his strategy of running a “boring” bank that takes deposits and makes loans while avoiding volatile businesses such as investment banking.
“The derivative of our income, 50 percent or thereabouts coming from fee businesses like trusts, and like payment businesses, also serves as a buffer against the vagaries of interest rates and market perception,” Davis said today on a conference call. “We have these other cylinders that provide us with this fee business, which is less consistent, but also has a whole lot less variability.”
U.S. Bancorp gained 0.5 percent to $33.11 at 10:41 a.m. in New York. The firm’s shares climbed 22 percent this year through yesterday, compared with an 18 percent increase in the KBW index.
Revenue climbed 8.1 percent to $5.07 billion from a year earlier, driven by 6.6 percent growth in net-interest income and 9.7 percent increase in noninterest income. Mortgage banking revenue more than doubled to $490 million from $239 million last year.
U.S. Bancorp (USB:US) set aside $470 million for soured loans, compared with $572 million in the second quarter last year.
Wholesale banking and commercial real estate posted a 21 percent increase in income to $330 million. Consumer and small- business banking income doubled to $378 million from $189 million.
Total loans surged 7.7 percent to $214.1 billion from $198.8 billion. The net-interest margin, the difference between what U.S. Bancorp pays to borrow money and what it gets for loans, narrowed to 3.58 percent from 3.67 percent a year earlier.
On a year-over-year basis, U.S. Bancorp has boosted profit every period since the middle of 2009, a record that beats JPMorgan Chase & Co., and until the start of this year, net income had increased sequentially for eight straight quarters.
U.S. Bancorp is the biggest regional U.S. bank by assets, operating in 25 states as of midyear, and ranks fifth by deposits among commercial U.S. lenders.
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