Bloomberg News

U.S. Bancorp Profit Matches Estimates as Revenue Declines (1)

April 16, 2014

U.S. Bancorp, the nation’s biggest regional lender, posted a first-quarter profit that matched analysts’ estimates as mortgage-banking revenue declined.

Net income fell 2.1 percent to $1.4 billion, or 73 cents a share, from $1.43 billion, or 73 cents, a year earlier, the Minneapolis-based firm said today in a statement. That equaled the average estimate (USB:US) of 31 analysts surveyed by Bloomberg.

Chief Executive Officer Richard Davis is relying on fees from businesses including credit cards and wealth management to help counter a slump in mortgage lending. The company last month received Federal Reserve approval to raise its quarterly dividend to 25 cents after passing the central bank’s annual stress test.

“Our performance clearly reflects the advantage of our diversified business mix and disciplined expense management, which has enabled us to withstand the revenue challenges facing our industry in this slow-growth economy,” Davis, 56, said in the statement. “Credit quality is expected to remain relatively stable in the coming quarters.”

Total revenue declined 1.2 percent to $4.81 billion from a year earlier as mortgage-banking fees dropped 41 percent to $236 million, according to the statement. Credit and debit-card revenue increased 12 percent to $239 million and trust and investment-management fees increased 9.4 percent to $304 million, the firm said.

‘Historical Premium’

U.S. Bancorp is among firms including JPMorgan Chase & Co. (JPM:US) and Wells Fargo & Co. reporting a decline in first-quarter mortgage revenue. Lenders made $226 billion of mortgages in the period, the smallest quarterly amount since 1997 and less than one-third of the 2006 average, according to the Mortgage Bankers Association.

“The key to the quarter, in our view, is the company’s card and payment-processing businesses,” said Chris Mutascio, an analyst at Stifel Financial Corp.’s KBW unit.

U.S. Bancorp rallied 6.1 percent in the quarter, outpacing the 4.4 percent advance of the KBW Bank Index. (BKX) Shares increased 1.5 percent this year through yesterday, compared with the 0.2 percent decline in the 24-company index.

Efficiency Ratio

Provisions for credit losses fell 24 percent to $306 million and non-interest expenses increased 3 percent to $2.54 billion. The company’s efficiency ratio, which measures management’s ability to control costs, deteriorated in the quarter, rising to 52.9 percent from 50.7 percent a year earlier, according to the statement. Net interest margin, the difference between what a bank pays for deposits and charges for loans, fell to 3.35 percent from 3.48 percent.

U.S. Bancorp said April 14 it will purchase Ally Financial Inc.’s custodian bank, adding 40 employees, and in January announced plans to buy 94 branches from RBS Citizens Financial Group Inc. Last year, the lender agreed to acquire Quintillion Ltd., a Dublin-based hedge-fund administrator.

Among its regional peers, Pittsburgh-based PNC Financial Services Group Inc. (PNC:US) said today that first-quarter profit climbed 6.5 percent. JPMorgan, the biggest U.S. bank, said April 11 that net income fell 19 percent on lower fixed-income trading and mortgages, while San Francisco-based Wells Fargo, the biggest U.S. home lender, reported a 14 percent increase in net income as fewer customers missed loan payments.

To contact the reporter on this story: Elizabeth Dexheimer in New York at edexheimer@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Steven Crabill, Steve Dickson


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Companies Mentioned

  • USB
    (US Bancorp/MN)
    • $44.38 USD
    • 0.37
    • 0.83%
  • JPM
    (JPMorgan Chase & Co)
    • $60.34 USD
    • 0.04
    • 0.07%
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