US Bancorp Posts Beat on Loan, Fee Growth

U.S. Bancorp (NYSE: USB) reported second-quarter fiscal 2016 results before markets opened Friday. The consumer and commercial banking company reported adjusted diluted earnings per share (EPS) of $0.83 on revenue of $5.45 billion. In the same period a year ago, the bank reported EPS of $0.80 on revenue of $5.04 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.80 on revenue of $5.19 billion.

Quarterly profits rose 9.6% sequentially to $1.54 billion and 2.6% year over year. Net interest income rose 4.5% to $2.9 billion year over year, and noninterest income rose 12.3% to $2.55 billion.

The bank’s return on average assets slipped from 1.46% a year ago to 1.43% and the return on average common equity dipped from 14.3% to 13.8%. Net interest margin also came in slightly lower, down from 3.03% in the second quarter of last year to 3.02%.

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U.S. Bancorp’s noninterest expenses rose 11.6% year over year to $2.99 billion, reflecting higher professional services and compensation expenses, partially offset by lower employee benefits expense.

The provision for credit losses in the first quarter this year totaled $327 million, down from $381 million in the year-ago quarter.

CEO Richard K. Davis said:

Steady loan growth, demonstrated by continued strength in commercial loans and momentum in consumer loans, led to increased net interest income despite a decline in net interest margin. Growth in our fee revenue continued across many of our fee-based businesses, including our payments business lines. We also reported strong results in our capital markets business as we were positioned well to provide products and services to our customers as they navigated through the recent market volatility. And we managed our capital effectively, delivering 77 percent of our second quarter earnings back to shareholders through dividends and share buybacks. During the quarter, we were pleased to receive the Federal Reserve’s non-objection to our capital plan, allowing us once again to return value to our shareholders by increasing our annual common dividend by 9.8 percent in the third quarter of 2016.

The bank did not offer guidance in its press release, but the consensus estimates call for third-quarter EPS of $0.84 on revenues of $5.29 billion. The EPS estimate for the 2016 fiscal year is $3.25 on revenues of $20.85 billion.

Shares traded up about 1.3% in Friday’s premarket to $41.80, having closed on Thursday at $41.25. The current 52-week range is $37.07 to $46.20. Thomson Reuters had a consensus analyst price target of $44.66 before the results were announced.

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