U.S. Bancorp Profit Beats Estimates as Loss Provisions Fall

Jan 22, 2014 11:57 am ET

(Updates with CEO comment, share price starting in fourth paragraph.)

Jan. 22 (Bloomberg) -- U.S. Bancorp, the nation’s largest regional lender, reported fourth-quarter profit that beat analysts’ estimates as credit losses narrowed, cushioning a decline in revenue.

Net income rose 2.5 percent to $1.46 billion, or 76 cents a share, from $1.42 billion, or 72 cents, a year earlier, the Minneapolis-based bank said today in a statement. The average estimate of 31 analysts surveyed by Bloomberg was for adjusted earnings of 75 cents a share. Full-year net income increased 3.3 percent to a record $5.8 billion.

U.S. Bancorp, run by Chief Executive Officer Richard Davis, joins other regional lenders whose attention is shifting from credit-crisis fallout to the nation’s improving economy. The bank’s provision for credit losses dropped 37 percent from a year earlier, to $277 million. While revenue fell amid an expected decline in mortgage-banking business, the firm outpaced larger peers last year on metrics including return on equity, return on assets and cost controls.

“We’re on the verge and the advent of an increasing sentiment for consumer spending,” Davis said today on a conference call. “But I think we’ll see it second half of the year and I think the spring will really tell the tale.”

Share Performance

U.S. Bancorp fell two cents to $41.56 at 11:14 a.m. in New York. The shares climbed 2.9 percent this year through yesterday, compared with the 2.6 percent advance of the KBW Bank Index.

Revenue in the fourth quarter declined 4.4 percent to $4.89 billion, driven by a 51 percent drop in mortgage banking. Noninterest expenses fell less than 1 percent to $2.68 billion. The net interest margin, the difference between what a bank pays for deposits and charges for loans, decreased to 3.4 percent in the fourth quarter from 3.43 percent three months earlier.

“There were no real surprises,” R. Scott Siefers, an analyst at Sandler O’Neill & Partners LP who rates the stock buy, said today in a note. “This struck us as a very steady quarter.”

Net income before taxes and provisions fell 9 percent to $2.21 billion from a year earlier, the bank said. The firm’s tax rate dropped to 23.8 percent in the quarter.

Among its regional peers, fourth-quarter profit increased 53 percent at Pittsburgh-based PNC Financial Services Group Inc. and 20 percent for Atlanta-based SunTrust Banks Inc. Earnings rose 1.9 percent at Capital One Financial Corp. of McLean, Virginia.

U.S. Bancorp agreed Jan. 7 to buy the Chicago branches of Charter One Bank owned by RBS Citizens Financial Group. In November, the lender agreed to buy Quintillion Ltd., a Dublin- based hedge-fund administrator.

The bank will seek additional deals, including branch acquisitions, Davis said on the call. Buying an entire bank isn’t likely, he said.

“We like adding branches,” Davis said. “I also don’t see us doing a full bank transaction.”

--Editors: Steve Dickson, Steven Crabill