U.S. Bancorp (USB-PA): A Diversified Financial Powerhouse Delivering Consistent Performance

Published on September 24, 2024 | Ticker: USB-PA

U.S. Bancorp, a leading financial services company, has consistently demonstrated its ability to navigate challenging market conditions and deliver strong financial results. In the latest quarter, the company reported diluted earnings per share of $0.97, which included a $0.01 per share charge related to the FDIC special assessment. Excluding this one-time item, U.S. Bancorp delivered earnings per share of $0.98.

Financials

U.S. Bancorp's annual net income for the most recent fiscal year stood at $5,429 million, while its annual revenue reached $28,013 million. Its annual operating cash flow was a robust $8,447 million, and its annual free cash flow was lower than the operating cash flow.

In the second quarter of 2024, U.S. Bancorp's revenue growth was supported by improved spread income as well as continued growth across many of its fee-based businesses. On both a linked-quarter and year-over-year basis, the company's non-interest expense, as adjusted, decreased, benefiting from cost synergies with Union Bank, prudent expense management, and multi-year investments that have resulted in greater efficiencies and enhanced operating effectiveness.

U.S. Bancorp's credit quality results were in line with expectations, as it saw stabilization in delinquency rates and a modest increase in non-performing assets. Average total deposits increased 2.2%, and the company continued to see growth in consumer deposits despite industry and liquidity headwinds.

As of June 30, 2024, U.S. Bancorp's tangible book value per share increased to $23.15, up 2.8% from the previous quarter and 10.1% higher than a year ago. The company's common equity tier 1 capital ratio increased 30 basis points from the prior quarter and 120 basis points from last year, ending the quarter at 10.3%.

Business Overview

Turning to U.S. Bancorp's business segments:

Wealth, Corporate, Commercial and Institutional Banking

This segment contributed $651 million to U.S. Bancorp's net income in the first quarter of 2024, a decrease of 30.9% compared to the same period in 2023. This was primarily due to a decrease in net interest income, partially offset by an increase in noninterest income.

Consumer and Business Banking

This segment contributed $601 million to U.S. Bancorp's net income, a decrease of 21.9% compared to the first quarter of 2023. This was driven by a decrease in net interest income, partially offset by an increase in noninterest income and a decrease in noninterest expense.

Payment Services

This segment contributed $248 million to U.S. Bancorp's net income, a decrease of 20.0% compared to the first quarter of 2023. This was primarily due to an increase in the provision for credit losses, partially offset by an increase in both net interest income and noninterest income.

Treasury and Corporate Support

This segment recorded a net loss of $181 million in the first quarter of 2024, compared to a net loss of $324 million in the first quarter of 2023. The decrease in net loss was primarily due to a decrease in the provision for credit losses, partially offset by a decrease in net interest income.

Outlook

Looking ahead, U.S. Bancorp provided forward-looking guidance. The company expects net interest income for the third quarter on an FTE basis to be relatively stable compared to the second quarter. For the full year 2024, U.S. Bancorp expects net interest income on an FTE basis to be in the range of $16.1 billion to $16.4 billion. Additionally, the company expects to achieve mid-single-digit growth in noninterest income as adjusted for the full year, and it continues to expect full-year noninterest expense as adjusted to be $16.8 billion or lower.

Conclusion

U.S. Bancorp's diversified business model, featuring a highly diversified revenue mix, strong risk management discipline, and a robust earnings and capital generation profile, has enabled the bank to navigate the challenging market environment and deliver consistent performance. U.S. Bancorp's focus on its core competencies, strategic investments, and prudent expense management position it well for continued growth and industry-leading returns.

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