US Bancorp Loan Growth Up, But Profits Down

Despite reporting lower revenues and income in the second quarter, U.S. Bancorp said clouds may be lifting for results going forward.

As reported by The Wall Street Journal on Wednesday (July 15), the financial institution, the fifth largest commercial bank in the country based on asset size, said earnings were $1.48 billion, down slightly from the $1.5 billion seen in the year prior. The top line also shrank, down 2.8 percent year over year to the most recent $5 billion tally. Results matched Wall Street expectations as the $.80 per share in earnings was in line with the Street and the sell-side had expected $5 billion in revenue.

One of the key drivers of profitability, known as net interest margin, slid as well to 3 percent in the most recent quarter and down from roughly 3.3 percent last year. That was also down sequentially, as the ratio was about 3.1 percent in the first quarter of this year. The net interest margin, or NIM for short, is the spread between what the bank earns on its assets and what it pays out on deposits.

Shares rose on the latest results, up 3 percent on the day, perhaps on management commentary that NIM should stabilize in the next quarter, halting recent dips. The NIM should also start to rise alongside the widely expected Fed rate increases.

“There’s been a lot of quarters since we have been able to say we’d have a stable NIM. We are very, very happy to report that,” Chief Financial Officer Kathy Rogers said in an interview with WSJ.

WSJ noted that CEO Richard Davis said in May, at the latest quarterly results, that U.S. Bancorp might have to cut expenses, along with staff, in the event that rates did not in fact increase.

Looking at the balance sheet, average total loans were up by about 2.5 percent, helped by an 11 percent boost in commercial lending to about $83 billion in loans. Mortgages dropped a bit, year over year, by about 1.4 percent to $51 billion.

Management also said in the discussion of the latest results that it is conducting due diligence on at least part of the financial unit that General Electric Co. has put up for sale, WSJ added.

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