USB US Bancorp

By Austen Hufford and Rachel Louise Ensign 

U.S. Bancorp said its profit increased in the second quarter as both loans and deposits rose.

The bank posted earnings of $1.52 billion, up from $1.48 billion in the prior-year period. On a per-share basis, earnings rose to 83 cents from 80 cents.

Revenue at the Minneapolis-based bank rose 8.1% to $5.45 billion. Analysts had expected 80 cents a share in earnings and $5.19 billion in revenue, according to Thomson Reuters.

Like other regional banks, U.S. Bank has remained under pressure from low interest rates. That has intensified after the U.K.'s vote to leave the European Union. After the Brexit vote, prospects for near-term Federal Reserve rate increases dimmed and long-term bond yields fell to record lows.

Still, Chief Executive Richard Davis said during a call with analysts that the company is seeing signs of a recovery.

"On a real-time basis which we live in every day, we are seeing a slow recovery," he said. " A recession says things are going backwards...we are not seeing that."

Excluding an asset sale, noninterest revenue increased 4.4% due to increases in credit and debit card revenue, trust and investment management fees and commercial products revenue.

The bank took $110 million in accruals related to legal and regulatory matters. Executives declined to provide further detail but said the company goes through an assessment each quarter to determine if there are new legal claims that need to be accounted for.

In November, the company said it had recently entered into a consent order with the Office of the Comptroller of the Currency over alleged anti-money-laundering deficiencies. On the call with investors, Mr. Davis said the order hasn't stopped the company from doing the deals it has wanted.

Net interest margin, an important measure of lending profitability, fell to 3.02% from 3.06% in the first quarter due to changes in the loan portfolio mix as well as lower average rates on new securities purchases.

An advertising and branding campaign in many of the company's major markets drove marketing and business development costs up 55%. Expenses overall rose 11.6% to $2.99 billion.

Average total loans rose by 8.1%, spurred by broad-based increases across auto lending, mortgage lending and home equity, Chief Operating Officer Andy Cecere said. Deposits increased 7.6%.

U.S. Bancorp shares, up 1.5% in the last three months, recently rose 1%.

On Friday, fellow banks Citigroup Inc. and Wells Fargo & Co. also reported results for the quarter. Citigroup posted better-than-expected results, despite a 17% year-over-year drop in profit. Wells Fargo said its profit fell as low interest rates continued to sap profitability.

Write to Austen Hufford at austen.hufford@wsj.com and Rachel Louise Ensign at rachel.ensign@wsj.com

(END) Dow Jones Newswires

July 15, 2016 12:12 ET (16:12 GMT)

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