U.S. Bank Profit Shoots Higher, But Questions Linger on Loan Growth -- 2nd Update
October 18 2017 - 11:16AM
Dow Jones News
By Christina Rexrode
U.S. Bancorp, the biggest so-called regional bank in the U.S.,
said Wednesday that its third-quarter profit rose to a record
level, but analysts raised questions about future loan growth.
Shares fell in early-morning trading, dipping 1.7% on a day when
bank stocks and the broader stock market were up.
Per-share earnings and revenue rose in line with analysts'
expectations. The bank reported net income of $1.56 billion, or 88
cents a share. That compared with $1.50 billion, or 84 cents a
share, in the same period a year ago. Per-share earnings were in
line with the expectations of analysts polled by Thomson
Reuters.
Revenue rose 4% from a year ago to $5.61 billion. That slightly
beat the $5.60 billion expected by analysts.
Like some other banks, U.S. Bank has benefited as the Federal
Reserve has raised interest rates this year, which allows banks to
charge more for loans. The bank's net interest income was up 8%
from a year ago.
Average loans were up 3% from a year ago. Consumer loans,
including residential mortgage loans and credit card loans, also
rose. Commercial loans increased, but commercial mortgages were
down. Some analysts were disappointed by the level of loan growth,
which has slowed since last year, and executives said Wednesday
that the growth was lower than what they would have expected over
the long term. They also said that businesses' borrowing was
related to mergers and acquisitions more than core expansions.
Lending to businesses has been a key factor that analysts are
watching this year at regional banks, the group of firms that are
smaller than the big, national banks, yet bigger and broader in
reach than community banks. After the Trump election, bankers and
investors predicted that lending to businesses would take off, but
the growth of such loans has faltered.
Executives also said they had expected quarter-over-quarter loan
growth to stay steady in the fourth quarter, which was also a
disappointment to some analysts hoping for a return to stronger
increases. The bank's quarter-over-quarter loan growth was in line
with what executives had predicted last month, though they had
lowered their expectations from a previous forecast.
U.S. Bank executives said Wednesday that the slower loan growth
was partly due to corporate customers paying off bank loans to
instead borrow from the bond market, repeating an explanation that
they and other banks had given last month. Executives said some
customers are still waiting for more clarity on the Trump
administration's tax policy before investing in their
businesses.
Income from treasury-management fees, trust and
investment-management fees and corporate-payment products rose from
a year ago.
Write to Christina Rexrode at christina.rexrode@wsj.com
(END) Dow Jones Newswires
October 18, 2017 11:01 ET (15:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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