U.S. Bancorp, PNC Report Increase in Revenue, Drop in Expenses

By Allison Prang

Fourth-quarter earnings results varied at two of the country's largest regional banks, while both firms reported a drop in expenses and an increase in revenue.

Both U.S. Bancorp and PNC Financial Services Group reported their fourth-quarter earnings results before the market opened Wednesday. U.S. Bancorp said earnings were $1.10 a share, up from 97 cents a share a year earlier. PNC said earnings were $2.75 a share, down from $4.18 a share. PNC said that in the fourth quarter of 2017, its earnings included a $900 million benefit from the new tax law and other items.

Analysts polled by FactSet were expecting U.S. Bancorp to report earnings of $1.06 a share and PNC to report earnings of $2.79 a share.

PNC and U.S. Bancorp's results fall in line with others in the industry in feeling benefits from higher interest rates. J.P. Morgan Chase and Wells Fargo & Co. -- both of which reported their results Tuesday -- saw an increase in revenue from lending as a result of higher interest rates, they said.

Net interest income at U.S. Bancorp rose 4% to $3.3 billion. It rose 5.8% at PNC to $2.48 billion.

U.S. Bancorp said higher interest rates boosted net interest income but added that higher deposit costs affected results. PNC echoed U.S. Bancorp and said that while it its yields on loans were higher, it also saw increased borrowing and deposit costs.

As rates rise, banks are able to make more money on their loans, but customers also demand higher interest rates on their deposits.

U.S. Bancorp's net interest margin, which is a marker of how profitable a bank is, was 3.15%, unchanged from the third quarter. Compared with the fourth quarter a year ago, it expanded by 4 basis points.

PNC reported a net interest margin of 2.96%, a drop of 3 basis points from the third quarter but up 8 basis points compared with the fourth quarter a year ago. The margin narrowed from the third quarter because of a change in how it calculates some interest-earning assets, PNC said.

Noninterest expenses at U.S. Bancorp fell 16% to $3.28 billion. In the comparable quarter a year ago, U.S. Bancorp recorded $825 million in costs that included settling a regulatory issue, among other items.

PNC's noninterest expenses fell 16% to $2.58 billion in large part because of the comparison to the fourth quarter a year ago, which included expenses such as a $200 million contribution to the company's foundation.

Sandler O'Neill + Partners said in an analyst note previewing banks' fourth-quarter earnings results that recent rate increases from the Federal Reserve could help banks' net interest margins, but said they expect the flattening yield curve in the latter part of 2018 to hurt results.

Shares of U.S. Bancorp were unchanged in premarket trading and shares of PNC shares fell 0.6%.

Write to Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

January 16, 2019 09:29 ET (14:29 GMT)

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