U.S. Bancorp Results Signal End to Lending Doldrums
July 19 2017 - 11:51AM
Dow Jones News
By Christina Rexrode
U.S. Bancorp's shares rose Wednesday morning, after the bank
said it expected loan growth would return to normal after a
sluggish start to the year.
The Minneapolis-based bank reported that average loans were up
compared with the previous quarter and the year-ago quarter, driven
by an increase in demand from large corporate customers and
construction loans. Shares were up 1.8% in morning trading.
CEO Andrew Cecere, in a call with analysts to discuss
second-quarter results, said that "the evolving economic and
regulatory backdrop has the promise to be conducive to growth."
"I just spent time in Washington last week and left very
encouraged by the open and productive dialogue that is taking
place," Mr. Cecere said. In recent months, including at an industry
conference last month, Mr. Cecere has said that corporate customers
were waiting for more certainty from Washington before moving ahead
with borrowing plans.
Overall, net income was $1.5 billion, down about 1% from $1.52
billion a year ago. But on a per-share basis, earnings rose to 85
cents from 83 cents, just passing the average estimate of analysts
polled by Thomson Reuters, which was 84 cents.
Revenue rose 0.7% compared with a year ago, to $5.49
billion.
U.S. Bank is the largest regional bank in the country, and its
results serve as a bellwether for the rest of the industry. Though
bank stocks have rallied since the Trump election in November,
analysts and investors are still waiting to see whether that will
actually translate into more lending. PNC Financial Services Group
Inc., based in Pittsburgh, said last week that it continues to
expect loans to be up by mid-single digits for the full year, which
analysts took as an encouraging sign. Its average loans were up 2%
over the quarter.
In April, investors were disappointed when U.S. Bank's
first-quarter loans grew just 0.2% quarter-over-quarter. That
growth had averaged 1.5% throughout 2016.
Wednesday, U.S. Bank said second-quarter loans were up 0.9% from
the previous quarter, on the high end of what bank officials had
signaled last month. Bank officials also said they expect
quarter-over-quarter loan growth to return to a range of 1% to 1.5%
in the third quarter.
Commercial loans were up over the year and over the quarter, as
were construction and development loans. But overall commercial
real estate lending was down, which Chief Financial Officer Terry
Dolan said reflects the bank's "prudent approach" to segments
including multifamily and retail.
Bank officials said they expect consumer lending demand to
"remain fairly strong" in the second half of the year. They noted
good demand in auto loans and leases, but said they were focusing
only on prime customers.
Noninterest expenses rose 1% from a year ago. The bank said it
had set aside money related to litigation accruals and a charitable
contribution.
Like other banks, U.S. Bank has benefited as the Federal Reserve
has raised interest rates this year, which allows banks to charge
more on loans. The bank's net interest income was up 6% from a year
ago. Net interest margin, an important measure of lending
profitability, was roughly flat. That equation is affected by the
amount of deposits, which were up almost 8% over the year.
Cara Lombardo contributed to this article
Write to Christina Rexrode at christina.rexrode@wsj.com
(END) Dow Jones Newswires
July 19, 2017 11:36 ET (15:36 GMT)
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