U.S. Bancorp Profit Rises -- WSJ
October 19 2017 - 3:02AM
Dow Jones News
By Christina Rexrode
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 19, 2017).
U.S. Bancorp, a bellwether for regional banks in the U.S., said
its third-quarter profit rose to a record level, but analysts
raised concerns about future loan growth.
The bank Wednesday said that net income increased 4%, to $1.56
billion, or 88 cents a share, compared with $1.5 billion, or 84
cents a share, in the same period a year ago. Revenue gained 4%, to
$5.61 billion. Per-share earnings were in line with analyst
expectations, while revenue slightly beat estimates.
U.S. Bancorp's shares fell 1.1%, to $53.27, on a day when bank
stocks and the broader stock market rallied.
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.
Chief Financial Officer Terry Dolan said in an interview that
the bank had turned in a strong quarter, noting that it was the
first time in nearly three years that the bank achieved positive
operating leverage. But he acknowledged that loan growth was lower
than the bank had previously expected.
After the election of Donald Trump, bankers and investors
predicted that lending to businesses would take off, but the growth
of such loans has faltered. "I think we went into the year
believing that commercial and corporate lending would be reasonably
strong and robust," Mr. Dolan said. "But Washington always takes
longer than you think it's going to."
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.
At U.S. Bank, the largest regional lender by assets, average
loans rose 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 expressed 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.
Evercore ISI analyst John Pancari said U.S. Bank's earnings
represent a broader trend of regional banks in tight competition
with the bigger, universal banks for business customers. Some of
U.S. Bank's slowing loan growth is from the bank's conservative
underwriting principles, Mr. Pancari said. But investors also took
note of the bank's indications that loan growth wasn't going to
pick up much in the fourth quarter either.
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.
"Almost every customer we talk to...is in wait-and-see mode,"
Mr. Dolan said.
The executives also said they had expected quarter-over-quarter
loan growth to stay steady in the fourth period, 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.
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 19, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
US Bancorp (NYSE:USB)
Historical Stock Chart
From Jun 2024 to Jul 2024
US Bancorp (NYSE:USB)
Historical Stock Chart
From Jul 2023 to Jul 2024