USB US Bancorp

By Allison Prang 

U.S. Bancorp could close as many as 450 branches over the next few years, bringing the regional lender's branch count under 3,000, as the company looks to trim its expenses and push more digital tools.

The branch closure plans come as U.S. Bank now has "more flexibility" after a consent order on the company was lifted, said Chief Executive Andy Cecere on the company's first-quarter earnings call with analysts Wednesday.

"We're going to be remolding and changing the footprint," Mr. Cecere said Wednesday.

In December, U.S. Bank said the Office of the Comptroller of the Currency had lifted an order it had placed on the company back in 2015 related to the Bank Secrecy Act and anti-money-laundering.

The company is looking to trim between 10% and 15% of its branches on a net basis, Mr. Cecere said. Chief Financial Officer Terry Dolan said the cuts will take place by the end of 2021. The company had roughly 3,000 branches at the end of 2018, which span over the Western and Midwestern U.S.

U.S. Bank is one of several banks closing branches. Wells Fargo & Co. is aiming to lower its branch count to under 5,000 by the end of next year.

U.S. Bank has already been lowering its branch count, but a cut of at least 10% would be substantially more than it has done recently.

While they trim branches overall, several banks are also opening new branches or expanding into new markets. Mr. Cecere said U.S. Bancorp would open new branches, too.

The moves come as banks invest heavily in beefing up products that allow customers to transact digitally. U.S. Bank recently rolled out a new version of its app and during the call with analysts Mr. Cecere said that roughly a third of its loan applications are completed digitally, up from 25% a year earlier.

Mr. Cecere said that the moves improve the customer experience, but also improve the company's efficiency. U.S. Bank's efficiency ratio -- which compares overhead as a percentage of revenue -- was 55.4%, down from 55.9% a year earlier.

The bank reported a rise in profit in its first quarter as total net interest income ticked higher, driven by an increase in interest rates and loan growth.

Profit at the Minneapolis-based company climbed 1.4% in the first quarter, to $1.7 billion. Earnings were $1 a share, up from 96 cents a share, which met the analyst consensus from Refinitiv.

Overall net revenue, which combines net interest income and noninterest income, rose 2% to $5.58 billion, slightly missing the consensus estimate from analysts of $5.59 billion. That rise was boosted primarily by net interest income, which increased 2.8%.

Shares of the company were up 1% Wednesday.

Banks reporting first-quarter earnings have gotten somewhat of a bump from the December interest rate increase, as a higher fed-funds rate increases what they charge customers on adjustable-rate loans. Higher rates also lead to banks paying more for deposits, which pressures their earnings.

The company's net interest margin -- an important profitability metric for banks -- rose to 3.16% from 3.13%. It rose 0.01 percentage point from the fourth quarter of 2018. U.S. Bancorp reported a 75% increase in interest expenses, primarily because of higher deposit costs.

The bank said its provision for credit losses was $377 million, up 11% from the comparable quarter a year ago. Mr. Dolan said the company's second-quarter loan-loss provision "will continue to be reflective of loan growth."

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

(END) Dow Jones Newswires

April 17, 2019 12:14 ET (16:14 GMT)

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