U.S. Bancorp to Cut Up to 450 Branches Amid Digital Shift -- WSJ
April 18 2019 - 3:02AM
Dow Jones News
By Allison Prang
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 (April 18, 2019).
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 18, 2019 02:47 ET (06:47 GMT)
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