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U.S. Bancorp (USB) Q4 Earnings Top Estimates, Revenues Rise
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Riding on higher revenues, U.S. Bancorp’s (USB - Free Report) fourth-quarter 2018 adjusted earnings per share of $1.07 outpaced the Zacks Consensus Estimate by a penny. Results were also up 10.3% from the prior-year quarter.
Higher revenues, along with loan and deposit growth, were the driving factors. Though lower mortgage banking revenues along with escalating expenses and provisions disappointed, easing margin pressure on rising rates and overall higher fee income acted as tailwinds.
Including certain one items, net income came in at $1.86 billion or $1.10 per share compared with $1.68 billion or 97 cents in the prior-year quarter.
For full-year 2018, earnings per share reached $4.14 per share, surpassing the Zacks Consensus Estimate of $4.10. Further, the earnings figure compares favorably with the prior-year tally of $3.51 per share.
Revenues & Loans Grow, Costs & Provisions Flare Up
For full-year 2018, the company reported revenues of $22.6 billion, up around 3.4% year over year. Moreover, the revenue figure surpassed the Zacks Consensus Estimate of $22.4 billion.
U.S. Bancorp’s net revenues came in at around $5.8 billion in the quarter, up 4.1% year over year. Increase in net interest as well as non-interest income led to this upside. Revenues also came in above the Zacks Consensus Estimate of $5.7 billion.
U.S. Bancorp’s tax-equivalent net interest income totaled $3.3 billion in the quarter, up 3.2% from the prior-year quarter. The upswing mainly stemmed from earning assets growth, increased security yields and rising interest rates. These positives were partially mitigated by impact of tax reform, higher rates on deposits and shift in funding mix.
Average earning assets climbed 1.7% year over year, supported by growth in average total loans and average other earning assets. Furthermore, net interest margin of 3.15% was up 4 basis points year over year, driven by higher interest rates. Deposit and funding mix, reduced loan spreads, and the impact of tax reform partially mitigated rise in margins.
U.S. Bancorp’s non-interest income escalated 5.4% on a year-over-year basis to $2.5 billion. The upsurge was mainly due to rise in mostly all components of income, partially offset by lower treasury management fees, ATM processing services, mortgage banking revenues and securities gains.
Provision for credit losses increased 9.9% year over year to $368 million in the reported quarter.
U.S. Bancorp’s average total loans inched up 0.9% sequentially to $283.7 billion. This stemmed from a rise in commercial loans, commercial real estate, residential mortgages, credit card and other retail loans.
Average total deposits were up 1.3% from the prior quarter to $334.4 billion. The rise was due to growth in non-interest-bearing deposits.
Non-interest expenses declined 15.9% year over year to $3.3 billion at U.S. Bancorp. Excluding certain one-time items, expenses flared up 1% year over year. The upswing in mostly all components of non-interest expenses was partially offset by lower marketing and business development expenses and other expenses, along with other intangibles.
Efficiency ratio came in at 56.3%, improving from 69.8% in the year-ago quarter. A decrease in the ratio indicates improved profitability.
Credit Quality: A Mixed Bag
Credit metrics at U.S. Bancorp remained mixed in the Dec-end quarter. Net charge-offs came in at $353 million, up 8.6% year over year. On a year-over-year basis, the company witnessed deterioration, mainly in net charge-offs in the credit card, other retail and commercial segments, which was muted by improvement in residential mortgages and commercial real estate.
U.S. Bancorp’s non-performing assets (excluding covered assets) came in at $989 million, down 17.6% year over year. Total allowance for credit losses was $4.4 billion, slightly up on a year-over-year basis.
Strong Capital Position
During the quarter under review, U.S. Bancorp maintained a solid capital position. The Tier 1 capital ratio came in at 10.7% compared with 10.8% in the prior-year quarter. Common equity Tier 1 capital to risk-weighted assets ratio under the Basel III standardized approach fully implemented was 12.6% as of Dec 31, 2018, down from 12.9% reported in the year-ago quarter.
All regulatory ratios of U.S. Bancorp continued to be in excess of well-capitalized requirements. In addition, based on the Basel III fully implemented advanced approach, the Tier 1 common equity to risk-weighted assets ratio was estimated at 11.8%, as of Dec 31, 2018, compared with 11.6% in the prior-year quarter.
The tangible common equity to tangible assets ratio was 7.8% as of Dec 31, 2018, up from 7.6% in the prior-year quarter.
U.S. Bancorp posted an improvement in book value per share, which increased to $28.01 as of Dec 31, 2018, from $26.34 recorded at the end of the year-earlier quarter.
Capital Deployment Update
Reflecting the company’s capital strength during the fourth quarter, U.S. Bancorp returned 80% of earnings to its shareholders through common stock dividends and buybacks.
Conclusion
U.S. Bancorp posted an impressive quarter. Rise in revenues, aided by increase in lending activities, is expected to continue. Though weakness in the credit card portfolio and escalating expenses remain headwinds, rising margins are likely to continue.
Dismal fixed income trading and underwriting business performance affected JPMorgan’s (JPM - Free Report) fourth-quarter 2018 earnings of $1.98 per share, which lagged the Zacks Consensus Estimate of $2.20. However, the figure surged 85% from the prior-year quarter.
Citigroup (C - Free Report) kick-started the earnings season and delivered a positive earnings surprise of 3.9% in fourth-quarter 2018, backed by expense control and lower cost of credit. Adjusted net income per share of $1.61 for the quarter handily outpaced the Zacks Consensus Estimate of $1.55. Also, adjusted earnings climbed 26% year over year.
Backed by lower expenses, Wells Fargo (WFC - Free Report) delivered a positive earnings surprise of 3.4% in fourth-quarter 2018. Earnings of $1.21 per share surpassed the Zacks Consensus Estimate of $1.17. The bottom-line figure also compared favorably with $1.16 recorded in the prior-year quarter.
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U.S. Bancorp (USB) Q4 Earnings Top Estimates, Revenues Rise
Riding on higher revenues, U.S. Bancorp’s (USB - Free Report) fourth-quarter 2018 adjusted earnings per share of $1.07 outpaced the Zacks Consensus Estimate by a penny. Results were also up 10.3% from the prior-year quarter.
Higher revenues, along with loan and deposit growth, were the driving factors. Though lower mortgage banking revenues along with escalating expenses and provisions disappointed, easing margin pressure on rising rates and overall higher fee income acted as tailwinds.
Including certain one items, net income came in at $1.86 billion or $1.10 per share compared with $1.68 billion or 97 cents in the prior-year quarter.
For full-year 2018, earnings per share reached $4.14 per share, surpassing the Zacks Consensus Estimate of $4.10. Further, the earnings figure compares favorably with the prior-year tally of $3.51 per share.
Revenues & Loans Grow, Costs & Provisions Flare Up
For full-year 2018, the company reported revenues of $22.6 billion, up around 3.4% year over year. Moreover, the revenue figure surpassed the Zacks Consensus Estimate of $22.4 billion.
U.S. Bancorp’s net revenues came in at around $5.8 billion in the quarter, up 4.1% year over year. Increase in net interest as well as non-interest income led to this upside. Revenues also came in above the Zacks Consensus Estimate of $5.7 billion.
U.S. Bancorp’s tax-equivalent net interest income totaled $3.3 billion in the quarter, up 3.2% from the prior-year quarter. The upswing mainly stemmed from earning assets growth, increased security yields and rising interest rates. These positives were partially mitigated by impact of tax reform, higher rates on deposits and shift in funding mix.
Average earning assets climbed 1.7% year over year, supported by growth in average total loans and average other earning assets. Furthermore, net interest margin of 3.15% was up 4 basis points year over year, driven by higher interest rates. Deposit and funding mix, reduced loan spreads, and the impact of tax reform partially mitigated rise in margins.
U.S. Bancorp’s non-interest income escalated 5.4% on a year-over-year basis to $2.5 billion. The upsurge was mainly due to rise in mostly all components of income, partially offset by lower treasury management fees, ATM processing services, mortgage banking revenues and securities gains.
Provision for credit losses increased 9.9% year over year to $368 million in the reported quarter.
U.S. Bancorp’s average total loans inched up 0.9% sequentially to $283.7 billion. This stemmed from a rise in commercial loans, commercial real estate, residential mortgages, credit card and other retail loans.
Average total deposits were up 1.3% from the prior quarter to $334.4 billion. The rise was due to growth in non-interest-bearing deposits.
Non-interest expenses declined 15.9% year over year to $3.3 billion at U.S. Bancorp. Excluding certain one-time items, expenses flared up 1% year over year. The upswing in mostly all components of non-interest expenses was partially offset by lower marketing and business development expenses and other expenses, along with other intangibles.
Efficiency ratio came in at 56.3%, improving from 69.8% in the year-ago quarter. A decrease in the ratio indicates improved profitability.
Credit Quality: A Mixed Bag
Credit metrics at U.S. Bancorp remained mixed in the Dec-end quarter. Net charge-offs came in at $353 million, up 8.6% year over year. On a year-over-year basis, the company witnessed deterioration, mainly in net charge-offs in the credit card, other retail and commercial segments, which was muted by improvement in residential mortgages and commercial real estate.
U.S. Bancorp’s non-performing assets (excluding covered assets) came in at $989 million, down 17.6% year over year. Total allowance for credit losses was $4.4 billion, slightly up on a year-over-year basis.
Strong Capital Position
During the quarter under review, U.S. Bancorp maintained a solid capital position. The Tier 1 capital ratio came in at 10.7% compared with 10.8% in the prior-year quarter. Common equity Tier 1 capital to risk-weighted assets ratio under the Basel III standardized approach fully implemented was 12.6% as of Dec 31, 2018, down from 12.9% reported in the year-ago quarter.
All regulatory ratios of U.S. Bancorp continued to be in excess of well-capitalized requirements. In addition, based on the Basel III fully implemented advanced approach, the Tier 1 common equity to risk-weighted assets ratio was estimated at 11.8%, as of Dec 31, 2018, compared with 11.6% in the prior-year quarter.
The tangible common equity to tangible assets ratio was 7.8% as of Dec 31, 2018, up from 7.6% in the prior-year quarter.
U.S. Bancorp posted an improvement in book value per share, which increased to $28.01 as of Dec 31, 2018, from $26.34 recorded at the end of the year-earlier quarter.
Capital Deployment Update
Reflecting the company’s capital strength during the fourth quarter, U.S. Bancorp returned 80% of earnings to its shareholders through common stock dividends and buybacks.
Conclusion
U.S. Bancorp posted an impressive quarter. Rise in revenues, aided by increase in lending activities, is expected to continue. Though weakness in the credit card portfolio and escalating expenses remain headwinds, rising margins are likely to continue.
U.S. Bancorp Price, Consensus and EPS Surprise
U.S. Bancorp Price, Consensus and EPS Surprise | U.S. Bancorp Quote
U.S. Bancorp currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Dismal fixed income trading and underwriting business performance affected JPMorgan’s (JPM - Free Report) fourth-quarter 2018 earnings of $1.98 per share, which lagged the Zacks Consensus Estimate of $2.20. However, the figure surged 85% from the prior-year quarter.
Citigroup (C - Free Report) kick-started the earnings season and delivered a positive earnings surprise of 3.9% in fourth-quarter 2018, backed by expense control and lower cost of credit. Adjusted net income per share of $1.61 for the quarter handily outpaced the Zacks Consensus Estimate of $1.55. Also, adjusted earnings climbed 26% year over year.
Backed by lower expenses, Wells Fargo (WFC - Free Report) delivered a positive earnings surprise of 3.4% in fourth-quarter 2018. Earnings of $1.21 per share surpassed the Zacks Consensus Estimate of $1.17. The bottom-line figure also compared favorably with $1.16 recorded in the prior-year quarter.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>