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U.S. Bancorp's (USB) Q2 Earnings Beat Estimates, NIM Up
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U.S. Bancorp (USB - Free Report) reported second-quarter 2022 earnings per share of $1.09 ( excluding merger and integration-related charges of 10 cents), which beat the Zacks Consensus Estimate of 1.07 per share. However, the results do not compare favorably with the prior-year quarter’s figure of $1.28.
Results were supported by an increase in revenues, average loan growth and lower non-performing assets. The company’s credit quality was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.
Net income came in at $1.56 billion, a 22.8% fall from the prior-year quarter’s $1.99 billion.
Revenues & Costs Rise
In the second quarter, U.S. Bancorp’s total net revenues were $5.98 billion, up 4% year over year. The top line beat the Zacks Consensus Estimate of $5.76 billion.
U.S. Bancorp’s tax-equivalent net interest income totaled $3.46 billion in the reported quarter, up 9.5% from the prior-year quarter. The increase mainly stemmed from higher loan and investment securities balances. In addition, rising interest rates and high-yielding assets contributed to growth.
Average earning assets climbed 7.2% year over year, supported by growth in average investment securities and average total loans, partially offset by lower average interest-bearing deposits with banks. However, the net interest margin (NIM) of 2.59% increased 6 basis points, mainly due to the influence of rising interest rates and high yields on investment securities, partially offset by deposit pricing and lower noninterest-bearing deposits.
U.S. Bancorp’s non-interest income decreased 2.7% on a year-over-year basis to $2.55 billion. Non-interest income was affected by mortgage banking revenues, other non-interest income and lower gains on the sale of securities.
U.S. Bancorp’s non-interest expenses, including merger and integration charges, climbed 10% year over year to $3.72 billion.
Efficiency ratio was at 62.1%, higher than the year-ago quarter’s 59%. An increase in the ratio indicates a fall in profitability.
U.S. Bancorp’s average total loans improved 3.6% sequentially to $324.19 billion. Average total deposits were marginally increased from the prior quarter to $456.52 billion.
Credit Quality Decent
The net charge-offs were $161 million, down 10.6% year over year. Total allowance for credit losses was $6.26 billion, down 5.4%. U.S. Bancorp’s non-performing assets were $770 million, down 27% year over year.
However, the provision for credit losses in the reported quarter was $311 million against a benefit of $170 million in the prior-year quarter.
Weak Capital Position
The Tier 1 capital ratio was 11.4% as of Jun 30, 2022, down from 11.5% in the prior-year quarter. The Tier 1 capital to risk-weighted assets ratio was 9.4% as of Jun 30, 2022, down from 9.5%.
Common Equity Tier 1 capital ratio under the Basel III standardized approach was 9.7% as of Jun 30, 2022, lower than 9.9% reported in the year-ago quarter. In addition, U.S. Bancorp posted a deterioration in book value per share, which decreased to $28.13 as of Jun 30, 2022, from $31.74 recorded at the end of the year-earlier quarter.
The tangible common equity to tangible assets ratio was 5.5% as of Jun 30, 2022, down from the prior-year quarter’s 6.8%.
Our Take
U.S. Bancorp’s performance in second-quarter 2022 appeared to be decent in terms of earnings and revenues. The bank’s net interest income was primarily supported by a rise in average earning assets. Furthermore, decent credit quality is expected to continue aiding its financials. However, in the second quarter, the weak capital position was an undermining factor.
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U.S. Bancorp's (USB) Q2 Earnings Beat Estimates, NIM Up
U.S. Bancorp (USB - Free Report) reported second-quarter 2022 earnings per share of $1.09 ( excluding merger and integration-related charges of 10 cents), which beat the Zacks Consensus Estimate of 1.07 per share. However, the results do not compare favorably with the prior-year quarter’s figure of $1.28.
Results were supported by an increase in revenues, average loan growth and lower non-performing assets. The company’s credit quality was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.
Net income came in at $1.56 billion, a 22.8% fall from the prior-year quarter’s $1.99 billion.
Revenues & Costs Rise
In the second quarter, U.S. Bancorp’s total net revenues were $5.98 billion, up 4% year over year. The top line beat the Zacks Consensus Estimate of $5.76 billion.
U.S. Bancorp’s tax-equivalent net interest income totaled $3.46 billion in the reported quarter, up 9.5% from the prior-year quarter. The increase mainly stemmed from higher loan and investment securities balances. In addition, rising interest rates and high-yielding assets contributed to growth.
Average earning assets climbed 7.2% year over year, supported by growth in average investment securities and average total loans, partially offset by lower average interest-bearing deposits with banks. However, the net interest margin (NIM) of 2.59% increased 6 basis points, mainly due to the influence of rising interest rates and high yields on investment securities, partially offset by deposit pricing and lower noninterest-bearing deposits.
U.S. Bancorp’s non-interest income decreased 2.7% on a year-over-year basis to $2.55 billion. Non-interest income was affected by mortgage banking revenues, other non-interest income and lower gains on the sale of securities.
U.S. Bancorp’s non-interest expenses, including merger and integration charges, climbed 10% year over year to $3.72 billion.
Efficiency ratio was at 62.1%, higher than the year-ago quarter’s 59%. An increase in the ratio indicates a fall in profitability.
U.S. Bancorp’s average total loans improved 3.6% sequentially to $324.19 billion. Average total deposits were marginally increased from the prior quarter to $456.52 billion.
Credit Quality Decent
The net charge-offs were $161 million, down 10.6% year over year. Total allowance for credit losses was $6.26 billion, down 5.4%. U.S. Bancorp’s non-performing assets were $770 million, down 27% year over year.
However, the provision for credit losses in the reported quarter was $311 million against a benefit of $170 million in the prior-year quarter.
Weak Capital Position
The Tier 1 capital ratio was 11.4% as of Jun 30, 2022, down from 11.5% in the prior-year quarter. The Tier 1 capital to risk-weighted assets ratio was 9.4% as of Jun 30, 2022, down from 9.5%.
Common Equity Tier 1 capital ratio under the Basel III standardized approach was 9.7% as of Jun 30, 2022, lower than 9.9% reported in the year-ago quarter. In addition, U.S. Bancorp posted a deterioration in book value per share, which decreased to $28.13 as of Jun 30, 2022, from $31.74 recorded at the end of the year-earlier quarter.
The tangible common equity to tangible assets ratio was 5.5% as of Jun 30, 2022, down from the prior-year quarter’s 6.8%.
Our Take
U.S. Bancorp’s performance in second-quarter 2022 appeared to be decent in terms of earnings and revenues. The bank’s net interest income was primarily supported by a rise in average earning assets. Furthermore, decent credit quality is expected to continue aiding its financials. However, in the second quarter, the weak capital position was an undermining factor.
U.S. Bancorp Price, Consensus and EPS Surprise
U.S. Bancorp price-consensus-eps-surprise-chart | 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.
Earnings Release Dates of Other Stocks
Fifth Third Bancorp (FITB - Free Report) is slated to report second-quarter 2022 results on Jul 21.
The Zacks Consensus Estimate for Fifth Third’s second-quarter earnings of 87 cents indicates a 7.45% decline from the prior-year quarter.
Citizens Financial Group (CFG - Free Report) is slated to report second-quarter 2022 results on Jul 19.
The Zacks Consensus Estimate for Citizens Financial’s second-quarter earnings of $1.02 indicates a 30.1% decline from the prior-year quarter.