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U.S. Bancorp (USB) Q3 Earnings Beat, Revenues & Costs Rise
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U.S. Bancorp (USB - Free Report) reported third-quarter 2022 earnings per share (excluding merger and integration-related charges) of $1.18, which beat the Zacks Consensus Estimate of 1.17 per share. In the prior-year quarter, the company reported earnings of $1.30 per share.
Results have been primarily aided by increased net interest income, supported by higher interest rates and loan growth. However, a decline in non-interest income and higher expenses were the undermining factors. Also, the company’s credit quality deteriorated in the reported quarter.
Net income (GAAP basis) was $1.82 billion, down from the prior-year quarter’s $2.03 billion.
Revenues Improve, Costs Rise
Total net revenues were $6.30 billion, up 7.4% year over year. The top line beat the Zacks Consensus Estimate of $6.28 billion.
The tax-equivalent net interest income totaled $3.86 billion, up 20.6% from the prior-year quarter. The increase was primarily due to the impact of rising interest rates on earning assets and strong growth in loan and investment securities balances, partially offset by deposit pricing, lower loan fees related to the forgiveness of PPP loans from a year ago, and funding mix.
Average earning assets climbed 7.6% year over year, supported by growth in average investment securities and average total loans, partially offset by lower average interest-bearing deposits with banks.
The net interest margin (NIM) of 2.83% increased 30 basis points year over year mainly due to the impacts of higher rates on earning assets, partially offset by deposit pricing and short-term borrowing costs.
Non-interest income decreased 8.3% on a year-over-year basis to $2.47 billion. The decline was primarily due to a fall in mortgage banking revenues and net securities gains.
Non-interest expenses, including merger and integration charges, climbed 6.1% year over year to $3.64 billion.
The efficiency ratio was 57.5%, lower than the year-ago quarter’s 58.4%. A decline in the ratio indicates an improvement in profitability.
Average total loans improved 3.9% sequentially to $336.8 billion. Average total deposits increased marginally from the prior quarter to $456.8 billion.
Credit Quality Worsens
Net charge-offs were $162 million, up 10.2% year over year. Total allowance for credit losses was $6.46 billion, up 2.5% year over year. The provision for credit losses in the reported quarter was $362 million against a benefit of $163 million in the prior-year quarter.
U.S. Bancorp’s non-performing assets were $677 million, down 28.3% year over year.
Capital Position Weakens
The Tier 1 capital ratio was 11.2% as of Sep 30, 2022, down from 11.7% in the prior-year quarter. The Tier 1-capital-to-risk-weighted assets ratio was 9.4% as of Sep 30, 2022, down from 9.7%.
Common Equity Tier 1 capital ratio under the Basel III standardized approach was 9.7% as of Sep 30, 2022, down from 10.2% reported in the year-ago quarter.
The tangible common equity to tangible assets ratio was 5.2%, down from the prior-year quarter’s 6.8%.
Our Take
U.S. Bancorp’s solid business model and diverse revenue streams are likely to keep aiding its financials. The company’s strong loan and deposit balances are positives. However, persistently rising expenses (as witnessed in the third quarter) might weigh on its bottom line in the near term.
Citizens Financial Group (CFG - Free Report) is slated to report results on Oct 19.
The Zacks Consensus Estimate for Citizens Financial’s third-quarter earnings of $1.22 indicates no change from the prior-year quarter’s reported figure.
Fifth Third Bancorp (FITB - Free Report) is slated to report third-quarter 2022 results on Oct 20.
The Zacks Consensus Estimate for Fifth Third’s third-quarter earnings is pegged at 98 cents, which indicates a 4.3% year-over-year rise.
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U.S. Bancorp (USB) Q3 Earnings Beat, Revenues & Costs Rise
U.S. Bancorp (USB - Free Report) reported third-quarter 2022 earnings per share (excluding merger and integration-related charges) of $1.18, which beat the Zacks Consensus Estimate of 1.17 per share. In the prior-year quarter, the company reported earnings of $1.30 per share.
Results have been primarily aided by increased net interest income, supported by higher interest rates and loan growth. However, a decline in non-interest income and higher expenses were the undermining factors. Also, the company’s credit quality deteriorated in the reported quarter.
Net income (GAAP basis) was $1.82 billion, down from the prior-year quarter’s $2.03 billion.
Revenues Improve, Costs Rise
Total net revenues were $6.30 billion, up 7.4% year over year. The top line beat the Zacks Consensus Estimate of $6.28 billion.
The tax-equivalent net interest income totaled $3.86 billion, up 20.6% from the prior-year quarter. The increase was primarily due to the impact of rising interest rates on earning assets and strong growth in loan and investment securities balances, partially offset by deposit pricing, lower loan fees related to the forgiveness of PPP loans from a year ago, and funding mix.
Average earning assets climbed 7.6% year over year, supported by growth in average investment securities and average total loans, partially offset by lower average interest-bearing deposits with banks.
The net interest margin (NIM) of 2.83% increased 30 basis points year over year mainly due to the impacts of higher rates on earning assets, partially offset by deposit pricing and short-term borrowing costs.
Non-interest income decreased 8.3% on a year-over-year basis to $2.47 billion. The decline was primarily due to a fall in mortgage banking revenues and net securities gains.
Non-interest expenses, including merger and integration charges, climbed 6.1% year over year to $3.64 billion.
The efficiency ratio was 57.5%, lower than the year-ago quarter’s 58.4%. A decline in the ratio indicates an improvement in profitability.
Average total loans improved 3.9% sequentially to $336.8 billion. Average total deposits increased marginally from the prior quarter to $456.8 billion.
Credit Quality Worsens
Net charge-offs were $162 million, up 10.2% year over year. Total allowance for credit losses was $6.46 billion, up 2.5% year over year. The provision for credit losses in the reported quarter was $362 million against a benefit of $163 million in the prior-year quarter.
U.S. Bancorp’s non-performing assets were $677 million, down 28.3% year over year.
Capital Position Weakens
The Tier 1 capital ratio was 11.2% as of Sep 30, 2022, down from 11.7% in the prior-year quarter. The Tier 1-capital-to-risk-weighted assets ratio was 9.4% as of Sep 30, 2022, down from 9.7%.
Common Equity Tier 1 capital ratio under the Basel III standardized approach was 9.7% as of Sep 30, 2022, down from 10.2% reported in the year-ago quarter.
The tangible common equity to tangible assets ratio was 5.2%, down from the prior-year quarter’s 6.8%.
Our Take
U.S. Bancorp’s solid business model and diverse revenue streams are likely to keep aiding its financials. The company’s strong loan and deposit balances are positives. However, persistently rising expenses (as witnessed in the third quarter) might weigh on its bottom line in the near term.
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
Citizens Financial Group (CFG - Free Report) is slated to report results on Oct 19.
The Zacks Consensus Estimate for Citizens Financial’s third-quarter earnings of $1.22 indicates no change from the prior-year quarter’s reported figure.
Fifth Third Bancorp (FITB - Free Report) is slated to report third-quarter 2022 results on Oct 20.
The Zacks Consensus Estimate for Fifth Third’s third-quarter earnings is pegged at 98 cents, which indicates a 4.3% year-over-year rise.