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U.S. Bancorp (USB) to Report Q1 Earnings: What's in Store?
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U.S. Bancorp (USB - Free Report) is scheduled to report first-quarter results on Apr 19, before the opening bell. USB’s quarterly earnings and revenues are likely to have improved year over year.
Before we analyze the factors that are expected to have impacted the first-quarter earnings, let’s look at U.S. Bancorp’s performance over the last few quarters.
In the last reported quarter, USB’s earnings surpassed the Zacks Consensus Estimate on an increase in net interest income (NII), average loan growth and higher rates. However, a decline in non-interest income (largely on lower mortgage banking income), higher expenses and the deteriorating credit quality were headwinds.
U.S. Bancorp has a strong surprise history. Earnings surpassed estimates in all of the trailing four quarters, the average beat being 4.32%.
The Zacks Consensus Estimate for first-quarter earnings of $1.13 has moved marginally south in the past week. Nonetheless, the figure indicates a 14.14% rise from the year-ago reported number.
The consensus estimate for revenues is pegged at $7.13 billion, suggesting growth of 28.04% from the year-ago reported number. Management anticipates first-quarter total revenues (excluding merger and integration charges) to be in the range of $7.1-7.3 billion in the to-be-reported quarter. This includes purchase accounting accretion of approximately $100 million.
Major Factors to Influence Q1 Results
Loan Demand & NII: Given U.S. Bancorp's substantial exposure to commercial and industrial loans, the company is likely to have been affected due to the decline in such loans in the to-be-reported quarter, per the Fed’s latest data. However, the commercial real estate loans, residential real estate loans and consumer loans improved modestly during the quarter.
Hence, a moderate growth is expected in the average earning assets during the quarter. Managements expects the metric to reach $605-610 billion. The Zacks Consensus Estimate of $610.89 billion for average interest-earning assets indicates a 6.7% sequential improvement.
The Federal Reserve raised rates by 50 basis points (bps) in the to-be-reported quarter and 25 bps in the prior quarter. The policy rate reached 4.75-5% in March 2023, the highest since 2008. Hence, the decent loan growth and higher rates are likely to have a positive impact on the NII and net interest margin (NIM).
The consensus estimate for NII suggests a 6.8% sequential increase to $4.58 billion. The company projects NIM (Non-GAAP basis) to increase by 5-10 bps sequentially.
Non-Interest Income: Heightening recession fears, uncertainty in economy and turmoil in the banking space post the collapse of the Silicon Valley Bank dampened the equity market performance. Amid this, disruptions in capital market activities are anticipated to have hindered commercial product revenues.
The purchase mortgage originations are expected to have continued to decline in the to-be-reported quarter whereas the refinancing originations might have remained almost stable sequentially. Also, mortgage rates during the quarter might have jumped, with the rate on the 30-year fixed mortgage reaching 6.32% in March, up from around 3% in the prior-year quarter. This is expected to have led to a decline in refinance originations. Nonetheless, the Zacks Consensus Estimate for mortgage banking revenues is pegged at $111 million, suggesting a 6.7% sequential rise.
The elimination of certain fees and lower deposit balances are likely to have affected growth in service charges. The consensus mark of $321 million indicates no change from the prior-quarter in revenues from service charges on deposits.
The consensus mark for trust and investment management fees is pegged at $585 million, indicating a sequential rise of 2.45%. The rising rates and high inflation are expected to have increased transactions and spend volumes, thereby supporting USB’s card fees in the quarter. However, the Zacks Consensus Estimate for the same is pegged at $375 million, indicating a 2.3% decrease from the prior-quarter.
Overall, the Zacks Consensus Estimate for the total non-interest income is pegged at $2.54 billion, implying a rise of 24.5% on sequential basis.
Expenses: As USB continues to invest in digital initiatives, payment capabilities and technology modernization, such costs might have weighed on its expense base to some extent in the to-be-reported quarter.
Management expects core expenses (excluding merger and integration charges related to the MUFG Union Bank buyout) to be $4.3-4.4 billion. This includes core deposit intangibles amortization related to Union Bank of approximately $125 million.
Asset Quality: With the moderate rise in loan balance and expectations of economic slowdown due to macroeconomic headwinds, USB is expected to have built reserves in the first quarter.
The Zacks Consensus Estimate for total non-performing assets of $1.13 billion implies a 10.7% jump from the prior quarter. The consensus estimate for non-performing loans of $1.09 billion suggests surge of 12.1% on sequential basis.
What the Zacks Model Predicts
Our proven model does not conclusively predict an earnings beat for U.S. Bancorp this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat which is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: U.S. Bancorp has an Earnings ESP of -0.86%.
Zacks Rank: U.S. Bancorp currently carries a Zacks Rank of 3.
Finance Stocks That Warrant a Look
The Bank of New York Mellon (BK - Free Report) and Commerce Bancshares (CBSH - Free Report) are a few finance stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Bank of New York Mellon is slated to report first-quarter 2023 results on Apr 18. BK carries a Zacks Rank #3 at present and has an Earnings ESP of +2.29%.
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U.S. Bancorp (USB) to Report Q1 Earnings: What's in Store?
U.S. Bancorp (USB - Free Report) is scheduled to report first-quarter results on Apr 19, before the opening bell. USB’s quarterly earnings and revenues are likely to have improved year over year.
Before we analyze the factors that are expected to have impacted the first-quarter earnings, let’s look at U.S. Bancorp’s performance over the last few quarters.
In the last reported quarter, USB’s earnings surpassed the Zacks Consensus Estimate on an increase in net interest income (NII), average loan growth and higher rates. However, a decline in non-interest income (largely on lower mortgage banking income), higher expenses and the deteriorating credit quality were headwinds.
U.S. Bancorp has a strong surprise history. Earnings surpassed estimates in all of the trailing four quarters, the average beat being 4.32%.
U.S. Bancorp Price and EPS Surprise
U.S. Bancorp price-eps-surprise | U.S. Bancorp Quote
The Zacks Consensus Estimate for first-quarter earnings of $1.13 has moved marginally south in the past week. Nonetheless, the figure indicates a 14.14% rise from the year-ago reported number.
The consensus estimate for revenues is pegged at $7.13 billion, suggesting growth of 28.04% from the year-ago reported number. Management anticipates first-quarter total revenues (excluding merger and integration charges) to be in the range of $7.1-7.3 billion in the to-be-reported quarter. This includes purchase accounting accretion of approximately $100 million.
Major Factors to Influence Q1 Results
Loan Demand & NII: Given U.S. Bancorp's substantial exposure to commercial and industrial loans, the company is likely to have been affected due to the decline in such loans in the to-be-reported quarter, per the Fed’s latest data. However, the commercial real estate loans, residential real estate loans and consumer loans improved modestly during the quarter.
Hence, a moderate growth is expected in the average earning assets during the quarter. Managements expects the metric to reach $605-610 billion. The Zacks Consensus Estimate of $610.89 billion for average interest-earning assets indicates a 6.7% sequential improvement.
The Federal Reserve raised rates by 50 basis points (bps) in the to-be-reported quarter and 25 bps in the prior quarter. The policy rate reached 4.75-5% in March 2023, the highest since 2008. Hence, the decent loan growth and higher rates are likely to have a positive impact on the NII and net interest margin (NIM).
The consensus estimate for NII suggests a 6.8% sequential increase to $4.58 billion. The company projects NIM (Non-GAAP basis) to increase by 5-10 bps sequentially.
Non-Interest Income: Heightening recession fears, uncertainty in economy and turmoil in the banking space post the collapse of the Silicon Valley Bank dampened the equity market performance. Amid this, disruptions in capital market activities are anticipated to have hindered commercial product revenues.
The purchase mortgage originations are expected to have continued to decline in the to-be-reported quarter whereas the refinancing originations might have remained almost stable sequentially. Also, mortgage rates during the quarter might have jumped, with the rate on the 30-year fixed mortgage reaching 6.32% in March, up from around 3% in the prior-year quarter. This is expected to have led to a decline in refinance originations. Nonetheless, the Zacks Consensus Estimate for mortgage banking revenues is pegged at $111 million, suggesting a 6.7% sequential rise.
The elimination of certain fees and lower deposit balances are likely to have affected growth in service charges. The consensus mark of $321 million indicates no change from the prior-quarter in revenues from service charges on deposits.
The consensus mark for trust and investment management fees is pegged at $585 million, indicating a sequential rise of 2.45%. The rising rates and high inflation are expected to have increased transactions and spend volumes, thereby supporting USB’s card fees in the quarter. However, the Zacks Consensus Estimate for the same is pegged at $375 million, indicating a 2.3% decrease from the prior-quarter.
Overall, the Zacks Consensus Estimate for the total non-interest income is pegged at $2.54 billion, implying a rise of 24.5% on sequential basis.
Expenses: As USB continues to invest in digital initiatives, payment capabilities and technology modernization, such costs might have weighed on its expense base to some extent in the to-be-reported quarter.
Management expects core expenses (excluding merger and integration charges related to the MUFG Union Bank buyout) to be $4.3-4.4 billion. This includes core deposit intangibles amortization related to Union Bank of approximately $125 million.
Asset Quality: With the moderate rise in loan balance and expectations of economic slowdown due to macroeconomic headwinds, USB is expected to have built reserves in the first quarter.
The Zacks Consensus Estimate for total non-performing assets of $1.13 billion implies a 10.7% jump from the prior quarter. The consensus estimate for non-performing loans of $1.09 billion suggests surge of 12.1% on sequential basis.
What the Zacks Model Predicts
Our proven model does not conclusively predict an earnings beat for U.S. Bancorp this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat which is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: U.S. Bancorp has an Earnings ESP of -0.86%.
Zacks Rank: U.S. Bancorp currently carries a Zacks Rank of 3.
Finance Stocks That Warrant a Look
The Bank of New York Mellon (BK - Free Report) and Commerce Bancshares (CBSH - Free Report) are a few finance stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Bank of New York Mellon is slated to report first-quarter 2023 results on Apr 18. BK carries a Zacks Rank #3 at present and has an Earnings ESP of +2.29%.
Commerce Bancshares is scheduled to release first-quarter 2023 results on Apr 18. CBSH currently has a Zacks Rank #3 and an Earnings ESP of +2.46%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.