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U.S. Bancorp's (USB) Q4 Earnings Meet Estimates, Costs Up
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U.S. Bancorp’s (USB - Free Report) fourth-quarter 2023 adjusted earnings per share (excluding the impact of notable items) of 99 cents met the Zacks Consensus Estimate. However, the bottom line declined 17.5% from the prior-year quarter's level.
Results have benefited from increased revenues supported by higher fee income. An improvement in credit quality was another positive. However, higher expenses and lower net interest income (NII) were major headwinds.
Net income (GAAP basis) attributable to U.S. Bancorp was $847 million, down 8.4% from the prior-year quarter's level.
In 2023, earnings per share (excluding notable items) of $4.31 missed the consensus estimate of $4.32. Net income (GAAP basis) was $5.43 billion, down 6.8% year over year.
Revenues Improve, Expenses Rise
Total revenues in the reported quarter were $6.76 billion, up 6.2% year over year. However, the top line missed the Zacks Consensus Estimate of $6.81 billion.
In 2023, total revenues grew 15.8% to $28.14 billion. The top line met the consensus estimate.
The tax-equivalent NII totaled $4.14 billion, down 4.2% from the year-ago quarter's level. The decrease was primarily due to the impact of deposit mix and pricing, partially offset by the acquisition of MUFG Union Bank and higher rates on earning assets.
The net interest margin of 2.78% contracted 23 basis points year over year.
Non-interest income grew 28.2% year over year to $2.62 billion. The uptick was driven by an increase in all fee income components.
Non-interest expenses climbed 29.1% year over year to $5.22 billion. The rise was due to an increase in almost all cost components, except for costs related to professional services and other expenses.
The efficiency ratio was 75.9%, higher than the year-ago quarter’s figure of 63.3%. A rise in the ratio indicates a deterioration in profitability.
Average total loans declined 1.1% sequentially to $372.86 billion. Average total deposits decreased 1.9% from the previous quarter's level to $502.78 billion.
Credit Quality – Mixed Bag
Total allowance for credit losses was $7.84 billion, up 5.9% year over year. As of Dec 31, 2023, U.S. Bancorp’s non-performing assets amounted to $1.49 billion, up 47% from the year-ago period's level.
Nonetheless, net charge-offs were $463 million, down from $578 million in the year-ago quarter. The provision for credit losses in the reported quarter was $512 million, down 57% from the prior-year quarter's level.
Capital Ratios Improve
The Tier 1 capital ratio was 11.5% as of Dec 31, 2023, up from 9.8% in the prior-year quarter. The Common Equity Tier 1 capital ratio under the Basel III standardized approach was 9.9% as of Dec 31, 2023, up from 8.4% in the year-ago quarter.
The tangible common equity to tangible assets ratio was 5.3%, up from the prior-year quarter’s 4.5%.
Share Repurchase Update
During the reported quarter, USB did not repurchase any shares. Owing to the MUFG Union Bank acquisition, the company suspended share repurchases at the beginning of third-quarter 2021.
Our Take
U.S. Bancorp’s solid business model and diverse revenue streams are likely to keep aiding its financials in the upcoming period. Further, the company has been growing through strategic acquisitions. However, persistently rising expenses may weigh on its bottom line in the near term.
Citigroup Inc.’s (C - Free Report) fourth-quarter 2023 earnings per share (excluding the impact of notable items) of 84 cents surpassed the Zacks Consensus Estimate of 73 cents. Including the impact of notable items in the quarter, C recorded loss per share of $1.16. It registered earnings of $1.16 per share a year ago and our estimate for the same was pegged at $1.15.
It witnessed growth in total loans and deposits in the reported quarter. However, a decline in revenues and deteriorating credit quality are near-term woes.
Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.29 surpassed the Zacks Consensus Estimate of $1.18. The figure improved 15% year over year. The adjusted figure excludes the impacts of expenses from FDIC special assessment, severance expenses for planned actions and discrete tax benefits related to the resolution of the prior period’s tax matters.
Results have benefited from higher non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, a decline in NII, worsening credit quality and a dip in loan balances were the undermining factors for WFC.
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U.S. Bancorp's (USB) Q4 Earnings Meet Estimates, Costs Up
U.S. Bancorp’s (USB - Free Report) fourth-quarter 2023 adjusted earnings per share (excluding the impact of notable items) of 99 cents met the Zacks Consensus Estimate. However, the bottom line declined 17.5% from the prior-year quarter's level.
Results have benefited from increased revenues supported by higher fee income. An improvement in credit quality was another positive. However, higher expenses and lower net interest income (NII) were major headwinds.
Net income (GAAP basis) attributable to U.S. Bancorp was $847 million, down 8.4% from the prior-year quarter's level.
In 2023, earnings per share (excluding notable items) of $4.31 missed the consensus estimate of $4.32. Net income (GAAP basis) was $5.43 billion, down 6.8% year over year.
Revenues Improve, Expenses Rise
Total revenues in the reported quarter were $6.76 billion, up 6.2% year over year. However, the top line missed the Zacks Consensus Estimate of $6.81 billion.
In 2023, total revenues grew 15.8% to $28.14 billion. The top line met the consensus estimate.
The tax-equivalent NII totaled $4.14 billion, down 4.2% from the year-ago quarter's level. The decrease was primarily due to the impact of deposit mix and pricing, partially offset by the acquisition of MUFG Union Bank and higher rates on earning assets.
The net interest margin of 2.78% contracted 23 basis points year over year.
Non-interest income grew 28.2% year over year to $2.62 billion. The uptick was driven by an increase in all fee income components.
Non-interest expenses climbed 29.1% year over year to $5.22 billion. The rise was due to an increase in almost all cost components, except for costs related to professional services and other expenses.
The efficiency ratio was 75.9%, higher than the year-ago quarter’s figure of 63.3%. A rise in the ratio indicates a deterioration in profitability.
Average total loans declined 1.1% sequentially to $372.86 billion. Average total deposits decreased 1.9% from the previous quarter's level to $502.78 billion.
Credit Quality – Mixed Bag
Total allowance for credit losses was $7.84 billion, up 5.9% year over year. As of Dec 31, 2023, U.S. Bancorp’s non-performing assets amounted to $1.49 billion, up 47% from the year-ago period's level.
Nonetheless, net charge-offs were $463 million, down from $578 million in the year-ago quarter. The provision for credit losses in the reported quarter was $512 million, down 57% from the prior-year quarter's level.
Capital Ratios Improve
The Tier 1 capital ratio was 11.5% as of Dec 31, 2023, up from 9.8% in the prior-year quarter. The Common Equity Tier 1 capital ratio under the Basel III standardized approach was 9.9% as of Dec 31, 2023, up from 8.4% in the year-ago quarter.
The tangible common equity to tangible assets ratio was 5.3%, up from the prior-year quarter’s 4.5%.
Share Repurchase Update
During the reported quarter, USB did not repurchase any shares. Owing to the MUFG Union Bank acquisition, the company suspended share repurchases at the beginning of third-quarter 2021.
Our Take
U.S. Bancorp’s solid business model and diverse revenue streams are likely to keep aiding its financials in the upcoming period. Further, the company has been growing through strategic acquisitions. However, persistently rising expenses may weigh on its bottom line in the near term.
U.S. Bancorp Price, Consensus and EPS Surprise
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 Banks
Citigroup Inc.’s (C - Free Report) fourth-quarter 2023 earnings per share (excluding the impact of notable items) of 84 cents surpassed the Zacks Consensus Estimate of 73 cents. Including the impact of notable items in the quarter, C recorded loss per share of $1.16. It registered earnings of $1.16 per share a year ago and our estimate for the same was pegged at $1.15.
It witnessed growth in total loans and deposits in the reported quarter. However, a decline in revenues and deteriorating credit quality are near-term woes.
Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.29 surpassed the Zacks Consensus Estimate of $1.18. The figure improved 15% year over year. The adjusted figure excludes the impacts of expenses from FDIC special assessment, severance expenses for planned actions and discrete tax benefits related to the resolution of the prior period’s tax matters.
Results have benefited from higher non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, a decline in NII, worsening credit quality and a dip in loan balances were the undermining factors for WFC.