We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
U.S. Bancorp's (USB) Q2 Earnings Beat on Higher Revenues
Read MoreHide Full Article
Reflecting top-line strength and lower provisions, U.S. Bancorp’s (USB - Free Report) second-quarter 2018 earnings per share of $1.02 outpaced the Zacks Consensus Estimate by a penny. Also, results came ahead of the prior-year quarter earnings of 85 cents.
Easing margin pressure on rising rates was witnessed in the quarter. Moreover, revenues improved, aided by rise in net interest, as well as fee income. Further, elevated average loans and deposits balances, along with lower provisions, were tailwinds. However, escalating expenses and lower mortgage banking revenues were major drags.
Net income was $1.8 billion, up 16.3% year over year.
Revenues, Loans & Deposits Grow, Costs Flare Up
U.S. Bancorp’s net revenues came in at around $5.6 billion in the quarter, up 3.5% year over year. Increase in net interest as well as non-interest income led to this rise. Revenues came in line with the Zacks Consensus Estimate.
U.S. Bancorp’s tax-equivalent net interest income totaled $3.2 billion in the quarter, up 4.1% from the prior-year quarter. The upswing mainly stemmed from earning assets growth and rising interest rates.
Average earning assets climbed 2.2% year over year, supported by growth in average total loans and average investment securities, along with elevated average other earning assets. Furthermore, net interest margin of 3.13% was up 5 basis points year over year, driven by higher interest rates. Loan mix, higher funding costs and the impact of tax reform partially mitigated rise in margins.
U.S. Bancorp’s non-interest income escalated 2.8% on a year-over-year basis to $2.4 billion. The upsurge was mainly due to rise in mostly all components of income, partially offset by lower treasury management fees, mortgage banking revenues and commercial products revenues.
Provision for credit losses decreased 6.6% year over year to $327 million in the reported quarter.
U.S. Bancorp’s average total loans inched up 1.1% year over year to $278.6 billion. The growth stemmed from a rise in commercial loans, residential mortgages, total other retail and credit card loans. These increases were partially offset by a drop in commercial real estate and covered loans. Excluding covered loans, average total loans rose 1.4% year over year.
Average total deposits were up 1.1% from the prior-year quarter to $334.8 billion. The upsurge was due to growth in interest-bearing deposits, partly offset by lower non-interest-bearing deposits.
Non-interest expenses flared up 3.4% year over year to $3.1 billion at U.S. Bancorp. The upswing in mostly all components of non-interest expenses was partially offset by lower professional services, other expenses, along with other intangibles.
Credit Quality: A Mixed Bag
Credit metrics at U.S. Bancorp was mixed in the reported quarter. Net charge-offs came in at $332 million, down 2.4% year over year. On a year-over-year basis, the company experienced deterioration, mainly in net charge-offs in the credit card segment, offset by improvement in residential mortgages.
U.S. Bancorp’s non-performing assets (excluding covered assets) came in at $1.1 billion, down 15.4% year over year. However, 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 10.5% compared with 11.1% in the prior-year quarter. Common equity Tier 1 capital to risk-weighted assets ratio under the Basel III standardized approach fully implemented was 9.3% as of Jun 30, 2018, down from 9.4% 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 11.6% as of Jun 30, 2018, compared with 11.7% as of Jun 30, 2017.
The tangible common equity to tangible assets ratio was 7.8% as of Jun 30, 2018, compared with 7.5% as of Jun 30, 2017.
U.S. Bancorp posted an improvement in book value per share, which increased to $27.02 as of Jun 30, 2018, from $25.55 recorded at the end of the year-earlier quarter.
Capital Deployment Update
Reflecting the company’s capital strength during the second quarter, U.S. Bancorp returned 69% of earnings to its shareholders through common stock dividends and buybacks.
Recently, following the Fed’s approval for the company’s 2018 Capital Plan, U.S. Bancorp announced an increased quarterly common stock dividend of 37 cents per share on its common stock, up 23% from the prior payout.
Further, the company’s board of directors has approved a new common stock repurchase authorization of up to $3 billion worth shares, replacing the authorization approved in July 2017.
Conclusion
U.S. Bancorp posted an impressive quarter. Rise in revenues, aided by increase in lending activities and deposits are expected to continue. Moreover, rising margins and lower provisions are likely to continue on an improving economy.
Nevertheless, weakness in the credit card portfolio might continue to impact asset quality. Also, escalating expenses remain a headwind.
Driven by top-line strength, Citigroup (C - Free Report) delivered a positive earnings surprise of 5.2% in second-quarter 2018. Earnings from continuing operations per share of $1.62 for the quarter easily outpaced the Zacks Consensus Estimate of $1.54. Also, earnings were up 28% year over year. Overall high revenues were reflected, driven by elevated banking, equity markets and consumer banking revenues, along with loan growth. Moreover, expenses remained stable. However, fixed income market revenues disappointed.
Wells Fargo (WFC - Free Report) recorded negative earnings surprise of 3.6% in second-quarter 2018. Adjusted earnings of $1.08 per share missed the Zacks Consensus Estimate of $1.12. Results came in line with the prior-year quarter earnings. Notably, results exclude net discrete income tax expense of 10 cents per share. Including non-recurring items, net income came in at $5.2 billion or 98 cents per share compared with $5.9 billion or $1.08 per share in the prior-year quarter.
Higher-than-expected trading revenues and rise in demand for loans drove JPMorgan’s (JPM - Free Report) second-quarter 2018 earnings of $2.29 per share, which outpaced the Zacks Consensus Estimate of $2.22. The figure was up 26% from the prior-year quarter. Unexpected improvement in trading activities, mainly driven by escalating trade war tensions between the United States and China, boosted JPMorgan’s market revenues. Fixed income trading and equity trading revenues were up 7% and 24%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
U.S. Bancorp's (USB) Q2 Earnings Beat on Higher Revenues
Reflecting top-line strength and lower provisions, U.S. Bancorp’s (USB - Free Report) second-quarter 2018 earnings per share of $1.02 outpaced the Zacks Consensus Estimate by a penny. Also, results came ahead of the prior-year quarter earnings of 85 cents.
Easing margin pressure on rising rates was witnessed in the quarter. Moreover, revenues improved, aided by rise in net interest, as well as fee income. Further, elevated average loans and deposits balances, along with lower provisions, were tailwinds. However, escalating expenses and lower mortgage banking revenues were major drags.
Net income was $1.8 billion, up 16.3% year over year.
Revenues, Loans & Deposits Grow, Costs Flare Up
U.S. Bancorp’s net revenues came in at around $5.6 billion in the quarter, up 3.5% year over year. Increase in net interest as well as non-interest income led to this rise. Revenues came in line with the Zacks Consensus Estimate.
U.S. Bancorp’s tax-equivalent net interest income totaled $3.2 billion in the quarter, up 4.1% from the prior-year quarter. The upswing mainly stemmed from earning assets growth and rising interest rates.
Average earning assets climbed 2.2% year over year, supported by growth in average total loans and average investment securities, along with elevated average other earning assets. Furthermore, net interest margin of 3.13% was up 5 basis points year over year, driven by higher interest rates. Loan mix, higher funding costs and the impact of tax reform partially mitigated rise in margins.
U.S. Bancorp’s non-interest income escalated 2.8% on a year-over-year basis to $2.4 billion. The upsurge was mainly due to rise in mostly all components of income, partially offset by lower treasury management fees, mortgage banking revenues and commercial products revenues.
Provision for credit losses decreased 6.6% year over year to $327 million in the reported quarter.
U.S. Bancorp’s average total loans inched up 1.1% year over year to $278.6 billion. The growth stemmed from a rise in commercial loans, residential mortgages, total other retail and credit card loans. These increases were partially offset by a drop in commercial real estate and covered loans. Excluding covered loans, average total loans rose 1.4% year over year.
Average total deposits were up 1.1% from the prior-year quarter to $334.8 billion. The upsurge was due to growth in interest-bearing deposits, partly offset by lower non-interest-bearing deposits.
Non-interest expenses flared up 3.4% year over year to $3.1 billion at U.S. Bancorp. The upswing in mostly all components of non-interest expenses was partially offset by lower professional services, other expenses, along with other intangibles.
Credit Quality: A Mixed Bag
Credit metrics at U.S. Bancorp was mixed in the reported quarter. Net charge-offs came in at $332 million, down 2.4% year over year. On a year-over-year basis, the company experienced deterioration, mainly in net charge-offs in the credit card segment, offset by improvement in residential mortgages.
U.S. Bancorp’s non-performing assets (excluding covered assets) came in at $1.1 billion, down 15.4% year over year. However, 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 10.5% compared with 11.1% in the prior-year quarter. Common equity Tier 1 capital to risk-weighted assets ratio under the Basel III standardized approach fully implemented was 9.3% as of Jun 30, 2018, down from 9.4% 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 11.6% as of Jun 30, 2018, compared with 11.7% as of Jun 30, 2017.
The tangible common equity to tangible assets ratio was 7.8% as of Jun 30, 2018, compared with 7.5% as of Jun 30, 2017.
U.S. Bancorp posted an improvement in book value per share, which increased to $27.02 as of Jun 30, 2018, from $25.55 recorded at the end of the year-earlier quarter.
Capital Deployment Update
Reflecting the company’s capital strength during the second quarter, U.S. Bancorp returned 69% of earnings to its shareholders through common stock dividends and buybacks.
Recently, following the Fed’s approval for the company’s 2018 Capital Plan, U.S. Bancorp announced an increased quarterly common stock dividend of 37 cents per share on its common stock, up 23% from the prior payout.
Further, the company’s board of directors has approved a new common stock repurchase authorization of up to $3 billion worth shares, replacing the authorization approved in July 2017.
Conclusion
U.S. Bancorp posted an impressive quarter. Rise in revenues, aided by increase in lending activities and deposits are expected to continue. Moreover, rising margins and lower provisions are likely to continue on an improving economy.
Nevertheless, weakness in the credit card portfolio might continue to impact asset quality. Also, escalating expenses remain a headwind.
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
Driven by top-line strength, Citigroup (C - Free Report) delivered a positive earnings surprise of 5.2% in second-quarter 2018. Earnings from continuing operations per share of $1.62 for the quarter easily outpaced the Zacks Consensus Estimate of $1.54. Also, earnings were up 28% year over year. Overall high revenues were reflected, driven by elevated banking, equity markets and consumer banking revenues, along with loan growth. Moreover, expenses remained stable. However, fixed income market revenues disappointed.
Wells Fargo (WFC - Free Report) recorded negative earnings surprise of 3.6% in second-quarter 2018. Adjusted earnings of $1.08 per share missed the Zacks Consensus Estimate of $1.12. Results came in line with the prior-year quarter earnings. Notably, results exclude net discrete income tax expense of 10 cents per share. Including non-recurring items, net income came in at $5.2 billion or 98 cents per share compared with $5.9 billion or $1.08 per share in the prior-year quarter.
Higher-than-expected trading revenues and rise in demand for loans drove JPMorgan’s (JPM - Free Report) second-quarter 2018 earnings of $2.29 per share, which outpaced the Zacks Consensus Estimate of $2.22. The figure was up 26% from the prior-year quarter. Unexpected improvement in trading activities, mainly driven by escalating trade war tensions between the United States and China, boosted JPMorgan’s market revenues. Fixed income trading and equity trading revenues were up 7% and 24%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>