U.S. Bancorp (USB - Free Report) remains well poised to benefit from improving economic backdrop along with its consistent efforts to drive efficiency and revenues. The company exhibits a well-diversified product mix, capital strength and sound decision-making capabilities.
However, escalating costs remain a key concern for the company. Also, pending legal matters continue to weigh on U.S. Bancorp’s financials.
The company’s second-quarter 2018 results were impressive as they reflected higher revenues, lower provisions and an improved balance sheet position. Revenue growth was aided by higher net interest income and fee income.
So far this year, shares of U.S. Bancorp have gained 1.1%, underperforming the industry’s rally of 4%.
Moreover, the Zacks Consensus Estimate for the company’s current-year earnings has been revised slightly upward, over the last 30 days. The stock currently carries a Zacks Rank #3 (Hold).
U.S. Bancorp has experienced robust balance sheet growth in the past few years, backed by its constant efforts to deepen existing relationships and improving customers experience through introduction of new products. Notably, the company’s average deposits and loans reflected a CAGR of 7.4% and 5%, respectively, over the last five years (ended 2017). The increasing trend continued in the first half of 2018 as well.
U.S. Bancorp has made a number of strategic bank acquisitions in the past years which helped it bolster its fee-based businesses apart from increasing market share. Further, the company remains committed to investing in technology with special focus on areas such as modes of payment along with digital/mobile banking. These initiatives are likely to greatly enhance customer satisfaction and might boost the company’s client base over the long term.
However, U.S. Bancorp’s increasing expenses remain a major concern. Costs have recorded a CAGR of 5.9% over the last five years (2013-2017) with the trend continuing in first six months of 2018. Given a persistent rise in compensation expenses and investment in technology platform, costs are likely to remain elevated in the near term.
Also, U.S. Bancorp continues to encounter many investigations and lawsuits from the investors and regulators. Though the company resolved certain litigations related to the sale of risky mortgage backed securities, many of the cases are yet to be resolved. All these are expected to lead to increased legal expenses and provisions in the near term.
Stocks to Consider
Comerica Incorporated (CMA - Free Report) has witnessed 4.6% upward estimate revision over the last 30 days. Also, the company’s shares have risen nearly 41% in the past year. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
M&T Bank Corporation (MTB - Free Report) has witnessed upward estimate revision of 2.1% over the last 30 days. Additionally, the stock has jumped more than 13% in a year’s time. It currently carries a Zacks Rank #2 (Buy).
Northern Trust Corporation’s (NTRS - Free Report) Zacks Consensus Estimate for current-year earnings has been revised 3% upward over the last 30 days. Also, the company’s shares have risen nearly 30% in the past year. It carries a Zacks Rank of 2, at present.
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