U.S. Bancorp's Steady Excellence Worth A Premium
Stephen Simpson, CFA
Stephen Simpson, CFA
U.S. Bancorp Seeing Stable Credit And Early Signs Of Loan Growth
Stephen Simpson, CFA
Stephen Simpson, CFA
Fri, Jul. 22, 2:52 PM
- "Both the knuckles are white, but we’re hanging in there," said U.S. Bancorp (USB +0.6%) CEO Richard Davis on his company's earnings call last week.
- Net interest margins for banks got a brief boost early this year after the Fed hiked rates in December, but there's been no hikes since, and margins are back on the decline.
- "This is really difficult for banks," said Huntington Bancshares (HBAN +1.1%) CEO Steve Steinour, whose bank last year stopped assuming any rate increases when making financial projections.
- "There are ways to compensate," said Citizens Financial (CFG +0.8%) CEO Bruce Van Saun, whose company topped expectations, and announced new cost-cutting initiatives.
Fri, Jul. 15, 2:55 PM
- There aren't a whole lot of catalysts for bank stocks unless there's a sustained rise in the 10-year Treasury yield, says FBR's Paul Miller. "I'm going to be buying these things all day long," will be investors' attitude once yields do move higher.
- Until then, one might have a look at those with high exposure to mortgages - Wells Fargo (NYSE:WFC), U.S. Bancorp (NYSE:USB), and PNC Financial (NYSE:PNC) - as they stand to benefit from the refinancing boom. This has risks as well as refi booms inevitably burn themselves out.
- ETFs: XLF, KBE, KRE
Fri, Jul. 15, 7:21 AM
- Q2 net income of $1.522B or $0.83 per share vs. $1.483B and $0.80 one year ago. Special items boosted this year's result by $0.01 per share, but that's still a $0.02 beat.
- Net interest income of $2.896B up 4.5% Y/Y, with NIM of 3.02% down one basis point. Average loans of $266.6B up 8.1%. Average deposits of $21.6B up 7.6%.
- Noninterest income of $2.5522B up 12.3% Y/Y, but excluding the Visa Europe sale, was up just 4.4%. Credit and debit card revenue of $296M up 11.3%. Mortgage banking revenue of $238M up 3%.
- Noninterest expense of $2.992B up 11.6% Y/Y, but excluding items was up just 6%. Compensation expense up 6.8%. Professional services expense up 14.2%.
- ROA of 1.43%, ROE of 13.8%, efficiency ratio of 54.9%, or 54% excluding items.
- CC at 8 ET
- Previously: U.S. Bancorp beats by $0.03, beats on revenue (July 15)
- USB +1.5% premarket
Fri, Jul. 15, 6:51 AM
Thu, Jul. 14, 5:30 PM
Mon, Jul. 11, 3:40 PM
- While nearly all major U.S. banks cruised through the stress tests last month, writes David Schawel, those exams are about determining if lenders have enough capital to get through a crisis, not whether they can earn the sort of risk-adjusted returns of the past.
- On this front (for insurers as well as banks), there's plenty more for investors to worry about, he says, thanks to the vanishing spread between short rates (what the companies pay on their liabilities), and long rates (what they earn on their assets).
- A new Fed study finds the adverse effect of weaker net interest margins is materially larger when rates are low. The reason: The lower bound of funding costs is zero as institutions are reticent to charge negative rates.
- Investors interested in buying banks or insurers because of seemingly cheap valuations might want to look again. Bank multiples, says Schawel, typically move alongside ROE, and serious improvement in ROE is unlikely with rates remaining low.
- Interested parties include: BAC, C, JPM, WFC, MET, PRU, LNC, PNC, USB, RF, KEY, KRE, KBE
Wed, Jun. 29, 4:44 PM
Fri, Jun. 24, 11:58 AM
- The Too Big To Fail lenders are naturally among the day's big losers following the U.K. vote to leave the EU, but losses in the financial sector are wide and deep as - among other things - interest rates look to be a lot lower for a lot longer.
- Among asset managers, Invesco (IVZ -10.8%) - with a sizable U.K. exposure - is faring about the worst. WisdomTree (WETF -7.8%) takes a hit as the yen is the solo currency surging against the dollar, reducing demand for its popular hedged Japan ETF.
- It's wait till next year (or even 2018 if you believe short-term rate futures markets) for rate hikes, meaning regional lenders can't celebrate their passing of the Fed stress tests last night. Regions (RF -7.8%), KeyCorp (KEY -6.4%), PNC Financial (PNC -5.5%), U.S. Bancorp (USB -4.2%), BB&T (BBT -5.1%).
- Even lower rates put even more pressure on the business models of the life insurers: MetLife (MET -8.8%), Prudential (PRU -7.7%), Lincoln National (LNC -9.9%), Voya (VOYA -7%). Online brokers too: E*Trade (ETFC -9.4%), Schwab (SCHW -9.5%).
- ETFs: KRE, KBE, IAT, KBWB, QABA, KBWR, KRU, KRS, WDRW, DPST
Thu, Jun. 23, 4:51 PM
- Ally Financial (NYSE:ALLY): Actual end of 2015 CET1 ratio of 9.2%, Q1 2018 CET1 ratio under severely adverse scenario of 6.1%, minimum 6.1%.
- American Express (NYSE:AXP): Actual 12.4%, Q1 2018 12.3%, minimum 11.4%.
- Bank of America (NYSE:BAC): Actual 11.6%, Q1 2018 8.1%, minimum 8.1%.
- BNY Mellon (NYSE:BK): Actual 11.5%, Q1 2018 11.2%; minimum 10.5%.
- BB&T (NYSE:BBT): 10.3%, 6.9%, 6.9%
- BBVA Compass (NYSE:BBVA): 10.7%, 6.5%, 6.5%.
- BMO Financial (NYSE:BMO): 11.9%, 5.9%, 5.9%.
- Capital One (NYSE:COF): 11.1%, 8.2%, 8.2%.
- Citigroup (NYSE:C): 15.3%, 9.2%, 9.2%.
- Citizens Financial (NYSE:CFG): 11.7%, 8.8%, 8.8%.
- Comerica (NYSE:CMA): 10.5%, 8.3%, 8.3%.
- Discover (NYSE:DFS): 13.9%, 12.4%, 11.9%.
- Fifth Third (NASDAQ:FITB): 9.8%, 6.8%, 6.8%.
- Goldman Sachs (NYSE:GS): 13.6%, 10.2%, 8.4%.
- HSBC N.A. (NYSE:HSBC): 15.7%, 9.1%, 9.1%.
- Huntington Bancshares (NASDAQ:HBAN): 9.8%, 5%, 5%.
- JPMorgan (NYSE:JPM): 12%, 8.3%, 8.3%.
- KeyCorp (NYSE:KEY): 10.9%, 6.4%, 6.4%.
- M&T (NYSE:MTB): 11.1%, 6.9%, 6.9%.
- Morgan Stanley (NYSE:MS): 16.4%, 10%, 9.1%.
- Northern Trust (NASDAQ:NTRS): 10.8%, 9.6%, 9.6%.
- PNC Financial (NYSE:PNC): 10.6%, 7.6%, 7.6%.
- Regions (NYSE:RF): 10.9%, 7.3%, 7.3%.
- Santander Holdings (NYSE:SAN): 12%, 11.8%, 11.8%
- State Street (NYSE:STT): 13%, 9.6%, 9.6%
- SunTrust (NYSE:STI): 10%, 7.5%, 7.5%.
- TD Group (NYSE:TD): 13.1%, 8.4%, 8.4%.
- U.S. Bancorp (NYSE:USB): 9.6%, 7.5%, 7.5%.
- Wells Fargo (NYSE:WFC): 11.1%, 7.2%, 7.2%.
- Zions (NASDAQ:ZION): 12.2%, 6.6%, 6.6%.
- Previously: All 33 banks pass this year's stress tests (June 23)
Fri, Jun. 17, 2:50 PM
- Diving interest rates have banks scrambling to up their expectations of how much mortgage business they'll be doing this year. Wells Fargo (NYSE:WFC) expects volume to be 20-25% higher than the $1.5T it initially guided to. JPMorgan (NYSE:JPM) thinks business could be 50% higher than expected. U.S. Bancorp (NYSE:USB) is busy hiring more loan officers at branches and call centers, with most of the increase coming in Q2.
- The MBA expects new mortgages of $1.608T this year, up from $1.38T at 2016's start. It's also upping the share of refinancing activity to 40% from 33% earlier (still nowhere near the 71% hit in 2012).
- The pickup naturally is coming as interest rates have defied expectations once again, with the 10-year Treasury yield at multi-year lows and close to an all-time low. The average 30-year mortgage rate at 3.59% this week is the lowest since April 2013.
Wed, Jun. 15, 1:03 PM
Mon, Jun. 13, 12:15 PM
- Current vice chairman and CFO Kathy Rogers will exit the role effective August 1 due to changing family circumstances and the need to be in Cincinnati full-time. She will remain with USB in her previous role in charge of the Stress Test process.
- Currently vice chairman, Wealth Management & Securities Services, Terry Dolan will take over as CFO. He's been with the bank for 18 years.
- Source: Press Release
Thu, Jun. 2, 12:20 PM
- "Auto is clearly a little stretched, in my opinion," says JPMorgan (JPM -0.3%) CEO Jamie Dimon, speaking at a conference. "Someone is going to get hurt... we don't do much of that."
- Speaking at the same conference, U.S. Bancorp (USB -0.3%) CEO Richard Davis calls the auto loan market "overheated" thanks to pricing competition .“It’s a business you have to watch through the cycles, and right now it is probably at its least attractive. But in what could be a day, a month or a year, it could be very attractive.”
- Interested players: COF, SC, ALLY, CACC
Thu, May 26, 3:15 PM
- All banks in the team's coverage universe have plenty of room for capital return, says analyst John McDonald, expecting some to have sufficient cushions to be able to move payout ratios (dividends and buybacks) to close to 100% of earnings.
- Those most likely to have solid increases in payouts are Bank of America (NYSE:BAC), BB&T (NYSE:BBT), PNC FInancial (NYSE:PNC), and Citigroup (NYSE:C). Those with the least cushion are U.S. Bancorp (NYSE:USB), JPMorgan (NYSE:JPM), and Regions Financial (NYSE:RF).
Fri, May 20, 12:11 PM
- "The days of negative provisioning are pretty much dead," says D.A. Davidson's Kevin Reevey. "Now, they're going to have to take provisioning expense and build up reserves based on loan growth."
- Total bank loan loss reserves were north of $250B in Q1 2010, before falling to about $24B at the end of last year. Amid the energy crash, they edged higher in Q1. Naturally, those lenders with the most exposure to energy posted some of the largest reserve increases in Q1. "It wasn't just the levels that [oil] went to, it was the speed at which prices dropped," says Peter Guilfoile, chief credit officer at one of those banks - Comerica (NYSE:CMA). Colorado-based National Bank Holdings (NYSE:NBHC) posted the largest Q/Q increase in reserves-to-loans, jumping 39 basis points to 1.43%.
- Meanwhile, there were plenty of other banks which actually saw declines in that ratio, notably Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), and U.S. Bancorp (NYSE:USB). These and other lenders in that bucket can thank denominator of that ratio growing quickly enough to offset reserve builds.
- Source: SNL Financial's Zach Fox and Venkatesh Iyer
- ETFs: XLF, FAS, FAZ, KRE, UYG, VFH, KBE, IYF, BTO, IAT, IYG, FNCL, SEF, FXO, KBWB, QABA, KBWR, RYF, FINU, KRU, RWW, XLFS, FINZ, KRS, WDRW, DPST, FAZZ
Wed, May 18, 1:08 PM
- The meme of rates lower for longer has been stood on its head in the last 24 hours thanks to some decent economic data, but also surprisingly hawkish Fedspeak yesterday.
- The fixed-income world now believes remarks from the Fed's Williams and Lockhart yesterday may have been a preview of what we'll get when the real power speaks tomorrow - Fischer and Dudley - and then on May 27, when Janet Yellen gives a speech.
- Up at 2 ET are the minutes from the FOMC's April meeting.
- The 10-year yield is higher by five basis points to 1.82% and short-term rate markets have upped expectations for a Fed move this year.
- XLF +1.85%, KBE +3.15%, KRE +3.3%
- Bank of America (BAC +3.7%), Citigroup (C +4.2%), JPMorgan (JPM +3.2%), Wells Fargo (WFC +2.1%), U.S. Bancorp (USB +2.1%), Regions (RF +3.3%), KeyCorp (KEY +3.7%), PNC Financial (PNC +2.7%), Fifth Third (FITB +3.7%), Capital One (COF +1.9%), E*Trade (ETFC +4.4%), Schwab (SCHW +4.8%), MetLife (MET +2.9%), Prudential (PRU +3.4%), Lincoln National (LNC +4.2%), BNY Mellon (BK +2.3%), Northern Trust (NTRS +2.9%)
U.S. Bancorp operates as a bank holding company, which through its subsidiary provides banking services. It provides a full range of financial services, including lending and depository services, cash management, foreign exchange and trust and investment management services. The company also... More
Industry: Regional - Midwest Banks
Country: United States
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