U.S. Bancorp's Steady Excellence Worth A Premium
Stephen Simpson, CFA
Stephen Simpson, CFA
Yesterday, 10:51 AM
- Rates are up across the globe again today, with the 10-year U.S. Treasury yield looking like it's ready for another assault on 2% - up 7 basis points on the session to 1.865%.
- Alongside a sharp move lower in REITs, the utility sector (XLU -0.9%) is facing a rough go of it.
- In the green though is the banking sector - (KBE +0.2%), (KRE +0.4%) - which has been awaiting a real move higher in rates for years. A big move on the long end while short rates hold (for now) is an added boost as it widens the yield curve.
- Bank of America (BAC +0.4%), Citigroup (C +0.4%), JPMorgan (JPM +0.4%), Wells Fargo (WFC +0.5%), PNC Financial (PNC +0.5%), Fifth Third (FITB +0.9%), U.S. Bancorp (USB +1.2%), BB& T(BBT +0.7%)
- Other high-yield beneficiaries include: MetLife (MET +0.9%), Lincoln Financial (LNC +1.3%), Schwab (SCHW +0.4%), Voya Financial (VOYA +0.9%).
- ETFs: XLF, FAS, FAZ, XLU, UTG, IDU, VPU, UYG, VFH, GUT, BUI, IYF, BTO, FUTY, IYG, FNCL, SEF, RYU, FXO, UPW, RYF, FXU, FINU, RWW, SDP, XLFS, FINZ, FUGAX, JHMF, FAZZ, FNCF, JHMU, UTLF
Wed, Oct. 19, 6:48 AM
Tue, Oct. 18, 5:30 PM
Wed, Oct. 5, 3:27 PM
- The continued rise in interest rates - the 10-year yield today breaching 1.70% - is giving additional fuel to the financial sector rally.
- The XLF's 1.7% advance today puts it in a tie with the energy sector's XLE. The S&P 500 is up just 0.45%.
- Banks, insurers, and brokers are all sharply ahead as investors envision the return of spread income. Even Wells Fargo (WFC +2.8%) is in the green - it's in fact atop the TBTF movers.
- Other gainers: Goldman Sachs (GS +2.4%), Morgan Stanley (MS +1.7%), U.S. Bancorp (USB +2.1%), SunTrust (STI +2.5%), PNC Financial (PNC +1.3%), E*Trade (ETFC +2.1%), Voya Financial (VOYA +4.7%), Lincoln National (LNC +2.4%).
Thu, Sep. 22, 3:31 PM
- Consumer complaint rates are likely to be an important metric for analyzing bank stocks going forward, and Piper's Kevin Barker and team combed through the CFPB database to see if any flags might be raised.
- What they found was that the biggest banks had the largest share of complaints (no surprise), but those with the highest rate of complaints per $1B of deposits were Fifth Third (NASDAQ:FITB), Citizens Financial (NYSE:CFG), BB&T (NYSE:BBT), and U.S. Bancorp (NYSE:USB).
- Running another screen, Barker found Citizens Financial, Wells Fargo, and Huntington Bancshares (NASDAQ:HBAN) were the lenders which most emphasized "cross-sell" or "increasing wallet share" in management comments over the past year.
Mon, Sep. 19, 9:28 AM
Thu, Sep. 15, 9:30 AM
- The lender only holds these events once every three years, and CEO Richard Davis kicked things off about an hour ago.
- Webcast and presentation slides
- The theme in this year's presentation is lowered expectations. Three years ago, the bank's ROE target was 16-19%, but it's achieved only 14.8%. The new ROE target is 13.5%-16.5%. Three years ago, the bank's ROA target was 1.6-1.9%, but it's achieved just 1.54%. The new ROA target is 1.35-1.65%.
- The targeted efficiency ratio three years ago was the low 50s, and 53.1% has been achieved since. That target remains the same.
- Embedded in these new expectations are a combined four 25 basis point rate hikes in 2017 and 2018, a steepening of the yield curve beginning in 2018, and GDP growth of 2-3% by 2018.
- USB -1.55%
Tue, Sep. 13, 2:09 AM
- Despite the penalties imposed on Wells Fargo (NYSE:WFC), there is probably no broader problem in the U.S. banking industry over abusive sales practices, according to the head of the Consumer Financial Protection Bureau.
- Regulators fined the company a total of $185M last Thursday, while Moody's warned the episode would negatively affect the bank's debt. Wells paid another $5M to customers for creating more than 2M fake accounts.
- Related tickers: JPM, C, BAC, MS, USB, COF, FITB, TD, PNC, STI
Thu, Sep. 1, 4:09 AM
- Despite an increasing regulatory burden and lackluster share performance, the U.S. banking industry just logged its most profitable quarter ever, according to figures from SNL Financial and S&P Global Market Intelligence.
- Earnings for the three-month period totaled $43.6B, compared to the $43.01B in Q2 of 2015, a 1.4% beat.
- On a sequential basis, the April-to-June period topped the previous quarter by $4.56B, an 11.7% rise.
- Related tickers: JPM, C, BAC, WFC, GS, MS, USB, BK, STT, PNC, COF
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