U.S. Bancorp: Valuation And A Vanishing Deal Overhang Should Help Address Underperformance

Nov. 28, 2022 7:29 PM ETU.S. Bancorp (USB)MUFG5 Comments
Stephen Simpson profile picture
Stephen Simpson
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Summary

  • U.S. Bancorp has continued to underperform its large bank peers, but the regulatory go-ahead for the Union Bank deal should ease at least one sentiment issue.
  • U.S. Bancorp delivered better-than-average loan growth in Q3, including strong commercial loan growth, but weaker core deposits and higher funding costs are a risk into 2023.
  • USB doesn't stand apart from its peers on metrics like ROTCE like it once used to, but the market seems to be pricing in less than 2% long-term growth.
  • A core earnings growth rate in the 4% range, a mid-20%s ROTCE, and a forward P/E a bit above 10 can all support a fair value in the low-to-mid $50s today.
US Bank ATM and branch

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Once one of the most well-regarded banks among the large-caps, U.S. Bancorp (NYSE:USB) hasn’t seen the same enthusiasm from investors in recent years and the shares have lagged their peers not only over the last year, but the

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Stephen Simpson profile picture
18.39K Followers
Stephen Simpson is a freelance financial writer and investor. Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds); now a semi-retired raccoon rancher. That last part isn't entirely true. Probably.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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