USB: What Credit Crisis?
By
Tom Hutchinson
April 16, 2008
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Like a soldier spraining his ankle in the Battle of Gettysburg, US Bancorp (NYSE: USB) has incurred very minor wounds in the midst of an industry bloodbath.
US Bancorp reported earnings on Tuesday, and the numbers showed the bank to be a model citizen in an industry increasingly fraught with troublemakers. Revenue for the first quarter of 2008 came in at $3.87 billion, a 14% rise from last year's $3.39 billion. Net income fell only 3.5% to $1.09 billion, or $0.62 per share, from $1.13 billion, or $0.63 per share, in the first quarter of 2007.
The drop was a result of writing off $253 million in structured debt and reserving a credit loss provision of $485 million. Those amounts counteracted both revenue growth and a $492 million profit on the shares US Bancorp sold as part of Visa's (NYSE: V) IPO.
In the current climate, these numbers are phenomenal. Think about it. The nation's seventh largest bank actually increased revenue and barely decreased net income in the midst of what the International Monetary Fund calls the worst banking crisis since the Great Depression. US Bancorp wrote off just millions in the first quarter, while UBS (NYSE: UBS), Merrill Lynch (NYSE: MER), and Citigroup (NYSE: C) have already collectively written off tens of billions, and they are by no means finished. UBS and Merrill probably spend $485 million on pizza for the employees who work overtime processing the credit-provision paperwork.
So US Bancorp has given the market a good piece of news early in an eagerly anticipated week that will include other highly anticipated earnings announcements from JPMorgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC). After these earnings come out, we may very well know whether we're through the worst of the credit crisis or whether we're in for a much longer and more painful ordeal.
US Bancorp has long been regarded as a well-managed bank, and it continued to bear that reputation out today. As Chairman and CEO Richard K. Davis pointed out, today's numbers "reflected the disciplined approach we have taken toward managing credit and operating risk."
Today, US Bancorp proved that some banks, whose management didn't bask in the instant gratification of ill-gotten subprime profits, can get through this crisis just fine.
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