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US Bancorp Outshines Fellow Banks

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The country's fifth largest lender, US Bancorp (NYSE: USB  ) saw its first-quarter profits rise by a staggering 28%. The results beat analyst estimates as the bank's revenues grew along with a reduction in its credit losses.

The Midwest bank, which has never posted a quarterly loss under CEO Richard Davis, saw its net income rise to $1.34 billion, which translates to $0.67 per share, ahead of the $0.64 analysts had expected.

USB's solid profit growth was driven by strong growth in its top line. Net interest income rose 7.3%, whereas non-interest income grew by 11.3%, helped by USB's mortgage banking activities, whose revenue more than doubled for the quarter.

One problem for banks' top lines has been historically low interest rates, but USB managed to counteract the pressure with strong loan growth. Average total loans for the banks rose by 6.4%, with a robust 17% growth in commercial borrowing, followed by a staggering 26% rise in commercial and commercial-real-estate commitments. Overall, the bank experienced new lending activity to the tune of $56 billion. With interest rates being as low as they are, loan growth should come as good news for any bank.

Apart from increased lending activity, another big positive out of USB's quarter was the improvement in its credit quality. One thing that helped the bank boost its bottom line was the sharp fall in its provision for loan losses. USB's loan-loss provisions declined by a whopping 36% to $481 million in the quarter.

Net chargeoffs declined by 41% to $571 million on a year-on-year basis. At the same time, nonperforming assets fell by 30.35% to $2.42 billion from a year ago. The decline in NPAs was mainly due to a fall in commercial and commercial-real-estate nonperforming assets. USB's Tier 1 capital ratio stood at 10.9% at the end of the quarter – indicating a pretty strong capital position.

On the whole, USB reported a solid quarter to kick off 2012. Its results especially stand out as earnings at major banks so far have been sort of a mixed bag. For instance, Citigroup (NYSE: C  ) saw both its earnings and revenues decline marginally, whereas JPMorgan Chase (NYSE: JPM  ) saw its revenues rise but profits fall by 3.1%.   

Following the recent round of stress tests, US Bancorp raised its annual dividend by 56%. Peer JPMorgan Chase also raised its quarterly dividends by 20% and announced plans to buy back $15 billion worth of its shares. Citi, on the other hand, saw its capital plans rejected by the Federal Reserve as it flunked the tests.

US Bancorp certainly looks like a pretty solid stock and one worthy of keeping tabs on with the Fool's free My Watchlist service.

To find out about another top-notch regional bank and see why our analysts think it's a promising stock, check out our brand-new free report: "The Stocks Only the Smartest Investors Are Buying." We invite you to download a free copy to find out the name that may have interested a younger Warren Buffett.

Fool contributor Shubh Datta doesn't own any shares in the companies mentioned above. The Motley Fool owns shares of Citigroup and JPMorgan Chase. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Related Tickers

10/20/2016 4:04 PM
USB $43.95 Down +0.00 +0.00%
US Bancorp CAPS Rating: ****
C $49.58 Down +0.00 +0.00%
Citigroup CAPS Rating: ***
JPM $68.26 Down +0.00 +0.00%
JPMorgan Chase CAPS Rating: ****