Can US Bancorp Stay on Top of Banking?

Shares of US Bancorp (NYSE: USB  ) hit a 52-week high yesterday. Let's look at how it got here and see whether clear skies are ahead.

How it got here
There haven't been a lot of happy days for investors in bank stocks recently, but one unsuspecting company has given something for investors to cheer about. Amid trading turmoil at JPMorgan Chase (NYSE: JPM  ) and an investigation into too-big-to-fails for rigging of the LIBOR rates, regional powerhouse US Bancorp has slowly chugged along to a new high.

This is like a tortoise-and-hare story, with the slow and steady bank's strategy of making loans and providing banking services to customers proving to be more profitable for investors than dealing massive amounts of complex derivatives and proprietary trading. Over the past five years, this has led the stock to outperform giants such as Goldman Sachs (NYSE: GS  ) , Bank of America (NYSE: BAC  ) , JPMorgan, and Citigroup (NYSE: C  ) .

USB Chart

USB data by YCharts

The reason for the stock's outperformance is easy. US Bancorp leads the pack in return on assets and return on equity, and it has earned a higher price/book value than its competitors. Not only is the more conservative approach proving more profitable, but the market is giving it higher multiples as well.



Return on Assets

Return on Equity

Forward P/E

US Bancorp 1.9 1.6% 14.8% 11.0
Goldman Sachs 0.7 0.4% 5.2% 7.9
Bank of America 0.4 0% 0% 8.3
JPMorgan Chase 0.8 0.8% 9.6% 6.7
Citigroup 0.4 0.6% 6.2% 6.0

Source: Yahoo! Finance.

What's next?
So can US Bancorp keep moving higher? The basic problem for banking stocks is the risk they pose to investors who don't know what kind of ticking time bombs might be on their balance sheets. A more conservative balance sheet doesn't mean that US Bancorp doesn't pose a risk, but there is a smaller likelihood of massive sudden losses than with other banking stocks. For that reason, I think the stock can slowly move higher, but I wouldn't expect it to wildly outperform the market with the economy mired in a weak recovery.

The CAPS community also has high regard for the stock, giving it a four-star rating (out of five).

This is best-in-breed of the large banks, but we've identified another banking stock that is a great pick for individual investors. Find out which stock it is in a free report.

Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of Goldman Sachs. 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. The Motley Fool has a disclosure policy.

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Related Tickers

10/24/2016 4:01 PM
USB $44.02 Up +0.17 +0.00%
US Bancorp CAPS Rating: ****
BAC $16.77 Up +0.10 +0.00%
Bank of America CAPS Rating: ****
C $49.58 Up +0.01 +0.00%
Citigroup CAPS Rating: ***
GS $175.12 Up +0.45 +0.00%
Goldman Sachs CAPS Rating: ***
JPM $68.87 Up +0.38 +0.00%
JPMorgan Chase CAPS Rating: ****