Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



U.S. Bancorp Earnings Show Solid Performance

By the looks of it, U.S. Bancorp (NYSE: USB  ) didn't get the memo about the headwinds facing the financial industry. Earlier today, the nation's largest regional bank reported third-quarter earnings that were almost indistinguishable from both the second quarter, and the same period last year.

For the three months ended Sept. 30, the Minnesota-based bank earned $1.43 billion, or $0.76 per diluted share, of common stock. The figure was a mere $14 million less than last quarter, and only $2 million below the third quarter of 2012.

According to president and chief executive officer Richard Davis, the results "reflected our continuing ability to manage through the current uncertain and slow-growing economy." Even though I'm obviously less biased than Davis, I'd have to agree with his conclusion.

One of the prevailing themes this earnings season is that banks are seeing revenues decimated by a drop in income from mortgage banking and fixed-income trading activities. JPMorgan Chase (NYSE: JPM  ) , the nation's largest bank by assets, provides a case in point. These two things alone reduced revenue at the megabank by $2 billion compared to the second quarter.

Although U.S. Bancorp was not entirely immune from these trends, it emerged from the quarter in considerably better shape than many of its peers. In the first case, because it doesn't have the same level of investment banking operations as the too-big-to-fail banks, it wasn't exposed to the drop in trading revenue. In addition, its income from mortgage banking fell by a comparatively reasonable 17% on a sequential basis.

To make up for the drop, most of U.S. Bancorp's peers looked to a reduction in loan loss provisions. This is the reason, for instance, that Wells Fargo (NYSE: WFC  ) was able to legitimately claim that its earnings rose for the 15th consecutive time, as it set aside only $75 million for anticipated loan losses going forward -- a far cry from the $1.6 billion that it expensed in the same quarter last year. And while U.S. Bancorp did follow suit, it wasn't nearly to the same degree, given that quarterly provisions fell to $298 million, down from $488 million in 2012.

But nothing speaks to U.S. Bancorp's accomplishments (click here to read about the secret to its success) more than its expense and profitability metrics, which can be considered benchmarks for the entire industry. With an efficiency ratio of 52.4%, shareholders receive nearly half of every dollar that the bank earns in revenue. This point is underlined by U.S. Bancorp's exceptional 15.4% return on equity, which is still almost unheard of from other players in the industry.

At the end of the day, there's no question U.S. Bancorp's stock trades for a pretty penny at 2.7 times tangible book value. Results like last quarter's prove, however, that this premium is duly earned.

Discover the stock Warren Buffett wishes he could buy, but can't
It's often assumed that small investors are at a great disadvantage relative to hedge fund managers and other institutional investors. But that's not always true. Bound by multibillion-dollar portfolios, and strict bylaws that govern what they can and can't invest in, these giants are often prohibited from tapping the market's greatest stocks until it's too late -- that is, after the stocks have already shot into large-cap status. In this free report, our analysts identify one such stock that Warren Buffett himself wishes he could buy but is effectively restricted from doing so because of its size. To discover the identity of this stock instantly (and for free!), simply click here now.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2686125, ~/Articles/ArticleHandler.aspx, 9/27/2016 11:57:45 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:01 PM
JPM $66.36 Up +0.58 +0.88%
JPMorgan Chase CAPS Rating: ****
USB $42.90 Up +0.43 +1.01%
US Bancorp CAPS Rating: ****
WFC $45.09 Up +0.21 +0.47%
Wells Fargo CAPS Rating: ****