What happened

Shares of US Bancorp (USB -1.67%) dropped last month, as the stock price fell 12.8% in May, according to S&P Global Market Intelligence. US Bancorpʻs stock price is down about 28% year to date, trading at around $31 per share as of June 5.

Looking at the broader markets, the S&P 500 index ticked up 0.3% in May, while the Dow Jones Industrial Average was down 3.5% and the Nasdaq Composite jumped 5.9%.

So what

US Bancorp, the holding company for U.S. Bank, is the fifth-largest bank in the country with about $590 billion in assets as of March 31. It is considered a super-regional bank with a near national footprint.

A major catalyst for the bankʻs May decline was the news that Berkshire Hathaway had dropped US Bancorp from its holdings entirely. This came out in the companyʻs 13F filing, which dropped mid-month. This is a stock that Berkshire Hathaway Chairman and CEO Warren Buffett had owned since 2006 and, just a year ago, was the company's ninth-largest holding, representing about 1.9 percent of the overall portfolio. 

Obviously, Buffett and his team soured on the bank stock, which resulted in a bit of a sell-off.

Overall, it wasnʻt a great month for banks, which are still grappling with the fallout from the March and April bank failures. One of the factors that moved bank stocks last month was the May 11 announcement by the Federal Deposit Insurance Corporation (FDIC) of a special assessment on banks to recover funds depleted from its Deposit Insurance Fund (DIF).

Later in the month, bank stocks, including US Bancorp, dropped after the FDICʻs quarterly report revealed that the banking system lost $472 billion in deposits in the first quarter. This 2.5% decline in deposits was the largest quarterly drop since 1984 when the FDIC began tracking it. 

Now what

As a large, super-regional bank, US Bancorp was not as impacted by dwindling deposits as some of the smaller regional banks were. In fact, In the first quarter, US Bancorp saw deposits increase about 12.4% year over year to $510 billion, buoyed by the acquisition of MUFG Union Bank, which closed in late 2022. Post the early March bank failures, until the end of the quarter, US Bancorp deposits were relatively stable.

Revenue and earnings were solid in the first quarter, too, with revenue up 28% year over year and net income up 9%. The big issue was liquidity, as the common equity tier 1 (CET1) ratio dropped to 8.5% from 9.8% after the first quarter of 2022. That is still above the required 7%, but lower than most of its peers'.

On the Q1 earnings call, CEO Andy Cecere said it was related to the merger of Union Bank and he expects it back to 9% by the end of the year, as the integration process reveals synergies and cost savings. In the first-quarter report, the company said it does not expect any share repurchases until it reaches 9%. Keep an eye on that CET1 ratio as we head into the third quarter.