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7 Things You Need to Know About U.S. Bancorp

By John Grgurich - Apr 10, 2013 at 11:03AM

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A few of my favorite things about this unsung bank.

Heard about U.S. Bancorp (USB 0.69%) lately? Probably not, and that's a good thing. U.S. Bancorp is the big bank with small drama: quietly -- but profitably -- going about its business year in and year out, and rewarding the patient, insightful investor who's looking for something a bit off the beaten path.

As a quick way of introduction to U.S. Bancorp, here are seven of my favorite things about this often overlooked bank.

1. U.S. Bancorp is a bigger bank than you think
Again, it's not bank that's in the news everyday, but for its size, it easily could be. With more than $353 billion in total assets, it's the seventh largest bank in the country, just ahead of Bank of New York Mellon (BK 1.80%)another low-drama bank that rewards the patient, long-term investor.

In and of itself, being big means nothing. But a big bank that's well-managed and conservatively run -- like U.S. Bancorp -- means it has enough resources and reach to generate profit, but likely won't get itself, or its investors, into trouble.

2. Great 2012 share-price performance
We all know that investor darling Bank of America (BAC 0.95%) returned better than 100% for investors in 2012, but less well-known is the fact that shares in U.S. Bancorp gained a big 15.81% in the same time period.

3. Great return on assets
ROA measures how well a company performs relative to its total assets and is broadly a measure of management effectiveness.

U.S. Bancorp's ROA is a big 1.58% trailing 12 months. JPMorgan Chase's (JPM 1.41%) ROA is only 0.92% TTM -- this from a bank widely recognized to be very well run.

4. Great return on equity
ROE is another measurement of management effectiveness, and looks at the amount of net income a company makes with its shareholder's money.

U.S. Bancorp's ROE is a big 14.59% TTM, significantly better than JPMorgan's 10.98%, and slightly better even than the normally indomitable Wells Fargo (WFC 0.64%), which has an ROE of 12.89%.

5. Solid fourth-quarter earnings
In the fourth quarter of 2012, U.S. Bancorp grew its revenue by 5.1% year over year, and its net income by 5.2% year over year. Not staggering, but solid, and easily beating B of A's -20.7% and -63.2% for the same respective categories.

6. U.S. Bancorp pays a solid dividend
2.3% isn't the biggest dividend in the world, but it's healthy. Wells Fargo only pays 2.7%, BNY Mellon only pays 1.9%, and investor-favorite B of A only pays 0.3%.

7. Great stress-test performance
U.S. Bancorp had a Tier 1 common ratio of 9% for 2013 and a stressed minimum of 8.3%, arguably better than JPMorgan's 10.4% and 6.3% (respective) performance. As a result, U.S. Bancorp will be raising its dividend by 18% and will be buying back $2.25 billion in shares.  

Foolish bottom line
In banking, it pays to be healthy and strong. U.S. Bancorp is practically the poster child for this. It's a low-drama, steady performer -- the perfect bank stock for Foolish investors.

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Stocks Mentioned

U.S. Bancorp Stock Quote
U.S. Bancorp
USB
$52.50 (0.69%) $0.36
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$37.02 (0.95%) $0.35
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$131.27 (1.41%) $1.83
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$45.89 (0.64%) $0.29
The Bank of New York Mellon Corporation Stock Quote
The Bank of New York Mellon Corporation
BK
$46.48 (1.80%) $0.82

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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