The U.S. Bank Tower in Portland, Oregon. Image source: Wikimedia Commons.
Every bank claims to operate prudently and efficiently, but U.S. Bancorp (USB +1.01%) is one of the few that actually back it up with indisputable results.
A review of its annual reports and shareholder letters dating back to the year 2000 proves this beyond doubt. That was the year Minneapolis-based Firstar acquired and assumed the name of U.S. Bancorp, which had been founded in Portland, Oregon, in 1891.
What this review demonstrated to me, a writer with a deep interest in the history of American banking, is that U.S. Bancorp's leadership not only appreciates the perils of operating in a viciously cyclical industry with little room for error, but also that it has long exploited the opportunities presented therefrom.
Its stellar reputation for honesty and integrity strengthened its brand after its money-center peers got caught facilitating the accounting scandals at companies like Enron and Worldcom that came to light in 2001 and 2002.
The de-risking of its balance sheet from 2000 to 2005 positioned U.S. Bancorp to avoid the worst excesses of the financial crisis. This helped it surge ahead of its less prudent peers in the following years, as customers and investors sought out banks that were strong enough to lend in the wake of the worst economic downturn since the Great Depression.
Its disciplined approach to acquisitions, focusing on fee-based businesses and piecemeal purchases in existing markets, allowed U.S. Bancorp to sidestep the egregious destruction of shareholder value that washed over the bank industry after the proverbial tide went out in 2008.
Its dedication to industry-leading efficiency, a boring and unsexy concept that only the greatest bankers genuinely appreciate, gives it margins that are the envy of even otherwise highly efficient banks like Wells Fargo.
While many other bank CEOs fought the post-crisis regulations that have made the financial industry safer and more accountable, U.S. Bancorp embraced them. Part of this was undoubtedly because the $422 billion bank agreed with the spirit of the rules. But it's also because the bank's leadership understands that a strong and stable financial industry provides the fuel that powers America's extraordinary economic engine.
And its long-running dedication to returning the majority of its earnings to shareholders, split roughly evenly between dividends and stock buybacks, constantly reaffirms its commitment to the owners of its stock. It's worth pointing out that doing so also reduces U.S. Bancorp's incentive to squander capital on overpriced, speculative investments.
These traits have produced industry-leading results. Measured by total shareholder return, U.S. Bancorp has outperformed every single one of its big bank peers since its transformative merger in Oct. 2000. This is a track record that every investor, employee, and customer of the bank can (and should) be proud of.
