U.S. Bancorp Q3 Earnings Surpass Estimates on Lower Expenses

U.S. Bancorp’s USB third-quarter 2024 adjusted earnings per share (excluding the impacts of notable items) of $1.03 beat the Zacks Consensus Estimate by 3%. However, the bottom line decreased 1.9% from the prior-year quarter.

Find the latest earnings estimates and surprises on the Zacks Earnings Calendar.

USB shares have gained 2.1% in the early market trading session on better-than-anticipated earnings. A full day’s trading will depict a better picture.

Results have benefited from lower expenses. Also, a strong capital position was a tailwind. However, a decline in net interest income (NII) and non-interest income created major headwinds.

Net income (GAAP basis) attributable to U.S. Bancorp was $1.71 billion, up 12.5% from the prior-year quarter.

USB’s Revenues & Expenses Fall

Total revenues in the reported quarter were $6.83 billion, down 2.4% year over year. The top line missed the Zacks Consensus Estimate by 0.7%.

The tax-equivalent NII totaled $4.17 billion, down 2.4% from the year-ago quarter. The downside was primarily caused by the impacts of higher interest rates on deposit mix and pricing, partially offset by higher rates on earning assets and balance sheet optimization activities.

The net interest margin of 2.74% contracted 7 basis points year over year.

Non-interest income moved down 2.4% year over year to $2.69 billion. The downside was due to the net loss on the sale of securities, decreased service charges and lower other revenues, partially offset by higher fee revenues across all other categories.

Non-interest expenses declined 7.2% year over year to $4.20 billion. The fall was due to lower other non-interest expenses, partially offset by higher compensation and employee benefits. 

The efficiency ratio was 60.2%, lower than the year-ago quarter’s 64.4%. A decline in the ratio indicates an improvement in profitability.

U.S. Bancorp’s Loans & Deposit Balances Decline

Average total loans declined marginally to $374.1 billion from the previous quarter. Average total deposits decreased 1% from the previous quarter to $508.8 billion.

USB’s Credit Quality Deteriorates

Total allowance for credit losses was $7.93 billion, up 1.8% year over year. As of Sept. 30, 2024, U.S. Bancorp’s non-performing assets amounted to $1.85 billion, up 41.1% from the year-ago period.

The increase in non-performing assets resulted from higher commercial and commercial real estate non-performing loans.

Net charge-offs were $564 million, up from $420 million in the year-ago quarter. The provision for credit losses in the reported quarter was $557 million, up 8.2% from the prior-year quarter.

U.S. Bancorp’s Capital Ratios Improve

The Tier 1 capital ratio was 12.2% as of Sept. 30, 2024, up from 11.2% in the prior-year quarter. The Common Equity Tier 1 capital ratio under the Basel III standardized approach was 10.5% as of Sept. 30, 2024, up from 9.7% in the year-ago quarter.

The tangible common equity to tangible assets ratio was 5.7%, up from the prior-year quarter’s 5.0%.

USB’s Outlook

Q4

Net interest income is projected to be relatively stable compared with the third quarter reported figure.

2024

Net interest income is expected to be $16.1- $16.4 billion.

Adjusted total non-interest income is anticipated to register mid-single-digit growth from the $10.8 billion reported in the year-ago period.

Adjusted total non-interest expenses are projected to be $16.8 billion.

Our Take on U.S. Bancorp

USB’s solid business model and diverse revenue streams are likely to keep aiding its financials in the upcoming period. The company has been growing through acquisitions. However, a rise in provision and weakening asset quality are major concerns.

U.S. Bancorp Price, Consensus and EPS Surprise

Currently, U.S. Bancorp carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performances of Other Banks

The Bank of New York Mellon Corporation’s BK third-quarter 2024 adjusted earnings of $1.52 per share surpassed the Zacks Consensus Estimate of $1.41. Also, the bottom line reflects a rise of 19.7% from the prior-year quarter.

BK’s results have been primarily aided by a rise in fee revenues and net interest income (NII). The assets under custody and/or administration and assets under management (AUM) balances grew on a solid market rally. However, a rise in non-interest expenses and provisions hurt the results to some extent.

State Street Corporation’s STT third-quarter 2024 earnings of $2.26 per share surpassed the Zacks Consensus Estimate of $2.08. The bottom line also increased 80.8% from the prior-year quarter.

Results were primarily aided by growth in fee revenues and higher net interest revenues. Also, the company witnessed improvements in the total assets under custody and AUM balances. However, higher expenses hurt the results to some extent.

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