Why US Bancorp Investors Are Optimistic

Executives at U.S. Bancorp (

USB, Financial) said they see good things ahead in 2022 thanks to encouraging signs of consumer and business activity, even as profit for the first quarter fell due to a higher provision for credit losses.

The Minneapolis, Minnesota-based financial services holding company reported its first-quarter fiscal 2022 earnings results on Thursday. Net income of $1.55 billion resulted in diluted earnings per common share of 99 cents, which was 5.32% better than estimates. Return on assets was 1.09% and return on equity was 12.7%. Net revenue was $5.59 billion, including $3.2 billion of net interest income and $2.4 billion of non-interest income.

Despite beating estimates, net income was $723 million lower than the $2.28 billion recorded for the first quarter of 2021 and $116 million lower than the $1.67 billion for the fourth quarter of 2021, the company noted. Diluted earnings per common share also declined vs. the $1.45 achieved in the first quarter of 2021 and $1.07 in the fourth quarter of 2021. Bank officials said the decrease in net income year-over-year was primarily due to a higher provision for credit losses.

Shares closed Thursday trading at $52.71, a gain of $2.10, or 4.15%.

Despite the optimism of U.S. Bancorp’s top brass, stock analysts have noted a mixed performance of late, deeming the bank to be performing worse in comparison to larger competitors like Bank of America Corp. (

BAC, Financial), Citigroup Inc. (C, Financial) and Wells Fargo & Co. (WFC, Financial).

“We’re projecting pretty strong net interest income growth during the year, in the 8% to 11% range,” said Terry Dolan, the company’s Chief Financial Officer. “That’s as strong as it’s been for well over a decade, if not a couple of decades.”

“In the first quarter, we reported earnings per share of 99 cents and a return on tangible common equity of 16.6%,” said Andy Cecere, Chairman, President and CEO, in a statement. “Our results benefitted from healthy trends in consumer and business activity. We saw very strong loan growth, which drove solid growth in net interest income. Our fee revenue growth was supported by improving business activity and new business wins.”

Notably, Cecere explained, executives continued to see good momentum in the bank’s payments businesses, reflecting both continued cyclical recovery in pandemic impacted industries, particularly the travel and entertainment sectors, as well as the benefit from previous investments.

Net interest income increased 3.6% on a year-over-year taxable-equivalent basis due to higher loan and investment securities balances and favorable deposit and funding mix due in part to higher noninterest-bearing deposits, partially offset by lower loan yields and mix as well as lower loan fees driven by the impact of loan forgiveness related to the SBA Paycheck Protection Program in the first quarter of 2021. Pretax income before the provision for credit losses was essentially flat compared to a year ago.

Initiatives aimed at advancing digital offerings, expanding payment services capabilities and enhancing core technology are ongoing. Management also continues to work on integration activities related to the bank’s planned acquisition of Union Bancshares (

UNB, Financial).

“Our credit quality remains strong,” Cecere added, “and we continue to approach credit decisions with a through the cycle lens.” The year, he assured investors, “is off to a good start.”