We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
U.S. Bancorp (USB) Reiterates Q2 & 2023 View Amid Uncertainty
Read MoreHide Full Article
U.S. Bancorp (USB - Free Report) reiterated its second-quarter and full-year 2023 guidance at the Morgan Stanley US Financials, Payments & CRE Conference. The reiteration represents USB’s competence amid expectations of an economic slowdown/recession.
Because of the uncertainty related to debt ceiling, U.S. Bancorp built cash balances a little more than what was expected in the second quarter. As a result, its second-quarter 2023 net interest margin (NIM) might be slightly lower than the 3% projected earlier.
However, this is temporary and USB intends to restore cash to normal levels. Thus, the company’s NIM guidance for full-year 2023 remains in the 3-3.05% band.
Management said that the net-charge off ratio is expected to increase over time and reach the 50 basis points mark by mid-2024.
While the company has restated its guidance, it has made a minor change to the tax rate outlook for second-quarter and full-year 2023. Now, the adjusted income tax rate for each of second-quarter and full-year 2023 is expected to be 24%, slightly increased from the prior guidance of 23%.
Notably, in December 2022, U.S. Bancorp completed the acquisition of MUFG Union Bank’s core regional banking franchise, expanding its branch network and having greater access to digital banking tools.
In connection with the integration, USB’s chief financial officer Terry Dolan stated, “So, we're really fundamentally taking that 1.2 million customers and put it onto our platform and being able to utilize all the technology investment that we've already made.”
Dolan added, “And again, scale in this environment is critically important. If you think about it simply Union Bank allowed us to increase our scale 15% to 20% with a very efficient platform that we've already invested in.”
Dolan also noted that the acquisition of MUFG Union Bank would aid the bank’s earnings strength. It is expected that USB would improve its CET1 capital ratio by 0.20% to 0.25% every quarter. Also, Dolan aims to lower the bank's risk-weighted assets through "low impact actions".
Providing its guidance on capital, the bank’s chief executive officer Any Cecere said that the company’s target CET1 capital ratio for 2023 and 2024 is 9% and 10.5%, respectively.
Apart from the above-mentioned metrics discussed at the conference, USB had provided guidance for some other line items during its first-quarter earnings call.
The company had said that it expects second-quarter 2023 total revenues to reach $7.1-$7.3 billion compared with $7.2 billion in the first quarter. The outlook included purchase accounting accretion of approximately $85 million.
Also, management had anticipated average earning assets to be between $600 billion and $605 billion compared with $607.6 billion recorded in the first quarter.
Over the past six months, shares of USB have lost 20.2% compared with a decline of 2.5% recorded by the industry.
Amid the turmoil in the banking space as well as hovering recession fears, some of USB’s peers including KeyCorp (KEY - Free Report) and Fifth Third Bancorp (FITB - Free Report) have lowered their second-quarter 2023 guidance.
KEY’s CEO Chris Gorman noted that net interest margin (NII) will come much lower than previously expected. NII is anticipated to slide 12% sequentially, which is substantially below the 4-5% fall guided during the first-quarter earnings conference call.
FITB stated that adjusted NII is anticipated to be down 4-5% sequentially in the second quarter. This overrides the adjusted NII guidance of a decline of around 1% reported during the first-quarter earnings conference call.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
U.S. Bancorp (USB) Reiterates Q2 & 2023 View Amid Uncertainty
U.S. Bancorp (USB - Free Report) reiterated its second-quarter and full-year 2023 guidance at the Morgan Stanley US Financials, Payments & CRE Conference. The reiteration represents USB’s competence amid expectations of an economic slowdown/recession.
Because of the uncertainty related to debt ceiling, U.S. Bancorp built cash balances a little more than what was expected in the second quarter. As a result, its second-quarter 2023 net interest margin (NIM) might be slightly lower than the 3% projected earlier.
However, this is temporary and USB intends to restore cash to normal levels. Thus, the company’s NIM guidance for full-year 2023 remains in the 3-3.05% band.
Management said that the net-charge off ratio is expected to increase over time and reach the 50 basis points mark by mid-2024.
While the company has restated its guidance, it has made a minor change to the tax rate outlook for second-quarter and full-year 2023. Now, the adjusted income tax rate for each of second-quarter and full-year 2023 is expected to be 24%, slightly increased from the prior guidance of 23%.
Notably, in December 2022, U.S. Bancorp completed the acquisition of MUFG Union Bank’s core regional banking franchise, expanding its branch network and having greater access to digital banking tools.
In connection with the integration, USB’s chief financial officer Terry Dolan stated, “So, we're really fundamentally taking that 1.2 million customers and put it onto our platform and being able to utilize all the technology investment that we've already made.”
Dolan added, “And again, scale in this environment is critically important. If you think about it simply Union Bank allowed us to increase our scale 15% to 20% with a very efficient platform that we've already invested in.”
Dolan also noted that the acquisition of MUFG Union Bank would aid the bank’s earnings strength. It is expected that USB would improve its CET1 capital ratio by 0.20% to 0.25% every quarter. Also, Dolan aims to lower the bank's risk-weighted assets through "low impact actions".
Providing its guidance on capital, the bank’s chief executive officer Any Cecere said that the company’s target CET1 capital ratio for 2023 and 2024 is 9% and 10.5%, respectively.
Apart from the above-mentioned metrics discussed at the conference, USB had provided guidance for some other line items during its first-quarter earnings call.
The company had said that it expects second-quarter 2023 total revenues to reach $7.1-$7.3 billion compared with $7.2 billion in the first quarter. The outlook included purchase accounting accretion of approximately $85 million.
Also, management had anticipated average earning assets to be between $600 billion and $605 billion compared with $607.6 billion recorded in the first quarter.
Over the past six months, shares of USB have lost 20.2% compared with a decline of 2.5% recorded by the industry.
Image Source: Zacks Investment Research
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.
Competitive Landscape
Amid the turmoil in the banking space as well as hovering recession fears, some of USB’s peers including KeyCorp (KEY - Free Report) and Fifth Third Bancorp (FITB - Free Report) have lowered their second-quarter 2023 guidance.
KEY’s CEO Chris Gorman noted that net interest margin (NII) will come much lower than previously expected. NII is anticipated to slide 12% sequentially, which is substantially below the 4-5% fall guided during the first-quarter earnings conference call.
FITB stated that adjusted NII is anticipated to be down 4-5% sequentially in the second quarter. This overrides the adjusted NII guidance of a decline of around 1% reported during the first-quarter earnings conference call.