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U.S. Bancorp's (USB) Q2 Earnings Beat on Lower Expenses
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U.S. Bancorp’s (USB - Free Report) second-quarter 2024 adjusted earnings per share (excluding the impact of notable items) of 98 cents beat the Zacks Consensus Estimate by 2%. However, the bottom line declined 12.5% from the prior-year quarter's level.
Shares of USB have increased around 4.1% 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 higher deposits and lower expenses. However, a decline in net interest income (NII) was a major headwind.
Net income (GAAP basis) attributable to U.S. Bancorp was $1.60 billion, up 17.8% from the prior-year quarter's level.
Revenues & Expenses Fall
Total revenues in the reported quarter were $6.84 billion, down 4.4% year over year. The top line surpassed the Zacks Consensus Estimate by a whisker.
The tax-equivalent NII totaled $4.05 billion, down 8.9% from the year-ago quarter's level. The downside was primarily due to the impact 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 2.67% contracted 23 basis points year over year.
Non-interest income moved up 3.3% year over year to $2.82 billion. The uptick was driven by a higher fee revenue across most categories.
Non-interest expenses declined 7.8% year over year to $4.21 billion. The fall was due to prudent expense management, continued focus on operational efficiency and synergies from the acquisition of MUFG Union Bank (MUB), partially offset by higher marketing and business development expenses.
The efficiency ratio was 61%, lower than the year-ago quarter’s figure of 63.7%. A decline in the ratio indicates an improvement in profitability.
Average total loans declined 3.6% to $374.69 billion from the year-ago quarter. Average total deposits increased 3.3% from the previous year's quarter level to $513.90 billion.
Credit Quality: Mixed Bag
Total allowance for credit losses was $7.93 billion, up 3.1% year over year. As of Jun 30, 2024, U.S. Bancorp’s non-performing assets amounted to $1.85 billion, up 70.7% from the year-ago period's level.
The increase in nonperforming assets was chiefly due to higher commercial and commercial real estate nonperforming loans.
Net charge-offs were $538 million, down from $649 million in the year-ago quarter. The provision for credit losses in the reported quarter was $568 million, down 30.8% from the prior-year quarter's level.
Capital Ratios Improve
The Tier 1 capital ratio was 11.9% as of Jun 30, 2024, up from 10.6% in the prior-year quarter. The Common Equity Tier 1 capital ratio under the Basel III standardized approach was 10.3% as of Jun 30, 2024, up from 9.1% in the year-ago quarter.
The tangible common equity to tangible assets ratio was 5.4%, up from the prior-year quarter’s 4.8%.
Our Take
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 strategic acquisitions. However, a rise in provision and weakening asset quality are a major concern.
The PNC Financial Services Group, Inc.’s (PNC - Free Report) second-quarter 2024 earnings per share of $3.39 surpassed the Zacks Consensus Estimate of $3. In the prior-year quarter, the company reported earnings per share of $3.36.
Results were aided by a rise in fee income and higher loan balance, along with reduced expenses. However, a decline in NII and an increase in provisions for credit losses acted as spoilsport.
The Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2024 adjusted earnings of $1.51 per share surpassed the Zacks Consensus Estimate of $1.43. Also, the bottom line reflects a rise of 9.4% from the prior-year quarter.
BK’s results are primarily aided by a rise in fee revenues and lower expenses. The assets under custody and/or administration and assets under management balances grew on a solid market rally. However, a decline in net interest revenues hurt results to some extent.
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U.S. Bancorp's (USB) Q2 Earnings Beat on Lower Expenses
U.S. Bancorp’s (USB - Free Report) second-quarter 2024 adjusted earnings per share (excluding the impact of notable items) of 98 cents beat the Zacks Consensus Estimate by 2%. However, the bottom line declined 12.5% from the prior-year quarter's level.
Shares of USB have increased around 4.1% 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 higher deposits and lower expenses. However, a decline in net interest income (NII) was a major headwind.
Net income (GAAP basis) attributable to U.S. Bancorp was $1.60 billion, up 17.8% from the prior-year quarter's level.
Revenues & Expenses Fall
Total revenues in the reported quarter were $6.84 billion, down 4.4% year over year. The top line surpassed the Zacks Consensus Estimate by a whisker.
The tax-equivalent NII totaled $4.05 billion, down 8.9% from the year-ago quarter's level. The downside was primarily due to the impact 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 2.67% contracted 23 basis points year over year.
Non-interest income moved up 3.3% year over year to $2.82 billion. The uptick was driven by a higher fee revenue across most categories.
Non-interest expenses declined 7.8% year over year to $4.21 billion. The fall was due to prudent expense management, continued focus on operational efficiency and synergies from the acquisition of MUFG Union Bank (MUB), partially offset by higher marketing and business development expenses.
The efficiency ratio was 61%, lower than the year-ago quarter’s figure of 63.7%. A decline in the ratio indicates an improvement in profitability.
Average total loans declined 3.6% to $374.69 billion from the year-ago quarter. Average total deposits increased 3.3% from the previous year's quarter level to $513.90 billion.
Credit Quality: Mixed Bag
Total allowance for credit losses was $7.93 billion, up 3.1% year over year. As of Jun 30, 2024, U.S. Bancorp’s non-performing assets amounted to $1.85 billion, up 70.7% from the year-ago period's level.
The increase in nonperforming assets was chiefly due to higher commercial and commercial real estate nonperforming loans.
Net charge-offs were $538 million, down from $649 million in the year-ago quarter. The provision for credit losses in the reported quarter was $568 million, down 30.8% from the prior-year quarter's level.
Capital Ratios Improve
The Tier 1 capital ratio was 11.9% as of Jun 30, 2024, up from 10.6% in the prior-year quarter. The Common Equity Tier 1 capital ratio under the Basel III standardized approach was 10.3% as of Jun 30, 2024, up from 9.1% in the year-ago quarter.
The tangible common equity to tangible assets ratio was 5.4%, up from the prior-year quarter’s 4.8%.
Our Take
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 strategic acquisitions. However, a rise in provision and weakening asset quality are a major concern.
U.S. Bancorp Price and EPS Surprise
U.S. Bancorp price-eps-surprise | U.S. Bancorp Quote
U.S. Bancorp currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
The PNC Financial Services Group, Inc.’s (PNC - Free Report) second-quarter 2024 earnings per share of $3.39 surpassed the Zacks Consensus Estimate of $3. In the prior-year quarter, the company reported earnings per share of $3.36.
Results were aided by a rise in fee income and higher loan balance, along with reduced expenses. However, a decline in NII and an increase in provisions for credit losses acted as spoilsport.
The Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2024 adjusted earnings of $1.51 per share surpassed the Zacks Consensus Estimate of $1.43. Also, the bottom line reflects a rise of 9.4% from the prior-year quarter.
BK’s results are primarily aided by a rise in fee revenues and lower expenses. The assets under custody and/or administration and assets under management balances grew on a solid market rally. However, a decline in net interest revenues hurt results to some extent.