On Mar 11, 2014, we issued an updated research report on
). This regional bank recently reported impressive fourth-quarter
Results were aided by lower non-interest expenses, increased
loan and deposit balances and reduced provision for credit
losses, partially offset by a declining top line. Though the
company shows stability in its fundamentals, we remain cautious
due to the current economic uncertainty across the industry.
U.S. Bancorp reported fourth-quarter 2013 earnings of 76 cents
per share, beating the Zacks Consensus Estimate by 1.33%. Net
income was up 2.5% year over year to $1.5 billion.
The company exhibited a decent performance in 2013 as evident
from its earnings history. In 2013, the company posted in-line
earnings in 3 quarters while a positive earnings surprise in the
U.S. Bancorp has made a number of strategic bank acquisitions in
the past years, which have opened new markets to it. Moreover, it
continued to invest in businesses throughout 2013. Recently, the
company purchased Chicago branch franchise owned by RBS Citizens
Financial Group, a subsidiary of
The Royal Bank of Scotland Group plc.
). The deal is expected to aid U.S. Bancorp to overcome the
financial complexities in its internal rate of return and enhance
earnings per share.
We view U.S. Bancorp as a sound asset for yield-seeking
investors. Reflecting U.S. Bancorp's capital strength during the
year, the company was able to return 71% of its earnings to
shareholders, within the range of its long-term goal of returning
60-80%. Such a shareholder-friendly approach inspires investors'
confidence in the stock.
Despite strong fundamentals, we believe there are certain issues
that may create pressure on the company's financials in the near
term. These include absence of credible improvement in the
mortgage market, declining net interest margin due to low
interest rate environment and the prevailing stringent regulatory
Further, the Zacks Consensus Estimate over the past 60 days
declined around 1% to $3.17 per share for 2014. Also, for 2015 it
dipped about 1% to $3.43 per share, over the same time frame.
U.S. Bancorp currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better ranked major regional banks include
Fifth Third Bancorp
The PNC Financial Services Group, Inc.
). Both stocks carry a Zacks Rank #2 (Buy).
FIFTH THIRD BK (FITB): Free Stock Analysis
PNC FINL SVC CP (PNC): Free Stock Analysis
ROYAL BK SC-ADR (RBS): Free Stock Analysis
US BANCORP (USB): Free Stock Analysis Report
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