It's no secret Warren Buffett likes the value proposition of
Wells Fargo (
). The current market value of Berkshire Hathaway's (
) stake in Wells Fargo is about $13 billion. But Wells Fargo
isn't his only bank crush. Berkshire Hathaway's stock investment
portfolio also includes a chunk of U.S. Bancorp (
) with a current market value of $2.6 billion.
Granted, that's not exactly an outsize bet given that
Berkshire's investment portfolio had a market value of $89
billion at the end of the first quarter. But U.S. Bancorp, the
parent of U.S. Bank National Association, the fifth largest
commercial bank in the country, is actually outperforming Wells
Fargo lately-and to be clear, Wells Fargo has been on a roll of
its own, as seen in this
U.S. Bancorp even manages to best Wells Fargo on return on
assets. . .
USB Return on Assets
. . .as well as return on equity.
USB Return on Equity
Management reiterated in its second quarter conference call
that those ratios are at the low end of long-term targets of
1.6%-1.9% on return on assets and 16%-19% for return on
In a lot of ways, U.S. Bancorp ($353 billion in total assets)
is sort of the mini-me version of Wells Fargo ($1.336 total
assets). Like Wells Fargo the focus at U.S. Bancorp is on
old-fashioned banking -- bring in deposits, make loans, charge
fees -- rather than looking to generate profits from aggressive
in-house trading, à la JPMorgan (
The plain vanilla route seems to be a pretty good business
model for U.S. Bancorp. In the second quarter it reported an 8%
jump in net revenue and earnings per share rose 18.3%.
Overall fee revenue increased 9.7% in the quarter. That's
impressive given that it includes a near 18% decline in revenues
from credit card and debit fees federal regulations, courtesy of
new federal regulations.
U.S. Bancorp is also positioned to ride the housing recovery.
Overall loan volume at U.S. Bancorp rose 7% in the second quarter
compared to a year earlier; the residential mortgage slice grew
at nearly three times that rate. And the charge-off rate for bad
residential mortgages fell to 1.12% compared to 1.46% in the
second quarter of 2011.
Financial Crisis? What financial crisis?
With a strong balance sheet, the Minneapolis based regional
bank was able to use the financial crisis as a growth
opportunity, taking failed banks off the FDIC's hands and making
acquisitions as well.
USB Total Assets
And despite a solid increase in the company's value, it's
still trading at a pretty low
USB PE Ratio
Just the sort of chart Buffett would love.
Carla Fried is an editor for the
YCharts Pro Investor Service
which includes professional