On Jun 2, 2014, we issued an updated research report on
). This regional bank recently reported decent first-quarter 2014
results. Results were aided by growth in average loans and
deposits, partially offset by a declining top line and increasing
non-interest expenses. Though the company shows stability in its
fundamentals, we remain cautious due to the current economic
uncertainty across the industry.
U.S. Bancorp reported first-quarter 2014 earnings of 73 cents per
share, in line with the Zacks Consensus Estimate. Average total
loans climbed 6% year over year, while average total deposits were
up 5.1% from the prior-year quarter.
The company exhibited a decent performance in the last 4 quarters
with an average beat of 1.33%.
U.S. Bancorp has made a number of strategic bank acquisitions in
the past years, which opened new markets to it and fortified
existing markets. In Jan 2014, the company purchased the Chicago
branch franchise owned by RBS Citizens Financial Group, a
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 capital strength during the first quarter, the company
was able to return 67% of its earnings to shareholders. Following
the Federal Reserve's approval in Mar 2014, the company's board of
directors approved a share repurchase program up to $2.3 billion
through Mar 2015. Further, in Jun 2014, the company plans to hike
its quarterly dividend by 6.5% to 24.5 cents per share. Such a
shareholder-friendly approach inspires investors' confidence in the
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 a credible improvement in the
mortgage market, declining net interest margin due to the low
interest rate environment and the prevailing stringent regulatory
Further, the Zacks Consensus Estimate over the past 30 days
remained stable at $3.10 and $3.36 per share, for 2014 and 2015,
respectively. Hence, U.S. Bancorp currently carries a Zacks Rank #3
Key Picks from the Sector
Some better ranked finance stocks include
BofI Holding, Inc.
Western Alliance Bancorporation
). Both stocks carry a Zacks Rank #1 (Strong Buy).
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US BANCORP (USB): Free Stock Analysis Report
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