U.S. Bancorp (USB): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
U.S. Bancorp's third-quarter 2014 earnings were in line with the Zacks Consensus Estimate. However, results were above the prior-year quarter earnings. Organic growth was reflected in the quarter aided by higher revenues, loans and deposits. U.S. Bancorp's attractive core franchise, diverse revenue streams and a strong performance in the past years are impressive. A solid capital position, improving credit quality and an increase in strategic acquisitions augur well. Yet, regulatory issues along with the expectation of a continued low interest-rate environment are likely to limit the stock's upside potential in the coming quarters. Moreover, an expanding cost base remains a concern.

Overview:

Headquartered in Minneapolis, MN, U.S. Bancorp (USB) is one of the nation's top 10 financial holding companies. Its current structure was formed in Feb 2001 with the merger of the former U.S. Bancorp and Firstar Corporation. The company has operated a well-balanced business model, with non-interest income representing 46% of net revenue in 2013.

In Jun 2014, U.S. Bancorp, doubled its deposit market share in Chicago with the closure of the acquisition of the Chicago branch network of the Charter One Bank franchise owned by RBS Citizens Financial Group, a subsidiary of The Royal Bank of Scotland Group plc. The deal was inked in January this year. Apart from the Chicago branch network of Charter One Bank, U.S. Bank also assumed small business operations and select middle market client relationships. With this deal, U.S. Bank now has over 160 branches in Chicago. The Charter One branches are now recognized as U.S. Bank branches. The company acquired approximately $969 million of loans and $4.8 billion of deposits with this transaction.

The company offers a wide array of financial services through five operating segments:


The Consumer and Small Business Banking segment (accounted for 39% of net revenue in 2013) offers banking services to individuals and small businesses.

The Wholesale Banking and Commercial Real Estate segment (16%) extends traditional banking services, such as lending, depository and treasury management, to mid-sized and larger corporations, financial institutions and public sector organizations.

The Payment Services segment (24%) provides services relating to credit/debit cards, merchant processing and customized technologically advanced products and services to consumers, merchants, institutions and affinity partners.

The Wealth Management & Securities Services segment (8%) includes private banking, trust, custody, investment management and related financial advisory services, which are extended to individuals and institutional investors.

The Treasury and Corporate Support segment (13%) includes the company's investment portfolios, funding, capital management, asset securitization and interest rate risk management.

Commercial loans, which form the largest section of the loan portfolio, represented 32% of total loans as of Sep 30, 2014, followed by residential mortgage loans (21%), retail loans (20%), commercial real estate loans (17%), credit card loans (7%) and covered loans (3%).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

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