We are upgrading our recommendation on U.S. Bancorp (USB) to Outperform from Neutral based on its solid fundamentals in the midst of a challenging economic environment. The company’s fourth-quarter 2011 earnings surpassed the Zacks Consensus Estimate due to growth in revenue and reduced credit costs.
Top-line expansion was supported by increases in both net interest income and fee-based revenue. Its diverse revenue stream, improving credit quality and solid capital levels are impressive.
Though a low interest rate environment and regulatory issues remain our concerns, we believe that the company’s loan growth will be encouraging and it will raise dividend and buyback shares following the stress test results.
