US Bancorp (USB) is scheduled to release its fourth quarter and full year 2009 financial results prior to the market open Wednesday, Jan. 20. According to the Zacks Consensus Estimate, US Bancorp will report earnings of 28 cents per share for the fourth quarter and 96 cents per share for the full year.
US Bancorp remains one of the more profitable large-cap banks in the industry. With a wide range of product offerings, the company remains well positioned for organic growth. Its strong retail banking franchise and leadership in payment processing should continue to create growth opportunities over time.
Given the economic conditions and the company’s strategic operations, we expect net interest income to be up modestly in the fourth quarter compared to the prior quarter. Growth in fee income is expected to be somewhat moderated due to lower mortgage revenues and core expenses to be flat compared to the previous quarter, primarily driven by the expense control initiatives.
On the other hand, given the continued stress in the commercial and residential real estate and consumer loan portfolios, we expect credit losses and nonperforming assets to continue to trend higher in the fourth quarter. However, we noticed that the rate of deterioration has somewhat moderated in the third quarter.
US Bancorp reported third quarter earnings of $603 million or 30 cents per share. Results were ahead of the Zacks Consensus Estimate of 26 cents. Results reflected higher revenue and an increase in fee income, partially offset by a deterioration of credit metrics.
We have been encouraged by US Bancorp’s exit from the Treasury’s Capital Purchase program. Despite the dilutive impact, the capital bolstering initiatives are also positive as these will not only reduce government intervention but also help in maintaining a strong capital base in a soft economic environment.
US Bancorp is also focused on expanding its business. The company has recently announced a number of diverse and strategically important acquisitions in the second half of 2009. These opportunistic acquisitions bode well going forward.
Nevertheless, we expect the overall uncertainties for the industry, competitive market conditions and higher credit costs to continue weighing on the shares of US Bancorp in the coming quarters. However, we expect the company to post a growth in core earnings and benefit from its diversified revenue base and opportunistic acquisitions. Hence, we have a Neutral recommendation on its shares.
Read the full analyst report on “USB”
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