US Bancorp (USB) and privately held SolarCity have doubled the size of their fund to $100 million for financing solar projects in 2009.
In June this year, U.S. Bancorp Community Development Corporation, a unit of U.S. Bancorp and SolarCity entered into an agreement to install solar electric panels on homes and businesses in California, Oregon and Arizona for customers who do not prefer to pay the upfront cost of buying and installing a solar energy system.
Financing solar installations is attractive for investors like banks as they can enjoy tax breaks including a solar tax credit. The federal tax credit is equivalent to 30% of a project’s cost. SolarCity could also apply for the cash equivalent of the tax credit from the U.S. Department of Treasury.
U.S. Bancorp Community Development Corporation (USBCDC) has assets over $5.5 billion and is the largest New Markets tax credit investor in the country, investing billions of dollars nationwide in hundreds of transactions. Such investments help in providing renewal and new resources to communities throughout the country. USBCDC finances community development and affordable housing projects through the use of New Markets, Historic, Low-Income Housing, and Renewable Energy tax credits.
US Bancorp’s second quarter earnings of 12 cents per share were a penny short of the Zacks Consensus Estimate, reflecting deteriorating credit quality. However, we have been encouraged by the company’s exit from the Treasury’s Capital Purchase program. The SolarCity funding would help the company to enjoy solar tax credits.
However, we think that the stressed residential real estate market and the issues with the company’s commercial and retail customers will continue to weigh on the shares of USB. We therefore continue with our Neutral recommendation on the shares of US Bancorp.
Read the full analyst report on “USB”
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