U.S. Bancorp Fourth-Quarter Profit Climbs 39%, Beating Analysts’ Estimates

U.S. Bancorp (USB), the nation’s fifth- largest lender by deposits, reported a 39 percent increase in fourth-quarter profit, beating analysts’ estimates as costs linked to souring loans fell.

Net income attributable to the bank rose to $1.35 billion from $974 million in the year-earlier period, the bank said today in a statement. Earnings per share increased to 64 cents, excluding a 5-cent net gain linked to items including a litigation settlement, from 49 cents. The average estimate of 30 analysts surveyed by Bloomberg was for 63 cents.

Chief Executive Officer Richard Davis expanded the bank during the credit crisis to take market share and counter slow industry growth. The Minneapolis-based bank boosted commercial lending 16 percent from a year earlier, while reducing provisions for credit losses by 46 percent to $497 million.

“Credit quality continued to improve this quarter,” Davis, 53, said in the statement. “We expect that nonperforming assets will decline in the coming quarter as the economy slowly improves.”

Revenue increased 8.1 percent from a year earlier to $5.1 billion. Net charge-offs fell to $622 million from $669 million in the third quarter and $937 million in the year-earlier period. The company said it expects charge-offs will “be down modestly” in this year’s first three months.

Full-year profit climbed 47 percent to $4.87 billion, as revenue climbed 5.3 percent.

Federal Reserve Tests

The Federal Reserve told the nation’s 31 largest banks to test their loan portfolios against a deep recession to ensure they have enough capital to withstand losses. The Fed said it would approve dividend increases and other capital distributions for banks that demonstrate sufficient financial strength to operate in stressed markets.

“We expect to ‘pass’ the assessment, and we look forward to moving closer to our long-term goal of returning a majority of our earnings to shareholders,” Davis said in the statement. “Raising the dividend is a top priority.”

The firm joined Commerce Bancshares Inc. as the two lenders in the 24-company KBW Bank Index (BKX) to climb in 2011, with U.S. Bancorp rising 0.3 percent. It has advanced 6.4 percent this month.

To contact the reporters on this story: Patrick Clark in New York at pclark48@bloomberg.net; Laura Marcinek in New York at lmarcinek3@bloomberg.net.

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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