U.S. Bancorp Declines on Mortgage Forecast: Minneapolis Mover

U.S. Bancorp (USB), the nation’s largest regional lender, fell the most since April after the firm said it expects mortgage revenue to continue to decline this year.

U.S. Bancorp slid 2.5 percent to $36.36 at 10:01 a.m. in New York. The Minneapolis-based lender was the second-worst performer today in the 24-company KBW Bank Index, which rose 0.5 percent.

Second-quarter net income climbed 4.9 percent to $1.48 billion, or 76 cents per share, the bank said in a statement today, matching the average estimate of 34 analysts surveyed by Bloomberg. U.S. Bancorp executives said mortgage revenue will probably decline in the second half, and that the lender’s net interest margin, or the difference between what it pays for deposits and charges for loans, will be stable in the third quarter.

“In June we expected mortgage banking revenue to be higher in the second quarter than the first quarter,” Chief Financial Officer Andrew Cecere said on a conference call following the results. “However, since the time we made that statement to the end of the quarter, rates moved up by about 60 basis points and refinance activity slowed significantly.”

Second-quarter revenue fell 2.4 percent to $4.95 billion from a year earlier, led by a decline in mortgage income, which slid 19 percent to $396 million, according to the statement. Net interest margin shrank by 5 basis points from the first quarter to 3.43 percent.

U.S. Bancorp is “kind of a victim of being one of the best banks out there, and so at this point there’s not a lot of recovery left for them to really participate in,” Marty Mosby, an analyst for Guggenheim Securities LLC, said in a phone interview before results were released.

Chief Executive Officer Richard Davis, 55, said in May that the “intangible lack of overall confidence” in the U.S. economy has led to tepid loan growth in the banking industry. U.S. Bancorp cut expenses by 1.7 percent in the second quarter to $2.56 billion from a year earlier and reduced the amount set aside for soured loans by 23 percent to $362 million, according to today’s statement.

To contact the reporters on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net; Erika Waddell in New York at ewaddell1@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Christine Harper at charper@bloomberg.net

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