U.S. Bancorp Profit Beats Estimates on Commercial Loan Gains

  • Second-quarter profit climbs 2.6% to a record $1.52 billion
  • Total average loans increase 8.1% as energy provisions fall

U.S. Bancorp, the nation’s largest regional lender, posted record second-quarter profit that beat analysts’ estimates as gains in commercial and credit-card loans helped drive revenue.

Net income climbed 2.6 percent to $1.52 billion, or 83 cents a share, from $1.48 billion, or 80 cents, a year earlier, the Minneapolis-based bank said Friday in a statement. Profit excluding gains from the sale of its Visa Europe stake and other one-time items, was 82 cents a share, compared with the 80-cent average estimate of 30 analysts surveyed by Bloomberg. Revenue increased 8 percent to $5.45 billion, while expenses rose 12 percent.

Total average loans rose 8.1 percent to $266.5 billion, driven by an increase in commercial and credit-card lending. The bank sees opportunity in providing more home equity and consumer loans, Chief Executive Officer Richard Davis said at an investor conference last month. U.S. Bancorp has relied on increased fees from credit cards and auto financing as persistently low interest rates squeeze lending margins.

“It’s quite satisfying to have such a good quarter, a record quarter, in this very challenging, volatile environment,” Chief Operating Officer Andrew Cecere said in a phone interview. “That’s a function of the diversification that we have of our business.”

Energy Provisions

U.S. Bancorp rose 1.2 percent to $41.76 at 11:10 a.m. in New York, the best performance among 92 companies in the S&P 500 Financials Index. The stock has dropped 2.1 percent this year.

Provisions for credit losses declined 0.9 percent from the first quarter to $327 million. The bank set aside less for soured energy loans, with reserves totaling 8.8 percent of that portfolio as of June 30, down from 9.1 percent three months earlier.

“The energy improvement was a positive and overall credit looks acceptable,” Jon Arfstrom, an analyst at RBC Capital Markets, said in a note to clients. “This was a very solid quarter for the company that was generally better than our expectations.”

Net interest margin, the difference between what the bank pays for deposits and earns on loans, slid 0.01 percentage point to 3.02 percent in the second quarter from the same period a year earlier. Return on equity, a measure of profitability, fell to 13.8 percent from 14.3 percent.

Earlier Friday, PNC Financial Services Group Inc. posted profit that beat analysts’ estimates as the second-largest regional bank set aside less money for bad loans. Second-quarter net income fell 5.3 percent from a year earlier to $989 million, or $1.82 a share.

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