U.S. Bancorp Profit Beats Estimates on Gains in Loans, FeesBy
Net income climbed 0.9 percent to $1.5 billion this quarter
Bank review of sales practices revealed no systemic issues
U.S. Bancorp, the country’s largest regional lender, posted third-quarter profit that beat analysts’ estimates as revenue from loans and fee-based businesses increased.
Net income climbed 0.9 percent to $1.5 billion, or 84 cents a share, from $1.49 billion, or 81 cents, a year earlier, the Minneapolis-based bank said Wednesday in a statement. The average estimate of 29 analysts surveyed by Bloomberg was for adjusted per-share profit of 83 cents. Revenue increased 4.7 percent to $5.39 billion, beating analysts’ estimates, while expenses grew 5.6 percent.
“Despite the operating environment, we announced record earnings per share and solid revenue growth, particularly within our fee-based businesses,” Chief Executive Officer Richard Davis, 58, said in the statement.
U.S. Bancorp has relied on increased fees from credit cards and auto financing as persistently low interest rates have squeezed lending margins. The bank still sees the potential for growth, despite the U.S. economy’s “tortured, slow recovery,” Davis told investors last month at a conference.
U.S. Bancorp undertook an assessment of its sales practices following revelations that thousands of Wells Fargo & Co. employees opened as many as 2 million unauthorized accounts for customers to meet cross-selling goals. The review didn’t reveal any problems similar to Wells Fargo’s, Chief Operating Officer Andy Cecere said in a telephone interview.
“We don’t have quotas, we don’t have cross-sell objectives,” Cecere said, adding that the firm is participating in a regulatory review of all large banks’ practices. “Our sales incentives are based on customer usage and really offering them a product that they benefit from, so it’s all about the usage and the customer interaction with that product.”
The recent controversy at Wells Fargo has been “tough on the industry,” Davis said during a conference call with analysts. He said U.S. Bancorp doesn’t track the number of products customers have with the firm.
“Honest to God, I’ve never, ever looked at that number,” Davis said. “People buy our products, we don’t sell them. And as long as we have something they want and it’s for services rendered and fees benefited, we’ll be happy to provide that.”
Noninterest income rose 5.1 percent to $2.45 billion from a year earlier on gains in revenue from mortgage banking and cards, the bank said. Net interest income increased 4.3 percent to $2.94 billion, fueled by loan growth and higher interests rates. Net interest margin, the difference between what a bank charges for loans and pays depositors, fell 4 basis points to 2.98 percent from the preceding quarter.
U.S. Bancorp shares gained 1.4 percent to $43.63 at 12:53 p.m. in New York. The stock has gained 2.3 percent this year.
PNC Financial Services Group Inc., the second-largest U.S. regional bank, said last week that net income rose 1.1 percent to $1 billion in the quarter, beating analysts’ estimates, as the lender reserved less money for bad loans. On Tuesday, Regions Financial Corp. and Comerica Inc. also reported profit that exceeded estimates on lower energy-related provisions.