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U.S. Bancorp Q1 profit meets; revenues miss on lower mortgage banking sales

U.S. Bancorp Q1 profit meets; revenues miss on lower mortgage banking sales

U.S. Bancorp's (NYSE:USB) first quarter earnings have met expectations, with the company reporting net income that grew almost 7 per cent year-over-year, driven by loan growth, lower non-interest expense and a lower provision for credit losses, but revenue declined on a drop in non-interest income. 

"Our first quarter earnings of $1.4 billion, or $.73 per diluted common share, reflected our company's continuing ability to perform against the backdrop of a slow-growth, uncertain economic environment," U.S. Bancorp chairman, president and CEO Richard Davis said in a company statement on Tuesday.

Net income for the first quarter was $1.4 billion, or 73 cents per share, compared to $1.3 billion, or 67 cents per share, in the year-ago period. The latest results also compare with $1.4 billion or 72 cents per share in the fourth quarter of 2012. 

Revenue in the first quarter declined 1.1 per cent to $4.87 billion, reflecting a 3.3 per cent decrease in non-interest income, partially offset by a 0.7 per cent increase in net interest income. Mortgage banking revenue retreated 11 per cent to $401 million. 

Analysts were expecting earnings of 73 cents for the latest period, on revenue of $5.03 billion. 

Return on average assets came in at 1.65 per cent, an improvement on 1.60 per cent from the same period last year. Return on average common equity came in at 16 per cent, down on 2012’s first quarter figure of 16.2 per cent, but up on the 15.6 per cent reported for the final quarter of 2012.

With mortgage-banking revenue in decline, the nation’s largest regional bank was buttressed by solid demand for commercial loans.

Contributing to the performance was the first quarter’s new lending activity of US$57.3 billion, which includes US$27.1 billion of new and renewed commercial and commercial real estate commitments and US$27.9 billion in mortgages and other retail loan originations, as well as US$2.3 billion related to new credit card accounts. 

Average total loans grew 5.8 per cent compared to the corresponding quarter in 2012, while average commercial and commercial real estate commitments saw 11.9 per cent growth year-over-year.

Deposits also saw significant growth, with the average deposit coming in 7.3 per cent higher than in the first three months of 2012. This included a bump of 4.4 per cent in average non-interest-bearing deposits year-over-year and growth of 8.7 per cent in average total savings deposits.

Davis pointed out that while mortgage fee revenue took a hit as mortgage application volumes fell across the board, with results also affected by seasonal factors, these changes in revenue were  "more than offset by decreases in credit costs and in noninterest expense."

The bank said non-interest expense declined 3.5 per cent to $2.47 billion. 

U.S. Bancorp’s net-interest margin, which measures the difference between the interest income generated by banks and the amount of interest paid out to their lenders, dropped to 3.48 per cent, versus 3.60 per cent a year ago and 3.55 per cent in the prior quarter.

Credit-loss provisions for the first quarter totalled $403 million, down by $78 million on the same period in 2012 and $40 million down on the last quarter of 2012. Non-performing assets declined on both a quarter and year-over-year basis.

Shares are currently trading at $32.68, down almost 1.9 per cent on Tuesday afternoon.

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January 18 2012

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