US Bancorp (NYSE:USB) just took a hit, its shares falling 6.6% this morning after its fourth-quarter earnings report failed to impress. While net income nearly doubled year over year to $1.67 billion, the bank’s adjusted earnings per share came in at $1.07. Revenue rose 3.7%, with non-interest income jumping 8.1%, driven by strong performance in trust and investment management fees. But higher financing costs and a falling net interest margin to 2.71% cast a shadow over the results.
The problem? Expenses. Noninterest costs increased 2.5% from last quarter to $4.31 billion. The bank emphasizes operational efficiency, but lease write-downs and strategic spending are weighing on its results. Adding to the pressure, US Bancorp’s allowance for credit losses rose 9.4% year-over-year, a sign of continued stress in commercial real estate and credit card lending. Investors weren’t having it.
Despite the brutal market reaction, management remains optimistic. CEO Andy Cecere highlighted a strong financial position, with a CET1 ratio of 10.6%, and confidence in delivering “leading returns on tangible equity”. It is betting on the growth of wealth management and payment services to generate future gains. But with cost pressures and economic uncertainty looming, investors are closely watching whether the bank can restore momentum in its favor.
This article was first published on GuruFocus.
