USB beats on EPS, misses revenue expectations
U.S. Bancorp (USB) has reported its Q4 earnings, exceeding expectations with adjusted earnings per share (EPS) of $0.99, compared to the consensus estimate of $0.71. The company's revenues for the quarter stood at $6.76 billion, slightly lower than expectations of $6.85 billion.
U.S. Bancorp's Q4 profit was impacted by a $734 million charge associated with a fee paid to the FDIC to refill the fund. This contributed to a 4.2% decrease in net interest income, which amounted to $4.14 billion for the quarter.
U.S. Bancorp's Q4 profit took a hit due to a $734 million charge related to the fee paid to the FDIC to refill the fund. Net interest income fell by 4.2% to $4.14 billion during the quarter. The bank's Q4 results included other one-time items, such as balance sheet optimization charges, merger and integration-related charges related to the acquisition of MUFG Union Bank (MUB), and a Federal Deposit Insurance Corporation (FDIC) special assessment. These items were partially offset by favorable tax settlements and a charitable contribution to fund obligations under the Community Benefit Plan.
Noninterest income increased by 12.1% year-over-year but decreased by 0.9% compared to the previous quarter when adjusted for items. The decline in net income attributable to U.S. Bancorp was primarily influenced by notable items and an increase in the provision for credit losses. Excluding notable items, pretax income for Q4 decreased by 10.3% compared to the previous year.
The net interest margin, a measure of the difference between interest income and interest expenses, decreased to 2.78% in Q4 2023 from 3.01% in Q4 2022, primarily due to deposit mix and pricing. However, the net interest margin showed a slight increase on a linked quarter basis, reflecting the impact of higher interest rates on earning assets and balance sheet repositioning.
The bank's return on average assets (ROAA) was reported to be 0.99%, while return on average common equity (ROCE) stood at 12.9%. The efficiency ratio, adjusted for items, was 61.1%.
U.S. Bancorp experienced average total loan growth of 3.6% year-over-year but saw a decline of 1.1% on a linked quarter basis. Similarly, the average total deposit growth showed an increase of 4.3% year-over-year but a decrease of 1.9% on a linked quarter basis.
The average total deposit growth saw a year-over-year increase of 4.3%, but a decrease of 1.9% on a linked quarter basis.
The bank's CET capital ratio improved to 9.9% at the end of December 2023, compared to 9.7% at the end of September 2023.
Overall, U.S. Bancorp's Q4 earnings report displays strong performance in terms of adjusted EPS and noninterest income growth. However, there are challenges such as the decline in net interest income and average total deposits, as well as the negative impact of notable items on net income. These factors highlight the importance for the bank to continue focusing on optimizing its balance sheet, managing credit losses, and navigating interest rate dynamics to drive future growth and profitability.