U.S. Bancorp said its second-quarter earnings rose to $1.5 billion, just beating Wall Street estimates as customers took out more loans and the bank benefited from recent interest-rate increases.
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The company's average loans grew 3.4% to $275.5 billion from last year and 0.9% since the last quarter. U.S. Bank executives earlier this year had dampened expectations for loan growth, warning that commercial clients are slowing borrowing through traditional loans, a trend the entire banking industry faces.
But U.S. Bank Chief Executive Andy Cecere and other industry leaders expect bank-friendly regulatory reforms from Washington to boost their businesses.
"Our balance sheet is strong and our core businesses are well positioned for an economic and regulatory backdrop that has the promise to be more conducive to growth," he said.
Noninterest expenses rose 1% from a year ago. The bank said it had set aside money related to litigation accruals.
U.S. Bank's net income in the second quarter matched its net income a year ago. But on a per-share basis, earnings rose to 85 cents from 83 cents, just passing the average estimate of analysts polled by Thomson Reuters, which was 84 cents.
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Revenue, a combination of fee-based income and net interest income, rose 3.1% to $5.5 billion. Credit and debit card revenue grew 7.8% year over year, while revenue from trust and investment management fees increased 6.1%.
Net interest income rose 6% to $3.02 billion but missed the $3.04 billion estimate analysts expected.
Shares in the Minneapolis-based company, the nation's fifth-largest bank and largest regional bank, were inactive premarket. Shares have risen less than one percentage point this year.
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U.S. Bancorp said Wednesday it expects loan growth to return to normal after a sluggish start to the year.
The Minneapolis-based bank reported that average loans were up compared with the previous quarter and the year-ago quarter, driven by an increase in demand from large corporate customers and construction loans. Shares rose 0.9% on a day when broader bank stocks were down.
CEO Andrew Cecere, in a call with analysts to discuss second-quarter results, said that "the evolving economic and regulatory backdrop has the promise to be conducive to growth."
"I just spent time in Washington last week and left very encouraged by the open and productive dialogue that is taking place," Mr. Cecere said. In recent months, including at an industry conference last month, Mr. Cecere has said that corporate customers were waiting for more certainty from Washington before moving ahead with borrowing plans.
Overall, net income was $1.5 billion, down about 1% from $1.52 billion a year ago. But on a per-share basis, earnings rose to 85 cents from 83 cents, just passing the average estimate of analysts polled by Thomson Reuters, which was 84 cents.
Revenue rose 0.7% compared with a year ago, to $5.49 billion.
U.S. Bank is the largest regional bank in the country, and its results serve as a bellwether for the rest of the industry. Though bank stocks have rallied since the Trump election in November, analysts and investors are still waiting to see whether that will actually translate into more lending. PNC Financial Services Group Inc., based in Pittsburgh, said last week that it continues to expect loans to be up by mid-single digits for the full year, which analysts took as an encouraging sign. Its average loans were up 2% over the quarter.
In April, investors were disappointed when U.S. Bank's first-quarter loans grew just 0.2% quarter-over-quarter. That growth had averaged 1.5% throughout 2016.
Wednesday, U.S. Bank said second-quarter loans were up 0.9% from the previous quarter, on the high end of what bank officials had signaled last month. Bank officials also said they expect quarter-over-quarter loan growth to return to a range of 1% to 1.5% in the third quarter.
Commercial loans were up over the year and over the quarter, as were construction and development loans. But overall commercial real estate lending was down, which Chief Financial Officer Terry Dolan said reflects the bank's "prudent approach" to segments including multifamily and retail.
Bank officials said they expect consumer lending demand to "remain fairly strong" in the second half of the year. They noted good demand in auto loans and leases, but said they were focusing only on prime customers.
Noninterest expenses rose 1% from a year ago. The bank said it had set aside money related to litigation accruals and a charitable contribution.
Like other banks, U.S. Bank has benefited as the Federal Reserve has raised interest rates this year, which allows banks to charge more on loans. The bank's net interest income was up 6% from a year ago. Net interest margin, an important measure of lending profitability, was roughly flat. That equation is affected by the amount of deposits, which were up almost 8% over the year.
Cara Lombardo contributed to this article
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(END) Dow Jones Newswires
July 19, 2017 17:07 ET (21:07 GMT)