U.S. Bank Profit Shoots Higher, But Questions Linger on Loan Growth -- 2nd Update

By Christina Rexrode Features Dow Jones Newswires

U.S. Bancorp, the biggest so-called regional bank in the U.S., said Wednesday that its third-quarter profit rose to a record level, but analysts raised questions about future loan growth.

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Shares fell in early-morning trading, dipping 1.7% on a day when bank stocks and the broader stock market were up.

Per-share earnings and revenue rose in line with analysts' expectations. The bank reported net income of $1.56 billion, or 88 cents a share. That compared with $1.50 billion, or 84 cents a share, in the same period a year ago. Per-share earnings were in line with the expectations of analysts polled by Thomson Reuters.

Revenue rose 4% from a year ago to $5.61 billion. That slightly beat the $5.60 billion expected by analysts.

Like some other banks, U.S. Bank has benefited as the Federal Reserve has raised interest rates this year, which allows banks to charge more for loans. The bank's net interest income was up 8% from a year ago.

Average loans were up 3% from a year ago. Consumer loans, including residential mortgage loans and credit card loans, also rose. Commercial loans increased, but commercial mortgages were down. Some analysts were disappointed by the level of loan growth, which has slowed since last year, and executives said Wednesday that the growth was lower than what they would have expected over the long term. They also said that businesses' borrowing was related to mergers and acquisitions more than core expansions.

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Lending to businesses has been a key factor that analysts are watching this year at regional banks, the group of firms that are smaller than the big, national banks, yet bigger and broader in reach than community banks. After the Trump election, bankers and investors predicted that lending to businesses would take off, but the growth of such loans has faltered.

Executives also said they had expected quarter-over-quarter loan growth to stay steady in the fourth quarter, which was also a disappointment to some analysts hoping for a return to stronger increases. The bank's quarter-over-quarter loan growth was in line with what executives had predicted last month, though they had lowered their expectations from a previous forecast.

U.S. Bank executives said Wednesday that the slower loan growth was partly due to corporate customers paying off bank loans to instead borrow from the bond market, repeating an explanation that they and other banks had given last month. Executives said some customers are still waiting for more clarity on the Trump administration's tax policy before investing in their businesses.

Income from treasury-management fees, trust and investment-management fees and corporate-payment products rose from a year ago.

Write to Christina Rexrode at christina.rexrode@wsj.com

(END) Dow Jones Newswires

October 18, 2017 11:01 ET (15:01 GMT)