U.S. Bank Reports Higher Profit -- Update
U.S. Bancorp, the biggest regional bank in the country, said Wednesday that the new tax law helped boost its fourth-quarter earnings.
The bank also disclosed that it had set aside money for a potential settlement related to its anti-money-laundering program.
Even so, profit at the Minneapolis-based bank rose 13% to $1.69 billion, from $1.49 billion a year ago. Per share, earnings were 97 cents.
On an adjusted basis, which strips out a tax-related gain and the legal accruals, earnings would have been 88 cents per share. That beat the 87 cents expected by analysts polled by Thomson Reuters.
The bank said it set aside $608 million for "regulatory and legal matters." The Office of the Comptroller of the Currency has previously flagged its anti-money-laundering program for deficiencies, and the bank said it expects to pay civil monetary penalties to resolve this.
The bank had also previously disclosed that it was being investigated by the Manhattan U.S. attorney's office for its relationship with a former customer, race-car driver Scott Tucker, who was convicted of fraud in October related to payday loans. The bank said it is working on a settlement, which it expects to include a deferred prosecution agreement and payment of a penalty.
Revenue rose 4% to $5.64 billion, helped by rising interest rates and increased lending. Like its peers, U.S. Bank has benefited from higher interest rates, which allow it to charge more on loans. The bank's net interest income grew 6%. The Federal Reserve raised short-term rates three times last year.
Average loans grew 2.6% over the year, driven by consumer lending.
The new tax law is expected to help banks over the long term, by lowering the corporate tax rate from 35% to 21%. But the new law is having a disparate impact across bank earnings this quarter. U.S. Bank and PNC Financial Services Group Inc., for example, received a short-term earnings boost. But Citigroup Inc., which reported results Tuesday, had its quarterly earnings wiped out by the tax law.
U.S. Bank Chief Executive Andy Cecere said in a statement that the bank plans to use some of its savings from the lower corporate tax to invest in technology and innovation.
"The economic backdrop is favorable, and tax reform legislation enacted late last year has provided us an opportunity to accelerate investment in our businesses, our people, and our communities, while at the same time enhancing shareholder value through the potential for increased payouts," Mr. Cecere said.
U.S. Bank, like some other banks, already announced that it will raise wages for lower-paid employees and donate to charity with some of its tax savings.
The tax law hurt Citigroup's earnings because of that bank's deferred tax assets, which are past losses that the company can use to defray future tax bills. With a lower tax rate, those assets are no longer as valuable.
U.S. Bank, however, has deferred tax liabilities, or taxes it expects to pay in the future. The new, lower tax rate is a boon for those future earnings. U.S. Bank's net deferred tax liability was $588 million at the end of the third quarter.
Shares, which have been trading at all-time highs, were unchanged in premarket trading.
Write to Christina Rexrode at christina.rexrode@wsj.com
(END) Dow Jones Newswires
January 17, 2018 08:26 ET (13:26 GMT)