U.S. Bancorp (USB) Q3 2024 Earnings Call Highlights: Strong Profitability Amidst Deposit and ...

GuruFocus News
3 min read

In This Article:

  • Diluted Earnings Per Share: $1.3

  • Total Net Revenue: $6.9 billion

  • Return on Tangible Common Equity: 17.9%

  • Common Equity Tier 1 Capital Ratio: 10.5%

  • Tangible Book Value Per Share: $24.71

  • Return on Average Assets: 1.03%

  • Efficiency Ratio: 60.2%

  • Net Interest Margin: 2.74%

  • Total Average Deposits: $509 billion

  • Average Loans: $374 billion

  • Investment Portfolio Ending Balance: $167 billion

  • Net Charge-Off Ratio: 0.60%

  • Allowance for Credit Losses: $7.9 billion

  • Net Interest Income (Taxable Equivalent Basis): $4.17 billion

  • Noninterest Income: $2.7 billion

  • Noninterest Expense: $4.2 billion

Release Date: October 16, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • U.S. Bancorp (NYSE:USB) reported strong growth in net interest income, driven by improved spread income and favorable loan mix.

  • The company achieved year-over-year double-digit growth in commercial and investment products revenue.

  • Return on tangible common equity was 17.9% for the quarter, showcasing strong profitability.

  • The efficiency ratio improved to 60.2%, indicating better cost management.

  • USB's tangible book value per share increased by 6.7% linked quarter and 18.5% year-over-year, reflecting strong financial health.

Negative Points

  • Total average deposits decreased by 1.0% on a linked quarter basis, indicating potential challenges in deposit growth.

  • Average loans saw a modest decrease of 0.2% on a linked-quarter basis, reflecting muted industry loan growth.

  • The net charge-off ratio increased slightly to 0.60%, indicating a rise in credit losses.

  • Noninterest income included $119 million of net security losses related to rebalancing activity within the investment portfolio.

  • Service charges decreased by 6.2% linked quarter, partly due to the exit from the ATM cash provisioning business.

Q & A Highlights

Q: John, can you explain why net interest income (NII) came in better than expected? A: John Stern, CFO: The improvement was due to a few factors, including the remixing of our portfolio, strength in our credit card business, and favorable deposit pricing following a 50 basis point Fed rate cut.

Q: Can you provide more details on the securities repositioning and its impact on NII? A: John Stern, CFO: We restructured about $10 billion in securities, resulting in $119 million in losses. This action is expected to have a two-year payback and contributed around $10 million to NII this quarter.

Q: What are your expectations for operating leverage in 2025? A: Andrew Cecere, CEO: We reported positive operating leverage of 30 basis points in Q3 and expect over 1% in Q4. We anticipate this to expand further into 2025.

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