Friday, January 14, 2011

U.S. Bancorp (NYSE: USB): Q4 Earnings Preview 2010

U.S. Bancorp (NYSE: USB), the fifth-largest US bank by deposits, is scheduled to release its fourth-quarter earnings before the opening bell on Wednesday, January 19, 2011. Analysts, on average, expect the company to report earnings of 46 cents per share on revenue of $4.52 billion. In the year ago quarter, the company reported earnings of 30 per share on revenue of $4.33 billion.

U.S. Bancorp, a financial bank holding company, provides various banking and financial services in the United States.  The Company provides a range of financial services, including lending and depository services, cash management, foreign exchange and trust and investment management services.

U.S. Bancorp came through the recent crisis better off than most. It didn’t report an annual loss, and it had kept enough powder dry to buy some failed banks on the cheap and then begin growing while others were still licking their wounds.

In the preceding third quarter, the Minneapolis, Minnesota-based company's net income was $871 million, up 49.4% from $583 million in the prior-year quarter. Earnings per share was $0.45, higher than $0.30 a year ago. Total net revenue grew 7.9% to $4.59 billion from $4.25 billion in the same quarter last year. Analysts, on average, expected the company to earn $0.43 a share on revenue of $4.45 billion.

The company expects the level of both net charge-offs and nonperforming assets, excluding covered assets to continue to decline in the fourth quarter. Thge company expects overdraft pricing and policy changes to reduce revenue by $110 to 120 million in the fourth quarter, bringing its full year 2010 estimate to between $250 and $260 million. The annual run rate going forward is expected to be $440 to $480 million. The CARD Act is expected to reduce revenue by approximately $60 to $80 million in the fourth quarter of 2010. The company expect the total 2010 revenue impact to be in the range of $160 to 180 million with an annual run rate going forward or approximately $250 million.

At its last earnings call in October, the company said that increasing the dividend remains a top priority. The large U.S. banks will have to undergo another round of stress tests securing approval from the Federal Reserve to increase their dividends or buy back shares. All the 19 banks, including big names such as JPMorgan, Bank of America Corp. (NYSE: BAC), Wells Fargo & Company (NYSE: WFC) and Goldman Sachs Group Inc. (NYSE: GS) will have to demonstrate that they have adequate capital to address potential losses over the next two years under various scenarios. These are mainly a precautionary measure amid economic recovery.

Late in November, U.S. Bancorp's subsidiary, U.S. Bank, N.A., agreed to buy the domestic and European-based securitization trust administration businesses of Bank of America, N.A., a subsidiary of Bank of America Corp. (NYSE: BAC). Over the last 20 years, U.S. Bank has effectively completed 18 corporate trust acquisitions. This very acquisition offers U.S. Bancorp an opportunity to strengthen its market position within the U.S. structured finance trust business and compliments its current market position in the country’s corporate and municipal trust business. It solidifies the company’s positions in collateralized debt obligations and commercial and residential mortgage-backed securitizations. Moreover, the acquisition provides the bank with a prospect of expanding its presence in the European market with offices in Ireland and London, England. 

In terms of stock performance, Bank of America shares have gained nearly 7 percent over the past year.

Full Disclosure: None.
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