U.S. Bancorp (NYSE:USB) reported net income of $1,386 million for the first quarter of 2016, or $0.76 per diluted common share, compared with $1,431 million, or $0.76 per diluted common share, in the first quarter of 2015.
Highlights for the first quarter of 2016 included:
- Industry-leading return on average assets of 1.32 percent, return on average common equity of 13.0 percent and efficiency ratio of 54.6 percent
- Returned 80 percent of first quarter earnings to shareholders through dividends and share buybacks
- Average total loans grew 5.8 percent over the first quarter of 2015 and 2.2 percent on a linked quarter basis (1.6 percent excluding the credit card portfolio acquisition at the end of the fourth quarter 2015)
- Average total commercial loans grew 10.2 percent over the first quarter of 2015 and 3.5 percent over the fourth quarter of 2015
- Average total deposits grew 6.3 percent over the first quarter of 2015 and 0.5 percent on a linked quarter basis
- Average low-cost deposits, including noninterest-bearing and total savings deposits, grew 9.7 percent year-over-year
- Net interest income grew 4.9 percent year-over-year and 0.6 percent linked quarter
- Average earnings assets grew 4.8 percent year-over-year, and 1.4 percent on a linked quarter basis
- Net interest margin of 3.06 percent for the first quarter of 2016 was the same as the fourth quarter of 2015, down 2 basis points from 3.08 percent in the first quarter of 2015
- Payments-related fee revenue grew 5.1 percent year-over-year, driven by an increase in credit and debit card revenue, including the impact of recent portfolio acquisitions, and merchant processing services revenue
- Credit quality was relatively stable other than energy-related commercial loans, the deterioration of which impacted the amount of nonperforming assets and the provision for credit losses
- Energy-related commercial nonperforming assets increased $257 million linked quarter
- Reserves for energy-related commercial loans were 9.1 percent of outstanding balances at March 31, 2016, compared with 5.4 percent at December 31, 2015
- Strong capital position. At March 31, 2016, the estimated common equity tier 1 capital to risk-weighted assets ratio was 9.2 percent using the Basel III fully implemented standardized approach and was 11.9 percent using the Basel III fully implemented advanced approaches method
Net income attributable to U.S. Bancorp was $1,386 million for the first quarter of 2016, 3.1 percent lower than the $1,431 million for the first quarter of 2015, and 6.1 percent lower than the $1,476 million for the fourth quarter of 2015. Diluted earnings per common share were $0.76 in the first quarter of 2016, the same as the first quarter of 2015 and $0.04 lower than the $0.80 reported for fourth quarter of 2015. The decrease in net income year-over-year was primarily due to a higher provision for credit losses driven by energy-related commercial loan downgrades, lower mortgage banking revenue due to lower production and higher noninterest expense driven by higher compensation expense related to the impact of merit increases and higher variable compensation expense, as well as compliance-related matters, partially offset by an increase in net interest income driven by strong loan growth. The decrease in net income on a linked quarter basis was principally due to typical seasonality in some of our business lines, a higher provision for credit losses driven by energy-related loans, as well as the impact of the fourth quarter 2015 gain on the sale of the Health Savings Account deposit portfolio (“HSA deposit sale”). The linked quarter seasonality reflects decreases in fee-based revenue, primarily related to payments and deposit services, and lower costs related to investments in tax-advantaged projects. Other expense increases included higher stock-based and other variable compensation expense.
U.S. Bancorp earnings per share showed an increasing trend of 2.8% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 353%.Analysts project EPS growth over the next 5 years at 5.05%. It has EPS annual growth over the past 5 fiscal years of 12.8% when sales grew 0.4. It reported 5.2% sales growth, and -0.1% EPS decline in the last quarter.
The stock is trading at $42.82, up 16.24% from 52-week low of $37.07. The stock trades down -5.72% from its peak of $46.26 and 6.26% above the consensus price target of $45.5. Its volume clocked up at 6.59 million shares which is lower than the average volume of 7.3 million shares. Its market capitalization currently stands at $74.15B.
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