U.S. Bancorp Profit Declines on Bigger Energy-Related Provision
April 20 2016 - 8:50AM
Dow Jones News
U.S. Bancorp said its first-quarter profit slipped as the lender
set aside more reserves to cover potential energy loan losses and
booked sharply lower mortgage-banking revenue amid heightened
competition.
The Minneapolis-based lender logged earnings of $1.39 billion,
down from $1.43 billion a year earlier. On a per-share basis,
profit was flat at 76 cents thanks to a lower share count.
Revenue edged 2.7% higher to $5.04 billion. Analysts projected
76 cents in earnings per share on $5.06 billion in revenue.
Shares slipped 2% in light premarket trading.
U.S. Bank is one of the country's biggest banks, offering retail
and commercial services across much of the West and Midwest. The
company said its energy-related commercial loan portfolio
deteriorated during the quarter, prompting it to push its loan-loss
provision up to $330 million—25% higher than a year earlier and up
8.2% from the fourth quarter.
The company said Wednesday that as of March 31, roughly $3.4
billion of commercial loans were to customers in energy-related
businesses, representing 1.3% of its portfolio and up slightly from
the end of December. Reserves for these loans were 9.1% of U.S.
Bank's outstanding balances at the end of March, up from 5.4% three
months earlier.
Meanwhile, revenue from fee businesses inched 0.2% lower to
$2.15 billion as mortgage banking revenue dropped 22% on lower
originations and lower pricing. A 10% rise in fees from credit and
debit cards help to partially offset the mortgage slide; for U.S.
Bancorp, card fees make up the biggest chunk of noninterest
income.
Like many other lenders, the company has hoped the Fed's
decision to lift interest rates late last year—albeit
modestly—would bolster profitability. But a key measure of lending
profitability, net interest margin, slipped to 3.06% during the
period from 3.08% a year earlier. U.S. Bank attributed the decline
to a shift in its loan portfolio, which countered impact of higher
interest rates. From the fourth quarter, the metric held
steady.
Overall lending grew 5.8%, driven by commercial and credit card
lending.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
April 20, 2016 08:35 ET (12:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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