USB US Bancorp

By Allison Prang 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 17, 2019).

Fourth-quarter earnings results varied at two of the U.S.'s largest regional banks, while both reported a drop in expenses and increase in revenue.

U.S. Bancorp said earnings were $1.10 a share, up from 97 cents a share a year earlier. PNC Financial Services Group said earnings were $2.75 a share, down from $4.18 a share. PNC said that in the fourth quarter of 2017, its earnings included a $900 million benefit from the new tax law and other items.

Analysts polled by FactSet expected U.S. Bancorp to report earnings of $1.06 a share and PNC to report earnings of $2.79 a share.

PNC and U.S. Bancorp's results fall in line with others in the industry in feeling the benefits of higher interest rates. JPMorgan Chase & Co. and Wells Fargo & Co., which both reported results Tuesday, had higher revenue from lending as a result of increased interest rates, they said.

Total net revenue at U.S. Bancorp increased 4.1% to $5.83 billion and PNC's rose 1.9% to $4.34 billion.

Net interest income -- or the difference between the interest collected versus the interest paid -- on a taxable-equivalent basis at U.S. Bancorp rose 3.2% to $3.3 billion. Net interest income rose 5.8% at PNC to $2.48 billion.

U.S. Bancorp said higher interest rates boosted net interest income but added that higher deposit costs affected results. PNC echoed U.S. Bancorp and said that while its yields on loans were higher, it also had increased borrowing and deposit costs.

As rates rise, banks are able to make more money on their loans, but customers also demand higher interest rates on their deposits.

U.S. Bancorp's net interest margin, which measures how profitable a bank is, was 3.15%, unchanged from the third quarter. Compared with the fourth quarter a year earlier, it expanded by 0.04 percentage point.

PNC reported a net interest margin of 2.96%, a drop of 0.03 percentage point from the third quarter but up 0.08 percentage point from the fourth quarter a year earlier. The margin narrowed from the third quarter because of a change in how it calculates some interest-earning assets, PNC said.

Noninterest expenses at U.S. Bancorp dropped 16% to $3.28 billion in the fourth quarter. A year earlier, U.S. Bancorp recorded $825 million in costs that included settling a regulatory issue, among other items.

PNC's noninterest expenses fell 16% to $2.58 billion, largely because of the comparison to the year-earlier period, which included expenses such as a $200 million contribution to the company's foundation.

Sandler O'Neill + Partners said in an analyst note previewing banks' fourth-quarter earnings results that recent rate increases from the Federal Reserve could help banks' net interest margins but said they expect the flattening yield curve in the latter part of 2018 to hurt results.

Both banks reported their fourth-quarter results before the market opened Wednesday. Shares of U.S. Bancorp gained 2.4% to $49.11. PNC shares added 0.9% to $121.21.

Write to Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

January 17, 2019 02:47 ET (07:47 GMT)

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