US Bancorp (NYSE:USB) stock declined about 20% since the beginning of 2023, largely influenced by a broader weakness in the banking sector and Warren Buffett‘s Berkshire (NYSE:BRK.A) (NYSE:BRK.B) significantly reducing its stake in the bank. Nevertheless, analyst Ebrahim Poonawala of Bank of America Securities is bullish about the bank’s growth prospects. Yesterday, he upgraded the stock’s rating to Buy from Hold and lifted the price target to $40 from $38.
According to the analyst, USB is considered to possess one of the “highest-quality franchises” within the U.S. banking industry. Poonawala holds the view that the strength and stability of U.S. Bancorp’s business model, along with its capacity to generate consistent earnings, may be underappreciated by the market.
Looking ahead, Poonawala expressed optimism about U.S. Bancorp’s performance in the upcoming credit cycle. This positive outlook is based on the bank’s robust underwriting practices and its diversified loan portfolio. Additionally, the analyst views USB’s limited exposure to volatile sectors such as commercial real estate as a favorable factor.
Currently, investors have concerns regarding the company’s capital position, as USB’s common equity tier 1 capital ratio is expected to exceed 10% by the end of 2024 compared with 8.5% in the most recent reported quarter. Poonawala expects that “a gradual recovery of unrealized losses, retained earnings, and risk-weighted assets optimization” will contribute to reaching this target.
Corporate Insiders are Buying USB Stock
Supporting the analyst’s views, corporate insiders are also giving bullish signals to the stock.
The TipRanks Insider Trading Activity Tool shows that the Insider Confidence Signal on USB is Very Positive, with corporate insiders buying $2.4 million worth of shares in the last three months. The tool highlights that insiders are optimistic about USB’s future trajectory and are taking advantage of the current price correction.
Is USB Stock a Buy, Sell, or Hold?
Based on U.S. Bancorp’s strong capitalization, the normalization of deposit flows after the first quarter, and the bank trading below its historical price-to-book ratio, USB presents an appealing opportunity in the regional banking sector. Overall, USB stock carries a Moderate Buy consensus rating on TipRanks. Meanwhile, the average USB stock price target of $43.03 reflects an upside potential of 21.1% from the current level.
