Shares of U.S. Bancorp (USB) declined 7.8% to close at $57.37 on Wednesday after the company reported lower-than-expected Q4 results, which lagged both earnings and revenue estimates.
The bank reported earnings of $1.07 per share, missing analysts’ expectations of $1.11 per share. Revenues of $5.68 billion came below the consensus estimate of $5.77 billion.
Net interest income came in at $3.15 billion, down 1.6% year-over-year due to lower loan spreads and mix of earning assets, while non-interest income fell about 1% to $2.5 billion, mainly driven by lower mortgage banking revenue.
Net interest margin was 2.4% in the quarter, down 13 basis points sequentially and 17 bps from the year-ago period.
The provision for credit losses was a benefit of $13 million in the quarter against the expense of $441 million in last year’s quarter. Non-interest expenses were up 5% year-over-year at $3.5 billion.
The company reported average loans of $302.8 billion, up slightly from the prior-year quarter. However, average deposits surged 6.5% to $449.8 billion.
U.S. Bancorp CEO Andy Cecere said, “As we start a new year, we are encouraged by the momentum building in each of our lines of business. The investments we have made in our digital transformation and payments ecosystem initiatives will continue to enable customer and revenue growth and we expect continued momentum in customer spend activity and loan growth.”
For 2021, the company reported a net income of $8 billion and earnings per share of $5.10, compared to the net income of $5 billion or $3.06 per share in 2020.
Following the Q4 results, KBW analyst David Konrad downgraded U.S. Bancorp’s rating to Hold from Buy and lowered the price target to $64 (11.6% upside potential) from $73.
Konrad said that the company’s results were disappointing, as they missed both payments and expenses, and Q1 guidance fell short of expectations. The analyst says near-term uncertainty regarding U.S. Bancorp’s pace of recovery in payments, core expense growth and the timing of the Union Bank deal approval are moving him to the sidelines.
Overall, the stock has a Moderate Buy consensus rating based on 6 Buys and 7 Holds. The average US Bancorp price target of $66.25 implies 15.5% upside potential from current levels. Shares of USB have jumped 28.5% over the past year.
Hedge Fund Trading Activity
TipRanks’ Hedge Fund Trading Activity tool shows that confidence in U.S. Bancorp is currently Negative, as the cumulative change in holdings across all 22 hedge funds that were active in the last quarter was a decrease of 3 million shares.
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