On Jun 10, 2013, we reiterated our long-term recommendation on U.S. Bancorp (USB) at Neutral based on its attractive core franchisee, diverse revenue streams and strong capital base. However, regulatory issues coupled with fundamental pressures on the banking sector might act as deterrents to the company’s fundamentals.
U.S. Bancorp has yet again delivered impressive earnings in the first quarter of 2013. Aided by reduced non-interest expenses and a lower provision for credit losses, the company reported earnings per share of 73 cents, up from 67 cents reported in the year-ago period. However, results were in line with the Zacks Consensus Estimate.
U.S. Bancorp remains one of the most profitable large-cap banks in the industry, with a return on equity (:ROE) of 16.0% and a return on assets (:ROA) of 1.65% in first-quarter 2013. With a wide range of product offerings, the company is well poised for organic growth. Its strong retail banking franchise and leadership in payment processing should continue creating growth opportunities going forward.
However, a sluggish economy that adversely affected consumer and business spending has impacted a number of fee-based categories over the last several quarters. Though we expect the fee-based category to grow over time with an improvement in the economy, we think that the progress will be tardy with the economy recovering at a slow pace.
For U.S. Bancorp, the Zacks Consensus Estimates for 2013 and 2014 remained stable at $3.04 and $3.24 per share, respectively, over the last 30 days. Hence, U.S. Bancorp carries a Zacks Rank #3 (Hold).
Other Major Banks to Consider
Some major banks that are worth considering include The PNC Financial Services Group, Inc. (PNC), JPMorgan Chase & Co. (JPM) and Comerica Incorporated (CMA). All the 3 banks hold a Zacks Rank #2 (Buy).
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