U.S. Bancorp (USB) President and Chief Executive Officer (CEO) Richard Davis’ total compensation package received a 41% cut on a year-over-year basis, according to a Securities and Exchange Commission (:SEC) filing on Tuesday. His annual salary has been slashed to $10.79 million in 2013 from $18.21 million.
The CEO’s pay package includes a base salary of $1.1 million and stock awards worth $5.25 million for 2013. He has also received $1.75 million as option awards and $2.69 million as non-equity incentive plan compensation and other types of compensation. Notably, Davis’s package plunged primarily due to the lower value of his future retirement benefits, which reduced to $70,355 from $8.05 million in 2012.
Among other banking giants, JPMorgan Chase & Co.’s (JPM) chief Jamie Dimon has received a 74% hike in pay, which totaled $20 million in 2013, while Morgan Stanley’s (MS) chief James Gorman has been conferred with stock bonus of $4.9 million in 2013, up 88% year over year. Moreover, Bank of America Corp. (BAC) has rewarded its CEO, Brian Moynihan with a pay raise of 17% to $14 million in 2013.
Davis, also a chairman of U.S. Bancorp, has been acting as the CEO since 2006. Focusing on traditional banking services, Davis helped U.S. Bancorp to navigate through the financial crisis.
Notably, the company’s net income climbed 3.3% to $5.8 billion in 2013. Moreover, the company reported average total loans of $232.8 billion, up 5.7% year over year while average total deposits jumped 5.4% from the prior-year quarter to $256.9 billion.
Notably, in the stress test results for 2013 U.S. Bancorp emerged triumphant. The company has not only managed to clear the stress test but has outperformed other major banks. In its 2013 capital plan, U.S. Bancorp received approval for $2.25 billion worth of share repurchases through Mar 2014. Reflecting U.S. Bancorp’s capital strength during 2013, the company was able to return 71% of its earnings to shareholders, within the range of its long-term goal of returning 60–80%.
These factors have made investors more confident of U.S. Bancorp's growth prospects. Notably, the company's share price rose nearly 25.5% in 2013 following an 18.6% increase in 2012.
We believe that U.S. Bancorp’s attractive core franchisee, diverse revenue streams and strong performance in the past years are impressive. A solid capital position, improving credit quality and increase in lending activities augur well for the company. It adheres to a conservative growth stratagem and has made small but strategic acquisitions. Exposure to mortgage buybacks and legal hassles are also minimal.
Though there are concerns related to the impact of legal issues and its global exposures, equity-centric activities in the U.S. are expected to support U.S. Bancorp’s results in the upcoming quarters with continued recovery in the capital markets. The shares of U.S. Bancorp currently carry a Zacks Rank #3 (Hold).
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