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$26.89 -1.02 (-3.65%)
12/4/2008 4:00 PM

US Bancorp (USB)

CAPS Rating:
****

The Company provides financial services including lending & depository services, also engages in credit card, merchant, ATM processing, mortgage banking, insurance, trust & investment management, brokerage, & leasing activities in domestic markets.

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Avatar NetscribeBanking (96.18) Submitted: 1/17/07 1:29 AM : Outperform Start Price: $32.69 USB Score: 22.54

U.S. Bancorp, with assets of $217 billion, is the 6th largest financial services holding company in the United States. The company operates 2,462 banking offices and 4,943 ATMs providing a full line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions.

The year 2007 is marked for a total transformation and the management believes growth drivers would be the fee income driven by the payment processing and wealth management services. Moreover these services help in superior scalability with less capital. Investments made over the years in acquisition of Citigroup's European merchant services, EuroConex, NOVA and trust services of other major bank is expected to pay off with estimated revenues of $350 million.

The retail-banking’s Power Bank venture of extended banking days is expected to boost revenues by 2%-3% apart from volumes in the coming years. Centralized Credit scoring by Project Gold has resulted in speeding up credit request and hence loan growth. However the bank has huge challenge ahead as its loan growth is not proportionate to the deposit growth. The bank is highly leveraged and dangerously using the borrowings for funding.

The bank has been very cautious with its expenses while maintaining branch expansion. Super market branches opened in the valuable metropolitan regions of Los Angeles, Las Vegas and San Francisco cost just one sixth of a standalone bank. Though there are talks of the company being taken over, the banks practice of returning 80% of its annual earnings, its outstanding efficiency ratio of 44.7% would act as a deterrent for the same. Merger synergies are difficult to look as the operational cost are already low and is heading for a bullish run.

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Avatar NetscribeBanking (96.18) Submitted: 4/16/07 6:43 AM

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U.S. Bancorp’s net income for 2006 grew modestly to $4.8 billion apart from achieving industry leading profitability metrics with return on average assets of 2.23% and return on average common equity of 23.6%. The strategy of the bank has been to dominate the Midwestern and western markets by rolling out its PowerBank campaign. These advertisement and costumer satisfaction exercise would help in increasing the long-term growth, profitability and loyal customer base. Efficiency ratio of 45% is considered best amongst its peers and would help it price commercial loans competitively.

The bank looks well positioned deriving around 50% of its revenue as fee income thereby reducing its interest rate sensitivity. Payment processing activities has been its main growth engine, still remaining a bright spot. Endorsing the same it has acquired additional card portfolios and expanded it merchant services business in Western Europe and Canada. Over the years it has built a good corporate trust business by a series of acquisitions.

Capital ratios remain in tact and its conservativeness attitude has resulted in high loss reserve ratios. Historically it believes in paying out 80% of its earnings to shareholders in the form of cash dividends and share buybacks. This acts as Damocles sword hanging over the management to make capital efficient decisions and improve earnings. The management expects the net interest margin to remain stable irrespective of the Fed actions and all set for another promising year.

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