U.S. Bancorp’s fourth-quarter profit fell 20%, hurt by one-time expenses, lower interest rates and a marginal deceleration of loan activity.
The nation’s fifth-largest bank took several special charges at the end of 2019, including one tied to a liability from 11 years ago, that combined to account for most of the profit decline. As well, its year-ago results got a small boost in per-share profit from one-time events.
Even so, the fundamentals at U.S. Bank showed a slight slowing in key lending activities. Net interest income, which accounts for about two-thirds of the company’s revenue, fell and its total loans grew at the slowest quarter-to-quarter pace of the year. For the full year, U.S. Bank’s total loans grew more than twice as fast as they did in 2018, however.
In a statement, chief executive Andy Cecere said the year ended on a “good note” and the company was well positioned in 2020. He said growth was strong for both deposits and loans in its banking business and accounts and volume in its fee-based businesses.
U.S. Bancorp said it earned $1.49 billion, or 90 cents a share, in the last three months of 2019. The special charges reduced its per-share profit by 18 cents.
The company earned $1.86 billion, or $1.10 a share, in the same period a year ago, when one-time gains and charges produced a boost to per-share profit of 3 cents.
Revenue fell about 3% to $5.67 billion.
Net interest income fell by 2.9% and the company’s net interest margin, the difference between what it earns from loans and the interest it pays to depositors, shrank to 2.92% from 3.15% in the same period a year earlier.
That margin drop reflected the impact of three cuts in interest rates by Federal Reserve during 2019. U.S. Bank executives have said they expect one cut this year. Lower interest rates tend to erode profit margins at banks, though they can also increase demand for loans.
The company’s total loans grew 0.8% from the third quarter, the slowest such rate of the year. The company saw 1.1% gains to loans in both the second and third quarters and a 0.9% gain in the first.
Commercial and residential mortgages grew sharply during the latest period but broader commercial lending to businesses rose just 0.2%.
U.S. Bank’s non-interest income fell 2.5% from the year-ago period. But the surge of activity in mortgage refinancing showed through, with a 43% jump in mortgage banking fees.
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January 15, 2020 at 07:38PM
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U.S. Bank's latest profit dips 20% on charges, fundamentals slow slightly - Minneapolis Star Tribune
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