Business loans, mortgages, fees were 2Q bright spots for U.S. Bancorp

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U.S. Bancorp in Minneapolis benefited from diverse loan and fee income growth during the second quarter, despite a tougher interest rate environment that squeezed its net interest margin.

Net income for the $481.7 billion-asset U.S. Bancorp rose 4% from a year earlier to $1.8 billion. Earnings per share came in at $1.09, or 2 cents higher than the mean estimate of analysts polled by FactSet Research Systems. Net revenue increased 3.2% to $5.8 billion.

“Despite a more challenging interest rate environment, our loan and deposit trends were healthy and drove good growth in net interest income,” Chairman and CEO Andy Cecere said in a press release Wednesday. “Fee income growth was supported by solid results across our payments services, trust, wealth management and commercial products businesses. Expense growth was well controlled even as we continued to invest in our digital initiatives, and credit quality was stable.”

Net interest income rose 3.2% to $3.3 billion. The net interest margin narrowed by 3 basis points to 3.13%.

Total loans grew 3.8% to $289.2 billion, driven by increases in several categories. U.S. Bancorp's commercial lending rose 5% to $103.2 billion, though commercial real estate lending contracted 1.2% to $39.4 billion. Residential mortgages grew 9.9% on a year-over-year basis, totaling $66.8 billion, while credit card lending expanded 7.6% to $22.8 billion.

Noninterest income rose 3.1% to $2.5 billion. Credit and debit card revenue, corporate payments revenue, merchant processing services and trust and investment management fee income all contributed to that rise. Deposit service charges, however, fell 16.8% to $227 million.

Total deposits grew 3.1% to $345.2 billion. The company said that non-interest-bearing deposits shrank 7.5% to $73.1 billion as customers continued to move money into higher-yielding account types.

Expenses increased 2.2% to $3.1 billion, reflecting yearly increases in compensation, employee benefits, professional services and occupancy and equipment costs. U.S. Bancorp held marketing and business development expenses flat from last year.

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Regional banks Earnings Commercial lending Credit cards Fee income Net interest margin Mortgages U.S. Bancorp