U.S. Bancorp said it will be forced to take more charges related to its first-quarter merger with Firstar Corp. than previously anticipated.
In its quarterly filing this week with the Securities and Exchange Commission, the Minneapolis company reported that merger and restructuring-related charges will reach $1.4 billion. U.S. Bancorp originally estimated merger charges at $800 million.
The company said the increase stems from the restructuring of the credit portfolio, a risk management conformance program, and the discontinuation of products that do not complement its strategy.
U.S. Bancorp's filing said that the additional charges should help improve the company's risk profile and save more money.
New charges will include $82 million associated with the closing of U.S. Bancorp Libra, a unit that specializes in underwriting and trading high-yield debt. U.S. Bancorp had decided to close the operation because it did not fit into the company's strategy, the filing said.
It is also restructuring its investment banking division, U.S. Bancorp Piper Jaffray, and expects to take $28.9 million of charges from that reorganization this year. The unit is expected to boost efficiency by removing excess from the product distribution system and by implementing new operating models.
The company has already taken some charges this year. In the second quarter it took $233.2 million in merger and restructuring-related charges, including $98.1 million for severance and employee-related costs, $7.7 million for building and equipment costs, $45.5 million for restructuring expenses, and $29 million for miscellaneous expenses.
U.S. Bancorp was not available to comment about the charges.
U.S. Bancorp's acquisition by Milwaukee-based Firstar created a company with $160 billion of assets, 10 million customers, and 2,200 branches in 24 states from the Midwest to the Pacific Ocean. The new company is now focusing on sustaining the consumer-banking unit's growth.
