U.S. Bancorp's loan growth power comes from working the weights.
On Wednesday, the Minneapolis-based company reported year-over-year loan growth of 4%, while it reported an 11% increase in lending activity, which includes loan commitments, from the first quarter.
U.S. Bancorp, which has $321 billion of assets, is succeeding in the anemic loan market because of a "barbell" lending strategy it instituted three years ago, Richard K. Davis, the chairman and chief executive, said in a conference call with investors. On one end was a heavy focus on small-business loans, and on the other were loans to bigger corporations and municipalities.
"We brought in a number of new small business lenders and originators and changed the way our branch managers become the center of small business activities,""Davis said. "The same three years ago we started introducing to all of you this corporate bank that we are building out, and it wasn't just for the sake of having a few more people on the East Coast. It was to really become a whole-service, top-flight corporate bank. So we are getting not only more customers, we're getting a lot more invitations to the party.""
The new loans are also a function of bullish pricing, though not at the expense of profitability, company officials said.
"We are being competitive on price but I will tell you that the margins are still very profitable," Andrew Cecere, the vice chairman and chief financial officer, said during the call. Pricing is down 25 to 30 basis points, to 2.20%, he said. That's "still well above where it was in 2006, early 2007."
Though the company is happy to compete on price, Davis vowed not to take undue risks elsewhere.
"We don't compete on underwriting. We won't do that — ever," Davis said.
The company reported second-quarter earnings of $1.2 billion, up 57% from a year earlier.
