U.S. Bancorp's third-quarter profit improved 4.7% as revenue jumped due to net interest income and fee revenue growth, as well as fewer charges.
"Once again, credit costs had a significant impact on earnings this quarter," said President and Chief Executive Richard Davis. "Total net charge-offs and nonperforming assets were higher than the previous quarter but, as expected, the rate of increase on a linked quarter basis moderated."
Until this quarter, the Minneapolis-based bank had recently reported lower earnings, as the banking industry continued to struggle. But revenue has grown and unlike many of its peers, USB Bancorp hasn't swung into the red due to fewer soured loans and market-related write-downs.
The company posted a profit of $603 million, up from $576 million a year ago, but per-share earnings fell to 30 cents from 32 cents amid a 9% increase in the total shares outstanding. The latest results included $415 million of provision for credit losses, $76 million of net securities losses and a $39 million gain related to the company's investment in Visa Inc. Those items lowered earnings by 19 cents. Year-ago results were lowered by 28 cents amid chargeoffs and securities losses.
Revenue climbed 26% to $4.25 billion, due to strong growth in both net interest income and fee revenue.
Analysts surveyed by Thomson Reuters expected per-share earnings of 27 cents on revenue of $4.12 billion.
Credit-loss provisions were $1.46 billion, up 95% from a year ago and 4.4% from the prior quarter. Net charge-offs, loans the bank doesn't think are collectible, rose to 2.27% of average loans outstanding from 1.19% and 2.03%, respectively.
Total loans grew 9.3% from a year earlier but fell 1% during the quarter. Deposits increased 25% and 1.9%, respectively.
Last month, U.S. Bancorp joined a parade of the nation's biggest banks changing their overdraft policies amid critics' claims that levying heavy fees to customers is unfair. But rolling back fees poses a dilemma for banks, as the fees account for about 25% of the industry's total revenue.
U.S. Bancorp has paid back government preferred stock and warrants issued as part of the industry's bailout. Davis said Wednesday the company was "considerably above the well-capitalized level as defined by regulators" following the repayment under the program.
Shares were inactive in premarket trading, at $23.80. The stock has been improving since March, but is still down 5% this year.