US Bancorp Earnings: Company Lowers 2024 Guidance for Both Net Interest Income and Expense

Key Morningstar Metrics for US Bancorp

• Fair Value Estimate: $53.00
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of US Bancorp’s Earnings

While reporting its first-quarter results, US Bancorp USB lowered its 2024 net interest income and expense guidance. This doesn’t change our long-term outlook for the company, so we maintain our fair value estimate of $53 per share and believe the stock is undervalued. The company reported net income to common shareholders of $1.2 billion, or $0.78 per diluted share, on $6.7 billion of net revenue. Excluding notable items like $155 million of integration costs and a $110 million FDIC special assessment charge, diluted earnings per share would have been $0.90.

Net revenue decreased 6.4% from a year ago, with a 14% decrease in net interest income more than offsetting a 7.7% increase in noninterest income. The story was the same sequentially, with net interest income falling more than non-interest income increased. The decrease comes from the firm’s net interest margin compressing to 2.7% from 3.1% a year earlier and 2.78% the previous quarter.

Despite short-term interest rates not moving for a couple of quarters, customers continue to shift from non-interest-bearing deposits to higher-yielding accounts that increase interest expense for US Bancorp, such as money market savings and time deposits. Though total deposits have remained stable over the previous year at $500 billion-$510 billion, non-interest-bearing deposits decreased to $85 billion from $130 billion a year ago and $91 billion in the last quarter.

US Bancorp reduced its net interest income guidance to $16.1 billion-$16.4 billion from prior guidance of over $16.6 billion, as interest rates are expected to stay high for a bit longer and clients continue to shift deposits to more costly accounts. To offset some of the lower revenue, the company decreased its expense guidance to $16.8 billion from about $17.0 billion. Credit metrics remain reasonable and in line with industry peers.