U.S. Bancorp's Moat Widens
Strong fee revenue and low-cost funding offer the bank the ability to earn excess returns.
Following a major refinement to our bank economic moat methodology, we've upgraded several banks to a wide economic moat rating, including U.S. Bancorp (USB). The changes have resulted in higher fair value estimates across the group, as we assume excess returns persist over a longer time frame than before.
Our new methodology includes analysis of regulatory, competitive, political, and economic elements in all 22 countries we cover. These elements support the sustainability of banks' economic returns over time. Our updated analysis for rating financial systems explains why bank moats differ across our global banking coverage despite similar business models or similar profitability. Accordingly, we note that our wide-moat banks are generally contained within high-quality systems such as Australia, Canada, Sweden, and Chile, which score well across the banking system criteria we've developed. Some U.S. banks, like U.S. Bancorp, also earn wide moats despite operating in a weaker system. These banks score well on other factors, including evaluations of a bank's culture, balance sheet, ability to fend off disruption, and ability to generate excess returns.
Dan Werner does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.