U.S. Bancorp Earnings: As We Expected, Capital Build Process and Capital Levels Are Fine

Wide-moat-rated U.S. Bancorp reported what we consider to be another average quarter. However, we believe the shares have been materially undervalued, and when they are as cheap as they have been, sometimes it only takes an average quarter to encourage some rerating by the market. We think the market is most excited about management’s increased specificity and guidance with regard to the capital build process. Our thesis has been that capital levels would be fine, but while the math worked from our perspective, the market remained hesitant. We thought a key catalyst would be simply proving that the capital story would play out.