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

We believe US Bancorp stock remains undervalued.

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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.

U.S. Bank Stock vs. Morningstar Fair Value Estimate

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Michael Wong

Sector Director
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Michael Wong, CFA, CPA, is director of equity research, financial services, North America, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Michael previously served as chair of the valuation committee. Before assuming his current role in 2017, he was a senior equity analyst, covering investment banks and brokerages. Before joining Morningstar in 2008, he worked in corporate and public accounting.

Wong holds a bachelor’s degree in business administration, with concentrations in accounting, corporate finance, and financial services from San Francisco State University, where he graduated summa cum laude. He also holds the Chartered Financial Analyst® designation and is a Certified Public Accountant. Wong has also passed the Certified Financial Manager (CFM) and Certified Management Accountant (CMA) exams.

Wong won the “Technology Thought Leadership” award at the 2016 Industry Awards for his report, The Financial Services Observer: The U.S. Department of Labor’s Fiduciary Rule for Advisors Could Reshape the Financial Sector. In 2011, he ranked second in the Investment Services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. Wong was awarded the summer 2005 Johnson & Johnson Institute of Management Accountants CFM Gold Medal.

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