US Bancorp Earnings: Good Commercial Loan Growth, but Net Interest Margin Flat in First Quarter

Key Morningstar Metrics for US Bancorp

• Fair Value Estimate
  : $59.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

What We Thought of US Bancorp’s Earnings

US Bancorp USB reported OK first-quarter earnings. The bank has delivered positive operating leverage in the past seven quarters, with its first-quarter adjusted efficiency ratio of 58.2% in line with its medium-term target of the mid to high 50s.

Why it matters: We were encouraged by the bank’s acceleration in its loan growth, mostly driven by commercial lending. Average loans grew by 5.3% year over year, much better than the flat to low-single-digit loan growth seen during the past eight quarters (excluding portfolio sales during the second quarter of 2025).

• Following the bank’s strong loan growth in the first quarter, management raised full-year loan growth guidance to a mid-single-digit range from 3%-4% but left full-year revenue growth unchanged.
• We’re not too concerned about this, as it implies less net interest margin expansion contribution to the bank’s top line. Like another regional peer, US Bancorp noted that some of its commercial loan growth came at lower spreads from larger corporate clients.

The bottom line: As we incorporate these results and updated guidance, we expect to increase our $59 per share fair value estimate for wide-moat-rated US Bancorp by mid to high single digits, due to expectations for stronger near-term earnings growth and a higher leverage ratio. We assess the shares as being undervalued.

• We plan to increase the bank’s credit card growth in the near term from its partnership with Amazon’s small business card, which is expected to transfer to US Bancorp in the third quarter, adding around $75 million-$80 million in revenue per quarter.
• We also expect to increase our leverage ratio forecast for the bank, as it is expected to see 5%-7% relief in risk-weighted assets under the newly proposed bank capital regulations.

Long view: We like US Bancorp’s diversified fee income franchise and think its strategy of investing in its payment business and other fee income growth areas is the right move.