U.S. Bancorp Earnings: Net Interest Income Flat, but Guided Positive Operating Leverage in 2025

Key Morningstar Metrics for U.S. Bancorp

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

What We Thought of U.S. Bancorp’s Earnings

U.S. Bancorp USB reported slightly disappointing fourth-quarter results, with lackluster net interest income and payment-related fees. Net income to common shareholders was $1.58 billion, or $1.01 per diluted share. The results translate into a return on tangible common equity of 17.4%, in line with the bank’s medium-term target of the high teens. As we incorporate fourth-quarter results and 2025 outlook, we don’t anticipate materially changing our fair value estimate of $53 per share, and we assess the stock as slightly undervalued after a more than 5% price decline following the earnings.

Net interest income was $4.15 billion in the fourth quarter, up 0.3% from a quarter ago. Loan yields and securities yields dropped from a quarter ago after the Federal Reserve delivered 100 basis points of cumulative rate cuts since September. On the other hand, the bank also repriced its deposits lower. U.S. Bancorp expects modest loan and deposit growth in 2025, with more balance sheet growth in the second half. We note that a steepening yield curve is constructive to banks’ net interest margin. With the 10-year US Treasury yield around 4.7%, the yield curve should be conducive to the firm even if the Fed doesn’t cut rates this year.

The bank expects to grow 2025 total revenue by 3%-5% with positive operating leverage of over 200 basis points, mostly in line with our expectations. We view expense discipline as a key part of our thesis for the bank, and it delivered 190 basis points of operating leverage in the fourth quarter. However, the market is in a “wait and see” mood after the bank delivered disappointing negative operating leverage for the past several years. We think the bank’s previous investment in technology and digital capabilities should help it see solid expense control.