U.S. Bancorp's second-quarter earnings rose 35 percent, beating Wall Street expectations, as the bank cut its credit-loss provision by half, and predicted further credit improvement in the current quarter.
The Minneapolis-based bank on Wednesday reported net income available to its shareholders of nearly $1.17 billion, or 60 cents per share. That was up from $862 million, or 45 cents per share, in the same quarter a year ago.
Analysts surveyed by FactSet had forecast earnings of 53 cents per share, on average, in the latest quarter.
U.S. Bancorp said its provision for loan losses — money set aside to cover souring loans — dropped by 50 percent to $572 million from $1.14 billion in the year-ago quarter, and from $755 million in this year's first quarter. The company also reported declines in net charge-offs, or loans written off as uncollectable, delinquencies and nonperforming assets.
Chairman, President and CEO Richard K. Davis said he expects credit quality to continue improving, particularly in consumer credit cards. He forecast further reductions in net charge-offs and nonperforming assets in the current quarter, leading to expectations that the bank will cut its loss provision further "if the current trends and our longer-term credit outlook remain positive."
Second-quarter net interest income, or money earned from deposits and loans, rose nearly 6 percent to $2.54 billion. However, the net interest margin, or profit margin on lending, slipped to 3.67 percent from 3.9 percent in the year-ago quarter. With interest rates currently low, bank profits have been squeezed because the difference between what they pay depositors and what they make from investments and lending has narrowed.
Noninterest income, or earnings from fees and charges, rose nearly 2 percent to $2.15 billion.
Noninterest expenses rose 2 percent to $2.43 billion.
U.S. Bancorp reported 4 percent growth in total average loans compared with the year-ago quarter, and 14 percent growth in average deposits.
"Our business lines performed well this quarter despite ongoing economic headwinds and a very modest demand for new lending," Davis said.
With $321 billion in assets, U.S. Bancorp operates 3,086 branches in 25 states and 5,086 ATMs.
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