Banking stock under pressure: U.S. Bancorp (NYSE: USB)

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U.S. Bancorp (NYSE: USB) stock fell 2.86% 1.29% on January 15th, 2020 (Source: Google finance) and continued its bearish momentum on January 16th, 2020 falling over 0.7% (as of 9:57 am GMT-5; Source: Google finance). The company posted lower than expected results for the fourth quarter of 2019. The results reflects some of the challenges that are faced by regional banks, including slow commercial-loan growth and pressure to invest enough to remain relevant alongside banking behemoths. The results end a year in which regional banks struggled to swallow the first interest rate cuts in more than a decade and the largest bank merger since the financial crisis.

The bank’s net interest income declined 3% from a year ago to $3.23 billion and the bank expects it to decline slightly through 2020. The fall in the interest rates has led to fall in the non lending income by 2.5% at U.S. Bank and a 43% rise in mortgage banking revenue couldn’t offset the decline. The company expects non lending revenue to rise in 2020. The $495 billion-asset bank’s average loans grew 4% from a year earlier, on the back of stronger residential and credit-card lending. However commercial and industrial lending growth slowed after more business borrowers paid off their loans to tap the bond market for lower rates.

Moreover, the company posted 0.8% growth in the average loans on a linked quarter basis and increased 3.9% year-over-year. The sequential quarter growth was due to strength in residential mortgages, commercial real estate, and credit card loans. In C&I, paydown activity remained subdued in the fourth quarter, mainly due to the rate environment and robust capital market conditions. The company has posted 1.9% rise in the Deposits on a linked quarter basis and grew 6.6% year-over-year. The average savings deposits have posted the growth of 11.1%, on the back of across-the-board growth in wealth management, investment services, consumer banking, and commercial banking. Further, the non-performing assets have fallen approximately 15% on both a linked quarter and a year-over-year basis.

USB in the fourth quarter of 2019 has reported the adjusted earnings per share of 90 cents, missing the analysts’ estimates for the adjusted earnings per share of $1.08, according to Analysts polled by FactSet. The company had reported 3 percent fall in the adjusted revenue to $5.67 billion in the fourth quarter of 2019, missing the analysts’ estimates for revenue of $5.8 billion.

For the first quarter of 2020, the company expect fully taxable equivalent net interest income to decline at a low single-digit pace year-over-year. The company expects mid-single digit growth in fee revenue year-over-year and low single-digit growth in non-interest expenses on a year-over-year basis.

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