U.S. Bancorp Posts Solid Revenue Growth (Update 2)

• USB reports second-quarter earnings of 71 cents a share, beating the consensus estimate of 70 cents.
• Net interest income increases, but second-quarter net interest margin declines slightly from the first quarter, to 3.58%.
• Noninterest income increases 5% sequentially, with strong mortgage, card, and merchant processing revenue.

Updated with comments from Jefferies analyst Ken Usdin and FBR analyst Paul Miller, and also with market close information.

NEW YORK (TheStreet) -- U.S. Bancorp (USB) of Minneapolis on Wednesday reported that its second-quarter noninterest income grew by over 5% from the second quarter, as the company saw revenue increase across the board.

The company reported second-quarter earnings of $1.4 billion, or 71 cents a share, beating the consensus estimate among analysts polled by Thomson Reuters by one cent. Earnings increased from $1.3 billion, or 67 cents a share, in the first quarter, and $1.2 billion, or 60 cents a share, during the second quarter of 2011.

USB's shares rose 2% to close at $33.48.

U.S. Bancorp reported net second-quarter revenue of $5.1 billion, increasing 3% from the previous quarter, and 8% from a year earlier. Second-quarter net interest income grew 1% from the first quarter and 7% year-over-year, to $2.7 billion, although the net interest margin -- the bank's average yield from loans and investments less its average cost for deposits and borrowings -- narrowed to 3.58% during the second quarter, from 3.60% the previous quarter and 3.67% a year earlier, in line with the industry trend in the prolonged low-rate environment.

The company's total noninterest income increased 5% sequentially and 10% year-over-year, to $2.4 billion during the second quarter. Credit and debit card revenue was down 18% year, because of the implementation of the Durbin Amendment's caps on debit card interchange fees during the fourth quarter of last year, but these revenues grew 16% sequentially during the second quarter, to $235 million. Mortgage banking revenue showed continued strength as the wave of mortgage loan refinancing continued, increasing to $490 million during the second quarter, from $452 million in the first quarter, and $239 million during the second quarter of 2011.

U.S. Bancorp also saw its merchant processing fee revenue grow to $359 million during the second quarter, from $337 million the previous quarter, and $338 million a year earlier.

Average total loans increased 2% sequentially and 8% year-over-year to $214.1 billion during the second quarter. Average commercial loans grew 6% during the second quarter, with annual growth of over 23% to $54.4 billion. Average second-quarter commercial mortgage loan balances increased 2% during the second quarter and 8% from a year earlier, to $30.6 billion.

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