Staite has a neutral rating on U.S. Bancorp, with a $32 price target, valuing "the core banking business on 2.1x P/TB and a 10x PE to give a value of $23/share," and then adding "$9/share for the highly profitable Payment Services business which we value on 5x P/TB or a 12.6x PE."
The analyst said that "USB is currently very well run and highly profitable but we expect [return on tangible equity] to slip in 2013 to 22% from 24% in 2012 as the bank may struggle to offset an expected decline in mortgage revenues with cost savings."
The company's success has been "driven by a low cost efficiency ratio of only 55% plus a relatively high leverage ratio of 16x," Staite said.
Interested in more on U.S. Bancorp? See TheStreet Ratings' report card for this stock.
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