Juneja on Wednesday lowered his rating for U.S. Bancorp (USB - Get Report) to "neutral" from "overweight," while lowering his price target for the shares to $37.50 from $39.50. The analyst said that U.S. Bancorp had benefitted from the credit crisis, "by growing additional businesses to drive revenue growth faster than peers over last couple of years - notably mortgage originations, which offset slowdown in payments processing fee growth." But Juneja lowered his rating for the shares because he expects "the gap in revenue growth for USB to narrow versus peers," as the company's newer businesses mature and mortgage revenue declines. U.S. Bancorp has indeed stood out through the credit crisis, remaining profitable every quarter, while most of its large-cap banking peers did not. The company has continued to outperform during the credit recovery. Early this month, USB was featured by TheStreet among the eight actively traded banks that had managed to achieve returns on average tangible equity of at least 10% for every quarter since the end of 2009. For all of 2012, U.S. Bancorp's operating return on average assets (ROA) was 1.62%, according to Thomson Reuters Bank Insight, ranking it first among the 24 components of the KBW Bank Index (I:BKX). Wells Fargo (WFC - Get Report) came in second with an ROA of 1.41%. U.S. Bancorp's shares closed at $33.33 Tuesday, equating to 2.6 times tangible book value, which is a high valuation in the current environment. The shares trade for 10.1 times the consensus 2014 earnings estimate of $3.30, among analysts polled by Thomson Reuters. Juneja said that "the stock is appropriately valued and the valuation premium reflects USB's higher profitability." "Therefore, with slowing revenue growth gap and appropriate valuation, we are downgrading USB to Neutral relative to peers as these will make it difficult for the stock to outperform peers." Of course, you get what you pay for, and most sell-side analysts' price targets only take a 12-month outlook. Juneja said that "longer term, USB remains one of the best managed companies in our universe with a diverse array of revenues." U.S. Bancorp earned $2.87 a share during 2012. JPMorgan estimates the company's EPS will rise to $3.10 in 2013 and $3.30 in 2014.
Here are the four large-cap banks with "buy" ratings from JPMorgan Chase, sorted by forward price-to-earnings ratios, based on consensus 2014 earnings estimates: