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U.S. Bancorp Is Still Underappreciated

NEW YORK ( TheStreet) -- Shares of U.S. Bancorp (USB - Get Report) are still having a hard time gaining any sort of momentum following the bank's first-quarter earnings report. Although the stock has been up lately, shares have barely moved since January.

U.S. Bancorp has been a consistent performer in the financial sector for a number of years but the bank is taken for granted because it's not JPMorgan Chase (JPM) or Wells Fargo (WFC). It doesn't have to be. Investors should appreciate U.S. Bancorp has not had the struggles of Bank of America (BAC) and Citigroup (C).

The only "mistake" U.S. Bancorp has committed is lacking flair. When it comes to the metrics that should really matter -- operating margin, earnings per share and return on equity -- there are very few banks that can match USB's performance.

But can it continue?

Although the first-quarter results didn't overwhelm, including a 1% decline in operating revenue, relative to expectations, the performance wasn't all that bad. Besides, after having taking time to dissect earnings reports from some of the more prominent banks mentioned above, growth has been lacking across the board.

At USB, operating revenue fell 1% year over year and 5% sequentially. Although this is not entirely a surprise, the company posted strong growth in the previous January quarter of 5%, so some air was let out of USB's sails. Fee income was softer than expected, down 4% year over year and 7% sequentially. While U.S. Bancorp is not alone in these struggles, making a case for respect is hard when you're not showing much differentiation.

However, when keeping up with the same performance criteria, USB actually bested solid performers JPMorgan and Wells Fargo in some key areas. For instance, USB posted a 1% increase in net interest income (NII), while also posting strong results in average earnings assets.

By contrast, JPMorgan's net interest income declined 6% year over year and 2% sequentially due to margin erosion. Although USB's net interest margin (NIM) also declined by 12 basis points, this was almost half of JPMorgan's decline. Along similar lines, Wells Fargo's NIM declined 33 basis points from last year, which lead to a 3% year-over-year decline in net interest income.
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