This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

U.S. Bancorp Is Still Underappreciated

Granted, the first-quarter report wasn't USB's best performance. However, it's hard to get too discouraged given the subpar performance within the sector. Plus, it was also encouraging USB's management figured out ways to lower expenses, which helped offset the sub-par showing in fees. This is while at the same time negating the double-digit declines in mortgage banking.

Management's ability to lower expenses and in particular, establishing a fiscal focus, is important to note here. Given how heavily scrutinized banks have been by the Fed in terms of regulations to prevent "too big to fail" scenarios, USB's efficiency ratio actually shrunk below 51%.

By contrast, Wells Fargo's efficiency ratio is slightly above 57%, while JPMorgan's is just below 60. The lower the number, the stronger the bank is perceived to be. So, here, too, U.S. Bancorp is demonstrating that it just might be safer than two of the better names in the sector.

What's more, USB's impressive expense control, which contributed to a lower-than-expected loan loss provision, resulted in a 1% increase in pre-provision net revenue (PPNR). Even though PPNR arrived down 4% sequentially, it matched Wells Fargo's performance on the upside, while also outperforming on the downside -- losing 4% sequentially versus Wells Fargo's 7%.

With all of these factors at place, U.S. Bancorp seems underappreciated. The question, though, is to what extent management can invigorate growth to get investors excited about these shares. With the stock trading at $32 per share, this bank is certainly one of the best value plays in the financial sector, if not in the entire market.

While USB is not as large as some of the bigger banks on the market, investors should realize that it is second to none in terms of return on equity. With improved operating revenue and profit growth, these shares can reach $40 in the next six to 12 months.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
USB $42.81 -0.74%
AAPL $93.82 -1.10%
FB $117.40 0.57%
GOOG $694.00 0.43%
TSLA $241.20 -2.60%


Chart of I:DJI
DOW 17,768.03 -62.73 -0.35%
S&P 500 2,059.70 -16.11 -0.78%
NASDAQ 4,764.9010 -40.39 -0.84%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs