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U.S. Bancorp Credits Business Mix for 3rd-Quarter-Profit Beat

U.S. Bancorp profit is down, but the bank still beat Wall Street's earnings expectations.

U.S. Bancorp's  (USB) - Get U.S. Bancorp Report third-quarter earnings were down, but a strong mortgage banking business and consumer loan growth helped the fifth-largest commercial bank in the U.S. beat Wall Street's expectations

Shares of the Minneapolis financial-services company at last check were $38.44. 

The company reported third-quarter net income of $1.58 billion, or 99 cents a share, down from the year-earlier $1.82 billion, or $1.15 a share, but beating the FactSet consensus of 91 cents a share.

The bank said that components of its net income are being hurt by the covid-19 environment, "resulting in significantly lower interest rates and consumer and business spending activities and changes in credit quality."

"Consumer loan growth was robust, and our fee-based businesses performed well," Andy Cerere, chairman, president, and chief executive, said in a statement.  

"Our mortgage banking business was particularly strong in the third quarter as we continued to support customers’ home financing and refinancing needs," Cerere said.

"And our payments businesses benefited from improving consumer-spending activity as state and local economies continued to open."

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Noting the challenging environment created by the coronavirus pandemic, Cerere said the bank's capital and liquidity positions remained strong and while credit losses were increasing for the entire industry, "we are well positioned to navigate a more challenging credit environment."

Net interest income was $3.23 billion in the third quarter, down from $3.28 billion in the year-earlier quarter. Non-interest income rose to $2.71 billion compared with $2.61 billion a year earlier. 

Wall Street was looking for net interest income of $3.2 billion and non-interest income of $2.53 billion.

Provision for credit losses in the quarter was $635 million, compared with $1.74 billion in the second quarter of 2020. 

Average total deposits grew 15.9% year over year and average total loans grew 6.4% year over year.

In the fourth quarter, the bank said, it expects mortgage revenue to decline and payments revenue to continue to be hurt.