2. U.S. Bancorp
Shares of U.S. Bancorp ( USB) of Minneapolis closed at $31.94 Monday, returning 21% during 2012, with a three-year total return of 36%, although the five-year total return was 13%. The shares traded for 2.6 times tangible book value, and for 10.3 times the consensus 2013 EPS estimate of $3.08. The consensus 2014 EPS estimate is $3.32. Based on Monday's close and a quarterly payout of 19.5, the shares had a dividend yield of 2.44%. For the first quarter of 2010 through the third quarter of 2012, U.S. Bancorp's return on average tangible common equity was 22.84%. The company reported third-quarter net income of $1.474 billion, or 74 cents a share, earnings increasing from $1.415 billion, or 71 cents a share, during the second quarter, and $1.273 billion, or 64 cents a share, during the third quarter of 2011. The third-quarter net interest margin was 3.59%, increasing slightly from 3.58% in the second quarter, but narrowing from 3.65% a year earlier. The improved earnings reflected strong loan growth and mortgage fee income. The third-quarter return on average tangible common equity was 20.88%. Following the company's earnings announcement, UBS analyst Greg Ketron on Oct. 17 reiterated his "Buy" rating for U.S. Bancorp, with a $38 price target, saying "the bank continues to post above average returns, was able to maintain its NIM while there has been sharp contractions at peers, and has had above average loan growth." Ketron said the company was "on track for a 50% efficiency ratio." The efficiency ratio is, essentially, the number of pennies of overhead expenses a bank incurs for each dollar of revenue. Ketron said that during the third quarter, "the efficiency ratio improved to 50.4% from 51.1% in 2Q12. The 50.4% is the lowest level since 1Q10 and we believe USB will be able to generate levels near or below 50% on a long-term basis." The analyst estimates that USB will earn $3.10 a share in 2013, with EPS rising to $3.40 in 2014. USB data by YCharts
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