Mortgages are weighing heavily on both U.S. BanÂcorp and larger rival Bank of America Corp., although for very different reasons.
Bank of America swung to a loss in quarterly results it announced Wednesday on mortgage-related legal costs, as that lender tries to make things right with the government over past home loan sins.
For Minneapolis-based U.S. Bank, the ongoing falloff in mortgage banking activity continues to eat at its profits.
U.S. Bank, the nation's No. 5 commercial bank, on Wednesday reported net inÂcome of $1.4 bilÂlion, or 73 cents per share, in the first quarter, sputÂtering 2.2 percent lower from a year ago. It was the seÂcond, and largÂest, profÂit deÂcline in nearÂly five years for the lender, one of the banking inÂdusÂtry's most conÂsisÂtent playÂers.
Like most banks, U.S. Bank has been coping with fallÂing revÂeÂnue in a lumÂberÂing ecoÂnomÂic reÂcovÂerÂy with low inÂterÂest rates and cauÂtious busiÂness borÂrowÂers. Both inÂterÂest inÂcome, from old-fashÂioned loans, and noninterest inÂcome, from a range of serÂvices and fees, slid, despite solid growth in commercial loans.
ProfÂits got a lift from trimming exÂpensÂes, and a $35 million reÂlease from the bank's reÂserves for fuÂture bad loans.
Investors sent shares of both banks down Wednesday even as major stock indexes rose. U.S. Bank shares closed down 1.3 percent at $40.47. Bank of America shares fell 1.6 percent to close at $16.13.
"It was just kind of a lackÂlusÂter quarÂter for U.S. Bank," said ShanÂnon Stemm, a bank anÂaÂlyst at EdÂward Jones. "Investors mayÂbe just don't see a cataÂlyst here in the short term."
U.S. Bank alÂreadÂy is one of the inÂdusÂtry's most efÂfiÂcient banks and can't pull that levÂer much to boost growth, Stemm notÂed.
"Investors might be lookÂing to some of the othÂer reÂgionÂal banks that trade at lowÂer valuÂations," Stemm said.
U.S. Bank postÂed strong, broad-based loan growth as it swiped busiÂness from comÂpetiÂtors. Key drivÂers inÂcludÂed reÂtail leasÂing, credÂit cards and comÂmerÂcial real esÂtate loans. SeÂatÂtle, San Francisco, Los AnÂgeÂles and OrÂange County have been parÂticÂuÂlarÂly acÂtive, executives said.
Even resiÂdenÂtial mortÂgages were up 14 percent, though still slowÂing and off the exÂtremes of the refinance boom.
CEO RichÂard DaÂvis told inÂdusÂtry anaÂlysts WednesÂday that he exÂpects to continue growÂing total avÂerÂage loans at the high end of the 1 to 1.5 percent range from quarÂter to quarÂter. "We're acÂtuÂalÂly seeÂing some slight but conÂtinued imÂprovÂing," DaÂvis said.
DaÂvis said faster growth "is probÂaÂbly a few years out but may start in the last half of 2014."
Several of the bank's business lines showed strong growth. Profits in the company's large treasury and corporate support operation rose 8 percent from a year ago, and rose 11 percent in payment services. Profits in the bank's small but growing wealth management and securities services line jumped 41 percent.
JenÂniÂfer Bjorhus • 612-673-4683