A 2.2 percent profit decline is the largest in nearly five years.
Mortgages are weighing heavily on both U.S. Bancorp 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 income of $1.4 billion, or 73 cents per share, in the first quarter, sputtering 2.2 percent lower from a year ago. It was the second, and largest, profit decline in nearly five years for the lender, one of the banking industry’s most consistent players.
Like most banks, U.S. Bank has been coping with falling revenue in a lumbering economic recovery with low interest rates and cautious business borrowers. Both interest income, from old-fashioned loans, and noninterest income, from a range of services and fees, slid, despite solid growth in commercial loans.
Profits got a lift from trimming expenses, and a $35 million release from the bank’s reserves for future 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 lackluster quarter for U.S. Bank,” said Shannon Stemm, a bank analyst at Edward Jones. “Investors maybe just don’t see a catalyst here in the short term.”
U.S. Bank already is one of the industry’s most efficient banks and can’t pull that lever much to boost growth, Stemm noted.
“Investors might be looking to some of the other regional banks that trade at lower valuations,” Stemm said.
U.S. Bank posted strong, broad-based loan growth as it swiped business from competitors. Key drivers included retail leasing, credit cards and commercial real estate loans. Seattle, San Francisco, Los Angeles and Orange County have been particularly active, executives said.
Even residential mortgages were up 14 percent, though still slowing and off the extremes of the refinance boom.
CEO Richard Davis told industry analysts Wednesday that he expects to continue growing total average loans at the high end of the 1 to 1.5 percent range from quarter to quarter. “We’re actually seeing some slight but continued improving,” Davis said.
Davis said faster growth “is probably 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.
Jennifer Bjorhus • 612-673-4683