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U.S. Bancorp: Quarterly profit lowest in more than 7 years
U.S. Bancorp reported a surge in soured commercial and residential real estate loans, a reflection of how the recession and the credit crisis is hurting consumers and companies
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U.S. Bancorp became the latest major bank to report a severe plunge in profits, announcing that its quarterly net income fell 65 percent as it boosted reserves to cover delinquent loans and losses on securities.
Shares of the Minneapolis-based regional bank fell 9 cents to $15.25 a share in early trading Wednesday. Shares have fallen 50 percent over the past year.
U.S. Bancorp reported a surge in soured commercial and residential real estate loans, a reflection of how the recession and the credit crisis is hurting consumers and companies. U.S. Bancorp increased the amount of money set aside for credit losses to $1.27 billion from $748 million in the previous quarter. Net charge-offs nearly tripled from a year ago to $632 million from $225 million.
The bank also incurred $253 million of securities losses, largely on write-downs associated with so-called structured investment vehicles.
The worsening loan and securities losses more than offset strong growth in U.S. Bancorp's core business of making loans. Overall, U.S. Bancorp reported that its net income fell to $330 million, or 15 cents a share, from $942 million, or 53 cents a share, a year earlier. Analysts on average expected profit of 18 cents per share. It was the lowest quarterly profit in more than seven years.
However, the bank reported average loan growth for the quarter of 17 percent over a year earlier, led by strong growth in credit card balances, home equity lines of credit and student loans.
"Although we were able to absorb the increased cost of credit and market-related writedowns, I am disappointed with the overall decline in this quarter's earnings," chief executive officer Richard Davis said in a written statement.
Most U.S. banks are adding to reserves as the recession deepens and defaults grow on real estate and other loans.
The weak results are likely to increase pressure on U.S. Bancorp management to cut the bank's dividend, which some analysts consider too generous. In the fourth quarter, U.S. Bancorp's dividend to shareholders was 42.5 cents a share -- nearly three times its earnings per share.
Chris Serres • 612-673-4308
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