U.S. Bancorp saw first-quarter revenue fall for the first time in years as the country’s wild mortgage refinance ride comes down off a peak.
The Minneapolis-based lender said Tuesday that it expects mortgage banking to pick up again in the second quarter but expressed an overall sense of caution about the year ahead.
Chairman and CEO Richard Davis said the bank’s customers, businesses and households alike, have gotten used to living with less and see no immediate need, such as interest rates suddenly jumping, to kick into higher gear.
“It’s torturously slow,” Davis said. “It’s not going to be robustly coming back on all cylinders. It is particularly the lack of a catalyst perhaps more than it is the uncertainty.”
The dip echoed results announced last week by Wells Fargo & Co., the nation’s top mortgage lender, which said revenue slipped as fewer people took advantage of ultralow interest rates and government programs to refinance.
U.S. Bank’s first quarter profits were $1.43 billion, or 73 cents per share, up 6.7 percent from a year ago and meeting the Wall Street consensus expectation by Thomson Reuters.
But it grew profits largely by prudent management, cutting expenses and setting aside less for credit losses. The bank’s net interest income on loans crept up just 0.7 percent year-over-year, its slowest growth in some time, as loan growth slowed too to 5.8 percent.
The fee income that makes up the other half of the bank’s business dropped 3 percent from a year ago.
The bank’s corporate customers are in “stick to their knitting” mode, Davis said.
“This year will be a harder year for revenue growth,” he said.
Mortgage banking revenue, which has lifted many big banks in recent quarters, dropped 11 percent from a year ago to $401 million.
U.S. Bank shares dropped to $32.72 Tuesday, down 59 cents.
Fitch Ratings analyst Justin Fuller wrote in a report that he expects revenue growth at U.S. Bank to remain challenging through the remainder of the year.
“The tail wind from mortgage banking income, which boosted results last year, is likely to slow further as the mortgage market moves from heavy refinancing activity to a more purchase-driven market,” Fuller said.