U.S. Bancorp, Minnesota's largest bank, posted a 26 percent increase in first-quarter profit, matching analysts' estimates as income from lending and fee-generating businesses grew.

Net income advanced to $669 million, or 34 cents a share, from $529 million, or 24 cents, in the same period a year earlier, Minneapolis-based U.S. Bancorp said Tuesday. Twenty-five analysts surveyed by Bloomberg had an average profit estimate of 34 cents a share. Profit excluding minority interests was $663 million for the quarter.

Chief Executive Richard Davis, who kept U.S. Bancorp profitable while competitors collapsed or were forced to sell themselves during the credit crisis, said he feels "very confident" about the bank's ability to raise its dividend. The bank is waiting for more certainty about the economic recovery and clarity about capital guidelines, Davis said on a conference call. The lender paid out 5 cents a share in the first quarter.

U.S. Bancorp, which bought FBOP Corp. in a Federal Deposit Insurance Corp.-aided acquisition last year, is looking for takeover targets such as payments businesses, corporate trusts and FDIC-related transactions, Chief Financial Officer Andrew Cecere said in an interview.

"The deals we have done in the past are the ones you should expect us to do in the future," Cecere said.

The lender in the first quarter set aside $1.31 billion to cover bad debts, decreasing from $1.32 billion in the same period a year earlier. Debt that U.S. Bancorp doesn't expect to be repaid rose to $1.14 billion in the period from $788 million a year earlier. The lender said it expects charge-offs to remain "relatively stable in the second quarter of 2010."

Net interest income rose 15 percent to $2.4 billion from $2.1 billion in the same period a year earlier, U.S. Bancorp said. Net interest margin, the difference between what a bank pays on deposits and charges for loans, widened to 3.9 percent from 3.59 percent, "principally due to the impact of favorable funding rates," the bank said.

New credit card legislation, which became effective in February, will reduce U.S. Bancorp's 2010 revenue by $100 million as rates and fees are lowered, Cecere said. The Credit Card Accountability Responsibility and Disclosure Act limits industry practices including double-cycle billing and "universal default," or raising rates based on a missed payment with another lender.

"From our perspective, U.S. Bancorp's quarter was solid yet in line with expectations," analyst David George of Robert W. Baird & Co., who rates the stock "outperform," wrote in a note to clients. "Credit trends are stabilizing."

U.S. Bancorp shares rose 60 cents, or 2.2 percent, to close at $28.21.