U.S. Bancorp on Tuesday reported a decline in its fourth-quarter earnings, but the Minneapolis-based bank escaped the financial meltdown that beset many other banks at the end of 2007.
Earnings fell 21 percent during the quarter compared with a year earlier, but the fall-off was anticipated because of earlier reported extraordinary items.
Fourth-quarter earnings were $942 million, or 53 cents per share, down from $1.19 billion, or 66 cents per share, in the same period in 2006.
Profit for the full year was $4.32 billion, or $2.43 a share, a 9 percent drop from the 2006 total of $4.75 billion, or $2.61 a share.
The quarter's results included pretax charges of $215 million for the bank's share of a settlement involving litigation against Visa Inc. and $107 million in losses that resulted from the bank purchasing securities from money market funds managed by an affiliate. Both charges were announced earlier.
On a day when many bank shares took a pounding, U.S. Bancorp shares closed at $30.42, up 10 cents. Almost as remarkable in the financial sector now, the bank said it would increase its quarterly dividend from 40 cents per share to 42.5 cents.
"They deserve to be up,'' Jon Arfstrom, bank analyst at RBC Dain Rauscher in Minneapolis, said of the bank's shares. "Most of the other [bank] results were not as good."
In a conference call with analysts, CEO Richard Davis said the bank isn't immune from the slowdown in the economy and expects to see more people unable to pay their debts. However, he predicted that losses will remain contained at U.S. Bancorp.
"Given the current economic environment, we anticipate our nonperforming assets will continue to move higher, but the increase will be very manageable," Davis said.
The bank raised its reserves for credit losses to $225 million in the quarter, up $56 million from the same period a year ago.
Less than 3 percent of total loans are subprime mortgages, said Chief Financial Officer Andrew Cecere, and the bank has forgone some of the resets on those loans that would have pushed borrowers into higher payments.
"U.S. Bank doesn't want to own the house, doesn't want to put people out of the house. We want to do what's right," Davis said.
Tom Kersting, financial services analyst at Edward Jones & Co. in St. Louis, also had good things to say about the bank.
"It's pretty clear that their earnings were quite good in what's turning out to be a quite challenging quarter for U.S. banks," he said.
Kersting said he was particularly impressed by the bank's gains in deposits in markets as disparate as St. Louis, Seattle and Portland, Ore., where the bank recently has increased advertising and customer-support spending.
Analysts had concerns "as to whether or not those investments would pay off with more deposits and greater market share," he said. "It's pretty clear those investments are paying dividends."
Mike Meyers • 612-673-1746