U.S. Bancorp targets mobile, compliance programs

U.S. Bancorp has been carefully monitoring expenses for the last several quarters as it anticipates a higher interest rate environment and more robust economic growth, said Richard Davis, CEO of the Minneapolis-based financial services holding company, during an Oct. 15 conference call regarding third-quarter results.

During the question-and-answer session, an analyst asked Davis which projects he would support no matter how long it takes for interest rates to rise.

"One is mobile transitions to banking channels," Davis said. "We are spending money on that."

According to Davis, U.S. Bancorp has hundreds of people in Atlanta at work on those topics.

"I haven't starved that one bit because that is the changing environment we are in," Davis said. "We have to be a leader on that."

The second project area is compliance, which is becoming more important as the industry faces increasing regulation.

"I am spending money on either back office or, more often than not, technology to replace some of the error-ridden places where human interaction creates an outcome that's not acceptable anymore," Davis told analysts. "That investment is worth it, not because it's a better product necessarily, but because it's a better compliance outcome."

Analyst: Helios good match for UnitedHealth

Bloomberg News reported last week that Minnetonka-based UnitedHealth Group was close to acquiring the pharmacy benefit manager Helios from its private equity owners Kelso & Co. and Stone Point Capital for $1.5 billion to $1.9 billion.

Leerink analyst Ana Gupte picked up on the rumored offering and wrote in a quick note to investors that the Memphis-based Helios would be a good match to previous UnitedHealth acquisitions.

"The Helios deal is coming after the Catamaran deal in the spring for $13 billion showing UnitedHealth's commitment to the PBM [pharmacy benefit manager] market and continued diversification," Gupte wrote.

Patrick Kennedy

Leerink analyst David Larsen has a positive rating on Woonsocket, R.I.-based CVS Health Corp. in part because of its pending $1.9 billion acquisition of Target's pharmacy business.

Larsen wrote in a recent note to investors: "CVS' pending acquisition of Target Pharmacies is also a significant positive since it gives CVS a retail presence in new geographies (e.g., Pacific Northwest and Colorado) where it can now more aggressively go after PBM business."