Profits of US Bancorp weaken as energy loan provisions rallied by 25%.
US Bancorp issued its financial earnings for 1Q fiscal year 2016 as profits declined and provisions on energy loans surges. It was reported that the earnings of the bank struggled mainly from loan losses to the energy sector.
US Bancorp is regarded as one of the largest regional banks in the US. It primarily offers services such as retail and commercial throughout the western region. Its net revenue for the first quarter was down to $5.2 billion, however, it has seen an increase of 2.7% on a year-over-year (YoY) basis.
It appears that the bank did not meet the expected revenue of 0.36%. Among its eight quarters, three of them missed their targets in revenue. Meanwhile, the company’s earnings logged in settled at $1.39 billion, down from $1.43 billion YoY.
They’ve also focused on energy exposures amid the current earnings season. Ahead of the weakening oil prices, it has sent numbers of bank such as Bank of America, Citigroup, and JP Morgan Chase to struggle from losses.
Subsequently, the company mentioned in a press release that the energy related commercial loans were the reason behind their poor performance. Thus, provisions in credit losses rallied to $330 million, suggesting an increase of 25% YoY, and 8.2% compared to the prior quarter. Loans to energy related businesses of US Bancorp have mounted to $3.4 billion, which appears to account for about 1.3% of the loans outstanding in total, as of March 31.
The credit quality remained stable excluding energy related loans. Provisions for credit losses, including non-performing assets, has sent the credit quality to worsen. Non-performing assets of energy-related loans rallied to $257 million for the quarter.
Meanwhile, the energy commercial loans reserves represent 9.1% of the overall outstanding balance as of March 31, compared to a record of 5.4% in December 2015.
Revenue in mortgage business lost 22%, incurring lower pricing and originations, while revenue from the fee business increased by about 0.2% to $2.15 billion. The card free of US Bancorp accounts most of the non-interest income. A 10% increase was seen on credit and debit cards, suggesting a slight offset on declining mortgage.
Richard K. Davis, chairman and CEO said in the press release, “U.S. Bancorp is off to a solid start in 2016 as we once again delivered industry-leading performance metrics against a backdrop of global concerns driving long-term interest rates lower and continuing pressure on the energy sector.”
It was reported by a research firm that they remain bullish on shares of US Bancorp. Among 36 analysts, 17 of which have issued a Buy rating, 18 have given a Sell rating, and one affirmed a Sell rating. Shares increased by about 1.5% after financial earnings was issued, given a price of $42.52.
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U.S. Bancorp is regarded as a financial services holding firm, which provides wide-range of activities of financial services within the United States. Shares of the bank currently have a dividend yield of 2.5%, and a PE ratio of 13.
Conversely, 9 analysts of which gave a buy rating, 1 issued a sell rating, and 9 affirmed a hold rating.
The average volume for US Bancorp settled at 8.4 million share per day since last month. The market cap of the firm posted $69.6 billion, and is considered as part of the financial sector, including the banking industry.
The stock posted a beta of 0.83, and a 0.7% short float, covering 1.55 days. Shares traded down by about 6% year-to-date after the markets closed on Wednesday.