Overview

U.S. Bancorp, one of the largest banking companies in the United States, has reported its financial results for the third quarter and first nine months of 2024. The company achieved strong earnings growth compared to the same periods in 2023, with net income attributable to U.S. Bancorp reaching $1.7 billion in the third quarter and $4.6 billion in the first nine months of 2024.

Financial Performance

In the third quarter of 2024, U.S. Bancorp reported net income of $1.7 billion, or $1.03 per diluted common share, compared to $1.5 billion, or $0.91 per share, in the third quarter of 2023. This represents a 13.2% increase in earnings per share. For the first nine months of 2024, net income was $4.6 billion, or $2.77 per diluted common share, compared to $4.6 billion, or $2.79 per share, in the same period of 2023.

The company’s return on average assets improved to 1.03% in the third quarter of 2024, up from 0.91% in the prior year quarter. Return on average common equity also increased to 12.4% from 11.9% over the same period.

Revenue and Profit Trends

Total net revenue, which includes net interest income and noninterest income, decreased by 2.4% in the third quarter of 2024 compared to the prior year quarter. This was driven by a 2.4% decline in both net interest income and noninterest income.

The decrease in net interest income was primarily due to the impact of higher interest rates on deposit pricing and mix, partially offset by higher yields on earning assets and changes in the balance sheet composition. Noninterest income declined due to net losses on investment securities sales, lower service charges, and lower other noninterest income, partially offset by higher fee revenue across other categories.

For the first nine months of 2024, total net revenue decreased by 4.4% compared to the same period in 2023. Net interest income fell by 8.6%, while noninterest income increased by 2.7%. The decrease in net interest income was again driven by the impact of higher rates on deposits, partially offset by higher yields on earning assets. The increase in noninterest income was due to higher fee revenue, which was partially offset by higher net losses on investment securities sales.

Noninterest expense decreased by 7.2% in the third quarter and 5.7% in the first nine months of 2024 compared to the prior year periods. This was primarily due to lower merger and integration charges, partially offset by higher compensation and employee benefits expense.

The provision for credit losses increased by 8.2% in the third quarter of 2024 compared to the prior year quarter, driven by higher net charge-offs. However, for the first nine months of 2024, the provision for credit losses decreased by 4.8% compared to the same period in 2023, due to the impacts of balance sheet repositioning and capital management actions taken in the second quarter of 2023.

Strengths and Weaknesses

U.S. Bancorp’s key strengths include its diversified business model, strong fee-based revenue streams, and disciplined expense management. The company’s commercial banking, wealth management, and payment services divisions have all contributed to its revenue growth and profitability.

However, the company faces challenges from the rising interest rate environment, which has put pressure on its net interest margin and deposit mix. The decrease in noninterest-bearing deposits and increase in time deposits and savings accounts reflect customers’ shifting preferences in response to higher rates.

Additionally, the company has experienced higher net charge-offs in its loan portfolio, particularly in credit cards, commercial loans, and commercial real estate. This has led to an increase in the provision for credit losses, which could continue to be a headwind if economic conditions deteriorate.

Outlook

Looking ahead, U.S. Bancorp’s management remains cautiously optimistic about the company’s prospects. The bank is focused on managing its balance sheet and funding mix to mitigate the impact of rising rates, while also continuing to invest in its fee-generating businesses and digital capabilities to drive long-term growth.

The company’s strong capital position and risk management practices should help it navigate any potential economic challenges. However, the outlook for the banking industry remains uncertain, and U.S. Bancorp will need to closely monitor credit quality, interest rate trends, and competitive dynamics to ensure it can deliver consistent financial performance for its shareholders.

Overall, U.S. Bancorp has demonstrated its ability to adapt to a changing market environment and deliver solid financial results. By leveraging its diversified business model and disciplined approach to risk management, the company is well-positioned to continue generating value for its customers and shareholders in the years ahead.