U.S. Bancorp USB is scheduled to report fourth-quarter 2024 results on Jan. 16, 2025, before the opening bell. The company is expected to have witnessed a year-over-year rise in quarterly revenues and earnings.
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In the third quarter, U.S. Bancorp benefitted from lower expenses and a strong capital position. However, a decline in net interest income (NII) and non-interest income were headwinds.
U.S. Bancorp has an impressive earnings surprise history. Its earnings beat estimates in each of the trailing four quarters, the positive surprise being 1.55%, on average.
U.S. Bancorp price-eps-surprise | U.S. Bancorp Quote
NII: In the fourth quarter, the Federal Reserve cut interest rates by 50 basis points to 4.25-4.5%. This, along with the rate cut in September, is likely to have offered some support to USB’s NII as the rise in funding/deposit costs declined.
Management expects NII for the fourth quarter of 2024 to be relatively stable compared with the third quarter’s reported figure of $4.17 million.
The consensus estimate for NII for the fourth quarter is pegged at $4.15 billion, indicating a marginal increase from the prior year’s reported figure.
Loans: Greater clarity into the Fed’s rate cut trajectory, coupled with a stabilizing macroeconomic environment, is likely to have improved lending conditions. According to the Fed’s recent data, demand for commercial and industrial loans was decent during the fourth quarter of 2024, while demand for commercial real estate remained subdued.
The company’s lending book is likely to have been positively impacted by growth in commercial and industrial and consumer loan demand, while the subdued commercial real estate loan demand might have offset the growth to some extent.
The Zacks Consensus Estimate of $608.8 million for average earning assets indicates a marginal year-over-year increase.
Non-Interest Income: The fourth quarter witnessed robust client activity and market volatility, driven by optimism surrounding strong economic growth, slowing inflation and a potential easing of monetary policy. Additionally, volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange.
In the fourth quarter of 2024, trading volumes across equity derivatives and corporate bonds exhibited significant growth, reflecting heightened market activity and investor engagement.
The Zacks Consensus Estimate for commercial product revenues in the fourth quarter of 2024 is pegged at $383 million, indicating a decline of 3.5% from the prior year’s reported figure.
Mortgage rates in the fourth quarter of 2024 were 6.8%, slightly higher than the 6.2% reported at the end of the third quarter. Despite the central bank’s interest rate cuts, mortgage rates did not decline significantly. Despite this, refinancing activities and origination volumes witnessed decent growth. Thus, U.S Bancorp’s mortgage banking fees are likely to have witnessed some improvement.
The Zacks Consensus Estimate for mortgage banking revenues in the fourth quarter of 2024 is pegged at $155.05 million, which remained flat from the prior year’s reported figure.
Increased consumer spending activities are likely to have driven USB’s card revenues. The Zacks Consensus Estimate for income from card revenues is pegged at $446.1 million, indicating an increase of 4.7% from the prior year’s reported figure.
The consensus mark for trust and investment management fees in the fourth quarter of 2024 is pegged at $679.2 million, indicating a rise of 1.8% from the prior year’s reported figure.
Overall, the Zacks Consensus Estimate for total non-interest income in the fourth quarter of 2024 is pegged at $2.86 billion, indicating a rise of 6.1% year over year.
Expenses: As the bank continues to invest in technology modernization, the expense base is likely to have remained elevated in the fourth quarter. Moreover, higher costs related to compensation employee benefits and net occupancy are expected to have hindered the company’s bottom line in the quarter under review.
Asset Quality: The company is likely to have set aside a substantial amount of money for potential bad loans, given the expectations of higher for longer interest rate backdrop.
The Zacks Consensus Estimate for non-performing loans is pegged at $1.88 billion, indicating a rise of 4.1% from the prior year’s reported figure.
