American bank USB is expected to release its fourth quarter and 2021 results on January 19, before the opening bell. USB’s revenue and earnings are expected to improve year over year.
Before analyzing the factors that could have influenced fourth quarter earnings, let’s take a look at the performance of US Bancorp in recent quarters.
In the most recently reported quarter, USB earnings exceeded Zacks’ consensus estimate for reserve release and loan growth. However, falling incomes and escalating expenses were the main worrying factors.
US Bancorp has a decent surprise history. Earnings beat estimates in three of the last four quarters and hit the mark in the last, with the average surprise being 19.3%.
US Bancorp price and EPS surprise
US Bancorp price-eps-surprise | Quote from Bancorp in the United States
USB’s business in the quarter to report was not enough to win analysts’ confidence. As a result, the Zacks consensus estimate for fourth-quarter earnings of $1.11 has moved south 1.8% over the past 30 days. Nevertheless, the figure indicates a 16.8% increase from the figure reported a year ago. The consensus revenue estimate is set at $5.76 billion, suggesting growth of 0.6% from the figure published a year ago.
Main developments during the quarter
In early December 2021, US Bancorp subsidiary US Bank entered into the previously announced agreement to acquire PFM Asset Management. The buyout expands US Bank’s presence in institutional asset management nationwide and strengthens its position as the dominant provider of diverse investment solutions in the country.
In November 2021, US Bancorp agreed to acquire San Francisco-based fintech company TravelBank, which offers technology-driven cost and travel management solutions. For US Bank, which is already an industry leader in providing innovative business payment solutions such as virtual corporate credit cards and tools to improve working capital, the acquisition will help it accelerate integrating digital payments into its business segment.
Key Factors Impacting Fourth Quarter Results
Net interest income (NII): In the fourth quarter, which is usually a seasonal quarter for loan growth, lending activity saw a decent acceleration, sequentially. According to the latest data from the Fed, the portfolios of commercial and industrial loans, real estate loans and consumer loans remained strong in October and November. Against this backdrop, USB should see decent loan growth in the fourth quarter.
Low filing costs should reduce interest charges, easing pressure from NII. However, excess liquidity and low reinvestment rates on securities may have put downward pressure on asset returns, thus affecting interest income.
Zacks consensus estimate of $508.3 billion for quarterly average interest-earning assets indicates marginal sequential improvement, while NII’s estimate suggests a 1.5% sequential decrease to $3.13 billion of dollars. For the fourth quarter of 2021, management expects the fully taxable equivalent NII to be relatively stable compared to the third quarter.
Non-interest income: Mortgage rates rose sequentially in the quarter ahead. In addition, mortgage origination activity is believed to have declined significantly, with rising rates dismaying refinancing activity. The Zacks consensus estimate for mortgage bank revenue is pegged at $354 billion, suggesting a 15% decline from the figure reported in the prior quarter.
Card fees likely improved on higher consumer spending due to lower unemployment and consumer optimism. Also, the demand for online payment of products and services should have been decent. The consensus credit and debit card fee estimate of $352 million projects sequential growth of 3.3%. Management also expects total payments revenue trends to continue to strengthen in the quarter ahead.
Equity market volatility persisted during the fourth quarter of 2021. Thus, thanks to an increase in equity trading volumes and an increase in client activity, USB’s trading activity should have received a boost. substantial inch. Nonetheless, fixed income trading continued to normalize during the quarter, which impacted trading revenue. The Zacks consensus estimate for US Bancorp’s commercial products revenue points to a sequential decline of 1.4%.
Deposits showed improvement in the quarter, driven by stimulus-induced liquidity and an increase in money market balances. These likely led to an increase in revenue from service fees on deposits.
Zacks’ consensus estimate for total non-interest revenue is pegged at $2.6 billion, suggesting a 2.3% decline from the figure reported in the prior quarter.
Expenses: While the lack of huge legal expenses is encouraging, increased investment in technology to improve digital offerings could lead to moderate cost increases. This should limit net income growth in the fourth quarter.
Here is what our quantitative model predicts:
US Bancorp doesn’t have the right combination of the two key ingredients – a positive earnings ESP and a Zacks rank of #3 (Hold) or higher – to increase the odds of a beat gain this time around.
You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.
ESP Earnings: US Bancorp has an ESP on earnings of -1.83%.
Zacks Rank: US Bancorp currently carries a Zacks rank of 3.
Actions worth a look
Bank of the First Republic FRC, PNC Financial Services Group, Inc. cabin crew and Huntington Bancshares Incorporated HBAN are a few companies you might want to consider as they have the right combination of elements to beat on profits in their next releases, according to our model.
The First Republic has a Gain ESP of +2.11% and a Zacks Rank of 3 at present. FRC is expected to release its fourth quarter and full year results on January 14.
Over the past 30 days, FRC’s Zacks consensus estimate for quarterly earnings has risen 2.1%.
PNC Financial is expected to report fourth quarter 2021 and full-year results on January 18. PNC, which is currently ranked No. 3 from Zacks, has an ESP profit of +2.29%. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PNC’s fourth-quarter earnings estimates have fallen slightly over the past month.
Huntington Bancshares is expected to report earnings on January 21. HBAN, currently a No. 3 ranked player, has an Earnings ESP of +1.46%.
The Zacks consensus estimate for Huntington Bancshares’ fourth quarter earnings was unchanged over the past month.
Stay on top of upcoming earnings announcements with Zacks Earnings Calendar.
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