2024-03-15 00:12:38 ET
Summary
- U.S. Bancorp's EPS has fallen as expected, with a significant drop in income and a loss in stock value since I covered it last January.
- The bank is facing challenges in deposit growth and may need to raise savings account rates, leading to a decline in net interest income.
- The bank's leverage, exposure to high-risk assets, and unrealized losses pose significant risks to its liquidity and equity value.
- As excess financial system liquidity dries up later this year, I anticipate most large banks will see sharp NIM declines.
- USB's more significant exposure to commercial property loans may be an issue if nonperformance figures continue to rise.
Over a year ago, I published " U.S. Bancorp: Net Interest Margin Compression Could Quickly Erase Profits This Year." At that time, I had a bearish view on U.S. Bancorp ( USB ) under the view that its moderately high leverage combined with rising deposit rates would cause its NIM to compress, causing the company to lose most of its net income. At that time, most, but not all, analysts were bullish on USB because its dividend looked strong, potentially overlooking the negative outlook developing in its income....
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U.S. Bancorp: Excessive Premium To Tangible Equity, Growing Loan Loss Risks, And Precarious Deposits