- US Bank has resolved its regulatory issues I described in August 2017; since then, shares are up just 7% compared to S&P +75% and my favorite megabank, JPM +63%.
- Takeover of Union Bank likely to be a boon to earnings in years ahead if bank can protect revenue while cutting 40% of Union's expenses.
- However, investors will need patience as banks engaged in M&A struggle to create Alpha; big concern is not expense cuts, but revenue creation/retention.
- Decent dividend, superior risk-adjusted returns, and attractive Union Bank acquisition deal structure make US Bank a solid hold.
- I may sell Puts ($50 target) if and when USB and market hit a strong downdraft over the next six months or so.
For further details see:
U.S. Bancorp: Union Bank Merger Positive, But Be Patient