US Bancorp Q2 2023 Earnings Report
Key Takeaways
U.S. Bancorp reported a decrease in net income attributable to U.S. Bancorp and diluted earnings per common share compared to the previous quarter and the same quarter last year. The results were impacted by merger and integration-related charges and balance sheet optimization costs. However, adjusted diluted earnings per common share increased slightly year-over-year.
CET1 capital ratio of 9.1% at June 30, 2023, compared with 8.5% at March 31, 2023
Net income of $1,793 million and diluted earnings per common share of $1.12 as adjusted for notable items related to merger and integration-related charges associated with the acquisition of MUFG Union Bank (“MUB”) and balance sheet optimization activities
Net revenue of $7,197 million as adjusted for notable items including $4,449 million of net interest income on a taxable- equivalent basis and $2,748 million of noninterest income
Return on average assets of 1.07%, return on average common equity of 14.6%, and efficiency ratio of 59.2% as adjusted for notable items
US Bancorp
US Bancorp
Forward Guidance
U.S. Bancorp is focused on capturing cost synergies from Union Bank and executing revenue growth strategies. They aim to leverage digital offerings, payment services capabilities, and their broad product set to best serve clients, communities, and shareholders.
Positive Outlook
- Successfully completed conversion of Union Bank
- Accelerated accretion of capital, ending the quarter with a common equity tier 1 ratio of 9.1%
- Posted diluted earnings per common share of $1.12, as adjusted, driven by continued momentum across our businesses supplemented by positive operating leverage on a linked quarter basis
- Ended the quarter with $522 billion in total deposits, an increase of 3.2% versus the prior quarter
- Credit quality remains strong, however we continued to strengthen our balance sheet by increasing our loan loss reserve reflecting prudent credit risk management
Challenges Ahead
- Lower net interest margin this quarter reflects both higher levels of cash given debt ceiling concerns as well as higher deposit costs due to the rate environment
- Net income attributable to U.S. Bancorp was $1,361 million for the second quarter of 2023, which was $170 million lower than the $1,531 million for the second quarter of 2022
- Diluted earnings per common share were $0.84 in the second quarter of 2023, compared with $0.99 in the second quarter of 2022
- Net interest income decreased 4.7 percent on a taxable-equivalent basis due to deposit pricing, partially offset by the impact of rising interest rates on earning assets
- Provision for credit losses increased $394 million ($151 million excluding notable items) compared with the first quarter primarily due to normalizing credit losses and continued economic uncertainty