U.S. Bancorp (USB) | Investment Case

1. Company Snapshot

1.a. Company Description

U.S. Bancorp, a financial services holding company, provides various financial services to individuals, businesses, institutional organizations, governmental entities and other financial institutions in the United States.It operates in Corporate and Commercial Banking, Consumer and Business Banking, Wealth Management and Investment Services, Payment Services, and Treasury and Corporate Support segments.The company offers depository services, including checking accounts, savings accounts, and time certificate contracts; lending services, such as traditional credit products; and credit card services, lease financing and import/export trade, asset-backed lending, agricultural finance, and other products.

It also provides ancillary services comprising capital markets, treasury management, and receivable lock-box collection services to corporate and governmental entity customers; and a range of asset management and fiduciary services for individuals, estates, foundations, business corporations, and charitable organizations.In addition, the company offers investment and insurance products to its customers principally within its markets, as well as fund administration services to a range of mutual and other funds.Further, it provides corporate and purchasing card, and corporate trust services; and merchant processing services, as well as investment management, ATM processing, mortgage banking, insurance, and brokerage and leasing services.

As of December 31, 2021, the company provided its products and services through a network of 2,230 banking offices principally operating in the Midwest and West regions of the United States, as well as through on-line services, over mobile devices, and other distribution channels; and operated a network of 4,059 ATMs. The company was founded in 1863 and is headquartered in Minneapolis, Minnesota.

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1.b. Last Insights on USB

U.S. Bancorp's recent performance has been driven by several positive factors. The company's Q1 2025 earnings beat expectations, with net interest income (NII) and non-interest income rising, while expenses decreased. This was largely due to strong deposit growth, effective expense control, and excellent credit quality. Additionally, U.S. Bancorp has made significant progress in building its capital, which is expected to alleviate regulatory constraints and enable buybacks and multiple expansion by late 2026. The company's partnership with Fiserv to streamline digital card issuance and its expansion of embedded payment solutions are also expected to drive growth and efficiency. Furthermore, U.S. Bancorp's readiness to adopt stablecoins, as signaled by its recent announcement, positions it to capitalize on emerging trends in the financial sector.

1.c. Company Highlights

Last Price	51.26
Change Percentage	-0.21%
Open	51.17
Previous Close	51.37
Market Cap ( Millions)	79680
Volume	7454174
Year High	52.27
Year Low	35.18
M A 50	47.57
M A 200	45.22

FCF Yield	14.44%
Dividend Yield	3.94%
ROE	11.81%
Debt / Equity	123.12%
Net Debt / EBIDTA	114.77%
Price To Book	1.26
Price Earnings Ratio	11.1
Price To FCF	6.93
Price To sales	1.93
EV / EBITDA	9.21

2. U.S. Bancorp's Q3 Earnings: A Strong Performance

U.S. Bancorp reported a robust third-quarter earnings per share (EPS) of $1.22, significantly beating estimates of $1.13, representing an 18.4% year-over-year increase. The company's net revenue reached a quarterly record of $7.3 billion, driven by a broad-based strength across payments, institutional, and consumer businesses. The net interest margin (NIM) expanded to 2.75%, and the company achieved a return on average assets of 1.17% and a return on tangible common equity of 18.6%. Fee income grew 9.5% year-over-year, contributing to the overall strong performance.

Publication Date: Oct -17

                                    📋 Highlights
                                    Earnings Growth::
                                                Q3 EPS of $1.22, up 18.4% YoY, with net revenue hitting $7.3B (record high).
Fee Income Expansion::
                                                +9.5% YoY growth driven by payments, institutional, and consumer segments.
Operational Efficiency::
                                                Improved efficiency ratio to 57.2% and 530 bps of positive operating leverage.
Net Interest Margin (NIM)::
                                                2.75% (up 9 bps QoQ), with 3% target by 2027 via asset repricing and mix.
Deposit Growth::
                                                Average deposits rose 1.8% to $512B, supporting fee and NII stability in Q4 guidance.

                                

Revenue and Margin Analysis

The company's net interest income was $4.25 billion, up 4.2% from the linked quarter, with average loans totaling $379 billion and average deposits increasing 1.8% to $512 billion. The net interest margin expansion of nine basis points was a positive sign, and the company's guidance suggests that NIM is expected to reach 3% by 2027, driven by fixed asset repricing, mix favorability, and strategic balance sheet actions.

Valuation and Growth Prospects

Analysts estimate next year's revenue growth at 4.6%. With a current Price-to-Tangible Book Value (P/TBV) of approximately 1.13, and a Dividend Yield of 4.39%, the stock appears to be reasonably valued. The company's focus on organic growth, efficiency, and returning capital to shareholders is expected to drive future performance. As John C. Stern mentioned, "We're focused on organic growth, growing accounts and leaning into growth with our clients," indicating a positive outlook for loan growth and overall business expansion.

Outlook and Conclusion

U.S. Bancorp expects stable net interest income in the fourth quarter, with a bias to the upside, and is confident in its expense management disciplines. The company's sustainable finance business is growing rapidly, and its stablecoin efforts are focused on capital markets and investments, as well as stablecoins as a payment rail. With a strong Q3 performance and positive guidance, the company is well-positioned for future growth.

3. NewsRoom

US Bancorp: A Strong Contender in the Banking Sector

Dec -05

Source: fool.com

U.S. Bancorp to Speak at the Goldman Sachs U.S. Financial Services Conference

Dec -03

Source: businesswire.com

17 dividend-stock bargains from a value manager with a stellar track record

Dec -02

Source: marketwatch.com

5 Banks That Outperform the S&P 500 in Volatile November

Dec -02

Source: zacks.com

USB or BK: Which Is the Better Value Stock Right Now?

Nov -28

Source: zacks.com

3 Bank Stocks With Solid Dividend Yield to Keep an Eye On

Nov -28

Source: zacks.com

Goldman Sachs Spotlights Dividend Stocks Using AI – 5 Strong Buys Now

Nov -26

Source: 247wallst.com

Would You Like a New Car With That $8 USB Cable? Amazon Hopes So.

Nov -25

Source: wsj.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.50%)

6. Segments

Wealth, Corporate, Commercial and Institutional Banking

Expected Growth: 5.0%

The segment is expected to grow faster than the global average due to its exposure to corporate and institutional clients who are increasingly demanding digital banking solutions, driving investment in related services.

Consumer and Business Banking

Expected Growth: 4.2%

This segment is expected to grow slightly below the global average due to the mature nature of the consumer banking market, though it will still benefit from digital banking trends.

Payment Services

Expected Growth: 6.0%

The shift towards digital payments is expected to drive higher growth in this segment compared to the global average, as more businesses and consumers adopt electronic payment methods.

Unallocated Taxable-Equivalent Adjustment

Expected Growth: 0.0%

As this is not a revenue-generating segment but rather an accounting adjustment, its growth is not directly comparable to other segments and is expected to remain stable or be adjusted based on tax policies.

Treasury and Corporate Support

Expected Growth: 4.0%

The growth in this segment is expected to be slightly below the global average as it is influenced by the overall performance of the bank and its strategic decisions regarding capital allocation and corporate functions.

7. Detailed Products

Consumer Banking

Provides financial services to individual consumers, including checking and savings accounts, credit cards, home loans, and personal loans.

Corporate Banking

Offers financial services to large corporations, including cash management, treasury management, and lending services.

Commercial Banking

Provides financial services to small and medium-sized businesses, including cash management, lending, and treasury management services.

Wealth Management

Offers investment and wealth management services to individuals, families, and institutions, including investment advice, portfolio management, and retirement planning.

Payment Services

Provides payment processing services to merchants, including credit and debit card processing, electronic funds transfer, and online payment solutions.

Treasury Management

Offers cash management and treasury management services to corporations, including account management, payment processing, and risk management.

Investment Services

Provides investment products and services to individuals, families, and institutions, including brokerage services, investment advice, and retirement planning.

Mortgage Banking

Offers mortgage lending services to individuals and institutions, including residential and commercial mortgage loans.

8. U.S. Bancorp's Porter Forces

Forces Ranking

Threat Of Substitutes

U.S. Bancorp operates in a highly regulated industry, making it difficult for substitutes to emerge. Additionally, the company's diverse range of financial products and services makes it less susceptible to substitution.

Bargaining Power Of Customers

U.S. Bancorp's customers have some bargaining power due to the availability of alternative financial institutions. However, the company's large customer base and diversified product offerings mitigate this power to some extent.

Bargaining Power Of Suppliers

U.S. Bancorp's suppliers, such as technology providers and vendors, have limited bargaining power due to the company's large scale and diversified operations.

Threat Of New Entrants

The banking industry is highly regulated, and new entrants face significant barriers to entry, including high capital requirements and complex regulatory compliance. This limits the threat of new entrants to U.S. Bancorp.

Intensity Of Rivalry

The banking industry is highly competitive, with many established players competing for market share. U.S. Bancorp faces intense rivalry from other major banks, which can lead to pricing pressure and increased marketing expenses.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	53.23%
Debt Cost	9.32%
Equity Weight	46.77%
Equity Cost	9.32%
WACC	9.32%
Leverage	113.79%

11. Quality Control: U.S. Bancorp passed 2 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

PNC Financial Services Group

A-Score: 6.9/10

Value: 5.8

Growth: 6.0

Quality: 6.6

Yield: 8.0

Momentum: 6.0

Volatility: 9.0

1-Year Total Return ->

M&T Bank

A-Score: 6.6/10

Value: 6.6

Growth: 5.6

Quality: 6.8

Yield: 6.0

Momentum: 6.0

Volatility: 8.7

1-Year Total Return ->

Fifth Third

A-Score: 6.5/10

Value: 6.3

Growth: 5.6

Quality: 5.9

Yield: 8.0

Momentum: 5.0

Volatility: 8.0

1-Year Total Return ->

U.S. Bank

A-Score: 6.5/10

Value: 6.6

Growth: 5.6

Quality: 5.6

Yield: 8.0

Momentum: 5.0

Volatility: 8.0

1-Year Total Return ->

Truist

A-Score: 5.8/10

Value: 4.8

Growth: 2.8

Quality: 5.5

Yield: 8.0

Momentum: 6.0

Volatility: 8.0

1-Year Total Return ->

First Citizens BancShares

A-Score: 4.9/10

Value: 6.1

Growth: 9.8

Quality: 4.9

Yield: 0.0

Momentum: 2.5

Volatility: 6.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-4.67%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

9.32%

U.S. Bancorp - US9029733048

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on USB

1.c. Company Highlights

Average Yield

Stable Momentum

Average Quality

Earnings Beats

Revenues Beats

Average Growth

Medium Volatility

Fairly Valued

Revenues Miss

2. U.S. Bancorp's Q3 Earnings: A Strong Performance

Revenue and Margin Analysis

Valuation and Growth Prospects

Outlook and Conclusion

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.50%)

6. Segments

Wealth, Corporate, Commercial and Institutional Banking

Expected Growth: 5.0%

Consumer and Business Banking

Expected Growth: 4.2%

Payment Services

Expected Growth: 6.0%

Unallocated Taxable-Equivalent Adjustment

Expected Growth: 0.0%

Treasury and Corporate Support

Expected Growth: 4.0%

7. Detailed Products

Consumer Banking

Corporate Banking

Commercial Banking

Wealth Management

Payment Services

Treasury Management

Investment Services

Mortgage Banking

8. U.S. Bancorp's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: U.S. Bancorp passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

51.26$

Current Price

51.26$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA