US Bancorp (USB) beat market estimates on revenue and earnings for the third quarter of 2018, giving the stock a lift of about 1% in premarket hours on Wednesday. The company reported net revenues of $5.69 billion, up 2.4% from the same period last year.
Net income applicable to US Bancorp common shareholders grew 16.6% to $1.7 billion and diluted EPS grew 20.5% to $1.06 from the prior-year period, helped by the strong revenue growth.
Andy Cecere, Chairman, President and CEO stated, “In the third quarter, we expanded our commercial banking presence, launched a new digital platform to serve our small business customers and acquired new capabilities in our payments business. At the same time, our focus on optimization allowed us to deliver positive operating leverage and a best-in-class efficiency ratio, while growing our industry leading return on tangible common equity ratio to 19.9%.”
Net interest income, on a taxable-equivalent basis, rose 1.7% to $3.2 billion while non-interest income rose 3.3% to $2.4 billion. The growth in net interest income and non-interest income was driven by several factors including higher interest rates and earning assets growth as well as higher payment services revenue. The increases were partially offset by factors such as higher deposit rates and decreases in mortgage banking revenue.
During the quarter, non-interest expense rose 1.5% mainly due to increased compensation expense related to business growth, variable compensation related to revenue growth as well as other expenses.
Non-performing assets dropped 19.7% year-over-year due to improvements in non-performing residential mortgages and total commercial loans. Increases in interest rates drove net interest margin up slightly to 3.15% from last year, partially offset by deposits and funding mix, lower loan spreads and the tax reform.
The bank’s average total loans increased 1.2% to $3.4 billion driven by growth in residential mortgages, total commercial loans, credit card loans and retail leasing. Average total deposits dropped 1.5% to $5 billion from last year.
The company’s peers like Goldman Sachs (GS) and Bank of America (BAC) reported their third quarter earnings this week with both firms topping market expectations.
US Bancorp’s stock has been down around 4.8% so far this year.