U.S. Bancorp (NYSE:USB), known simply as USB to most people, is the fifth largest bank in the United States with assets of $354 billion. With most financials hitting fresh 52-week highs as a result of the latest rally, investors need to be more selective than ever when deciding which to invest in (if any). Additionally and perhaps more importantly, should current investors in USB and its big brothers take their profits, or is there more upside to be had?
U.S. Bancorp (NYSE:USB) operates its business through several segments: wholesale banking, consumer banking, wealth management & securities services, payment services, and treasury and corporate support. The company has recovered from the financial crisis faster than some of its rivals, and the Fed has approved two dividend increases, up to the 2.3% (78 cents per share) yield that it currently pays. They also approved the bank’s share repurchase program, which authorizes the purchase of up to 50 million common shares.
U.S. Bancorp (NYSE:USB) has done a very good job of growing its operations, and in fact has grown its total (interest and other) income every single year, including during the crisis. Can Citigroup Inc. (NYSE:C) or Bank of America Corp (NYSE:BAC) say the same?
The company intends to continue its winning strategy and use its financial strength to grow its market share. U.S. Bancorp (NYSE:USB) strives to provide the best possible customer service, and to manage costs as efficiently as possible, two areas where they have succeeded admirably in the past.
Back to the discussion of Citigroup and Bank of America, I had previously mentioned that U.S. Bancorp (NYSE:USB) increased its total income every year. Compare the chart above with the income instability of the other two shown in the chart below.
This alone speaks volumes to the viability of USB as a long-term investment. While it doesn’t have quite as many assets as Bank of America or Citigroup, it more than makes up for it with a history of growth and responsible banking practices, something that much of the banking industry seems to just be learning.
U.S. Bancorp (NYSE:USB) trades at a valuation of 12.1 times 2012’s earnings of $2.84 per share, which are expected to rise to $3.07, $3.29, and $3.57 over the next three years. This is an average forward growth rate of right around 8%, which certainly justifies the valuation. An interesting note earnings-wise is that although earnings were down for a few years, USB never had even one quarter in which it posted negative earnings, even in 2008 or 2009. Citigroup had 8 losing quarters, with losses totaling $91.00 per share! (Citigroup’s share price is only around $47)