Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

U.S. Bancorp (USB): Three Reasons to Hate the Earnings Report

U.S. Bancorp (NYSE:USB) has released its first-quarter earnings, and overall things look pretty good for the large regional bank. It earned $1.43 billion, or $0.73 per share, right in line with analysts’ expectations. Nevertheless, shares have been down as much as 2.6% this morning, prompting a deeper look into that earnings release. Here are three reasons investors may not be that pleased with the big Minnesota-based bank.
U.S. Bancorp (NYSE:USB)

1. Net revenue
While net income increased by 6.7% from the same quarter last year, the same cannot be said about the top line. For the quarter, U.S. Bancorp (NYSE:USB) recorded total net revenue of $4.9 billion. This was a 4.7% decline from the fourth quarter and a 1.1% decline from the same quarter last year.

Noninterest income, which we’ll cover in depth shortly, was primarily to blame. It was down 7% from the fourth quarter, and 3.3% from the same quarter last year, primarily because of lower mortgage banking revenues, as well as seasonally lower payments-related revenue.

2. Noninterest income
As mentioned previously, the largest reason for the decline in noninterest income was lower mortgage banking revenues. These revenues declined to $401 million during the quarter, down from $476 million during the previous quarter, equating to a 15.8% decline. This was in spite of $57.3 billion in new lending activity, including $27.9 billion of mortgage and other retail loan origination, proving that new loan activity does not automatically equal high revenues.

3. Net interest margin
Similar to , U.S. Bancorp (NYSE:USB) experienced a decline in net interest margin. At 3.48%, the bank’s net interest margin fell by seven basis points from the fourth quarter, and by 12 basis points compared to the same quarter last year. With U.S. Bancorp (NYSE:USB) reliant on interest income for over 55%of its total revenue, the decline in noninterest income was not solely responsible for the bank’s decline in revenue this quarter. However, the longer that the Federal Reserve’s quantitative easing continues, the bank may need to beef up operations elsewhere to mitigate some of these losses until its net interest margin stabilizes.

The Foolish bottom line
Meeting expectations often is not enough to satisfy the Street when it comes to earnings. That’s why it is important for investors to look beyond the first paragraph of an earnings release and try to get a grasp on what is happening “behind the scenes” at their favorite companies. In the long run, U.S. Bancorp (NYSE:USB) will probably be OK despite today’s earnings blip, and it could be a great addition to any portfolio.

The article 3 Reasons to Hate the U.S. Bancorp Earnings Report originally appeared on is written by Robert Eberhard .

Fool contributor Robert Eberhard has no position in any stocks mentioned. The Motley Fool owns shares of JPMorgan Chase.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.