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U.S. Bancorp (USB): Three Reasons to Love Earnings

U.S. Bancorp (NYSE:USB) reported first quarter earnings today, and while challenges lurk for the nation’s largest regional bank, there’s plenty for investors to love.

U.S. Bancorp

1. Healthy net-income increase
Net income for U.S. Bancorp (NYSE:USB) in the first quarter of 2013 was $1.4 billion, an increase of 6.7% over the first quarter of 2012, resulting in earnings per share of $0.73.

Last Friday, JPMorgan Chase & Co. (NYSE:JPM) reported a year-over-year increase in net income of 33%, but no one really expects U.S. Bancorp (NYSE:USB) to compete with that. For as well run a bank as it is, JPMorgan Chase & Co. (NYSE:JPM) is still a high-flyer, as evidenced by the trouble it got into last year by a botched derivatives bet that cost the bank more than $6 billion.

U.S. Bancorp (NYSE:USB) still makes money the old fashioned way: taking in deposits, lending it out, and profiting off the difference in interest. 6.7% growth in net income is healthy growth for this long-term investor favorite, reflecting the healthy way in which it operates.

2. Solid commercial loan growth
U.S. Bancorp (NYSE:USB) is reporting year-over-year commercial loan growth of 5.8%. With mortgage-loan business already starting to flag, this is good news for U.S. Bancorp (NYSE:USB) investors.

The onset of the Federal Reserve’s third round of quantitative easing last fall led to a resurgence in home lending at all the big banks, and a subsequent resurgence in the U.S. housing market. But as the natural limit for new mortgages and refinancings gets closer and closer to being reached, home-lending revenues and profits are already beginning to drop off.

Wells Fargo & Co (NYSE:WFC) is the country’s largest home lender, and last Friday it reported that home-mortgage originations were down 14.7% from the previous quarter. U.S. Bancorp is heavy into the home-lending business, too, but if it can keep growing its commercial loan business at a healthy rate, it should weather the mortgage-business wind-down better than its peers.

3. Growth on already fabulous return-on-assets
U.S. Bancorp is reporting return-on-assets of 1.65%, up from 1.60% the same period a year earlier. ROA of 1.60% is already outstanding, to see any growth at all is icing on the cake — another indicator of how this steady-Eddie of the banking world is getting the core things right.

ROA is a measurement of management efficiency, telling you how efficient it is at using the bank’s assets to generate earnings. An ROA of 1.65% is way up there. Wells is generally regarded as being one of the best-run banks in the country. It’s ROA is 1.49%. Likewise well thought of in this regard, JPMorgan has an ROA of just 0.97%.