US Bancorp's third-quarter results demonstrated a year-over-year decline, however, earnings surpassed market estimates as the company effectively managed its expenses. Adjusted earnings stood at $1.03 per share for the September quarter, marking a decrease from $1.05 the previous year but exceeding the consensus expectation of $0.99 as determined by Capital IQ.
Following this announcement, the stock experienced a premarket increase of 2.3%. The company's revenue, which comprises net interest and noninterest income but omits the fully taxable equivalent adjustment, fell to $6.83 billion, a decline from $7 billion in the corresponding quarter of the previous year.
This figure was lower than the market's forecast of $6.91 billion. On a taxable-equivalent basis, net interest income saw a reduction of 2.4%, settling at $4.17 billion. This decrease was attributed to the impact of elevated interest rates on the mix and pricing of deposits, albeit partially mitigated by improved rates on earning assets and modifications in the bank's balance sheet composition.
Additionally, noninterest income declined to nearly $2.7 billion from $2.76 billion last year, primarily due to net losses on the sales of securities, lower service charges, and reduced other revenue streams. Chief Executive Andy Cecere commented, "Our expense levels decreased year-over-year which supported modest positive operating leverage, excluding net securities losses and prior year notable items." He further noted the increases in net interest income and margin on a linked quarter basis due to favorable changes in loan mix, ongoing repricing of fixed-rate earning assets, and disciplined liability management.
Moreover, US Bancorp's noninterest expenses saw a 1% decline year-over-year on an adjusted basis, thanks to prudent expense management initiatives and efforts to identify operational efficiencies, as pointed out by Chief Financial Officer John Stern during an earnings call with analysts. The provision for credit losses experienced an increase, rising to $557 million from $515 million the previous year, driven by elevated losses in credit card, commercial, and commercial real estate loans.
Looking ahead to the fourth quarter, US Bancorp predicted that net interest income on a taxable-equivalent basis will remain "relatively stable" compared to the prior three-month period. The bank also anticipates a widening of positive operating leverage in the fourth quarter and extending into 2025.
The taxable-equivalent net interest income is projected to range between $16.1 billion and $16.4 billion for 2024, as detailed in the earnings presentation. Cecere concluded by highlighting the company's commitment to balancing capital growth through earnings accretion with capital distributions, indicating that share buybacks are expected to resume in the near term.
Stock Price: $48.10, Change: +$1.10, Percent Change: +2.34.