US Bancorp (NYSE: USB) is expected to release its results for the first quarter of fiscal 2021 on Thursday, April 15. We expect US Bancorp to beat consensus estimates for revenue and profit. The bank reported better-than-expected earnings in each of the past three quarters, and its annual revenues were slightly higher than in 2019. USB net interest income declined slightly in 2020, due to the decline interest rates which affected the net interest margin, partially offset by the growth in outstanding loans. The negative impact was offset by higher non-interest income, mainly in the wholesale banking and consumer banking segments. We expect the same trend to fuel the results for the first quarter of fiscal 2021 as well.
Our forecast indicates that Valuation of US Bancorp is about $ 53 per share, which is 8% less than the current market price of about $ 58. Watch our interactive dashboard analysis at US Bancorp pre-earnings: what to expect in the first quarter? for more details.
(1) Revenue expected ahead of consensus estimates in Q1
Trefis estimates US Bancorp’s tax revenue for the first quarter of 2021 to be around $ 5.71 billion, 3% above the consensus estimate of $ 5.53 billion. US Bancorp’s revenues of $ 23.2 billion for the year 2020 were slightly higher than in 2019. This despite a 2% year-on-year decline in net interest income which contributes about 55% of total income. . The net interest margin suffered during the year, however, some growth in outstanding loans reduced the impact on net interest income. Revenue in 2020 benefited from significant growth in mortgage creation, trading product income and securities gain income, which increased non-interest income by 6% year-on-year annual. We expect the same momentum to continue in the first quarter of fiscal 2021.
While interest rates are unlikely to immediately return to pre-Covid-19 levels – the Fed has decided to keep its benchmark rate near zero (according to the latest update on March 17), levels of consumer spending are expected to rebound. with improved economic conditions. Overall, the bank’s revenue is expected to remain around $ 22.8 billion in fiscal 2021. Our dashboard on US Bancorp revenues offers more details on the business segments.
2) EPS likely to beat consensus estimates
US Bancorp’s Q1 2021 adjusted earnings per share is expected to be $ 1.02 per Trefis analysis, nearly 7% above the consensus estimate of $ 0.95. The bank’s profitability figures fell in 2020, as its adjusted net profit fell 30% year-on-year to $ 4.6 billion. This reduced the EPS figure from $ 4.16 to $ 3.06. This could be mainly attributed to a significant jump in loan loss provisions from $ 1.5 billion to $ 3.8 billion. Provisions have been increased to offset the higher risk of default due to the impact of the Covid-19 crisis and the economic downturn – the bank has a large loan portfolio of $ 304 billion (according to figures of 2020). In addition, a slight increase in operating expenses as a% of revenue from 55.9% to 57.6% also weighed on net income. That said, the bank reduced its loan loss provisions in the fourth quarter on a sequential basis and we expect the same trend to continue in the first quarter of fiscal 2021 results.
Recently approved stimulus checks and the availability of the Covid-19 vaccine will likely increase the loan repayment capacity of the bank’s customers. This is likely to result in a favorable decrease in provisions for credit losses in the coming quarters. In total, the bank is expected to report EPS of around $ 4.25 in fiscal 2021.
(3) Estimate of the share price 8% lower than the current market price
Through our Valuation of US Bancorp, with an EPS estimate of around $ 4.25 and a multiple of P / E just above 12x in fiscal 2021, that translates to a price of $ 53, which is 8% lower than the current market price of about $ 58.
Note: P / E multiples are based on the stock price at the end of the year and the reported (or expected) adjusted profit for the full year.
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