U.S. Bancorp, the nation’s biggest regional lender, said third-quarter profit climbed 16% to a record, beating analysts’ estimates as mortgage-banking revenue more than doubled.
Net income rose to $1.47 billion, or 74 cents a share, from $1.27 billion, or 64 cents, a year earlier, the Minneapolis-based company said Wednesday in a statement. The average estimate of 31 analysts surveyed by Bloomberg was per-share profit of 73 cents.
U.S. Bancorp is focusing on taking market share in mortgage banking, a business that has been a “real positive” for the company, CEO Richard Davis told investors at a conference last month. Historically low interest rates and government incentive programs are fueling demand for home loans.
“Earnings included continued strong mortgage-banking activity, which contributed to our growth in fee income, residential real estate loans and loans held for sale,” Davis, who has never posted a loss since taking over at
U.S. Bancorp rose 0.2% to $33.68 in New York trading at 9:38 a.m. The shares gained 24% this year through Tuesday, compared with a 28% advance in the 24-company KBW Bank Index.
Revenue from mortgage banking in the third quarter was $519 million, compared with $245 million in the same period last year. That helped drive a 10% increase in non-interest income, which rose to $2.4 billion.
U.S. Bancorp’s net interest income increased 6.1% to $2.78 billion, and total revenue rose 8% to a record $5.18 billion.
While spurring demand for mortgages, low interest rates also mean banks earn less on the money they lend. U.S. Bancorp’s net interest margin, the difference between what it pays in deposits and what it charges for loans, narrowed to 3.59% from 3.65% in the third quarter of last year and widened from 3.58% in this year’s second quarter.
CFO Andrew Cecere said on a conference call with analysts Wednesday that he expected the margin to narrow a few basis points, or hundredths of a percentage point, in the fourth quarter.
The bank set aside $488 million for soured loans, a 6% decline from the third quarter of last year. Net charge- offs dropped 20% to $538 million.
Average total loans climbed 7.3% to $216.9 billion from the third quarter of last year and increased 1.3% from the second quarter, according to the statement. That was driven by a 22% rise in commercial loans and a 20% increase in residential mortgages.
