Good times can make it easier for investors to confuse the pretenders with the long-term winners, particularly if those pretenders are willing to ratchet up the risk and leverage in their business model to reap easy profits. When times get tough though, it is the best models and management teams that rise to the top. With the banking sector still firmly in the midst of malaise, U.S. Bancorp (NYSE:USB) is making a case that it may be the best bank investors can buy.
The Quarter That Was
Two significant points jump out with U.S. Bancorp's third quarter release - first, the company actually beat the consensus revenue estimate, and it did not need to release any reserves to meet or beat its earnings target.
Revenue rose 1.5% on a sequential basis, helped by a 3% sequential increase in net interest income. Unlike many banks, USB showed an increase in net interest margin (tiny as it may have been), and loans actually grew on a sequential basis. Total non-interest income was flat on a sequential basis, but fees did rise 5% as the company was able to offset deposit fee declines prompted by new banking regulations.
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