The first image I often get of U.S. Bancorp (NYSE:USB) is an old man snoozing in a leather armchair, but that's really not fair to this well-run bank. As decidedly "meh" as second quarter results were, it takes a lot of effort to do this well in the given banking environment and I think the better analogy is a surfer floating and paddling around while waiting for a good wave to come in.
I think the wave will come in time, and when it does, U.S. Bancorp should be able to generate mid-teens ROEs and mid single-digit earnings growth (with EPS growth likely to be in the high single digits due to buybacks). I also believe the company has the capital to get more aggressive with M&A and add a few more bricks to the walls of what is already a strong banking fortress. Today's opportunity is okay; I think the shares should be able to generate high single-digit to maybe low-double digit total annual returns, but these shares don't look dramatically undervalued.
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U.S. Bancorp Paddling Around Waiting For The Wave To Come