Renewed Operating Leverage From U.S. Bancorp Nice To See

Long one of the best-run banks out there, U.S. Bancorp (USB) has an interesting long-term challenge – as the performance of the “pack” continues to improve, does U.S. Bancorp still have levers to pull that can continue to allow it to stand out? This is, after all, a conservatively-run, very efficient, not especially asset-sensitive operation that already has sizable (and lucrative) fee-generating, non-banking businesses.

I thought U.S. Bancorp's shares were pretty richly valued at the start of the year, and the year-to-date performance, though positive, has lagged the S&P 500 and rival banks like Bank of America (BAC), PNC (PNC), JPMorgan (JPM), Citigroup (C), and SunTrust (STI). I expect profitability to improve next year, as the AML/BSA issue resolves, and asset sensitivity has been improving, but the shares still aren’t cheap. I wouldn’t suggest that long-term investors need to consider bailing out, but I do think the total return prospects are relatively modest.

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Renewed Operating Leverage From U.S. Bancorp Nice To See