Rate And Operating Leverage Challenges Counterbalancing U.S. Bancorp's Valuation

The trouble with excellence is that once you attain a high standard of performance, the improvements that follow don’t seem quite as impressive. Start an exercise program today, and you’ll probably see rapid improvement over the first few months … but after a year or so, those improvements will be slower and harder-earned. That may well be one of the primary issues for U.S. Bancorp (USB) now, as this well-regarded and highly profitable bank struggles to offset spread headwinds and operating leverage challenges.

I still wonder whether investor frustration with the slow progress here may eventually force management toward a more dramatic step like a large acquisition or merger of equals. Management certainly seems more open to the idea than before, but I wouldn’t make that a base-case assumption. In any case, U.S. Bancorp does appear to offer better-than-average upside here, but with sentiment in a “what have you done for me lately?” sort of place, it may take time for this more defensive name to shine.

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Rate And Operating Leverage Challenges Counterbalancing U.S. Bancorp's Valuation