U.S. Bancorp Looks Undervalued On Recovering Loan Growth And Opportunistic M&A

 

Writing about U.S. Bancorp (USB) last July, I thought there were more interesting candidates among this bank’s large bank brethren, and the shares have since underperformed by around 10%, with others like PNC (PNC), Truist (TFC), and Wells Fargo (WFC) outperforming, though I also tapped JPMorgan (JPM) and Citigroup (C), which haven’t done as well.

That underperformance comes despite the announcement of what should be a value-creative deal with Mitsubishi UFG (MUFG) Union Bank, and I believe reflects both some ongoing lackluster operational results at U.S. Bancorp and the market’s general skepticism around whole bank deals.

With that underperformance, I’m finding more to like in these shares. I do think U.S. Bancorp could be setting itself up for disappointment again on operating leverage in FY’22, but I do like the Union Bank deal, the ongoing investments in IT and fee-generating businesses like payments, and U.S. Bancorp’s ability to use a digital-backed “land and expand” branch-lite model to enter new markets.

 

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U.S. Bancorp Looks Undervalued On Recovering Loan Growth And Opportunistic M&A