U.S. Bancorp Beats, But Underlying Performance Is Still Lackluster

As seen in the first bank earnings of the reporting season, core banking operations are struggling, and U.S. Bancorp (USB) is no exception. While U.S. Bancorp does have a sizable collection of fee-generating businesses, most of those businesses are tied closely to economic activity (as opposed, say, to Truist’s (TFC) insurance operations or the trading operations of Bank of America (BAC), Citi (C), and JPMorgan (JPM)), and don’t do much to offset the core weakness that the banking sector is seeing now.

I thought U.S. Bancorp was undervalued three months ago, but also a somewhat lackluster near-term prospect, and the share price performance has been basically inline to slightly below its peer group, with Citi and Truist doing noticeably better. While I think U.S. Bancorp has made the right decision in accelerating its reserve-building, the bank’s heavier skew toward consumer banking could still be a relative headwind for sentiment. The shares offer above-average long-term potential, but I would underline the “long-term” part of that statement.

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U.S. Bancorp Beats, But Underlying Performance Is Still Lackluster