U.S. Bancorp reported Wednesday that quarterly revenue grew faster than expenses for the first time since the end of 2015 but the U.S. Bank parent’s shares fell amid concerns over loan growth.
For the third quarter, U.S. Bancorp’s net income increased 4%, to $1.56 billion, or 88 cents a share, from $1.5 billion, or 84 cents a share, in the same period a year ago. Revenue rose 4%, to $5.61 billion. Per-share earnings were in line with analyst expectations, while revenue slightly beat estimates.
The nation’s fifth-largest bank also showed positive operating leverage as the revenue gain topped a 3.7% increase in noninterest expense. Management believes U.S. Bancorp is now structured to maintain a positive ratio.
“The people are in place. The technology is in place,” CFO Terry Dolan told the Minneapolis Star-Tribune. “We feel really good at this inflection point.”
Net revenue and net income both rose to record levels during the third quarter. Other bright spots included return on average assets of 1.38%, return on average common equity of 13.6%, and an efficiency ratio of 54.3%, up 2 basis points from a year ago.
But noninterest income fell nearly 1%, principally due to lower mortgage banking revenue. In trading Wednesday, the bank’s shares dropped 1.1% to $53.27.
The company said the decline in mortgage revenue reflected a dropoff from strong refinancing activity in the third quarter of 2016, partially offset by increases in trust and investment management fees, payment services revenue, and treasury management fees as well as higher equity investment income.
Average loans were up 3% from a year ago and net interest income rose 8%. “Our company is strong and we are well positioned for growth. We continue to be focused on delivering a great customer experience through our One Bank initiatives, optimization of our businesses, data analytics, process improvements and product delivery,” CEO Andy Cecere said.
“Our strong revenue base and financial discipline positions us for growth heading into the next year,” he added.