On Aug 17, we issued an updated research report on US Bancorp (USB Quick QuoteUSB ) . The company continues to gain from organic and inorganic growth strategies, rising loans and deposits balances, while escalating expenses on investments in technology and lack of loan portfolio diversification are near-term headwinds.
Shares of US Bancorp have rallied 13.5% in the last six months compared with the industry’s growth of 12.7%.
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Also, the company’s current-year Zacks Consensus Estimate has been revised marginally upward, over the past 30 days. It currently carries a Zacks Rank #3 (Hold).
The company witnessed continued organic growth over the last few years backed by its constant efforts to fortify existing relationships and improving customer experience through the introduction of new products. Its revenues witnessed a CAGR of 2.5% over the last five years, ended 2020. This rise was primarily owing to higher net interest as well as non-interest income, with some annual fluctuations.
This aside, the company’s average deposits and loans also reflected a five-year CAGR of 3.5% and 6.2%, respectively, in 2020.We believe both loan and deposit balances are poised to amplify in a recovering economy.
Driven by a strong liquidity position, US Bancorp has been able to expand via a couple of mergers and acquisitions over the past couple of years, which have opened new markets to it and fortified the existing markets. These acquisitions, combined with the ongoing investments in innovative product improvements and services, have bolstered the company’s balance sheet and fee-based businesses besides boosting the market share.
However, the company’s bottom-line growth remains impacted due to rising costs. As the company intends to make investments in digital, data and technology r! efinements, product differentiation and other initiatives, we believe, such costs might weigh on its expense base to some extent in the upcoming quarters. The company’s non-interest expenses witnessed a CAGR of 3.8% over the last five years (2016-2020).
Further, a bulk of US Bancorp’s loan portfolio — nearly 48% as of Jun 30, 2021 — comprises total commercial loans. Such a lack of diversification can be precarious for the company amid a challenging economy.
Stocks to Consider
Some better-ranked stocks in the financial space include The Bancorp, Inc. (TBBK Quick QuoteTBBK ) flaunting a Zacks Rank 1# (Strong Buy), Bank First Corporation (BFC Quick QuoteBFC ) and Citizens Financial Services, Inc. (CZFS Quick QuoteCZFS ) , both carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Bancorp’s earnings estimates were revised upward by 1.1% for the ongoing year, in the past month. Also, its share price has appreciated 18.9%, over the last six months.
Bank First’s current-year earnings estimate has been revised 4.1% upward, over the last 30 days. Further, its shares have jumped 75.1%, in the last six months.
Citizens Financial witnessed marginal upward earnings estimate revision for the current year, in the past 30 days. Moreover, its shares have gained 12.7% in the last six months.