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US Bancorp

The One Big Bank That You Never Hear About

June 28, 2010 By Leave a Comment

While Bank of America (BAC), JPMorgan Chase (JPM), and Wells Fargo (WFC) dominate the headlines, there is one large bank that just slowly continues to grow away from the limelight. That bank is US Bancorp (USB). US Bank took TARP funds just like the other big banks but unlike the other big banks has been able to escape the public backlash.

US Bank has been a longtime Buffet holding because of the company’s great management team and conservative approach to lending. The company’s management is a big reason why the banking giant’s loan portfolio has been outperforming that of its banking peers. It’s non performing loans percentage is much lower than Citigroup and Bank of America. US Bank is the 5th largest bank in the US based on asset size and US Bank has been quietly increasing its size by buying up failed banks over the past year. There have been continuous rumors that US Bancorp may acquire a larger regional bank to expand its operations.

US Bancorp has reported nearly two consecutive years of profitability. Last quarter’s earnings were very solid. USB had earnings of $648 million dollars and an EPS of 34 cents per share. Profitability increased 55% and total deposits increased almost 14%. The encouraging news was that consumer loan delinquency was decelerating even as the bank was increasing its reserves for loan losses. Investors should pay attention to the July 21st earnings release to see how US Bancorp’s sizeable commercial loan portfolio is holding up.

US Bank pays out a much higher dividend than its banking competitors. Shares of US Bancorp are not expensive but are not particularly cheap either at $23. Shares trade at 11 times forward earnings and 1.8 times book value.

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Biggest Winners

August 5, 2009 By 3 Comments

So far I have a 22% gain on US Bancorp . I bought shares of USB at $17.70 and the stock has risen to $21.70.

General Electric has risen 24% from its $11 purchase price.

Supervalu (SVU) is up almost 14% from my initial purchase price of $13.13.

Visa is up 25% from the $55 purchase price.

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Bank of America Needs More Capital

April 27, 2009 By Leave a Comment

I have read a few articles late tonight that state that government stress tests show that Bank of America and Citigroup will need to raise billions more in capital. These 2 banks have already received almost 100 billion in funds through the government’s TARP program. These findings illustrate a larger problem facing US banks. IF B of A and Citi need more funds then why doesn’t PNC, Wells Fargo, US Bancorp or Suntrust need more capital? The problem in the banking system is that there is a perpetual cycle. Increases in unemployment lead to greater mortgage delinquencies which result in a decrease in housing prices. This leads to larger asset write downs which require banks to raise more capital. Until unemployment stops rising it will be impossible to predict how much capital banks need to survive this economic downturn. It is clear now that in September of 2008 that the US banking system was insolvent and without the major capital injections from the Treasury; the system would have collapsed.

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Financials Start Cutting Dividends

March 4, 2009 By Leave a Comment

US Banks are finally cutting dividends to acceptable levels to conserve capital.

US Bancorp (USB) cut its dividend 88% from $1.70 to .20 per share.

PNC Financial (PNC) has reduced its dividend from$2.64 a share to .40. a share.

Wells Fargo (WFC) is the last big bank standing that has not reduced its dividend yet. I don’t know how long this can last with the stock barely above single digits.

Now that major banks are cutting dividends look for insurers and credit card companies to start cutting next. Dividend cuts at Capital One and American Express appear likely.

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Bank Dividend Cuts

February 23, 2009 By Leave a Comment

JPMorgan Chase (JPM) cuts its annual dividend from $1.52 to 20 cents per share today. JPMorgan is preparing for a longer recession and double digit unemployment. JPMorgan has been deemed to be in the best financial shape of the other major banks. In the current marketplace that is like having the best seat on the Titanic. Banks are hemorrhaging and need every bit of capital that they can get their hands on. If JPMorgan is cutting their dividend then other major banks dividends are in trouble as well. Now that JPMorgan has cut its dividend, it will be easier for the following major banks to follow suit.

Wells Fargo (WFC) and its $1.36 dividend will likely go down to about 10 cents per share.

US Bancorp (USB) and its dividend of $1.70 is currently yielding over 16%. The yield is way too high. The new dividend would be about 10 cents per share.

PNC Financial (PNC) needs to cuts its $2.64 dividend with its 11.4% yield. PNC has not cut its dividend at all since receiving almost 8 billion in TARP money. PNC’s dividend should be cut to about 25 cents per share.

Suntrust Banks (STI) will probably undergo it third dividend cut in less than a year. I expect a drop from 40 cents to 8 cents per share.

Bank of New York Mellon (BK) is in the same boat as PNC Financial. Bank of New York has not had a dividend cut since receiving 2 billion dollars of TARP funds.

All of the dividend estimates are based on the Bank of America, Citigroup, JPMorgan models. Each of these banks cut their dividends to a yield that was approximately 1% of the stock’s price.

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Interesting Stocks

January 13, 2009 By Leave a Comment

Listed below are a few stocks that I have been trading in and out of over the past two months based on when I think shares are cheap.

Bank of America(BAC) dropped to the $10 price level today. As stated in a previous post, I sold off all shares at $17. I am waiting for the stock to hit the single digits and then I will be a big buyer again. A dividend cut is definitely coming. While Bank of America and Citigroup(C) are expected to report big losses for the 4th quarter. Wells Fargo(WFC) and US Bancorp(USB) are expected to be profitable in the 4th quarter.

Alcoa (AA) dropped to $9.50 today. I sold off all of my Alcoa shares at the $12 level because I figured the earnings would be bad. I would be a buyer again at the $7 price level.

General Electric(GE) dropped to $14.70 today. I began adding a small amount of shares again at the $14.90 level. Whenever GE gets below $15, I am a buyer.

United States Oil ETF(USO) is dipping to levels where I would look to add shares. Right now it trades at $31 per share. Below $30 I will look to add shares again.

Intel(INTC) with a 4% dividend yield at $13.57 looks reasonably cheap. I know that technology companies earnings are going to be rough in 2009 but Intel is a good long term investment. I think the stock will get cheaper still and will look to buy at $12.

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US Bancorp

January 9, 2009 By Leave a Comment

Bought 300 shares of US Bancorp(USB) at $22.45 per share. Great company with a large dividend trading at just about 10% above its 52 week low.

Sold off some shares of Dow Chemical at $16.00. I still like Dow Chemical but I am concerned about the Rohm & Haas deal. I am waiting for Dow to announce that they have renegotiated the purchase price.

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