10-QPeriod: Q3 FY2008

US BANCORP \DE\ Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 10, 2008For Securities:USBUSB-PHUSB-PPUSB-PRUSB-PQUSB-PSUSB-PA

Summary

For the third quarter of 2008, U.S. Bancorp reported net income of $576 million, a significant decrease from $1,096 million in the prior year's quarter, resulting in diluted earnings per share of $0.32 compared to $0.62. This decline was primarily attributed to substantial securities losses, totaling $411 million, including valuation impairment charges on structured investment securities and other troubled assets, as well as increased provision for credit losses ($748 million vs. $199 million). Despite these headwinds, the company highlighted strong performance in its core banking operations, with net interest income increasing by 16.7% due to higher earning assets and an improved net interest margin. The company also noted continued loan growth and deposit increases, demonstrating resilience amidst challenging market conditions. The nine-month period showed a similar trend, with net income at $2,616 million, down from $3,382 million in the prior year, impacted by similar factors including securities impairments and higher credit loss provisions.

Financial Highlights

22 data points
Beta

Net Income

$576.00M

EPS (Diluted)

$0.32

Cash & Equivalents

$7.12B

Free Cash Flow

$1.84B

Financial Statements
Beta
Interest Expense$1.12B
Net Income$576.00M
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)1.74B
Shares Outstanding (Diluted)1.76B

Key Highlights

  • 1Net income for Q3 2008 decreased by 47.4% to $576 million compared to $1,096 million in Q3 2007.
  • 2Diluted EPS for Q3 2008 was $0.32, down from $0.62 in Q3 2007.
  • 3The company recorded $411 million in securities losses in Q3 2008, primarily due to impairment charges on structured investment securities and other troubled assets.
  • 4Provision for credit losses significantly increased to $748 million in Q3 2008 from $199 million in Q3 2007.
  • 5Net interest income increased by 16.7% to $1,967 million in Q3 2008, driven by growth in earning assets and an improved net interest margin.
  • 6Total loans grew by 10.4% to $169.9 billion at September 30, 2008, compared to December 31, 2007.
  • 7Total deposits increased by 6.1% to $139.5 billion at September 30, 2008, compared to December 31, 2007.
  • 8U.S. Bancorp announced its intention to participate in the U.S. Treasury's Capital Purchase Program, planning to issue $6.6 billion of preferred stock.

Frequently Asked Questions

The significant decrease in net income was primarily due to substantial securities losses, amounting to $411 million, which included valuation impairment charges on structured investment securities and other troubled assets. Additionally, there was a notable increase in the provision for credit losses to $748 million from $199 million in the prior year, reflecting challenging economic conditions and stress in the real estate markets.

The company demonstrated resilience in its core banking operations. Total loans increased by 10.4% to $169.9 billion at September 30, 2008, compared to December 31, 2007, driven by growth across all major loan categories. Total deposits also saw an increase of 6.1% to $139.5 billion over the same period, indicating continued customer confidence in the bank's stability.

U.S. Bancorp announced its plan to issue $6.6 billion of preferred stock to the U.S. Treasury under the Capital Purchase Program. This move is intended to bolster the company's capital base and support its financial stability amidst challenging market conditions. This participation will impact dividend policies and stock repurchase plans for a period.

The report emphasizes significant risks arising from difficult market conditions, including dramatic declines in the housing market, which negatively impact real estate-related loans and asset values. Increased market volatility, potential liquidity constraints due to reduced access to capital markets, and the interconnectedness of financial institutions leading to systemic risk are also key concerns. The effectiveness of recent legislative actions, like the Emergency Economic Stabilization Act, in stabilizing markets remains uncertain.