10-QPeriod: Q2 FY2021

US BANCORP \DE\ Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 3, 2021For Securities:USBUSB-PHUSB-PPUSB-PRUSB-PQUSB-PSUSB-PA

Summary

U.S. Bancorp (USB) reported strong financial performance for the second quarter and the first half of 2021, demonstrating a significant rebound from the prior year's pandemic-impacted results. Net income attributable to U.S. Bancorp surged to $1.98 billion ($1.28 per diluted share) for Q2 2021, a substantial increase from $689 million ($0.41 per diluted share) in Q2 2020. For the first six months of 2021, net income reached $4.26 billion ($2.73 per diluted share), more than double the $1.86 billion ($1.12 per diluted share) reported for the same period in 2020. The company's return on average assets and return on average common equity also showed marked improvement, reflecting the improved earnings. Total net revenue saw a slight decrease of 0.9% for the quarter and 3.1% for the year-to-date period compared to the prior year, primarily due to lower net interest income driven by a lower interest rate environment and declining loan balances. However, noninterest income saw a modest increase in the quarter, driven by payment services and deposit fees, though it declined year-to-date. Noninterest expense increased by 2.1% for the quarter and 2.0% year-to-date, largely due to higher compensation and technology expenses, reflecting investments and improved financial results. A key driver of the improved profitability was the significant reduction in the provision for credit losses. For Q2 2021, the company recorded a benefit of $170 million, a stark contrast to the $1.74 billion provision in Q2 2020, due to improved credit quality and economic conditions. This trend continued for the first six months, with a benefit of $997 million compared to a provision of $2.73 billion in the prior year. Net charge-offs also decreased substantially year-over-year. The bank's capital ratios remained strong and well above regulatory requirements.

Financial Highlights

36 data points
Beta

Net Income

$1.98B

EPS (Diluted)

$1.28

Total Assets

$558.89B

Cash & Equivalents

$44.57B

Free Cash Flow

$5.58B

Financial Statements
Beta
Interest Expense$245.00M
Net Income$1.98B
EPS (Basic)$1.29
EPS (Diluted)$1.28
Shares Outstanding (Basic)1.49B
Shares Outstanding (Diluted)1.49B

Key Highlights

  • 1Net income attributable to U.S. Bancorp increased significantly to $1.98 billion in Q2 2021, up from $689 million in Q2 2020.
  • 2Diluted earnings per share rose to $1.28 in Q2 2021, compared to $0.41 in the prior year's second quarter.
  • 3The provision for credit losses reversed to a benefit of $170 million in Q2 2021, a substantial improvement from a $1.74 billion provision in Q2 2020, reflecting improved credit quality.
  • 4Total net revenue experienced a slight decline of 0.9% year-over-year for the quarter, primarily due to lower net interest income from a lower rate environment.
  • 5Noninterest expense increased by 2.1% for the quarter, driven by higher compensation and technology spending.
  • 6Return on average assets improved to 1.44% in Q2 2021 from 0.51% in Q2 2020.
  • 7Return on average common equity increased to 16.3% in Q2 2021 from 5.3% in Q2 2020.
  • 8Common equity tier 1 capital ratio remained strong at 9.9%.

Frequently Asked Questions

U.S. Bancorp demonstrated significantly improved profitability. Net income attributable to the company rose to $1.98 billion ($1.28 per diluted share) in the second quarter of 2021, a substantial increase from $689 million ($0.41 per diluted share) in the same period of 2020. This strong performance was also reflected in the first six months of 2021, with net income reaching $4.26 billion ($2.73 per diluted share), more than double the prior year's figure.

The primary driver for the improved profitability was the reversal of the provision for credit losses. In the second quarter of 2021, U.S. Bancorp recorded a benefit of $170 million for credit losses, a dramatic improvement from the $1.74 billion provision in the second quarter of 2020. This indicates a significant improvement in credit quality and the overall economic environment, leading to fewer expected losses on loans.

Total net revenue saw a slight decrease of 0.9% in the second quarter of 2021 compared to the prior year, driven by a 1.9% decline in net interest income. This decrease in net interest income was primarily attributed to lower interest rates and reduced average loan balances. Noninterest income saw a small increase of 0.2% in the quarter, fueled by growth in payment services and deposit service charges, although it was partially offset by lower mortgage banking revenue.

The report indicates an improving credit quality, as evidenced by the significant reduction in the provision for credit losses and lower net charge-offs. The company expects net charge-offs to return to more normalized levels as the economy continues to rebound. However, management notes that rising inflationary concerns and pandemic-related stress continue to affect select portfolios, and there remains uncertainty about the long-term effects of the pandemic on certain industry sectors.