Deposits, credit card spending growth lead to increased revenues for US Bancorp
People with excess cash continued to make new deposits into U.S. Bank accounts between April and June while also spending more on high-ticket items, leading to increased revenue for Minneapolis-based parent company U.S. Bancorp.
What U.S. Bank pays customers on those deposits, however, continued to increase, cutting into net interest income for the bank’s quarter ended June 30.
Overall, U.S. Bancorp on Wednesday reported net revenue of $6.86 billion, down 4.3% compared to the same quarter in 2023 — but higher than the first quarter of 2024 — and net income of $1.6 billion, or 98 cents per share, beating analysts projections.
“Revenue growth for the quarter was supported by improved spread income as well as continued growth across many of our fee-based businesses,” Chairman and Chief Executive Andy Cecere told analysts Wednesday.
Net income for the second quarter of 2023 was $1.3 billion. The company’s shares on Wednesday gained nearly 4% of value in mid-morning trading.
The bank saw total average deposits increase 2.2% to $10.8 billion last quarter, while interest expenses jumped 56% from $1.9 billion to $3 billion. Through the first six months of 2024, interest expenses on deposits crept up to $5.9 billion, compared with $3.4 billion for the same period last year.
Meanwhile, average total loans for the quarter were $374 billon, a 1% increase, driven by higher credit card loans from higher spending volumes and increased commercial loans from growth in corporate banking, Chief Financial Officer John Stern told analysts. The bank experienced an 8.8% increase in credit card loans compared with the same quarter in 2023, and 9.1% year-over-year increase through the first half six months of 2024.
Revenue increases in the quarter were offset by lower commercial loan products, particularly in real estate, which were down nearly 5% compared to the year-ago quarter, Stern said.
With heightened consumer spending, the bank also experienced increases in payment services revenue. Merchant processing revenue, for instance, rose $18 million, or 4.1%. Stern told analysts strong spending levels would continue, leading to further banking fee revenue growth for the bank.
For the three-month period, the bank also recorded a $26 million charge related to an increase in the Federal Deposit Insurance Corp. assessment rates. The bank has incurred previous charges — $110 million in the first quarter — as a special assessment to help replenish the government insurance fund used during the meltdown last year of Silicon Valley Bank and Signature Bank.