US Bancorp Earnings: Disciplined Expenses and Positive Operating Leverage

Key Morningstar Metrics for US Bancorp

• Fair Value Estimate: $53.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of US Bancorp’s Earnings

Solid expense control helped US Bancorp USB improve profitability in the first quarter with earnings of $1.03 per share, equivalent to a return on tangible common equity of 17.5%. Investors should be aware that the trajectory of the US economy has significant uncertainty related to tariffs.

Why it matters: US Bancorp has delivered several quarters of solid expense control, which we view as vital for the bank. It also maintained its 2025 guidance and medium-term targets under new CEO Gunjan Kedia.

• Adjusted expenses went up 0.9% from a year ago, and the bank delivered 270 basis points of positive operating leverage. Compensation expense declined by 2% year over year, which is very impressive, given the inflationary environment.
• Net interest income went up 2.7% from a year ago, driven by balance sheet growth and a slight net interest margin expansion of 2 basis points. Management guidance implied mid-single-digit NII growth in 2025, with some margin expansion driven by fixed-asset repricing.

The bottom line: We maintain our $53 fair value estimate after incorporating first-quarter results, and we view shares as undervalued. US Bancorp is our preferred name among US regionals, given its diversified fee income stream and prudent underwriting history.

• We were cautious about the US banking sector’s rally after the November election, as we thought there was uncertainty related to the incoming administration’s trade policy and that banking stock valuation was very healthy.
• The sector has corrected by more than 20%, and we think its current valuation looks more attractive.