U.S. Bancorp said its first-quarter profit rose 13.6% as the Minneapolis-based lender benefited from stronger interest income and higher fee revenue. The bank reported solid loan growth industrywide in recent months, which, together with rising consumer deposits, supported net interest income for the period.
Net interest income - the gap between interest earned on loans and interest paid on deposits - climbed 4.2% to $4.26 billion in the quarter compared with the year-ago period. Management attributed that increase to robust loan growth and record consumer deposits that helped underpin margins.
Fee revenue provided an additional boost. Total fee income increased 6.9% in the quarter, buoyed by a pickup in capital markets activity. Capital markets revenue jumped 29% year over year to $377 million, driven by stronger client-related derivatives activity and fees from corporate bond underwriting.
For the three months ended March 31, the bank posted net income of $1.95 billion, or $1.18 per share, up from $1.72 billion, or $1.03 per share, in the same quarter a year earlier.
CEO Gunjan Kedia emphasized the stability of the franchise in a statement, saying, "Credit quality and capital levels remain healthy and strong." The bank also noted it has limited exposure to business development companies, with structural protections across that portion of the portfolio. Business development companies are investment vehicles that provide investors access to private credit assets.
Industry disclosures related to non-bank lending exposures have increased among Wall Street banks in recent months following high-profile bankruptcies last year of certain corporate borrowers, which raised questions about credit quality. U.S. Bancorp said its position with business development companies is contained and protected by structural safeguards.
Separately, the bank secured the mandate last month to serve as the issuer of two small business credit cards that Amazon plans to relaunch this spring.
Summary of results and context:
- Profit rose 13.6% year over year to $1.95 billion in Q1.
- Net interest income increased 4.2% to $4.26 billion on strong loan growth and record consumer deposits.
- Fee revenue climbed 6.9%, helped by a 29% gain in capital markets revenue to $377 million.