On Thursday, Wells Fargo adjusted its financial outlook for U.S. Bancorp (NYSE:USB), shares reducing the price target from $50.00 to $48.00, while still retaining an Overweight rating on the stock.
The adjustment reflects U.S. Bancorp’s recent guidance that projected net interest income (NII) to be 1%-3% lower than previous estimates, now ranging between $16.1 billion and $16.4 billion. This revision comes after a quarter-over-quarter decrease in NII by 3% and a net interest margin (NIM) decline of 8 basis points.
The bank’s first quarter of 2024 also saw a reduction in the yield of NIM deposits to 17% compared to 18% in the previous quarter and a significant drop from 25% year-over-year. This decline is partly attributed to a disparity in the upward repricing of interest-bearing deposits versus loans, with deposits increasing by 12 basis points compared to a 7 basis point rise for loans.
Despite the downward adjustments, U.S. Bancorp has indicated that NII is expected to remain flat in the second quarter of 2024 when compared quarter-over-quarter. The bank also anticipates a modest increase in NII in the following quarters. This forward-looking statement offers a silver lining to the current financial adjustments, suggesting potential for growth in the latter half of the year.
The revised financial guidance and price target reflect the current challenges faced by U.S. Bancorp, including the impacts of interest rate changes on its deposit and loan pricing. The Overweight rating suggests that despite these challenges, Wells Fargo views the stock as a favorable investment relative to the market or sector.
InvestingPro Insights
As U.S. Bancorp (NYSE:USB) navigates through changes in net interest income and net interest margin, real-time data and insights from InvestingPro can provide additional context for investors. With a market capitalization of $61.58 billion and a price-to-book ratio of 1.26 as of Q1 2024, the bank’s financial stability is notable. Additionally, U.S. Bancorp’s revenue growth of 7.51% over the last twelve months highlights its ability to increase earnings despite economic headwinds.
InvestingPro Tips underscore the bank’s commitment to shareholder returns, with U.S. Bancorp raising its dividend for 54 consecutive years, a testament to its long-term financial health and management’s confidence in the company’s profitability, which analysts predict will continue this year. However, the bank does face challenges with weak gross profit margins, as indicated by recent analyst revisions of earnings downwards for the upcoming period.
For investors seeking more comprehensive analysis and additional InvestingPro Tips, they can explore further insights on U.S. Bancorp by visiting https://www.investing.com/pro/USB. There are 6 more InvestingPro Tips available, which can be accessed with a subscription. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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Source: investing.com
