6) U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 43
Analysts’ Average Price Target: 8.93%
U.S. Bancorp (NYSE:USB) is a diversified financial services company, providing lending and depository services, cash management, foreign exchange, and trust and investment management services.
U.S. Bancorp (NYSE:USB) has a wide economic moat, given the cost advantages and switching costs. The acquisition of Union Bank is expected to offer additional revenue growth, expense synergies, and value for shareholders. U.S. Bancorp (NYSE:USB) has a national scale and a unique mix of fee-generating businesses, which includes payments, corporate trust, wealth management, and mortgage banking. Having a complete product portfolio does equate to certain competitive advantages for the bank as a whole.
U.S. Bancorp (NYSE:USB)’s revenue and earnings are likely to be supported by a range of initiatives. It has been focusing on its payments ecosystem, expanding its branch presence, and pursuing new acquisitions and partnerships. Over the past few years, it expanded its footprint in numerous new population centers and has partnered with State Farm. U.S. Bancorp (NYSE:USB) has been making investments in its payments ecosystem, with a focus on winning more software-centric merchant acquiring business. Also, the banking company continues to cross-sell more payments-related services to corporate banking clients and vice versa.
While the credit outlook has stabilized, U.S. Bancorp (NYSE:USB) anticipates fee revenue growth to be driven by payments, trust investment management fees, and capital markets. Moreover, market experts believe that the banking giant should see positive operating leverage in 2H 2024. Looking forward, U.S. Bancorp (NYSE:USB) anticipates steady net interest income and mid-single-digit growth in non-interest income for FY 2024. Also, the bank expects net interest income in the range of $16.1 billion – $16.4 billion.
In 2Q 2024, the company generated $6.9 billion in net revenue as a result of improved linked quarter net interest income, aided by strong deposit growth, and strong momentum in leveraging its diversified fee income platform to improve the relationships.
Morgan Stanley upped their target price on the shares of U.S. Bancorp (NYSE:USB) from $47.00 to $54.00, giving an “Equal-weight” rating on 30th July. As per Insider Monkey’s 2Q 2024 data, the company was part of 43 hedge funds.
Artisan Partners, an investment management company, released its fourth quarter 2023 investor letter. Here is what the fund said:
“Banks were well represented among our top Q4 performers as the Treasury market rally drove big gains in the bank stocks. U.S. Bancorp (NYSE:USB), PNC Financial Services (PNC) and Bank of America—the three banks we hold in the portfolio—were each among our top five contributors to return. When bank stocks sold off in Q1 due to fears of contagion following Silicon Valley Bank’s failure, we took advantage of the market dislocation by purchasing top-10 US banks USB and PNC at what were, in our view, cheap prices. USB and PNC are banks we have known for years. They are well managed and well capitalized. As large banks, they were less impacted by the turmoil that affected smaller institutions as depositors sought the safest places to store their money. The recent rebound is an example of how our approach of investing in out-of-favor businesses can lead to alpha. USB and PNC are not immune from industry-wide headwinds from higher deposit costs, pressured net interest margins and fleeing deposits. However, we did not see these banks having a similar level of risk, with respect to uninsured deposits and unrealized losses, which contributed in varying degrees to the collapses of other banks in March 2023. As investors, we cannot avoid risk. However, we are willing to take risk if we are being compensated appropriately.”
