U.S. Bancorp (NYSE:USB) experienced a 4.7% drop in its stock price Wednesday, trading at just over $35 per share. The decline marks a rough year for the company, with its shares down approximately 19% year to date (YTD). This downturn was sparked by a presentation at the Barclays Global Financial Services Conference in New York City where President and CEO Andy Cecere and CFO John Stern gave guidance that fell below investor expectations.
In their presentation, the executives forecasted net interest income (NII) for the third quarter to be between $4.2 billion and $4.4 billion. This projection, at its best, would only match the $4.4 billion achieved in the second quarter. Adjusted revenue is anticipated to fall within the $6.9 billion to $7.1 billion range, marking a decrease from the $7.2 billion recorded in the previous quarter.
Stern attributed this quarter-over-quarter decline in NII to slower loan growth and higher deposit costs. He also projected a dip in the net interest margin for Q3 to around 2.80%, down about 10 basis points from Q2.
Despite these short-term setbacks, the bank expects improvements in the fourth quarter and maintains an optimistic outlook for the full fiscal year 2023. NII is predicted to rise to between $17.5 billion and $18 billion from $14.7 billion in 2022. Revenue is also forecasted to increase to between $28 billion and $29 billion, up from last year's $24.3 billion.
Further, U.S Bancorp remains on track to achieve $900 million in run rate cost synergies following its acquisition of Union Bank, with full integration expected by 2024.
In terms of shareholder returns, U.S Bancorp declared a $0.48 third-quarter dividend on Tuesday, maintaining the same rate as the previous quarter. Despite the bank's underperformance relative to its peers, it boasts a high yield of 5.2% and a 53% payout ratio. With its attractive dividend, low valuation, and anticipated strength post-acquisition, U.S Bancorp remains a noteworthy entity in the banking sector.
Meanwhile, market performance last Friday was mixed. The S&P 500 index saw a slight increase of 5 points (0.1%), while the Dow Jones Industrial Average fell by 47 points (-0.1%). The Nasdaq Composite gained 42 points (0.3%).
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