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UPDATE: This article includes information from the company's earnings call and an interview with Chief Financial Officer John Stern.
U.S. Bancorp is confident in its plan to right its ship following underperformance for the last couple of years.
Wall Street isn't convinced. The bank's stock neared a low of $47.20 in regular trade after the fourth-quarter earnings were reported Thursday and was recently down 4.8% at $48.20.
The Minneapolis, Minnesota-based bank said it expects to see revenue climb and expenses stay flat in 2025, leading to a 200-basis-point uptick in operating leverage. After spending more than it earned for several years, the bank is sticking to its previously announced goals following a period where it "met or exceeded expectations in virtually all areas," Chief Financial Officer John Stern told American Banker after the company's earnings call.
Chairman and CEO Andy Cecere said on the earnings call that the fourth quarter "showcased commitment to execution."
"2024 was a pivotal year for the company in many ways and marked a very important inflection point in our story," Cecere said. "Going into the year, there was much uncertainty with respect to the broader macroeconomic environment, persistent inflation, significant rate volatility, political and regulatory headwinds."
Now that it's begun turning performance around, keeping expenses relatively flat and seeing the benefit of payment service fees and trust and investment management business, the bank is guiding toward a strong 2025.
U.S. Bancorp posted $1.66 billion in net income in the three months ended Dec. 31, though a $109 million expense from "notable items," including lease impairments and operational efficiency actions, led to missing analyst estimates on earnings. Diluted earnings per share were $1.01, short of the consensus estimate of $1.05. Without the impact of the notable items, earnings per share hit $1.07.
Stern said after managing expenses — rejiggering real estate, focusing third-party strategies and optimizing workflows and automation — the bank has the right levers to steer costs toward positive operating leverage in any revenue environment.
"After so long of not having positive operating leverage, it's kind of a show-me story," Wells Fargo analyst Mike Mayo said on the earnings call.
The bank projected a 3% to 5% rise in revenue in 2025, after that figure fell by 2.4% in 2024.
Keith Horowitz, an analyst at Citi, said he thinks U.S. Bancorp can control expenses and turn out the numbers it teased, despite market skepticism.