July 16--U.S. Bancorp said Wednesday its second-quarter profit grew 0.7 percent to a record $1.5 billion, lifted by strong gains in commercial and real estate lending.
The Minneapolis-based company said total lending grew 6.8 percent, while commercial lending rose 12.4 percent year-over-year thanks to accelerating demand from commercial and industrial borrowers. Commercial real estate lending grew 6.9 percent, driven by growth in construction and development.
The April-to-June profit amounted to 78 cents a share, beating analysts' forecast of 77 cents a share. The bank earned $1.48 billion, or 76 cents a share, a year ago.
Revenue grew for the company after declining over the past year, rising by 4.9 percent to $5.2 billion on the commercial lending strength. The bank, which does business across a large swath of the central part of the country as well as the West Coast, also indicated the health of its loan portfolio was improving, with an 11 percent decline in net chargeoffs from a year ago.
CEO Richard Davis said in a conference call with analysts that loan demand is stronger because companies are building inventory to prepare for an improving economy.
"We're seeing it particularly in the middle market," he said. "Retail, food and ag continue to be strong."
He said the second quarter will likely be the strongest quarter for loan growth this year, but businesses are starting to borrow hoping to get favorable rates while the Federal Reserve is still holding interest rates down, something that appears to be coming to a close.
"That does encourage and incentivize customers to take action," Davis said. "Businesses lead out based on a belief that things are coming to an end on low rates, and consumers follow."
Thanks to what Davis calls a "lost" first quarter, the bank is asking employees to "watch their nickels and dimes," he said.
The bank has 98 branches in the Twin Cities and employs 10,000 people in the metro area.
Income from fees for the bank grew 7.4 percent year-over-year, despite rapidly declining mortgage fee revenue. Growth in payment processing and trust and investment management fees led the growth.
The bank's performance ratios continued to be among the highest among major U.S. banks, with a return on average assets of 1.6 percent and a return on equity of 15.1 percent.
USB also announced a $200 million settlement with the U.S. Department of Justice relating to the endorsement of mortgage loans under the Federal Housing Administration's insurance program.
Separately, it recorded a $214 million gain in the quarter from the sale of shares in Visa Inc. The two one-time items netted out and didn't affect the company's bottom line.
Adam Belz -- 612-673-4405
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