Today’s Stock of the Week is a bank that’s just the right size—big enough to invest in improvements and small enough that it’s not subject to too much regulatory scrutiny.
Just the Right Size
US Bancorp (USB) is in a sweet spot in terms of its size—big enough to invest in the latest technology and compete with huge money-center banks for business but not big enough to be subject to the largest banks’ extra regulatory scrutiny and systemic requirements.
Based in Minneapolis and focusing its 3,100-plus branches in the Midwest and West, the bank has been in business since 1863. It has a significant payments business in issuing credit cards for other banks, and it is the largest payment processor for the federal government. It is the fifth-biggest US bank, based on assets of $454 billion. Like all banks, US Bancorp is likely to benefit as interest rates rise because it will be able to raise what it charges for loans faster and to a greater extent than it will have to increase what it pays for deposits.
Revenue of $20.3 billion in 2015 should be reported to have grown to $21.2 billion in 2016 and should reach $21.9 billion in 2017. The dividend of $1.12/share/yr. recently yielded 2.19% and appears secure.
Earnings per share: 2017 est./$3.44… 2016 est./$3.23… 2015/$3.18.
This Week’s Expert
Lisa Welch is senior portfolio manager, Manulife Asset Management, and portfolio manager of the $1.4 billion John Hancock Regional Bank Fund (FRBAX), Boston. JHFunds.com