USB: Higher Fee Income and Credit Improvements Will Drive Performance Into 2026

U.S. Bancorp's average analyst price target rose slightly this quarter. Analysts cited improved profitability, better fee income growth, and solid credit metrics as reasons for upward revisions in their forecasts.

Analyst Commentary

Recent analyst updates following U.S. Bancorp’s quarterly results have provided a mix of optimism and caution. Upward revisions to price targets reflect improved trends in profitability, fee income growth, and credit performance. However, some analysts remain wary given the context of recent rallies and ongoing industry dynamics.

Bullish Takeaways

• Bullish analysts increased price targets, citing steady operating leverage improvements and robust earnings momentum projected into 2026.
• Fee income growth and higher net interest income have supported upward adjustments to both near- and longer-term earnings forecasts.
• Solid credit metrics were emphasized as a fundamental strength, reinforcing the view of an attractive entry point for investors at current share levels.
• Some analysts highlighted the company’s ongoing efforts to deliver on targeted metrics from its investor day. They view execution on these goals as a positive driver for valuation.

Bearish Takeaways

• Bearish analysts advise that recent rallies in bank shares have pushed valuations ahead of earnings estimate revisions, raising selectivity concerns for new investment.
• While core profitability has improved, there are lingering questions around whether recent positive trends in loan growth and capital markets activity are sustainable.
• The stock’s historical underperformance during the rate hiking cycle and management’s need to demonstrate consistent progress toward financial targets remain areas of caution.
• Despite a generally favorable industry backdrop, some maintain a neutral or hold stance and note that shares are now less attractively priced compared to previous periods.

What's in the News

• Treasury officials and lawmakers are backing a Senate bill that could raise the FDIC insured deposit limit to $10 million. This may significantly impact large banks like U.S. Bancorp by increasing their funding requirements. (WSJ)
• The Federal Reserve is considering smaller capital hikes for big banks, proposing aggregate increases of just 3% to 7% compared to much higher earlier estimates. This could affect capital planning for institutions such as U.S. Bancorp. (Bloomberg)
• Major U.S. banks, including U.S. Bancorp, are vying for significant roles in the potential Fannie Mae and Freddie Mac IPOs, which could become some of the largest public offerings in history. (WSJ)
• U.S. Bancorp announced a reduction in its prime lending rate from 7.5% to 7.25%, effective at all U.S. Bank locations. (Company announcement)
• Banking industry lobbies, with U.S. Bancorp among those represented, are warning lawmakers about potential regulatory loopholes that could allow crypto exchanges to pay interest on stablecoins. This raises consumer protection and competition issues. (Financial Times)

Valuation Changes

• Fair Value: Risen slightly, moving from $55.67 to $55.72 per share.
• Discount Rate: Increased from 7.68% to 7.87%.
• Revenue Growth: Decreased marginally, from 8.53% to 8.51% projected growth.
• Net Profit Margin: Improved, rising from 21.92% to 22.65%.
• Future P/E: Declined from 14.71x to 14.28x. This indicates a slightly lower expected earnings multiple.