U.S. Bank’s Profit Falls Slightly as Revenue Declines

U.S. Bancorp, the parent company of U.S. Bank, said Wednesday its second-quarter profit fell slightly from a year ago.

Net income was $1.483 billion, compared with $1.495 billion in the second quarter of 2014.

The quarterly profit amounted to 80 cents a share, in line with analysts’ expectations.

Little has changed over the past 12 months for the Minneapolis-based bank company. Both revenue and expenses declined slightly. The company’s net interest margin was 3.03 percent, down from 3.27 percent a year ago.

“We must continue to balance the investments we make in our highest return initiatives with prudent financial discipline. That’s the nature of navigating through this low interest rate environment,” CEO Richard Davis said in a statement.

Total loans grew for the bank, but its net interest margin, a key measure of lending profitability that represents the difference between what a bank pays out on deposits and what it earns in interest, fell to 3.03 percent from 3.27 percent a year ago.

U.S. Bank is anxious for the Federal Reserve to raise interest rates, which should quickly solve its net interest margin problems.

Revenue from credit and debit cards and merchant payment processing grew for the bank, and fees for trust and wealth management increased by 7.4 percent. Average total commercial lending grew by 11 percent over the past year. Retail lending is starting to pick up, Davis said, with more consumers tapping home equity loans and borrowing to buy cars.

Residential mortgage lending declined a little over the past 12 months, and fee income from mortgages dropped thanks to a decline in the value of the company’s mortgage-servicing rights.

Davis assured analysts that the bank would keep expenses from growing, even though the “cost of compliance is at a high water mark.” He promised a tight rein on discretionary costs like marketing and travel.

Compared to a year ago, the cost of salaries and benefits in the quarter rose $107 million to $1.49 billion, the bank reported. The company cut $16 million in costs for postage, printing and supplies.

The bank, which has been under a hiring freeze for 18 months, is optimistic that revenue will grow in the second half of the year, and expects to keep expenses flat without having to cut jobs, though Davis has kept that possibility open as the company awaits action from the Fed on interest rates.

“If we have to be more draconian we will, but the (job level) hold and watching our vacancies and things has served us pretty well so far,” Davis said.

Bank earnings announced this week have been mixed. Wells Fargo on Tuesday reported a slight decline in second-quarter profit compared to a year earlier. Bank of America on Wednesday said its profits doubled, as it put some of its legal woes behind it.