Buying Spree Key to US Bancorp Earnings Strength

Expect US Bancorp (USB) to come in right at or slightly below Wall Street estimates of 29 cent per share. The sixth largest U.S. commercial bank is reaping the benefits of acquisitions made possible by the failure of 140 U.S. banks during the recent banking crisis. The bank was able to take advantage of the favorable terms the Federal Deposit Insurance Corp. offered to have failed bank assets taken off its hands.In a Keefe Bruyette & Woods (KBW) report this month, US Bancorp was one of several large banks analysts, including David Konrad, said were likely to do well in 2010 because they have repaid their debt to the US Treasury's Troubled Asset Relief Program (TARP), have strong balance sheets, pay higher dividends than other equities and still have strong earnings power.

The report also pointed out that these banks were more likely to have benefited from acquisitions in 2009, as they snapped up bankrupt competitors with favorable terms from the FDIC. US Bancorp completed 8 different acquisitions in 2009, including purchasing $18.4 billion in assets and $15.4 billion of deposits from nine failed banks owned by FBOP Corp. last November. That one acquisition gave the $264 billion institution access to roughly 500,000 new customers and 150 new branches mainly in Illinois and California, writes Morningstar's Jaime Peters in an analysts note -- a significant driver of growth for the foreseeable future.

While USB will suffer some loan losses, they will be far outweighed by the assets the bank has acquired. And with US Bancorp's largely conservative banking approach, investors should be assured that the new resources will not be channeled into unreasonably risky investments in 2010.
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