Why USB Is Up and PNC Is Down
Why US Bancorp is up
Shareholders of US Bancorp should be happy this morning. According to the bank's press release, fourth-quarter earnings at the Minneapolis-based lender jumped 39%.
The bank's net income increased $376 million to $1,350 million compared with net income of $974 million from the same period a year ago. This was on the back of an 8.1% year-over-year increase in net revenue.
In terms of the numbers more generally, three things stick out.
First, the bank's average deposits grew by 17.3% over the same period a year ago -- 11.7% excluding acquisitions.
Second, average total loans in the quarter grew by 5.9% over the fourth quarter of 2010. This was in line with results at Citigroup (NYS: C) , JPMorgan Chase (NYS: JPM) , and Wells Fargo (NYS: WFC) , three of the four largest banks in the country. Citi's loans grew 14%. JPMorgan's increased 4%. And Wells Fargo's improved 2%.
Third, the bank set aside only $497 million in loan-loss provisions compared with $912 million a year ago. Indeed, in what hopes to be a harbinger of things to come for the broader economy, the bank's total nonperforming loans decreased by a staggering $1 billion from the same quarter in 2010.
In terms of the balance sheet, the bank's book value per share increased 14.4% to $16.43 a share. And its tier 1 common equity ratio, an important measure of a bank's capital position, increased to 8.6% from 7.8% last year.
The bank also reiterated its commitment to returning a significant amount of its earnings to shareholders through dividends. While it currently returns 29% of its earnings through both dividends and share buybacks, its stated long-term goal is to do so with a "majority of our earnings."
Why PNC Financial is down
Shareholders of PNC Financial won't be similarly rejoicing, as fourth-quarter profits at the Pittsburgh-based regional bank plunged 42%. For the quarter, the bank reported earnings of $476 million, down from a year-earlier profit of $823 million. On a per-share basis, this equates to $0.85 and $1.50, respectively.
For the year, meanwhile, the bank reported net income of $3.1 billion, or $5.64 per share, a decrease of 8.8% compared with 2010 net income of $3.4 billion, or $5.74 per share.
According to the bank's press release, a number of factors contributed to a decrease in fourth-quarter revenue from $3.9 billion in 2010 down to $3.5 billion in 2011. These included a nonrecurring $160 million gain realized in last year, as well as lower debit card and commercial service fees recorded this year.
The silver-lining to PNC's results concerns the performance of its loans. The ratio of non-performing loans to total loans decreased 73 basis points to 2.24%, down from 2.97% from the year-ago period. And along these lines, the bank set aside $71 million less in provisions for credit losses.
In addition, the bank progressed on the balance-sheet front. Its book value per share increased 9.3% from $56.29 last year to $61.52 today. And its tier 1 common equity ratio improved to 10.3% from 9.8% last year.
The next big bank to report is Bank of America, which releases its fourth-quarter earnings on Thursday.
Here at The Motley Fool, it's expected that the quarter may have been ugly for the nation's second-largest bank by assets because of the size of its investment banking and global business. Indeed, despite growing their loan books, both Citigroup and JPMorgan Chase reported worse-than-expected results as a consequence of capital market exposure via these business segments.
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At the time this article was published Fool contributor John Maxfield owns shares in Bank of America. The Motley Fool owns shares of PNC Financial Services Group, JPMorgan Chase, Bank of America, and Citigroup. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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