Banking on hope

15 July 2015 By Antony Currie, Daniel Indiviglio Follow @AntonyMCurrie

BofA and U.S. Bancorp stock shot up even though neither lender’s core earnings beat estimates. It reflects BofA’s cost cuts, U.S. Bank’s loan-growth plans and industry hopes for higher interest rates. None, though, does enough for the bottom line to justify the enthusiasm.

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U.S. Bancorp on July 15 reported net income of $1.5 billion. The result of 80 cents per diluted common share met analyst expectations, according to Thomson Reuters. The bank’s revenue of $5 billion grew about 3 percent compared with the first quarter and by about 1.4 percent from a year earlier, excluding a gain from a Visa stock sale in that period.

Expenses increased slightly compared to the prior quarter but were offset by the growth in the top line so that its ratio of expenses to revenue improved, falling to 53.2 percent. The bank’s annualized return on average common equity ticked up slightly to 14.3 percent for the three months ending in June, from 14.1 percent in the previous quarter, but was lower than the 15.1 percent reported in the same period last year.

Bank of America earned $5.3 billion in quarterly net income, the company reported on July 15. Its 45 cents per share in the quarter beat consensus sell-side estimates of 36 cents per share, according to Thomson Reuters. The bank’s annualized return on equity in the quarter was 8.75 percent.

Expenses at the Charlotte-based lender fell 6 percent compared to a year earlier to the lowest level since the end of 2008 and provided an efficiency ratio of 62 percent.

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