Earnings per share reached $2.77 for the first nine months of the year, compared with $2.79 for the same period last year. The period was marked by a marked reduction in non-remunerated deposits - the kind preferred by banks, since they can earn interest on them without redistributing anything to their holders.
This reduction is not entirely offset by the rise in interest-bearing deposits and term accounts. This may reflect an economic slowdown, since non-interest-bearing deposit accounts are most often company current accounts.
In the same vein, there has been a significant - though far from alarming - rise in non-performing loans, particularly in the corporate and commercial real estate segment. Total non-performing loans reached $1.8 billion, compared with $1.45 billion at the beginning of the year. This, against a total loan volume of $172 billion, is expected to decrease by 2.8% in 2024.
Renowned for its disciplined management, the Minneapolis-based bank has limited exposure to the most stressed segment of the current credit markets, namely commercial real estate, and office property in particular. On the other hand, at least on paper, its Tier 1 capital ratio is a notch below that of other major North American banks.
In our last earnings commentary, we pointed out that its valuation had returned to relatively high levels. This trend has intensified in recent months, even as several signs of a worsening economic environment have emerged. US Bancorp is now valued at x2.2 tangible equity, right on its ten-year average.
Remarkably, their valuation has never fallen below x1.2 of tangible equity, not even during the subprime crisis, the onset of the pandemic, or during the panic that swept through the US banking sector last year in the wake of rising interest rates - and the corresponding fall in the value of the ten-year Treasury bonds that make up the bulk of their capital.
