U.S. Bancorp Reports Declines in Profit, Revenue Despite Loan Growth

U.S. Bancorp said its profit edged down in the second quarter as revenue dropped and a key measure of lending profitability narrowed.

Still, loans grew and earnings matched Wall Street estimates.

The bank posted earnings of $1.48 billion, down from $1.5 billion in the prior-year period. On a per-share basis, earnings rose to 80 cents from 78 cents.

Revenue at the Minneapolis-based company—the fifth-largest U.S. commercial bank by assets—fell 2.8% to $5 billion. Analysts had expected 80 cents a share in earnings and $5 billion in revenue, according to Thomson Reuters.

Net interest margin, an important measure of lending profitability, slipped to 3.03% from 3.27% a year earlier. Net interest margin measures how much a bank earns from the difference between what it pays out on deposits and what it receives on loans and investments.

Like other regional banks, U.S. Bank has been pinched by low interest rates and is eagerly awaiting rate increases from the Federal Reserve. Chief Executive Richard Davis last quarter compared the bank's situation waiting for interest rates to rise to the last few grueling moments of a gym-class test, hanging on a bar for 90 seconds.

Mr. Davis said in May that if rates don't rise as expected the bank would have to cut expenses and potentially trim staff. During the June period, noninterest expense fell 2.6% to $2.68 billion, due in part to a legal settlement in the year-earlier quarter. The lender's efficiency ratio, which measures costs as a percentage of revenue, was little changed at 53.2%.

Meanwhile, U.S. Bancorp and other regional banks have in recent years invested in noninterest-income businesses that generate stable fees and help offset interest-related declines. In the latest quarter, noninterest income dropped 7% to $2.3 billion thanks in part to lower mortgage banking revenue.

Average total loans grew 2.5%, spurred by an 11% rise in commercial lending.

Write to Rachel Louise Ensign at [e-mail] and Lisa Beilfuss at [e-mail]

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