U.S. Bancorp put aside nearly $1 billion during the first quarter to cover loans that could go bad because of the economic downturn brought on by the coronavirus outbreak.
That’s more than two times what the Minneapolis-based banking giant normally socks away for expected losses over a three-month period. The giant provision pushed the company’s quarterly profit down 31% from the same period a year.
U.S. Bank, the nation’s fifth-largest, also coped with a drop in net interest income due to cuts in interest rates made by the Federal Reserve to help keep the economy going. And its expenses jumped sharply as it boosted pay to workers in branches and other operations considered essential to maintain service to consumers and businesses.
In a statement accompanying the early morning announcement, chief executive Andy Cecere thanked employees who continued working as the outbreak forced many businesses that face the public to close.
“The economic fallout from the COVID-19 pandemic is causing financial hardship to many in this country,” Cecere said. “We are intently focused on doing what we can for our customers, communities and employees as they grapple with their unique situations.”
At the outset of economic downturns, banks routinely set aside more money for expected credit losses. U.S. Bancorp reported a provision of $993 million for credit losses in the January-to-March period. That’s up from $377 million in the same period a year ago and more than half the $1.5 billion it put aside for credit losses in all of 2019.
On Tuesday, JPMorgan Chase, the nation’s largest bank, took a provision of nearly $7 billion for expected credit losses and Wells Fargo, the No. 4 bank, put aside $3 billion.
For its smaller size, U.S. Bank’s provision was similar in scope. But the bank has seen relatively few customers default on their loans or credit cards so far. Its actual credit losses and measure of nonperforming assets was only modestly higher in the quarter than a year ago.
The company earned $1.18 billion, or 72 cents a share, in line with diminished expectations by investment analysts, during the latest quarter. Revenue was $5.77 billion, up 3.5%.
Net interest income, which accounts for about two-thirds of revenue, fell 1.1%. Noninterest income, which includes fees from investment management, credit cards and mortgages, was up 10%. Like other banks, U.S. Bank experienced a surge of mortgage-related fees as homeowners, spurred by drops in interest rates, refinanced their home borrowings.
Evan Ramstad • 612-673-4241
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