Deposits, credit card spending growth lead to increased revenues for U.S. Bancorp

People with excess cash continued to make new deposits into U.S. Bank accounts between April and June while also spending more on high-ticket items, leading to increased revenue for Minneapolis-based parent company U.S. Bancorp.

What U.S. Bank pays customers on those deposits, however, continued to increase, cutting into net interest income for the bank’s quarter ended June 30.

Overall, U.S. Bancorp on Wednesday reported net revenue of $6.86 billion, down 4.3% compared to the same quarter in 2023 — but higher than the first quarter of 2024 — and net income of $1.6 billion, or 98 cents per share, beating analyst projections.

Net interest income grew 0.9% to $4.05 billion, the first time that metric grew in the previous five quarters.

“Revenue growth for the quarter was supported by improved spread income as well as continued growth across many of our fee-based businesses,“ Chairman and Chief Executive Andy Cecere told analysts Wednesday.

Net income for the second quarter of 2023 was $1.3 billion. The company’s shares closed Wednesday with a gain of about 4.5%.

The bank saw total average deposits increase 2.2%, or $10.8 billion, to $513.9 billion last quarter, while interest expenses jumped 3.5% from $2.9 billion to $3 billion.

Chief Financial Officer John Stern said the bank does not anticipate quite as much strength in deposits in future quarters.

“While it was good this quarter, we probably need to see more proof before that becomes the trend, and until that happens, deposits may not follow as much,” he said. “It’ll depend on the economy and if consumers and businesses become less cautious, then perhaps that will be beat our expectations.”

Meanwhile, average total loans for the quarter were $374 billon, a 1% increase, driven by higher credit card loans from higher spending volumes and increased commercial loans from growth in corporate banking, Stern told analysts. The bank experienced an 8.8% increase in credit card loans compared with the same quarter in 2023, and a 9.1% year-over-year increase through the first six months of 2024.

“Payment trends continue to be strong as consumers continue to spend,” Stern said. “Credit card loans are going to continue to be created out of that and that helps customers manage their spend levels and get the things they need over time, which I think is beneficial to the overall economy and growth.”

With heightened consumer spending, particularly for leisure travel in the summer months, the bank also experienced increases in payment services revenue. Merchant processing revenue, for instance, rose $18 million, or 4.1%. Stern told analysts strong spending levels would continue, leading to further banking fee revenue growth for the bank.

Revenue increases in the quarter were offset by lower commercial loan products, particularly in real estate, which were down nearly 5% compared to a year ago. Commercial real estate has been subdued with higher interest rates and less activity, said Stern, who expects loans in that segment — a small portion of U.S. Bank’s total loan business — to drop throughout the rest of the year.

For the three-month period, the bank also recorded a $26 million charge related to an increase in Federal Deposit Insurance Corp. assessment rates. The bank has incurred previous charges — $110 million in the first quarter — as a special assessment to help replenish the government insurance fund used during the meltdown last year of Silicon Valley Bank and Signature Bank.