Can U.S Bancorp’s Revenues Cross $25 Billion In Three Years?

U.S. Bancorp (NYSE:USB) is the seventh largest bank in the United States by assets. It provides consumer banking, commercial banking, cash management, credit card & payment solutions, foreign exchange, and investment management services to its clients, which include retail customers, corporates, small businesses and financial institutions. U.S Bancorp business model faces stiff challenges and competition from competitors including JPMorgan, Bank of America, Citigroup, HSBC, Wells Fargo and Capital One.

Trefis details the key components of U.S Bancorp’s Revenues in an interactive dashboard, along with our forecast for the next three years. In 2019, U.S Bancorp’s Consumer Banking and Card & Payment Services are expected to contribute roughly $8.7 billion (40%) and $6.2 billion (27%) respectively to its Total Revenue estimate of $22.9 billion. You can make changes to our forecast for individual revenue streams in the dashboard to arrive at your own forecast for U.S Bancorp’s Revenues. Additionally, you can see more Trefis data for financial companies here.

What to expect from U.S Bancorp’s Revenues

• Total revenues have increased at an average annual rate of 3% over the last three years — from $21.1 billion in 2016 to $22.5 billion in 2018.
• We expect it to grow 8% from $22.5 billion in 2018 to $24.4 billion by 2021, mainly driven by growth in consumer banking and card & payment services.

[A] Consumer Banking is expected to grow at a slower pace over coming years

• This segment includes community banking, metropolitan banking, indirect lending and mortgage banking operations.
• Consumer Banking revenues have grown 16% from $7.3 billion in 2016 to $8.5 billion in 2018, driven by higher net interest margin on consumer loans.
• However, we expect the revenues to grow at a slower annual rate of 3% over the next three years.
• This would enable the segment revenues to cross $9.3 billion by 2021.

[B] Card & Payment Services are expected to cross $6.6 billion by 2021

• This segment provides credit card services and merchant payment services for corporate and retail clients.
• The revenues have grown at an average annual rate of 3% over the last three years. This could be attributed to increase in net interest margin on credit cards as well as strong growth in card transaction volume.
• Although interest margins are expected to remain under pressure in the near- to mid-term, we expect steady growth in card usage to help boost revenues.

[C] Wholesale Banking revenues are expected to decrease by 1% from $3.8 billion in 2018 to $3.7 billion in 2019 due to 2% decline in net interest income from commercial loans.

• This represents the revenues for U.S. Bancorp from providing commercial products and services, as well as treasury management services to its corporate clients
• Although Wholesale Banking revenues have grown by 20% from $3.1 billion in 2016 to $3.8 billion in 2018, it is expected to drop in 2019 and then improve at an average annual rate of 3% to cross $4 billion by 2021.

[D] Wealth Management revenues are expected to grow at a slower pace and cross $3.1 billion by 2021.

• This division includes U.S. Bancorp’s asset management, investment, retirement, and brokerage services.
• Wealth Management has grown 35% over the last three years — from $2.1 billion in 2016 to $2.9 billion in 2018.
• Although the segment revenues have grown at an average annual rate of 16% over 2016-2018, the growth rate will be notably muted over coming years.
• The slowdown in segment revenues could be attributed to negative market conditions and lower consumer activity levels in 2019.

[E] Treasury & Corporate Support revenues don’t have a significant impact on U.S Bancorp’s total figure.

• This segment includes the bank’s investment portfolios, funding, capital management and interest-rate risk management operations which provide support to its other operating divisions.
• We expect the segment revenues to increase at an average annual rate of 1% and cross $1.41 billion by 2021.

Trefis estimates U.S Bancorp’s stock (shows cash and valuation analysis) to have a fair value of $57, which is slightly higher than the current market price. Our price estimate incorporates changes to our forecast based on latest U.S Bancorp’s earnings release.

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