U.S. Bank CEO Davis Predicts Tough 2013
U.S. Bancorp CEO Richard Davis is pessimistic about 2013 and believes that it will be a tough year for U.S. Bancorp and the entire banking industry.
“We’re actually quite concerned about the next year,” Davis told investors Tuesday at the Goldman Sachs Financial Services Conference in New York. “We think it’s going to be very, very difficult for banks.”
Even resolving the U.S. government’s so-called “fiscal cliff” of tax increases and spending cuts won’t help banks, Davis said, because low interest rates and the costs of new regulation will eat into banks’ revenue and earnings.
Revenue growth for U.S. Bancorp is going to be “substantially lower” next year, but “we’re prepared for it,” Davis said.
The company plans to offset a decline in revenue growth with fewer branch openings next year, but it does not plan to lay off people or close branches, he said.
“We’re just going to be very careful . . . so much so, that even things like our [merit-based pay] increases in our company are going to be limited to people who don’t enjoy a bonus.”
U.S. Bancorp is among Minnesota’s 10-largest public companies based on revenue, which totaled $19.1 billion in 2011, up 5.3 percent from its 2010 revenue. Its 2011 net income totaled $4.8 billion, or $2.46 per share, up 46.8 percent from its 2010 earnings. For the quarter that ended in September, the company reported net income of $1.47 billion, or 74 cents per share, up 15.8 percent from its earnings for the same quarter last year. Revenue for the quarter rose 8 percent to total $5.2 billion.
U.S. Bancorp is also the largest bank holding company in the state based on assets, which totaled $318 billion as of June 30.
Meanwhile, in other banking news, the Federal Deposit Insurance Corporation (FDIC) announced Tuesday that its list of “problem” banks across the country has gotten smaller; there are fewer than 700 banks on the list for the first time in three years. The FDIC does not release details about which banks are on the list, or why they are considered to be troubled.
FDIC-insured commercial banks and savings institutions collectively reported net income of $37.6 billion in the third quarter of 2012, up 6.6 percent from the $35.2 billion in profits the industry reported in the third quarter of 2011. This is the 13th consecutive quarter that earnings have registered a year-over-year increase, FDIC said.
As of Monday, 50 FDIC-insured banks nationwide had failed in 2012, compared to 90 as of the same day last year. Four of the banks that failed this year were in Minnesota: Bloomington-based First Commercial Bank, Inter Savings Bank in Maple Grove, Little Falls-based Home Savings of America, and Patriot Bank in Forest Bank. Regulators shuttered two Minnesota banks last year and eight in 2010.
“This was another quarter of gradual but steady recovery for FDIC-insured institutions,” FDIC Chairman Martin Gruenberg said in a statement. “Signs of further progress were evident in a number of indicators, such as loan growth, asset quality, and profitability.”