U.S. Bank Net Income Drops 31 Percent
A Wednesday headline in the Wall Street Journal summed up the situation for many lenders amid the Covid-19 economic meltdown: “Banks brace for consumer pain.” On Tuesday, the Journal reported that New York-based JPMorgan Chase and San Francisco-based Wells Fargo & Co. set aside billions of dollars, preparing for an expected wave of customers defaulting on loans.
Against that backdrop how is Minneapolis-based U.S. Bancorp doing?
On Wednesday, U.S. Bank reported its first quarter results with revenue of $5.8 billion, up 3.5 percent from the first quarter of 2019. But its net income dropped 31 percent to $1.2 billion, reflecting sharp earnings declines seen at other big banks. U.S. Bank is a Fortune 500 company and the fifth-largest bank in the U.S.
Meanwhile, U.S. Bank notably boosted its provision for credit losses to $993 million “reflecting the current economic market.”
“The decrease in net income year-over-year was primarily due to an increase in the provision for credit losses driven by deteriorating economic conditions caused by the impact of COVID-19 on the U.S. and global economies,” the company noted.
According to its earnings release statement, the bank has already worked extensively with customers to modify existing loan terms. U.S. Bank reported that it has modified more than $5.7 billion in loans on nearly 102,000 accounts. At the same time, the bank has seen approximately $22 billion in draw downs from credit lines as businesses are scrambling for funds to stabilize their operations.
The statement from U.S. Bank chairman, president, and CEO Andy Cecere said nothing specific about the lender’s first quarter results but instead focused on steps that the bank is taking to support its customers, employees and communities.
“Our capital and liquidity positions are strong, and we stand ready to help businesses access programs like the Paycheck Protection Program and Main Street Lending Program,” Cecere said in the statement. “We’ve introduced several changes to allow impacted customers forbearance or other payment relief and pricing flexibility on our products and services to make them more affordable and accessible to customers who may be experiencing financial stress.”
U.S. Bank has implemented a 20 percent temporary wage increase to more than 30,000 employees whose roles are deemed critical. It also recently announced a $30 million commitment to Covid-19 relief efforts across the U.S.