U.S. Bancorp May Be The Best of The Bunch
Tim is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Finding a strong company in the banking industry isn’t as difficult as some analysts and folks on The Street would have you believe, it just takes some digging. As noted in recent articles, there are several large banking concerns that offer investors some nice upside, particularly when Europe gets straightened out, and an oh-by-the-way decent dividend while you wait.
For larger institutions the options may not be quite as plentiful, but they are out there and U.S. Bancorp (NYSE: USB) is certainly one of them. Considered a super-regional institution, the $50 billion dollar Minneapolis-based holding company is one of the best around.
It was late August when the stock price dipped below $21 based primarily on negative market sentiment for banks of all shapes and sizes. Since then, USB has seen (relatively) consistent growth and now sits at $27.44. Even with the 30% pop these past four months, the bank is still priced at only 12 times earnings and compares favorably with the industry as a whole. Of course that’s what’ll happen when you crank out earnings of $2.28 a share during a “difficult time.” Earnings, as it happens, which have steadily increased each of the last four quarters.
How US Bancorp Compares
Assets and stockholder equity have also been consistently strong. With such a solid foundation, US Bancorp’s returns aren’t necessarily surprising and they stand tall compared to some other industry leaders. Wells Fargo (NYSE: WFC) is three times the size and is comparable in many areas, but also carries considerably more debt relative to equity than USB. JP Morgan (NYSE: JPM) is another mammoth institution that’s on the cheap, but is also sitting in the same boat as Wells; tons of assets, but also tons of debt.
Now make no mistake, there are several bargains in the financial services industry regardless of what you hear and read from market pundits. Picking among them is the trick, and you can do a lot worse than choosing USB.
US Bancorp’s recent $700 million credit card loan portfolio purchase from Bank of America (NYSE: BAC) looks like a winner too. It’s right in line with management’s 2012 objectives, and will up their retail and small business loan/credit card portfolio to nearly $18 billion.
Ah, but what about Europe you ask. As USB’s quarterly results have shown, exposure to foreign debt is limited and has not impacted the company or the stock price; something a lot of other institutions wish they could say.
The investment opinions included are just that, opinions. Tim is not a licensed investment professional, nor has he been for several years. Investing involves risk, as you well know, so consider your decisions wisely.