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In their presentation, the executives forecasted net interest income (NII) for the third quarter to be between $4.2 billion and $4.4 billion. This projection, at its best, would only match the $4.4 billion achieved in the second quarter. Adjusted revenue is anticipated to fall within the $6.9 billion to $7.1 billion range, marking a decrease from the $7.2 billion recorded in the previous quarter.
Stern attributed this quarter-over-quarter decline in NII to slower loan growth and higher deposit costs. He also projected a dip in the net interest margin for Q3 to around 2.80%, down about 10 basis points from Q2.
Despite these short-term setbacks, the bank expects improvements in the fourth quarter and maintains an optimistic outlook for the full fiscal year 2023. NII is predicted to rise to between $17.5 billion and $18 billion from $14.7 billion in 2022. Revenue is also forecasted to increase to between $28 billion and $29 billion, up from last year’s $24.3 billion.
Further, U.S Bancorp remains on track to achieve $900 million in run rate cost synergies following its acquisition of Union Bank, with full integration expected by 2024.
In terms of shareholder returns, U.S Bancorp declared a $0.48 third-quarter dividend on Tuesday, maintaining the same rate as the previous quarter. Despite the bank’s underperformance relative to its peers, it boasts a high yield of 5.2% and a 53% payout ratio. With its attractive dividend, low valuation, and anticipated strength post-acquisition, U.S Bancorp remains a noteworthy entity in the banking sector.
Meanwhile, market performance last Friday was mixed. The S&P 500 index saw a slight increase of 5 points (0.1%), while the Dow Jones Industrial Average fell by 47 points (-0.1%). The Nasdaq Composite gained 42 points (0.3%).
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