We initiate on USB with a Strong Buy rating and $60 PT. U.S. Bancorp is a Minneapolis-based national full-service bank with consumer, business, payment, corporate, and wealth capabilities spanning 2,000+ branches.
Beneath the veneer of a mature franchise, a trifecta of forces sets in motion to reimagine the forthcoming earnings cycle. Scheduled repricing of $8–10bn of fixed-rate assets/quarter, normalization of the FDIC special assessment, and conservative but material resumption of buybacks combine to create a near-term EPS ramp that easily surpasses consensus — largely ignored in our view.
Our models, based on management guidance and observed asset churn, imply FY25E diluted EPS of $4.41 and FY26E $4.88, handily above the street, with NIM accretion (25–50bps over 2 years) the key driver. We apply a 12.3x P/E multiple to FY26E, reflecting USB's consistent operating leverage above 200bps, capital efficiency, and proven ROtCE trending toward the high teens, at a valuation near the bottom quartile of its historical range.
No heroic margin expansion or market share capture is required — only the execution of visible levers in play. Macro and rate volatility sensitivity minimal. Credit quality deterioration remains the primary risk, but current reserves and capital levels suggest resilience well above regulatory minimums.
With implied annualized returns above 21% and a multiple still discounting visible improvement, we see a perceptual / fundamental disconnect skewed favorably for long-term investors.