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U.S. Bancorp Mortgage Income Rises 127% (Update 1)

Written by: Philip van Doorn 04/17/12 - 10:03 AM EDT
Tickers in this article: USB
  • U.S. Bancorp reports first-quarter earnings per share of 67 cents.
  • Analysts were expecting EPS of 64 cents.
  • Mortgage banking revenue more than doubles, to $452 million.

Updated with comments from Jefferies analyst Ken Usdin.

NEW YORK (TheStreet) - U.S. Bancorp (USB) on Tuesday reported a 127% year-over-year increase in mortgage banking revenue and another solid quarter for commercial loan growth.

The Minneapolis lender reported first-quarter net income available to common shareholders of $1.29 billion, or 67 cents a share, compared to $1.31 billion, or 69 cents a share, during the fourth quarter, and $1.00 billion, or 52 cents a share, during the first quarter of 2011.

U.S. Bancorp CEO Richard K. Davis

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The first-quarter earnings came in ahead of the 64 cent estimate among analysts polled by Thomson Reuters.

The company said that "on a linked quarter basis, the slight decrease in net income was largely due to the net impact of the merchant settlement gain and the expense accrual for mortgage servicing matters, which added $92 million (after tax) to net income in the fourth quarter of 2011," and that "excluding the impact from these two notable items, results on a linked quarter basis were higher by 6.4 percent, primarily driven by higher total net revenue, lower provision for credit losses and seasonally lower noninterest expense."

First-quarter mortgage banking revenue was very strong, at $452 million, increasing from $303 million the previous quarter, and $199 million a year earlier. This followed the industry trend, with President Obama's expanded Home Affordable Refinance Program, or HARP 2, allowing certain mortgage borrowers to refinance their entire loan balances at today's low rates, no matter how much the value of the underlying homes have dropped.

In his comments Monday on JPMorgan Chase's (JPM) earnings results, FBR analyst Paul Miller said that "HARP has not fully ramped up," so bank stock investors are likely to see continued mortgage strength in the second quarter.