US Bancorp (USB) Strong Investment

 

US Bancorp is a super-regional bank that is conservative, simple, and not overvalued: three things that quite simply make the one of the best investments ever.

Conservative Management

With the big four banks constantly getting into trouble with the DOJ (Department of Justice) over mortgage problems stemming from the 2008 financial crisis, US Bancorp is surprisingly absent from the headlines. Management prefers to be quiet about their lawsuits or not even have them at all, therefore allowing themselves to avoid billions in fines that the big banks simply can’t avoid. This conservatism gives US Bancorp a huge edge over its competitors, whose notoriety in the banking sector only get worse and worse. Even in times of huge crisis and recessions, US Bancorp’s management tries their best to follow the rules and not take speculative ventures that often end up hurting the long-term.

Simplistic Business Structure

Like Wells Fargo, US Bancorp follows and extremely simplistic business structure: they take in deposits from customers and loan that money out to other customers (at a way higher interest rates). There is no complexity involved, unlike companies like Bank of America or JPMorgan, whose involvement in investment banking and other ventures almost always get them into trouble or cause extremely high volatility. Simplistic business structures allow management to focus on what they are doing and not get constantly sidetracked by whatever pops up along the way. This way, they can further avoid catastrophes like 2008 from affecting them too much, since management can keep track of the the going-ons at the bank, and make sure they aren’t taking any risky ventures.

Shareholder-Friendly

Although perhaps not a dividend aristocrat or an aggressive share buyer like IBM or Coca-Cola, US Bancorp has been buying back share since 2011. Although this only reduced their total shares outstanding by a meager 5% to now, it does show that management is striving to return capital to shareholders. Dividends, as well, have been mediocre, and have only been increasing every year since 2011 as well, however, as all bank capital plans have to now be approved by the Federal Reserve before being put into action, one shouldn’t expect an overwhelming amount of share buybacks or anything more than modest dividend increases for the foreseeable future.

US Bancorp is currently fairly valued, trading at its long-term P/E ratio of 13. The company is excellently managed and boasts a simple, yet effective business structure.