US Bancorp exceeded third-quarter profit projections on Wednesday, offsetting a decline from larger credit-loss provisions with increased interest revenue from loans.
Since consumers are paying more for their mortgages and credit card debt, earnings for consumer-facing banks have increased as a result of the U.S. Federal Reserve’s vigorous monetary tightening over the past year to control inflation.
For USB, net interest income increased 10.7% to $4.27 billion for the third quarter that ended on September 30. Net interest income is the difference between what banks get from lending and what they pay out on deposits.
Once one-time expenses are subtracted, it made $1.05 per share. LSEG data shows that analysts had projected a $1.02 per share profit.
However, the ‘higher-for-longer’ interest rate environment has darkened the outlook for the economy as consumers feel the burn of increased borrowing prices and reduced household budgets, despite the fact that lenders have profited handsomely from interest income.
USB increased its provisions from $362 million to $515 million in anticipation of higher loan defaults.
Following a sector-wide crisis of trust early this year that resulted in customers withdrawing cash from banks, deposits at banks have been comparatively steady in recent months.
In the third quarter, USB’s average total deposits increased by 3% to $512 billion compared to the same period last year.