The competitive environment for commercial real estate loans has shifted, according to comments made by U.S. Bancorp executives during the fourth-quarter 2018 earnings call on Jan. 16.
Average loans at the bank grew 0.9% sequentially in the quarter to end the year at $283.68 billion. CFO Terrance Dolan said commercial loan growth accelerated in the fourth quarter and pipelines remain strong, driven by mergers and acquisitions. He added that the competitive environment for commercial real estate has "shifted a bit," which has created more lending opportunities meeting underwriting standards. Commercial real estate loans grew 1.5% from the quarter prior.
"The structures that we have seen most recently are things that we feel pretty comfortable about," he said.
A U.S. Bank branch.
Consumer lending saw strength in residential mortgages, credit cards and retail leasing. Credit cards experienced more active accounts and more sales per account during the quarter, boosted by seasonal spending behavior. Account-opening activity through digital channels remains "robust," Dolan said.
Dolan also said fee revenue should increase in the low single digits on a year-over-year basis. The bank still expects to deliver positive core operating leverage ranging from 100 to 150 basis points for full year 2019, in line with previous guidance. Looking ahead, Dolan said net interest income should increase in the low single digits on a year-over-year, fully taxable equivalent basis. He said interest income tends to be seasonally lower in the first quarter, and the first quarter of 2019 will also the include the negative impact of an acquired loan portfolio sale. He said first-quarter 2019 credit quality should be relatively stable compared to the quarter prior.
Net income applicable to common shareholders in the fourth quarter of 2018 climbed to $1.78 billion, or $1.10 per share, from net income of $1.61 billion, or 97 cents per share, in the fourth quarter of the prior year. The S&P Global Market Intelligence consensus mean estimate for fourth-quarter GAAP EPS was $1.06.