FINANCIALS: US Bancorp (USB A-/A/A) - Q4 Results
US Bancorp (USB A-/A/A) - Q4 Results
Pretty good for creditors despite miss on expectations
- Net interest income $4.15bn, flat on Q3 and up 1% Q4 23
- Commission and fee income was -8.9% lower vs Q3 and -2.9% lower than Q4 23. Although much higher other income more than offsets
- Expenses are significantly better than Q4 23 and on a better trajectory. Increasing by 2.5% vs Q3 having been contained all year.
- CET1 increases to 10.6%. +35bps from net income.
- OpInc/RWA increases 2bps to 1.87% QoQ
- Provisions are stable, as is impaired loans and LLR.
Valuation: The USB SR Pref (the only sr pref in the below chart, the rest are sr non-pref) is cheap for its rating. Probably because it is a less well-known name. Perhaps reflecting the negative Moody's outlook - although this is from November 2023 and unlikely to be converted given subsequent results
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GILTS: OPTIONS: Big G5 Call Spread
G G5 97.50/98.50 call spread, paper pays 4.0 to 5.0 on 10.65k
US DATA: Homebuilder Survey Points To Consolidating Housing Activity
December's National Association of Home Builders (NAHB) Housing Market Index printed 46 for a second consecutive month, continuing to point to a subdued outlook for single-family homebuilding activity versus post-pandemic highs.
- Current sales conditions were steady at 48, with prospective buyer traffic down 1 point to 31 - but 6-month sales expectations rose 3 points to a post-April 2022 high of 66.
- The NAHB noted "high home prices and mortgage rates offset renewed hope about a better regulatory business climate in 2025".
- The headline index is a good leading indicator of overall (single as well as multi-family) building permits over the following 1.5 years, which in turn leads actual housing construction - and recent readings suggest permit activity closer to 1.2M annualized than the 1.7M+ seen in 2021.
- As such while activity looks like it will indeed be softer over 2025-26 than at peak, it is consolidating as opposed to deteriorating rapidly (as witnessed in the housing-driven GFC).
US: Congress Strikes Government Funding Deal, Likely To Anger GOP Conservatives
Congressional leaders have struck a deal to extend government funding until March 14. The final text of the package is yet to be released but appears to include nearly all of the USD$100+ million in disaster relief requested by Biden and a one-year extension of the Farm Bill, which includes roughly USD$10 billion in economic assistance to farmers. The CR is also expected to include a package of China-related bills that crack down on US investment in some areas related to the Chinese tech sector.
- In striking the deal, which also includes swathes of unrelated policy, House Speaker Mike Johnson (R-LA) has offered a glimpse of how difficult it will be for Republicans to legislate President-elect Donald Trump's agenda in the new year, when Johnson's House majority will shrink to just one vote.
- If Johnson chooses to adhere to an informal GOP rule allowing lawmakers 72 hours to consider legislation, the package is likely to be sent to the Senate shortly before the Friday midnight deadline, running the risk of a short, but largely inconsequential, lapse of funding for federal agencies.
- It is unlikely Johnson has sufficient support from House conservatives, so the package will likely be moved under suspension of rules with Democrat votes. The final vote number will provide a useful indicator of Johnson's support heading into his re-election vote on January 3. Weak Republican support may signal that Johnson faces the same unruly conference that rendered him a lame-duck for much of 2024.
