U.S. Bancorp cut its estimates for revenue and profit growth over the next three years, a result of lower interest rates and a slowly expanding economy.
The $482 billion-asset banking company became the latest to reduce profit forecasts in the past week, following
U.S. Bancorp, based in Minneapolis, now expects revenue to grow between 5% and 7% per year through 2022, Chief Financial Officer Terry Dolan said on Thursday at the company’s investor day. Its previous estimate was 6% to 8%. The company cut its forecast for net income growth over the same period to 5% to 7%, also down from 6% to 8%.
Moreover, the company said it expects its net interest margin to decrease between 10 and 11 basis points this quarter. It had earlier forecast a decrease of 8 basis points.
U.S. Bancorp expects the Fed to further cut the short-term federal funds rate to 1.5% by early next year, from its current target range of 2% to 2.25%. It also projects that long-term rates such as the 10-year Treasury will increase modestly next year.
Gross domestic product is likely to rise between 1.5% and 2% each year, a slowdown from current growth rates, U.S. Bancorp said. GDP rose 3.1% in the first quarter of this year from the previous quarter; it increased 2% in the second quarter, according to the
Noninterest income should improve in the third quarter, Dolan said, on higher fees from mortgage banking, capital markets and merchant-acquiring services in its payments business.
“We’re getting sales growth of 7% to 9% from merchant acquiring,” Dolan said.
The bank’s rate of expense growth should also slow over the next three years, Dolan said. The company expects expenses to rise between 2% and 3% per year, down from a previous estimate of 3% to 5%.
