Higher NII & Non-Interest Income to Aid U.S. Bancorp's Q2 Earnings

U.S. Bancorp USB is scheduled to report second-quarter 2025 results on July 17, 2025, before the opening bell. The company is expected to have witnessed year-over-year increases in quarterly revenues and earnings.

In the first quarter, U.S. Bancorp benefited from lower expenses, higher non-interest income and a rise in net interest income (NII).

USB has an impressive earnings surprise history. Its earnings beat estimates in the trailing four quarters, the surprise being 2.52%, on average.

Factors Influencing U.S. Bancorp’s Q2 Performance

NII: The Federal Reserve kept interest rates unchanged at 4.25-4.5% in the second quarter of 2025 after cutting the same last year. This is likely to have had some positive impacts on USB’s NII, given relatively lower funding costs.

Management expects NII for the second quarter of 2025 to be in the range of $4.1-$4.2 billion.

The consensus estimate for NII is pegged at $4.01 billion, indicating a marginal increase from the prior quarter’s reported figure.
 
Loans: Despite uncertainties surrounding tariff policies, lending activity remained strong in the second quarter, supported by a resilient labor market and easing inflation. Per the Federal Reserve’s latest data, the demand for commercial and industrial loans was notably strong, while demand for commercial real estate loans was moderate. As a result, USB’s lending activity is expected to have seen a decent improvement.

The Zacks Consensus Estimate of $611.2 million for average earning assets indicates a marginal sequential increase.

Non-Interest Income:  The second quarter witnessed heightened market volatility and client activity because of uncertainty related to Trump’s tariff plans. Also, volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange.

In the second quarter of 2025, trading volumes across equity derivatives and corporate bonds exhibited growth, reflecting heightened market activity and investor engagement. The Zacks Consensus Estimate for commercial product revenues is pegged at $391 million, indicating an increase of 2.4% from the prior quarter’s reported figure.

Despite interest rate cuts by the central bank in 2024, mortgage rates did not come down significantly. The second quarter saw rates fluctuate, but they remained in the mid-to-upper 6% range. Hence, refinancing activities and origination volume were decent. Thus, U.S Bancorp's mortgage banking fees are likely to have seen some improvement.

The Zacks Consensus Estimate for mortgage banking revenues is pegged at $179.6 million, which indicates a 3.8% increase from the prior quarter’s reported figure.
 
The Zacks Consensus Estimate for income from card revenues is pegged at $437.4 million, indicating a jump of 9.9% from the prior quarter’s reported figure.

The consensus mark for trust and investment management fees is pegged at $686.4 million, indicating a rise of roughly 1% from the prior quarter’s reported figure.

Overall, the Zacks Consensus Estimate for total non-interest income is pegged at $2.93 billion, indicating a sequential rise of 3.3%.  Management expects total non-interest income to be $2.9 billion in the second quarter of 2025.

Expenses: Higher costs related to compensation, employee benefits, and net occupancy are expected to have kept the expense base elevated in the second quarter. Yet, the company’s focus on prudent expense management is likely to have offset the increase.

Management projects adjusted total non-interest expenses to be $4.2 billion or lower in the second quarter of 2025.

Asset Quality: The company is likely to have set aside a substantial amount of money for potential bad loans, given the expectations of a higher for longer interest rate backdrop and tariff-related uncertainty.

The Zacks Consensus Estimate for non-performing loans is pegged at $1.72 billion, indicating a rise of 1.8% from the prior quarter’s reported figure.

What the Zacks Model Unveils for USB

Per our proven model, the chances of U.S. Bancorp beating estimates this time are high.  The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is the case here, as you can see below. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: U.S. Bancorp has an Earnings ESP of +0.21%.

Zacks Rank: USB currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for second-quarter earnings of $1.07 has been unchanged in the past seven days. The figure indicates an increase of 9.2% from the year-ago reported number. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

The consensus estimate for second-quarter 2025 revenues is pegged at $7.06 billion, indicating a rise of 3.3% from the year-ago reported figure.

Other Stocks to Consider

Here are a couple of other bank stocks that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this time around.

The Earnings ESP for First Horizon Corporation FHN is +0.20% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2025 results on July 16.

Over the past seven days, the Zacks Consensus Estimate for FHN’s quarterly earnings has been unchanged at 41 cents.

Truist Financial TFC is scheduled to announce second-quarter 2025 results on July 18. The company carries a Zacks Rank #3 at present and has an Earnings ESP of +0.97%.

Quarterly earnings estimates for TFC have been revised 1.1% lower to 92 cents over the past week.

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This article originally published on Zacks Investment Research (zacks.com).

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