US Bank Dials Back Growth Forecasts

To reflect the upcoming adoption of new accounting standards as well as lower interest rates, U.S. Bancorp cut its growth outlook in the long term. Multiple large U.S. banks have decreased their targets with an economic environment that is changing, the Financial Times reported.

U.S. Bancorp said at its investor day on Thursday (Sept. 12) that it anticipates its revenues will grow in the neighborhood of 5 to 7 percent in the long term, which marks a decrease of a percentage point. The forecast assumes stable unemployment, GDP growth of 1.5 to 2 percent and two more rate cuts from the Fed prior to early next year.

The bank also indicated that the accounting standard of Current Expected Credit Loss (CECL), set to take effect in 2020, affected the outlook for growth. CECL will make banks account for expected credit losses in a faster fashion. The bank, however, left its target in the long term unchanged for return on tangible equity.

Bank shares have been helped by a slight steepening of the yield curve and increasing yields on treasuries that are long-dated. As rate pressures have abated, bank stocks in the U.S. have increased 10 percent as of the beginning of September. In mid-day trading, shares in U.S. Bancorp dropped by almost 1 percent.

The report, however, noted that Citibank, Wells Fargo, Morgan Stanley and JPMorgan have all said they forecast lower interest income in 2019 than what had been previously predicted.

In separate news, U.S. Bank recently announced that it has acquired talech, a software company that offers an integrated point-of-sale (POS) system for small and medium-sized businesses (SMBs). The deal’s financial terms, which closed on Sept. 9, were not made known.

Palo Alto-based taltec, which was established in 2012, offers software that lets businesses manage multiple operational tasks like order management, inventory and staff reporting, customer management, business insights and payments processing, in a single, integrated POS system. The company serves over 8,000 restaurants, professional services firms and retailers.