U.S. Bank posted its second-quarter earnings on Wednesday, showing the bank’s rapid response to assisting its customers and clients as they handle the impact of COVID-19.
According to the earnings report, to date, nearly 130,000 U.S. Bank accounts and over $17.2 billion in loans have been modified through forbearance programs, as the bank worked to support customers through “these extreme economic times.”
The bank was also a top lender for issuing funds from the Paycheck Protection Program, loaning $7.3 billion to more than 101,000 customers participating in the program that stems from the CARES Act passed by Congress.
“Our second-quarter earnings results were reflective of a more challenging economic environment than we have seen in some time,” said Andy Cecere, chairman, president and CEO of U.S. Bank. “However, our diversified business mix generated healthy fee revenue growth, expenses were essentially flat, and capital and liquidity positions ended the quarter in a strong position.”
Cecere commented on the bank’s ability to operate amid these challenging times, adding that he’s “proud of how our team came together this quarter to help customers and communities weather the COVID-19 pandemic by ensuring small businesses secured loans through the Paycheck Protection Program, developing digital tools that allow customers to bank virtually, and modifying loans for those impacted by the economic slowdown.”
U.S. Bank reported a net income of $689 million for the second quarter of 2020, which was 62.2% lower than the $1.8 billion for the second quarter of 2019, and 41.2% lower than the $1.17 billion for the first quarter of 2020. Earnings per share came in at $0.41 in the second quarter, down from $1.09 in the second quarter of 2019 and $0.72 in the first quarter of 2020.
Similar to Wells Fargo, Citigroup and JPMorgan Chase, U.S. Bank attributed the drop in net income to an increase in the provision for credit losses driven by “deteriorating economic conditions caused by the impact of COVID-19 on the U.S. and global economies.”
According to the earnings report, U.S. Bank supported a provision for credit losses of $1.7 billion resulting in a $1.3 billion increase in the allowance for credit losses in the second quarter of 2020. This was up from a $993 million provision for credit losses in the first quarter of 2020.
U.S. Bank also cited residential mortgages as one of the biggest drivers behind its 10% growth in average total loans for the second quarter of 2020. Given that U.S. Bank is the tenth largest mortgage lender in the nation and the surge in mortgage applications during the last quarter, it’s no surprise that residential mortgages increased 6.4% from last year.
Addressing social injustice
Deviating from a typical earnings report this quarter, U.S. Bank used this report to take a stand against social injustices, a move that more companies in the industry taken in an effort to combat systemic racism and promote more inclusion and diversity.
“Sadly, recent tragic events and related civil unrest hit close to home here in Minneapolis and this tragedy has galvanized our entire company and prompted us to double down on our efforts to address social injustice and create opportunities that bridge gaps in our communities and help people achieve their potential,” Cecere said.
In order to address social and economic inequities, the bank announced several initiatives to bridge social and economic gaps and enhance opportunity for people of color, including providing $100 million annually in additional capital to African-American owned and led businesses or organizations.
U.S. Bank is also establishing a $15 million fund to award community grants dedicated to addressing systemic economic and racial inequities in small business, affordable housing and workplace development for people of color.
“While there is a long way to go, I am confident in our ability to drive change, make a difference and create value for all our constituents,” he said. “I want to thank our employees for the hard work they do every day and the resiliency they have shown, in particular over these past few months.”
