As investors look past the banking crisis, one major regional U.S. bank has many worried as it reveals that it will report its results for the first quarter of 2021 a week later than its usual timeframe. U.S. Bancorp (NYSE: USB) is the largest regional bank in the US with assets exceeding $600 billion, and is a reliable bellwether for the regional banking industry.
The early April earnings report date is usually right after the big banks and other regional peers. Academic research has shown that delaying an earnings report, especially after years of a consistent release schedule gives investors cause for concern. After all, a delay typically signals the possibility of bad news to follow.
This news comes at a time when regional banks remain in the spotlight following the Silicon Valley Bank (SIVB) crisis. While these regional banks were following similar practices as the major banks, investing heavily in treasuries and mortgage-backed securities while rates were low, regional banks are now exposed to substantial interest rate risk as rates have risen in the past year.
Something else that has many talking is the addition of a major typo to U.S. Bancorp’s financial statements released at the end of 2022. This typo made it appear that loan values had risen when they in fact had declined. Investors will most likely be tracking figures such as unrealised losses in relation to common equity tier 1 capital, HTM securities, and loans as a percentage of deposits.
The Biden-appointed bank regulators have proposed safety measures in the event of a crisis, which includes raising long-term debt for regional banks of a certain size. Many bankers have resisted this move, claiming that it would raise costs for both business and consumer borrowers.
As traders wait for the quarterly financial reports of many large banks starting from April 14, the Q1 earnings report from U.S. Bancorp will be closely monitored for any news for and against the market’s opinion of the bank’s security. Investor Michael Burry, famous for his part in ‘The Big Short’ has warned that U.S. Bancorp, as well as other regional banks, is potentially at risk of a bank run due to the high percentage of uninsured deposits.
Nevertheless, U.S. Bancorp’s CET 1 Capital Ratio at 4.5% just manages to clear the minimum requirement, and the overall performance of the bank proves it to be competitive with other regional peers such as KeyCorp, Zions Bancorporation, First Republic Bank, and Comerica.
The company of U.S. Bancorp has been around since 1863 and is a financial services company providing traditional and online banking services, as well as other financial products such as loans, mortgages, investments, and other services across the United States. It is headquartered in Minneapolis, Minnesota, and provides banking services from numerous branches in 34 states.
The person mentioned in the article is Michael Burry, CEO of hedge fund Scion Asset Management, who is best known for his role in the movie “The Big Short”. He predicted the subprime mortgage crisis in 2008 and famously “short sold” mortgage backed securities for a billion dollar profit. He has recently raised the alarm about U.S. Bancorp and other regional banks, indicating high risk of a bank run. He is well known as an expert on values-based investing, and his book “The Big Short: Inside the Doomsday Machine” is considered an essential read by many financial analysts.