U.S. Bancorp USB faces the strong potential for upward revisions to 2021 earnings, driven by PPNR (pre-provision net revenue), apart from solid credit leverage, according to BofA Securities.
The U.S. Bancorp Analyst: Erika Najarian upgraded the rating for U.S. Bancorp from Underperform to Neutral, while raising the price target from $58 to $62.
The U.S. Bancorp Thesis: Payment activity is likely to gain momentum ahead of loan demand, given that consumers have de-levered, but the macro outlook is strong, Najarian said in the upgrade note.
“We project merchant processing revenue to recover 16% in ‘21, though note that the ’20 base is flattered by higher pre-paid card fees related to government stimulus,” she added.
“Credit and debit card revenues are expected to rise 6% in ’21, mostly led by debit in 1H21. We see credit card spending and corporate travel recovering in earnest in ’22, extending USB’s payments tailwinds in this category,” the analyst wrote. She expects corporate payment products revenues to come close to the 2019 levels by 2022.
Najarian raised the earnings estimates for 2021 and 2022 from $3.88 to $4 and from $4.36 to $4.48, respectively.
(Photo: U.S. Bankcorp)
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