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US Bancorp Profit Falls; Sees 'Tough' Mortgage Market

U.S. Bancorp, the sixth-largest U.S. bank, on Tuesday said third-quarter profit fell 2 percent, hurt by higher loan losses amid stress in the mortgage banking and home-building industries.

Profit nevertheless topped the average analyst forecast, helped by a stabilized lending margin.

Net income for the Minneapolis-based company fell to $1.18 billion from $1.2 billion a year earlier. Profit per share rose to 67 cents from 66 cents because of a decline in shares outstanding.

Revenue rose 3 percent from a year earlier to $3.53 billion, while expenses rose 6 percent to $1.63 billion. Compared with the second quarter, revenue was up 1 percent and expenses were down 1 percent.

Analysts on average forecast a profit of 66 cents per share on revenue of $3.54 billion, according to Reuters Estimates.

U.S. Bancorp set aside $199 million for credit losses, up 47 percent from a year earlier, reflecting growth in credit card accounts and higher commercial loan losses. Net charge-offs also increased 47 percent, to $199 million.

Nonperforming assets rose to $641 million from $565 million on June 30, largely from two mortgage banking customers that declared bankruptcy, as well as "continued stress" in construction lending.

"Continuing pressures felt by both businesses and consumers related to the residential mortgage and home-building industries will lead to somewhat higher net charge-offs and nonperforming assets," Chief Executive Richard Davis said in a statement. "These increases should, however, be very manageable for our company."

The bank said lending income rose 1 percent to $1.69 billion. Net interest margin held steady from the second quarter at 3.44 percent, though it fell from 3.56 percent a year earlier.

Fee income rose 5 percent to $1.84 billion, helped by double-digit gains in credit and debit cards, merchant processing and mortgage banking.

U.S. Bancorp operates 2,512 branches in 24 U.S. states, largely in the western two-thirds of the country. It ended the quarter with $227.6 billion of assets.

Shares of U.S. Bancorp closed Monday at $32.51 on the New York Stock Exchange and were down marginally Tuesday. The shares have fallen 10 percent this year, the same as the drop in the Philadelphia KBW Bank Index.