US Bancorp Reports Rise in Credit Card Portfolio and Charge Offs

Credit card issuer U.S. Bancorp (NYSE: USB) today reported first quarter net income of nearly $1.1 billion, down 3.5 percent from a year ago, on total net revenue on a taxable-equivalent basis of nearly $3.9 billion, a rise of more than 14 percent from the first quarter of 2007.

The allowance for credit losses was $2.4 billion in the quarter for the Minneapolis-based bank, compared with $2.3 billion at the end of 2007. The increase was due to the “continuing stress in the residential real estate markets, including homebuilding and related supplier industries, driven by declining home prices in several geographic regions,” the bank reported. Net charge-offs in the first quarter of 2008 were $293 million, compared with net charge-offs of $177 million in the first quarter of 2007.

Average credit card receivables in the quarter rose 28 percent to $11.0 billion from $8.6 billion a year ago. The credit card portfolio had a net charge off ratio of 3.93 percent in the quarter, up nearly 13 percent from 3.48 percent from the same period a year ago. U.S. Bancorp increased its allowance for credit losses on the card portfolio to $108 million, up nearly 46 percent from $74 million a year ago.

The Minneapolis-based bank reported a gain of $492 million from the initial public offering in March of the payments network Visa. U.S. Bancorp also took an impairment charge of $253 million on structured investment securities purchased in the fourth quarter of 2007 from certain money market funds managed by an affiliate.

In March, the bank announced the purchase of Mellon 1st Business Bank in California, doubling its deposit market share in the Los Angeles area.