U.S. Bancorp Lowers Forecast on ‘Tortured’ Recovery, CEO Says

(Bloomberg) -- U.S. Bancorp, the nation’s largest regional lender, lowered its forecast for profitability and return on equity amid continued global turbulence and persistently low interest rates.

The Minneapolis-based bank dropped its long-term net income growth projection to a range of 6 percent to 8 percent from 7 percent to 9 percent it estimated three years earlier.

“We see a slow, I’ll say tortured, recovery, and the global instability will probably get a little worse,” Chief Executive Officer Richard Davis, 58, said Thursday at the firm’s investor day in New York, adding that “the banking industry has a long way to go to recover its reputation.”

The lender cut its forecast for return on equity to 13.5 percent to 16.5 percent from 16 percent to 19 percent, and said it expected fee income and wholesale banking revenue growth both to be 6 percent to 8 percent through 2019, or 1 percentage point less than it forecast for the previous three-year period, according to the lender’s investor day presentation.

The bank reaffirmed its long-term earnings-per-share growth rate of 8 percent to 10 percent, and said it expects provisions for loan losses to increase.

The long-term forecasts are based on the Federal Reserve raising interest rates by 25 basis points four times through the end of 2018, a steepening yield curve by the beginning of 2018 and gross domestic product growth of 2 percent to 3 percent, the bank said.

Davis said he would dismiss any banker who tries to poach customers from Wells Fargo & Co., the San Francisco-based lender that agreed to pay $185 million to settle allegations that its employees opened 2 million accounts for clients without their knowledge to meet sales goals. He said that business would come to U.S. Bancorp “if we’ve earned it.”

U.S. Bancorp gained 11 cents to close at $43.03 in New York. The shares have advanced about 1 percent this year.

To contact the reporter on this story: Jenny Surane in New York at jsurane4@bloomberg.net. To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net, Steven Crabill, Dan Kraut