U.S. Bancorp’s Lagging Stock Puts Onus on Investor Day
(Bloomberg) -- As U.S. Bancorp holds its first Investor Day in five years on Thursday, investors will be listening for clues about how one of the biggest US lenders can turn its lackluster stock around.
The Minneapolis-based company has been left out of the rally that has swept the broader banking sector this year — eking out only a 3.4% gain through Wednesday, the worst among its S&P 500 industry peers. The investor event is a chance for new executives to address the public, as well as for the lender to give an updated look into its financial targets.
Wells Fargo & Co. analyst Mike Mayo, who has an overweight rating on the lender, says the bank has had a “lost decade of stock performance” and the event is a chance to turn the corner.
“It’s not a make-or-break day, but it will set a tone in terms of more or less confidence,” Mayo said in an interview. “It’s the degree of conviction and granularity about better control over expenses and growth in their higher-premium fee businesses, and how they’re positioned as a regional bank to become more national.”
The investor event is set to include presentations from executives including President Gunjan Kedia, who is being viewed by analysts as a potential future candidate for the chief executive officer post since she was appointed to her current role in May.
The bank has previously used such events to refresh its long-term targets, Piper Sandler analyst R. Scott Siefers said in a note last week. He expects U.S. Bancorp could do the same on Thursday. He said Kedia will be among the most visible new faces presenting.
“Given her recent title elevation and increase in responsibilities, many view Ms. Kedia as the eventual successor to Andy Cecere as CEO and will therefore be listening closely to any thoughts she may have regarding momentum or strategic direction,” Siefers wrote. “We will also be looking for any additional signs to validate the market’s perception of USB’s succession planning.”
The bank’s management hasn’t commented on the timing for potential changes in the CEO role. Cecere praised Kedia on the company’s second-quarter earnings call in July. A representative for the bank declined to comment on Wednesday.
Ahead of the event, the bank announced it would increase its quarterly dividend to $0.50 per share and authorized a buyback program for up to $5 billion of the company’s outstanding shares. In a presentation, the company said it sees its medium-term targets for an efficiency ratio in the “mid-to-high 50s” and fee income growth in the mid-single digits.
Shares rose 1.7% premarket as the event began.
The lender should consider bringing in an outside hire for its next top executive, Mayo said. The analyst said he isn’t calling for the ouster of the bank’s longtime CEO, but instead raises the question of how the board should be thinking about the role.
Shares of U.S. Bancorp are on course to lag its S&P 500 competitors for the sixth year in a row, sharply underperforming against the industry group’s 16% rally this year.
“Why not consider someone from the outside, given the stock underperformance?” Mayo said. “There is a scenario where U.S. Bancorp could potentially use a Starbucks moment.”
(Updates to add premarket trading and additional context from the company’s slides in the 9th and 10th paragraphs.)
