3 Reasons to Avoid USB and 1 Stock to Buy Instead

September 26, 2025 at 00:00 AM EDT

USB Cover Image

U.S. Bancorp trades at $49.44 and has moved in lockstep with the market. Its shares have returned 13% over the last six months while the S&P 500 has gained 15.7%.

Is there a buying opportunity in U.S. Bancorp, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is U.S. Bancorp Not Exciting?

We're cautious about U.S. Bancorp. Here are three reasons why USB doesn't excite us and a stock we'd rather own.

1. Net Interest Income Points to Soft Demand

Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.

U.S. Bancorp’s net interest income has grown at a 4.9% annualized rate over the last five years, worse than the broader banking industry. Its growth was driven by both an increase in its outstanding loans and net interest margin, which represents how much a bank earns in relation to its outstanding loan book.

U.S. Bancorp Trailing 12-Month Net Interest Income

2. Low Net Interest Margin Reveals Weak Loan Book Profitability

Net interest margin (NIM) serves as a critical gauge of a bank's fundamental profitability by showing the spread between interest income and interest expenses. It's essential for understanding whether a firm can sustainably generate returns from its lending operations.

Over the past two years, we can see that U.S. Bancorp’s net interest margin averaged a weak 2.7%. This metric is well below other banks, signaling its loans aren’t very profitable.

U.S. Bancorp Trailing 12-Month Net Interest Margin

3. Steady Increase in TBVPS Highlights Solid Asset Growth

We consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation.

Although U.S. Bancorp’s TBVPS increased by a meager 2% annually over the last five years, the good news is that its growth has recently accelerated as TBVPS grew at a solid 13.6% annual clip over the past two years (from $20.04 to $25.86 per share).

U.S. Bancorp Quarterly Tangible Book Value per Share

Final Judgment

U.S. Bancorp isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 1.4× forward P/B (or $49.44 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at the Amazon and PayPal of Latin America.

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