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U.S. Bancorp reports dip in Q1 profit

Jeremy Simon

U.S. Bancorp saw its first-quarter net profit slip 3.5 percent amid a sizable increase in the bank’s provision for credit losses, even as revenue advanced.

Provisions for credit losses — money set aside for loans that may go unpaid in the future — surged to $485 million in the period due to ongoing trouble in the residential real estate markets and the continued growth of consumer loan portfolios.

“The increase in the allowance for credit losses was primarily due to continued stress in the residential housing market, homebuilding and related industry sectors, in addition to the growth of the credit card and other consumer loan portfolios,” U.S. Bancorp said in its earnings release. Credit card loans rose 28 percent from the year-ago period to $11 billion, while allowance for credit card losses climbed to $108 million from $74 million from one year earlier.

U.S. Bancorp’s net charge-offs rose to 0.76 percent of average loans outstanding. Charge-offs are the value of uncollected loan balances removed from the books and charged against a bank’s loss reserves. The rate is the amount of charge-offs divided by the average outstanding balance owed to the issuer.

Despite the shaky loans, U.S. Bancorp expressed a positive outlook. “With the first quarter of 2008 successfully behind us, I am confident that our company will continue to perform and prosper, despite the current economic environment,” said Chairman and Chief Executive Officer Richard K. Davis.

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