U.S. Bancorp's first-quarter profit topped analysts' expectations as mortgage banking revenue surged.
Like other large banks, U.S. Bancorp received a boost as borrowers refinanced home loans at low interest rates. Mortgage banking revenue more than doubled to $452 million.
U.S. Bancorp has been building up its mortgage business while some large banks pull back, helping it gain market share from large and small players, Chief Executive Richard Davis said in a conference call with analysts.
"We see a market share (opportunity) that you only get once in a lifetime, and we intend to enjoy it now," Davis said.
The bank expects to become a top five player in U.S. mortgage originations and servicing, he said. According to Inside Mortgage Finance, U.S. Bancorp was fifth in originations in the fourth quarter of 2011 and sixth in servicing.
The company reported first-quarter net income of $1.3 billion, or 67 cents per share, up from $1.05 billion, or 52 cents per share, a year earlier.
Analysts, on average, expected the Minneapolis-based bank to earn 64 cents per share, according to Thomson Reuters I/B/E/S.
Net revenue increased 9.1 percent to $4.9 billion.
Like other banks, U.S. Bancorp benefited from improved credit quality. Its provision for loan losses fell 36 percent to $481 million.
U.S. Bancorp may jump to fourth in mortgage originations in the first quarter, moving ahead of Bank of America Corp, said Guy Cecala, publisher of Inside Mortgage Finance, citing mortgage securitization data. Bank of America, which has faced huge losses and lawsuits from its Countrywide Financial acquisition, last year stopped buying mortgages from smaller lenders as it focused on making loans through its own branches.
"As Bank of America and other large originators slowly bow out of a market that is already suffering from diminished capacity, small to middle-market originators stand to benefit," FBR Capital Markets analyst Paul Miller wrote in a research report on Tuesday.
Wells Fargo & Co is the largest U.S. mortgage originator and servicer, making nearly one in three home loans.
U.S. Bancorp shares were up 21 cents, or 0.7 percent, to $31.37 in morning trading.
