U.S. Bancorp consistently produces some of the best results among the nation's big banks, but even it can upset investors a little.
After the company reported a 13 percent jump in quarterly profit Wednesday morning, its shares fell 2 percent, outpacing a down day for the financial sector overall as investment analysts questioned its spending.
The nation's fifth-largest bank reported solid growth in its core consumer and business bank unit, in mortgage banking, wealth management and in fees from credit cards as consumer spending takes off.
But analysts and investors zeroed on executives' outlook for expense growth that was at the high end of a previously-announced range of 3 percent to 5 percent, chiefly because the firm is spending heavily on new technology.
As in many industries, smartphones and always-on networks are upending the way people use banks and financial products. Executives at U.S. Bank said they are now taking a "digital first" approach with both consumers and business customers.
"We need to be very focused on the whole digital transition of what we do," Terry Dolan, the company's chief financial officer, said in an interview. "It's hard to balance. A short-term investor would be happy if we cut every expense we could, but we wouldn't be here tomorrow if we did that."
During the quarter, U.S. Bank rolled out an web service that lets people shop for cars online and get preapproved for an auto loan before visiting a dealer. Last week, it announced that users of its corporate travel cards running on the MasterCard network could start paying for things with smartphones and other mobile devices. The bank, like others with a national presence, has also been heavily promoting the Zelle person-to-person payments service in recent months.
"Digital first is one of the things we talk a lot about," Dolan said. "We want to be sure we're enhancing and innovating the business model in our bank and the industry because if we stand still, we're going to be falling behind."
Expenses grew 5 percent in the first three months of the year, faster than the company's 3.4 percent jump in revenue. But executives forecast that revenue will grow faster than expenses over the full year, as it did last year excluding one-time items.
Chief executive Andrew Cecere gave an upbeat economic outlook for the rest of 2018, saying consumer and business confidence were strong. "Business optimism is evident in the conversations our bankers are having with clients," he said, adding that is translating into more demand for loans and other services.
The company reported a profit of $1.68 billion for the first three months of the year, up from $1.49 billion in the same period a year ago. Revenue was $5.47 billion.
The company, like other major banks, has benefited from rising interest rates and the new U.S. tax law. Its spending on taxes fell 29 percent to $391 million in the first quarter.
Net interest income, the money U.S. Bank gets from making loans, grew 6.3 percent. As well, its loan portfolio grew 2.3 percent and the amount of money it makes through each loan also grew, with net interest margin rising to 3.13 percent from 3.06 percent a year earlier.
The company reported a return on average assets of 1.5 percent, the highest among major U.S. bank firms.
