Upgrading to BUY: Trends Inflecting Favorably with Operating Leverage Upside

研报英文原文证据摘录

Upgrading to BUY: Trends Inflecting Favorably with Operating Leverage Upside

ings quality. USB *Adj EPS *Rev. (MM)

continues to reposition the balance sheet toward higher-return C&I and credit card lending

while reducing mortgage exposure. The onboarding of $1.6B of Amazon-related small business

card balances in 3Q should support loan growth, NII, and payments revenue. Investors may U.S. Large Cap Banks: USB Offers Above-Peer

be overlooking the earnings potential within the payments franchise, in our view. Merchant ROTCE at a Peer Valuation

acquiring and processing is a high-margin business undergoing a multi-year transformation 22.0% JPM, 20.1%

toward specialized verticals, and the additional investment in relationship management and direct 20.0%

BAC, 16.9%sales should stabilize this business. USB is adding to its earnings diversification with increased (%) 18.0% USB, 17.4% PNC, 17.8%

ROTCE 16.0% WFC, 16.2%

investments in fee generating businesses including the growth of its capital markets capabilities Core

FY27E

14.0%following the BTIG acquisition (should drive CM revenue to 11% of total revs from 7%).

C, 12.3%

12.0%

M&A related to whole bank deals we believe are a low priority, which we view as a positive, with 10.0%10.0x 10.5x 11.0x 11.5x 12.0x 12.5x 13.0x 13.5x 14.0x 14.5x

the focus more on bolt-on acquisitions that fill product gaps and deepen client relationships, as . P/27E EPS

Source: Jefferies, company documents

evidenced by the BTIG deal.

Valuation we view as attractive given earnings upside, POL upside, and a diversified earnings

base. USB trades at 10.7x our 2027 EPS, in line with regional peers. Our revised price target of

$75 (was $60) is based on a target P/E multiple on 2027 EPS of 13.0x, which is above the peer