(Reuters) - U.S. Bancorp (USB) on Wednesday beat estimates for first-quarter profit as rapid rate hikes from the Federal Reserve helped the lender earn more from the interest charged on loans.
That cushioned a hit from the bank increasing its rainy-day funds to $427 million from $112 million last year, as it girds for an uncertain economy that could keep customers from repaying their loans.
Higher rates to rein in inflation have sparked concerns of an economic slowdown, but lenders have benefited from the resulting boost to their net interest income (NII) - the difference between interest earned on loans and paid out on deposits.
The Minneapolis-based bank's NII grew to $4.63 billion for the quarter ended March 31, compared with $3.17 billion a year ago.
Shares of the company, which have shed about 20% so far this year, rose nearly 2% to $35.73 during premarket trading.
On an adjusted basis, USB reported a profit of $1.16 per share, beating analysts' average estimate of $1.12 per share, according to Refinitiv IBES data.
U.S. financial markets and investors are keeping a close tab on the performance of mid-sized lenders this quarter, after two regional players recently collapsed under bank runs that marked the sector's biggest meltdown since the 2008 financial crisis.
For USB, average total deposits grew 5.9% quarter-on-quarter to $510.32 billion, as the banking crisis prompted unnerved depositors to move their money out of smaller banks and into the perceived safety of bigger lenders.
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The lender's quarterly net income applicable to common shareholders rose to $1.59 billion, or $1.04 cents per share, compared with $1.47 billion, or 99 cents per share, a year ago.