(UPDATES with analyst comments and more detail on net charge-off rates.)
By Marshall Eckblad Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- U.S. Bancorp (USB) will post fourth-quarter net charge-offs of $600 million to $650 million and add a roughly equal amount to its loan-loss reserves, Chief Executive Richard Davis said Thursday.
As a result, U.S. Bank is likely to post about $1.2 billion in credit costs for this year's fourth quarter, a sharp rise from its third-quarter credit costs of $748 million.
Davis made the comments during a presentation to analysts at the Goldman Sachs Financial Services Conference.
The news disappointed investors, who have widely seen U.S. Bank as one of the strongest survivors of the widening banking crisis.
"This was not expected by investors and it is quite a different view of the company than what one has been led to believe," said Dick Bove, an analyst at Ladenburg Thalmann & Co. Inc., in a note to investors. "It is disappointing that the company...presented the information in a limited setting; and did not make a press release on what could be a billion-dollar-plus hit to earnings."
Davis emphasized on Thursday that the bank continues to perform better than most of its competitors.
Shares in U.S. Bank fell 10.2% to $24.85 on Thursday.
The bank expects to add substantial capital to its loan-loss reserves, or funds that the bank sets aside to offset future forecasted losses from souring loans. The bank added $250 million to its reserves in this year's third quarter, and is likely to add more than double that amount to its reserves in the fourth quarter.
"The magnitude of expected reserve building is much more than we had anticipated," said R. Scott Siefers, an analyst at Sandler O'Neill + Partners LP, in a note to investors.
The bank's charge-offs, or loans that a bank writes off as uncollectable bad debt, are likely to rise at approximately the same pace as last quarter, Davis said.
"U.S. Bank is not seeing an increasing...curve in charge-offs," Davis said. "We are not also seeing an improving slope. We're just seeing a continuation of the same curve."
At the end of the third quarter, the bank charged off 1.19% of its total loans, a lower rate than most of its competitors. During the fourth quarter, Davis said, U.S. bank will charge off 1.4% to 1.5% of its loans.
He said U.S. Bank will post "impairment" or write-down charges of about $200 million $300 million, compared with third-quarter impairment charges of $411 million.
Davis did warn investors that nonperforming loans - or loans nearing charge-off - will continue to rise in the fourth quarter to about 1.14% to 1.18% of all loans. That's a sharp increase from the bank's third quarter nonperforming ratio of 0.88%.
As consumers continue to fall behind on their loan payments in increasing numbers, banks are working to restructure loans to offer those consumers lower monthly payments.
U.S. Bank is faring considerably better than its peers in keeping restructured loans from lapsing back into default, according to historical research.
Davis said "one third to 40% of the loans we restructured found their way to net charge-off." That compares favorably with the higher rates of relapse at many other banks, who are seeing as many as one in every two restructured loans return to delinquent status.
-By Marshall Eckblad, Dow Jones Newswires; 201-938-4306; marshall.eckblad@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=OBSC4tG5tv93CjIHwO9G9A%3D%3D. You can use this link on the day this article is published and the following day.

Publié le 11 Décembre 2008 Copyright © 2008 Dowjones