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U.S. Bank’s non-interest income was impressive in 4Q14

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U.S. Bank has a balanced revenue profile

Non-interest income is important for a bank. It helps a bank leverage on its franchisee network. Also, it’s a low-risk revenue stream. It doesn’t carry a default risk.

U.S. Bank (USB) has a balanced revenue profile. Non-interest income, also called fee income, accounts for nearly 45% of the bank’s revenue. U.S. Bank earns non-interest income by providing services like trust and investment management, retail brokerage, custody, and merchant processing.

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U.S. Bank reported an increase in non-interest income

U.S. Bank’s non-interest income was $2,370 million in 4Q14. This was an excellent increase of 9.9%—compared to 4Q13. However, non-interest income included a one-time gain of $124 million on the sale of shares in Nuveen Investments. These shares were bought by U.S. Bank in 2010. Without the effect of this one-time gain, non-interest income grew by 1.05%.

The increase was primarily driven by two main revenue streams. A higher trust and investment management fee helped non-interest income growth. The revenue stream grew 8.4%—compared to 4Q13. The trust and investment management fee increased due to account growth, business expansion, and improved market conditions.

The higher merchant service revenue stream grew by 4.6%—compared to 4Q13. This was due to higher processing volumes. An increase in the product fee helped growth in non-interest income.

Credit and debit card revenue and corporate payment product revenue also helped drive non-interest income growth.

U.S. Bank did well in non-interest income

U.S. bank did relatively well in non-interest income. Wells Fargo (WFC), the bank with the strongest non-interest income, also saw a fall in the revenue stream in 4Q14. The trend was largely similar for other big banks in the Financial Select Sector SPDR (XLF). JPMorgan Chase (JPM) and Bank of America (BAC) also saw slow non-interest income growth.

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