January 17, 2018 / 12:21 PM / a year ago

UPDATE 2-U.S. Bancorp edges past earnings estimates on strong loan growth

(Adds expense forecast, CFO comment, share price)

By Nikhil Subba

Jan 17 (Reuters) - U.S. Bancorp's fourth-quarter earnings edged past analysts' forecasts on Wednesday, as the biggest U.S. regional bank by assets lent more and benefited from higher interest rates.

Its net interest income rose 6.4 percent to $3.14 billion in the quarter ended Dec. 31.

Average loans rose 2.6 percent to $279.75 billion, a result that some analysts cheered, while others said was in line with expectations.

The Federal Reserve raised interest rates three times in 2017. Policymakers are expected to maintain that pace through this year and the next.

However, U.S. Bancorp's shares fell 3 percent to $55.45 in morning trading after the bank said its expenses would grow in the mid-single percentage digits year-over-year in 2018.

The company had previously forecast expenses to increase 3 to 5 percent, said Wedbush Securities analyst Peter Winter.

Signaling more expenses ahead, U.S. Bancorp Chief Financial Officer Terrance Dolan said his company would invest about 25 percent of any tax benefit it may receive into initiatives including technology, automation and employee benefits.

The Minneapolis-based bank said it recorded a one-time benefit of $910 million related to the new U.S. federal tax law.

U.S. Bancorp joins peer PNC Financial in booking a gain from the new tax code, in contrast to most bigger banks including Goldman Sachs, Bank of America and Citigroup which have reported multi-billion-dollar charges due to the new laws.

U.S. Bancorp said net income attributable to common shareholders rose 16 percent to $1.61 billion or 97 cents per share, benefiting mainly from the tax-related gain.

Excluding the gain and other one-time items, the bank earned 88 cents per share, ahead of analysts' average estimate of 87 cents, according to Thomson Reuters I/B/E/S.

Total revenue rose 3.7 percent to $5.64 billion.

Shares of other banks also fell on Wednesday morning following quarterly reports from Goldman and Bank of America. (Reporting by Nikhil Subba in Bengaluru; editing by Sai Sachin Ravikumar)

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