Citi opens negative catalyst watch on U.S. Bancorp, sees ‘headwinds on the horizon’

Citi analysts opened a negative catalyst watch on U.S. Bancorp (NYSE:), lowering the firm’s price target on the Neutral-rated stock to $33 from $39 in a note to clients on Monday.

The analysts told investors in a note that there are headwinds on the horizon.

“Management recently spoke at an industry conference and made slight upward revisions to beta expectations, now calling for low 40s (vs. 40% previously), and suggested DDA mix could migrate towards the low-20s range, among the lowest in our coverage,” they explained.

“With our house view on rates calling for hikes at the June and July FOMC meetings, we see potential for betas to come in the mid-to high 40s range, coupled with our lower-than-consensus outlook on deposit balances due to QT, we believe 2H NII pressures will lead to a downward revision or miss on the 3.00-3.05% NIM and $28.5-30.5 bil total revenue guidance.”

In addition, Citi expects to see the higher rate environment resulting in negative OCI marks, “posing another headwind to an already challenged capital position.”