Bank bargain? Bet on US Bancorp (USB)

"Recent valuations in financial stocks suggest either 'the world is coming to an end' or there are some great values," says Gregory Dorsey.

Here, the contributing editor to to the top-notch Leeb's Income Performance Letter takes a look at one such "bargain" in the sector: U.S. Bancorp (NYSE: USB).

"So far, the financial sector has written off more than $300 million in assets. By some accounts the damage will rise to $1 trillion or more before all is said and done. 

"The selloff, which at its nadir was marked by a 55% year-over-year decline in the KBW Index, pushed the constituent members down to a collective 0.64 times book value and a dividend yield of 9%. 

"At those levels, either the world is coming to an end or there are tremendous bargains for investors with the courage of their convictions. 

"Looking hard at the data, we can only conclude the latter is the case, provided you're careful with your investment choices.

"U.S. Bancorp had a downbeat quarter. But all things being equal, we're content with its results. The company's per-share earnings dropped 18% in the quarter to 53 cents a share — 7 cents below Wall Street's forecast. 

"The Minneapolis-based bank took a $63 million impairment charge for securities and added to its provision for credit losses, which combined shaved 11 cents off of its bottom line.

"On the plus side, USB posted strong loan and deposit growth along with healthy core fee revenue growth. And, in contrast to many of its peers, its net interest margin expanded during the quarter.

"Taking advantage of the depressed share price, insiders have jumped in with both feet, scooping up more than 189,000 shares of USB in transactions valued at more than $4 million. 

"No one's in a better position to judge the health of a company than the folks who run it. We judge their buying to be a strong vote of confidence. And we certainly like the stock's better than 6% yield."