U.S. Bancorp, the fifth-largest US bank, beat analysts’ estimates on one of the revenue metrics key to Chief Executive Officer Gunjan Kedia’s plan to boost profitability.

Non-interest income for the first quarter rose 5% to $2.84 billion, topping the $2.79 billion predicted by analysts. Kedia has identified payments services as a growth priority to drive fee income.

“We managed expenses with discipline and delivered 270 basis points of positive operating leverage on an adjusted basis – our third consecutive quarter of year-over-year growth in revenues outpacing expenses,” Kedia, who officially took over as CEO on Tuesday, said in a statement Wednesday.

U.S. Bancorp’s non-interest expenses dropped 5.1% to $4.23 billion, roughly in line with analysts’ estimates.

Kedia, who joined in 2016 as vice chair for wealth management, is taking the reins at an inflection point to improve the firm’s performance, and in her words, with “a sense of urgency.” The firm’s stock is the among the worst-performing members of the 24-company KBW Bank Index over the past five years, gaining 16% compared with a 67% jump for the index.

The shares, which are down 19% this year through Tuesday, rose 1.9% in early New York trading.

Net interest income, which banks generate from making loans after accounting for the funding costs, missed analysts’ expectation. NII was $4.09 billion for the quarter, compared to analysts’ estimates of $4.11 billion.

MUFG Acquisition

The Minneapolis-based bank went on the offensive in 2022 with the $8 billion acquisition of MUFG Union Bank to expand on the West Coast. But the deal was completed at a time when unrealized losses in its securities portfolio began to weigh on capital.

Since then, the bank has been focused on building capital. Its common equity tier 1 ratio climbed from 8.5% two years ago to 10.8% in the first quarter.

U.S. Bancorp is also striving to maintain diversified revenue streams. Fee income, which accounts for about 40% of total revenue, has helped offset lending slowdowns during economic downturns.

Since becoming CEO in 2017, Cecere has initiated a digital transformation to improve the customer experience and the efficiency of its technology platforms.

Cecere will serve as the firm’s executive chairman to continue to lead the board and support Kedia in her new role. The CEO transition was marked by the loss of vice chair Terry Dolan, who died last month in a plane crash. A respected long-time executive with the firm, Dolan joined U.S. Bancorp in 1998.