BB&t has purchased a lot of institutions over the past few years. They have grown for 3.3B in 1988 to over 90B today.
The CEO, John Allison, is a great leader. He has sacrificed some in the short term to better solidfy the company in the long term.
No experts expected the bank to survive, but it did. Their plans to slow acquisitions, and let the company settle is going to help the company and therefore the stock price. I believe we will see very good rewards ovr the next few months.
It currently has a 17 PE which is high for a bank. HOwever, with the profits expected during 2004, I honestly believe we will be glad we own this stock by year end.
Jim, I usually don't beat a dead horse but there is some real value in appraising a bank by its book value. Let's say a bank earns 12% on book (usually roe) and trades in the market at 2 times book. Return to shareholders who buy the stock at that point, is 6%. Acquisitions of banks have, historically been about 1.5x book with the big exceptions being the banks BAC acquires when it pays multiples far higher. Bank business is pretty much a commodity effort so they try to build in fees for brand.
I am waitiing until the bank files its 10-K to look up its book but my sense is that it is could be as high as $23. Mr. Allison is careful about diluting book when he makes acquisitions.
Way back when, BAC paid 4+ times book for Barnett. That is an uneconomic price but it serves as an outlandish upside. The bottom is 1.5 times. Below that point, BBT will be history.
Back to your point, book value in non-financial companies is not useful for analysis, I agree. Assets on the books rarely reflect market value but are at cost less depreciation.
In banking, asset growth has nothing to do with the relative value of any individual stock holding. Especially in the case of BB&T which grows assets via M&A and thus dilutes its stock every time it does such a transaction. In general, look to earnings per share, credit quality, return on assets (ROA) and return on equity. Especially ROA, which is a ratio, can just as well be high or low at any absolute level of balance sheet assets.
Price of the stock will go up, just a matter or time, unless management does something really stupid. BBT assets in the past ten years has gone from approx. $4 billion to approx. $90 billion. It does not make sense that the price of the stock will not go up.
You might want to take another look at your assumptions on the previous post. According to Yahoo's finance site the 2003 earnings per share were $2.78 and the 2004 average estimate per share is $2.87.
If the above is true then there would not be any reason for a share of stock to increase very much if the 2003 price verus P/E was close to what the P/E should be.
Hope this doesn't offend, just wanted to give you a heads up on this issue.
Your for better investing,