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BB&T Corporation Message Board

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  • normlasky normlasky Nov 21, 2009 7:47 AM Flag

    Could pop on Monday - From 11/21 Barrons

    Like many banks, BB&T slashed its dividend earlier this year to conserve capital. It now pays out 15 cents a quarter, down from 47 cents, and sports a 2.4% yield. It has repaid the government its $3.1 billion in TARP, or Troubled Asset Relief Program, funds, and its Tier 1 common equity as a share of risk-weighted assets is a solid 8.4%.

    Another closely watched measure -- the percentage of net loan charge-offs -- was 1.71% at the end of the most recent quarter, down slightly from the previous quarter. That's far lower than peers such as SunTrust Banks (STI), at 3.33%, and Regions Financial (RF), at 2.86%.

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    Davis Turner/Bloomberg News
    Early-stage delinquencies showed some signs of stabilizing, as well. Loans 30 to 89 days past due totaled just under $1.7 billion, below the level of three months ago.

    THE MOST NETTLESOME PART of BB&T's commercial- loan portfolio is acquisition, development and construction, or ADC, loans, which bankroll smaller residential developments. As of Sept. 30, nonaccruing assets in that category were a high 12.08%. But these loans, totaling $6.3 billion, account for only about 6% of the portfolio. BB&T Chief Executive Kelly King told analysts last month that the portfolio was "under control" and adequately reserved, though he added the bank expects to see "further deterioration."

    BB&T's residential mortgage business doesn't hold a lot of subprime loans. Nonaccruals stood at 4.31% at the end of the quarter, although the percentage was much higher on Florida properties. Fortunately, the bank's exposure to Florida is much smaller than its presence in markets such as the Carolinas, Virginia and Georgia. Mortgage banking accounted for income of $144 million, up from $83 million a year earlier.

    Amid the downturn, BB&T has been increasing revenue at a healthy clip, thanks to businesses such as mortgage banking and insurance brokerage. And, unlike Regions and SunTrust, BB&T continues to be profitable. It posted earnings of 23 cents a share in the third quarter, down from 65 cents a year earlier. Revenue rose an impressive 16%, helped by a rise of a 12th of a percentage point in net interest margin -- the difference between what the bank receives on its loans versus what it pays depositors.

    The Bottom Line
    Unlike competitors, BB&T has remained profitable amid the financial crisis. Its shares could rally at least 30%, to the low 30s, from today's 24.65.
    A big factor behind that margin expansion was the August acquisition of Colonial Bank, which gives BB&T a bigger foothold in Alabama and Florida. It's a good deal, because the Federal Deposit Insurance Corp. covers most of the losses on assets acquired from Colonial. The Colonial deal also boosts client deposits, nearly $104 billion at the end of the quarter versus $80 billion a year earlier. Last year's money-market crisis helped BB&T gain new deposits, as did the troubles of competitors such as Wachovia.

    If the economy continues to improve, BB&T's stock could gain 30%, says MainStay ICAP's Senser. Other investors see even greater upside. In almost all ways, BB&T is poised to best competitors as the financial crisis recedes.

35.41+0.030(+0.08%)May 2 4:01 PMEDT