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BB&T Corporation Message Board

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  • dhrosier dhrosier May 25, 2010 4:51 PM Flag

    Why buy BB&T?????

    Copied this from Analyst Estimates here on Yahoo:

    Average Estimates
    2ndQ 0.34
    3rdQ 0.42
    2010 1.51
    2011 2.42

    Let me help you with the math:

    23.5% growth 2ndQ to 3rdQ (actual, not annualized!)

    60% growth in earnings year 2010 to year 2011.

    The figures are averages with pessimists and optimists all reflected.

    You cannot pay dividends without earnings, not for long.

    You can have retained earnings if you do not pay dividends, in this case I am confident they will generate continuing growth in earnings.

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    • I like BBT, think they are one of the best (maybe even the best) of the larger banks. That said let's look at some numbers. BBT is trading at a PE of 32 (ttm).

      With the estimated earnings growth maybe they would be at a 15 PE by mid 2011 - which is a more nomal PE for a bank (banks often trade at even lower PES that that).

      If banks get hit with a slew of defaults on Alt-A, interest only and other exotic mortgages this fall as these mortgages reset (peak resets expected to exceed sub-prime) then banks will get hit. Now admittedly BBT was not into underwriting these types of mortgages, but if other banks get taken down so will BBT.

      Given this I believe BBT is richly priced above $30 (even over priced).

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