"The Bottom Line If BB&T's performance continues to improve, the regional bank's shares, now in the high 20s, could generate a total return of 25% to 30% over the next two years."
"WHEN BB&T REPORTS FOURTH-QUARTER results Thursday, investors will want to see indications that return on assets can continue to show impressive gains. (The company declined to comment to Barron's ahead of the earnings release.) In 2010, ROA was 0.51%, but it has risen every quarter this year, hitting 0.67% in the third. In 2007, it was nearly 1.40%. The bank has about $167.7 billion in assets.
While the numbers are improving, "BB&T is still well below normal earnings," says Invesco's Bastian, who expects the company to achieve a 1.3% ROA in a more normal environment. "That's equivalent to about $3 per share in earnings," he adds. If that target is hit, the bulls say, the stock might jump to about 36. BB&T is also taking market share, adds Brooker, and benefiting from problems at bigger rivals, including Bank of America (BAC).
As 2012 progresses, BB&T's business should keep improving. So should its share price."
Will this pop or drop on the earnings annoucement ???
One of the big driver's of earnings increase not mentioned in the Barron's article is a sharp reduction in non-provisioning credit costs. In 2011, cost BBT about $1 billion pretax or about $1.10 per share after tax. Credit costs include the additional marks taken on oreos (primarily land), oreo maintenance expense, legal fees, real estate fees, personnel costs etc. I think in 2012 the bulk of these expenses will go away. I'm sure Kelly King and Clark Starnes will talk about this in detail this Thursday. My guess is that the reduction in credit costs will increase eps by about $.90 share in 2012. The provision for bad loans will also drop and is probably worth about $.25 per share in 2012.
Add the benefits of an improved economy - loan growth, improved insurance biz, capital markets, wealth management and I think Kelly King has a good chance of achieving his projection of 15% roa on book value - $25 share including intangibles.
So what? It is already built into the price. If we get to $35 it will be because of superior loan growth. And if you are so smart, why doesn't CSFB hire you to be a bank analyst, instead of posting on yahoo message boards...hmmm, or better yet, why were you not quoted in the barrons article...hmmmmmmmm
Norm is like my grumpy elderly Uncle who for my entire life said the Red Sox were the best team in baseball and then after not winning a Championship for nearly a friggin hundred years they won in '04 and he told me "see, I was right".
King said that the valuation adjustment charge will be elevated this quarter - my guess $200 million. If this materializes I think this would increase the mark on oreos to the 65% range. In 2012, the valuation adjustment should largely go away. We should keep in mind that Clark Starnes said in the last cc that the valuation adjustment will be down signfiicantly in the 4th qtr but I guess King wants to clean house in 2011. The valuation adjustment in total in wel over $1 billion since the start of the bust. Shows the inadequacy of the marks but heck, who would have thought that the value of land would approach zilch?
Bbt should still make consensus earnings for the qtr. I look for bbt to earn $3.75 share in 2012. Queef can keep on telling her red sox story - hot air - figuratively and literally.