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BB&T (BBT) Q1 Earnings Beat on Lower Expenses, Revenues Up

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BB&T Corporation’s BBT first-quarter 2018 adjusted earnings of 97 cents per share outpaced the Zacks Consensus Estimate of 92 cents. The figure recorded 31.1% surge from the year-ago quarter.

Results reflected a slight rise in revenues and lower operating expenses. However, higher credit costs and a decline in loan balance were the undermining factors.

Results excluded merger-related and restructuring charges. After considering these, net income available to common shareholders was $745 million or 94 cents per share, up from $378 million or 46 cents per share in the prior-year quarter.

Revenues Grow Slightly, Expenses Decline

Total revenues (taxable-equivalent) came in at $2.84 billion, up marginally year over year. The figure also outpaced the Zacks Consensus Estimate of $2.83 billion.

Tax-equivalent net interest income increased slightly from the prior-year quarter to $1.66 billion. Net interest margin fell 2 basis points (bps) from the prior-year quarter to 3.44%.

Non-interest income increased nearly 1% year over year to $1.18 billion. Higher investment banking and brokerage fees and commissions, and bankcard fees and merchant discounts were partly offset by decline in insurance income and mortgage banking income.

Non-interest expenses of $1.69 billion fell 19.8% from the year-ago quarter. The decrease was mainly due to lower outside IT services costs and net merger-related and restructuring charges as well as absence of loss on early extinguishment of debt.

BB&T’s adjusted efficiency ratio came in at 57.3%, down from 58.0% in the prior-year quarter. A fall in efficiency ratio indicates rise in profitability.

As of Mar 31, 2018, total deposits were nearly $158.2 billion, up marginally from the prior quarter. Total loans and leases of $144.2 billion were down slightly on a sequential basis.

Credit Quality: A Mixed Bag

As of Mar 31, 2018, total non-performing assets (NPAs) were $669 million, down 16.5% year over year. As a percentage of total assets, NPAs came in at 0.30%, down 6 bps.

Further, net charge-offs were 0.41% of average loans and leases, down 1 bp year over year. However, allowance for loan and lease losses came in at 1.05% of total loans and leases held for investment, up 1 bp from the prior-year quarter.

Also, provision for credit losses was $150 million at the end of the quarter, reflecting a 1.4% increase on a year-over-year basis.

Strong Profitability & Capital Ratios

At the end of the reported quarter, return on average assets was 1.45%, up from 0.79% in the prior-year quarter. Return on average common equity improved to 11.43% from 5.72% as of Mar 31, 2017.

As of Mar 31, 2018, Tier 1 risk-based capital ratio was 12%, on par with the year-ago quarter. BB&T's estimated common equity Tier 1 ratio under Basel III was approximately 10.2% as of Mar 31, 2018, down from 10.3% as of Mar 31, 2017.

Share Repurchases

During the reported quarter, BB&T repurchased $320 million worth shares through open-market purchases.

Our Take

BB&T remains well positioned for revenue growth through strategic acquisitions. Also, expected growth in loans, along with an improving rate scenario, is likely to propel its organic growth trajectory in the quarters ahead. However, such acquisitions are expected to keep costs toward the higher end, which might hurt profitability to some extent.

BB&T Corporation Price, Consensus and EPS Surprise

 

BB&T Corporation Price, Consensus and EPS Surprise | BB&T Corporation Quote

BB&T carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Major Banks

U.S. Bancorp’s USB first-quarter 2018 adjusted earnings per share of 95 cents surpassed the Zacks Consensus Estimate by a penny. The figure came ahead of the prior-year quarter earnings of 82 cents.

Comerica CMA reported adjusted earnings per share of $1.54 in first-quarter 2018, up from the prior-year quarter adjusted figure of $1.02 on high interest income. Including certain non-recurring items, earnings came in at $1.59. The Zacks Consensus Estimate was $1.49.

The PNC Financial Services Group PNC reported first-quarter 2018 earnings per share of $2.43 beating the Zacks Consensus Estimate by a penny. Moreover, the bottom line reflected a 24% increase from the prior-year quarter.

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