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BB&T Expands Globally Despite Revenue & Expense Pressure

Zacks Equity Research

We issued an updated research report on BB&T Corporation (BBT) on Aug 25, 2014. The company recently reported dismal second-quarter 2014 results. With continuing uncertainty around global markets, the company recorded a deteriorating top line and higher operating expenses.

BB&T reported lower-than-expected second-quarter adjusted earnings per share of 71 cents per share which missed the Zacks Consensus Estimate of 75 cents. Further, this was below 77 cents earned in the year-ago quarter.

Total revenue came in at $2.31 billion, down 7.5% year over year. A still low interest rate scenario and a sluggish economic recovery continue to keep BB&T’s interest revenues as well as net interest margin (NIM) under pressure. Moreover, the absence of credible improvement in the mortgage market remains a concern.

BB&T has been witnessing a persistent rise in total operating expenses at a CAGR of 3.4% over the last five years (as of the end of 2013). This trend continued in the first half of 2014 as well. Though management anticipates this trend to get reversed in the upcoming quarters, we foresee a rise in non-interest expenses owing to additional hiring, branch-building and inorganic growth plans.

BB&T’s continued growth through acquisitions, however, aids its geographical expansion. Looking ahead, the company is well positioned for further inorganic growth owing to its strong balance sheet position.

Additionally, BB&T is a sound asset for yield-seeking investors. The company raised its dividend by nearly 4% to 24 cents per share in Apr 2014. We believe that the company’s sound capital health will enhance shareholder value going forward.

Following dismal second-quarter results, over the last 30 days, the Zacks Consensus Estimate for 2014 decreased by a penny to $2.76 but remained stable at $3.16 per share for 2015. Hence, BB&T currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked banking stocks include Northrim Bancorp Inc. (NRIM), Sierra Bancorp (BSRR) and Central Valley Community Bancorp (CVCY). All these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on BBT
Read the Full Research Report on CVCY
Read the Full Research Report on BSRR
Read the Full Research Report on NRIM

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