On Aug 23, 2013, we reaffirmed our Neutral recommendation on BB&T Corporation (BBT). This was based on the company’s encouraging second-quarter 2013 results. However, the sluggish economic scenario and persistently rising expenses continue to be causes of concern.
On Jul 18, BB&T reported second-quarter 2013 earnings of 77 cents per share, beating the Zacks Consensus Estimate of 74 cents. Earnings were primarily driven by a surge in non-interest income, partially offset by reduced net interest income and higher operating expenses. Growth in loans and deposits, a strong capital position and improved credit quality added to the company’s strong financials.
The Zacks Consensus Estimate for 2013 advanced 1.0% to $2.97 per share over the last 60 days. However, for 2014, the Zacks Consensus Estimate remained unchanged at $3.09 per share over the same time period. As a result, BB&T currently carries a Zacks Rank #3 (Hold).
BB&T continues to look attractive to yield-seeking investors because of its dividend paying nature. Earlier this year, the company hiked it quarterly cash dividend by 15%.
Moreover, growth in client deposits and non-interest-bearing deposit accounts has been impressive in the preceding quarters. The company intends to expand by opening 30 new branches in Texas through the remainder of 2013. Additionally, continued stability in net interest margin is a major strength of BB&T.
Though credit metrics improved in the said quarter, they continue to be an area of concern for BB&T. Further, a tepid economic recovery, continuous rise in operating expenses, exposure to problem assets and various regulatory issues are other factors plaguing the bank.
Other Stocks Worth Considering
Other better performing banks include BankUnited, Inc. (BKU), State Street Corporation (STT) and The PNC Financial Services Group, Inc. (PNC). While BankUnited has a Zacks Rank #1 (Strong Buy), both State Street Corporation and PNC Financial carry a Zacks Rank #2 (Buy).
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