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Fee Income, Loan Growth to Support BB&T's (BBT) Q4 Earnings

Zacks Equity Research

BB&T Corporation BBT is slated to announce fourth-quarter 2018 results on Jan 17, before the market opens. Per the Fed’s latest data, commercial and industrial loans (accounting for nearly 40% of the company’s total loans and leases) recorded substantial growth, with the quarter witnessing an slight improvement in lending activities.

BB&T anticipates average total loans held for investment to be up 1-3% sequentially in the to-be-reported quarter. Driven by loan growth, earning assets are likely to rise too. The Zacks Consensus Estimate for average interest earning assets of $1.97 trillion indicates a modest rise sequentially.

Also, management expects GAAP and core net interest margin to improve on a sequential basis. Nonetheless, flattening of yield curve and rise in deposit betas are expected to hurt NII growth, while rise in interest rates and loan growth will offer some support. The Zacks Consensus Estimate for NII of $1.70 billion for the to-be-reported quarter reflects nearly 1% decline from the prior quarter.

Now, let’s check out some of the other factors that are likely to influence BB&T’s results:

Fee income to provide support: Given the rise in deposit balances, BB&T is likely to register a rise in service charge on deposits. The consensus estimate for service charge on deposits is $186 million, up 1.6% from the prior quarter.

Additionally, while rise in interest rates must have resulted in a fall in refinancing activity, overall mortgage originations seem to be decent in the fourth quarter. Thus, the Zacks Consensus Estimate for mortgage banking income of $79 million is stable sequentially.

Moreover, bankcard fees and merchant discounts are estimated to be $73 million, indicating a rise of 1.3% from the prior year.

Also, investment banking and brokerage fees and commissions are likely to support fee income growth to some extent. The consensus estimate for the same is $118 million, reflecting a rise of 1.7% sequentially.

Also, BB&T is expected to witness an improvement in insurance income in the to-be-reported quarter. The Zacks Consensus Estimate for insurance commission of $468 million shows 4.5% increase on a sequential basis. The rise likely to be driven by acquisition of Regions Insurance Group in the third quarter.

Overall, total non-interest income is projected to grow 1.5% from the prior quarter as the consensus estimate for the to-be-reported quarter is pegged at $1.26 billion.

Besides, management expects non-interest income in the fourth quarter to increase 2-4% year over year.

Expenses to rise: Excluding merger-related and restructuring charges, and other one-time items, BB&T expects expenses to increase 1-3% year over year.

In 2018, operating expenses are anticipated to remain stable.

Asset quality is not of much support: BB&T expects loan loss provision to match net charge-offs (NCOs) in addition to providing for loan growth. Further, management expects NCO rates to increase sequentially and be in the range of 35-45 basis points on the assumption of no deterioration in the economy.

The Zacks Consensus Estimate for non-performing assets of $654 million for the to-be-reported quarter shows an increase of 8.8% on a sequential basis.

Here is what our quantitative model predicts:

The chances of BB&T beating the Zacks Consensus Estimate this time are high as it has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for BB&T is +0.32%.

Zacks Rank: BB&T carries a Zacks Rank #3, which increases the predictive power of ESP.

BB&T Corporation Price and EPS Surprise

 

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

Notably, the Zacks Consensus Estimate for earnings for the quarter is $1.05, which reflects year-over-year improvement of 28.1%. Further, the consensus estimate for sales of $2.95 billion indicates 3% growth from the prior-year quarter.

Other Stocks That Warrant a Look

Here are a few other bank stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases.

U.S. Bancorp USB is scheduled to release results on Jan 16. The company, which carries a Zacks Rank of 3, has an Earnings ESP of +0.26%.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

M&T Bank Corporation MTB has an Earnings ESP of +0.80% and holds a Zacks Rank #3. It is scheduled to report results on Jan 17.

Zions Bancorporation, National Association ZION has an Earnings ESP of +0.75% and currently carries a Zacks Rank of 3. The company is slated to release results on Jan 22.

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