U.S. Markets closed

Loan Growth, Fee Income to Support BB&T's (BBT) Q2 Earnings

Zacks Equity Research

BB&T Corporation BBT is slated to announce second-quarter 2019 results on Jul 18, before market open. Per the Fed’s latest data, commercial and industrial loans (accounting for roughly 40% of the company’s total loans and leases) recorded modest growth, with the quarter witnessing slight improvement in overall lending activities.

BB&T anticipates average total loans held for investment to be up 4-6% sequentially (on annualized basis) in the to-be-reported quarter. Driven by slight loan growth, earning assets are likely to rise too. The Zacks Consensus Estimate for average interest earning assets of $2 trillion indicates nearly 1% rise sequentially.

Nonetheless, the Federal Reserve’s accommodative stance, flattening of the yield curve and steadily rising deposit betas are likely to hurt BB&T’s net interest margin (NIM). On a sequential basis, management expects GAAP and core NIM to decline 4-6 basis points.

The company expects net interest income (NII) to be up 2-3% year over year, driven by loan growth and an additional day in the quarter. The Zacks Consensus Estimate for NII of $1.70 billion is relatively stable with the year-ago reported number.

 

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

Fee income to improve: 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 $539 million indicates 5.7% increase on a sequential basis. The rise is likely to be driven by acquisition of Regions Insurance Group in 2018.

Also, bankcard fees and merchant discounts are estimated to be $75 million, up 7.1% sequentially.

Also, BB&T is likely to register a rise in service charge on deposits, as deposit balance is expected to increase. The consensus estimate for service charge on deposits is $183 million, up 7% from the prior quarter.

Further, low mortgage rates, seasonality and the central bank’s dovish stance seem to have led to an increase in refinancing activity during the quarter. Thus, the Zacks Consensus Estimate for mortgage banking income of $85 million suggests a jump of 34.9% sequentially.

Moreover, investment banking, and brokerage fees and commissions are likely to support fee income growth. The consensus estimate for the same is $114 million, indicating a rise of 2.7% from the first quarter.

Overall, total non-interest income is projected to grow 7.3% from the prior quarter as the consensus estimate for the to-be-reported quarter is pegged at $1.29 billion.

Besides, management expects non-interest income in the second quarter to increase 5-7% year over year.

Expenses not to be of much support: Excluding merger-related and restructuring charges, and other one-time items, BB&T expects expenses to remain stable or increase 2% year over year.

Asset quality to remain solid: 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 to 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 $589 million indicates rise of nearly 1% from the prior-quarter reported figure.

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 — for increasing the odds of an earnings beat.

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 +1.24%.

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 price-eps-surprise | BB&T Corporation Quote

Notably, the Zacks Consensus Estimate for earnings for the quarter is $1.08, which suggests improvement of 6.9% from the year-ago reported number. Further, the consensus estimate for sales of $2.98 billion indicates 3.6% growth.

Other Stocks That Warrant a Look

Here are a few other major 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.

PNC Financial PNC is scheduled to release results on Jul 17. The company has an Earnings ESP of +0.88% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Comerica CMA is +0.52% and it carries a Zacks Rank of 3, currently. The company is scheduled to report earnings on Jul 17.

The Earnings ESP for M&T Bank MTB is +0.20% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jul 18.

Radical New Technology Creates $12.3 Trillion Opportunity

Imagine buying Microsoft stock in the early days of personal computers… or Motorola after it released the world’s first cell phone. These technologies changed our lives and created massive profits for investors.

Today, we’re on the brink of the next quantum leap in technology. 7 innovative companies are leading this “4th Industrial Revolution” - and early investors stand to earn the biggest profits.

See the 7 breakthrough stocks now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
BB&T Corporation (BBT) : Free Stock Analysis Report
 
Comerica Incorporated (CMA) : Free Stock Analysis Report
 
The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
 
M&T Bank Corporation (MTB) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.