BB&T (BBT) Has Right Approach for Better Returns, Growth - Barron's
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BB&T Corp. (NYSE: BBT) shares are up early Tuesday following a positive report in Barron's over the weekend.
Although BB&T continues to show strong profitability, Barron's points out overall market concerns tied to capital ratio requirements and news from peers has weighed on the stock. Since October 2008, BB&T shares are down 26 percent, compared with a 17 percent gain for the S&P 500 over the same period. At $27, shares are well off highs of $40 hit three-years ago.
But heading into earnings, Barron's believes BB&T's luck will change for the better. Specifically, Barron's is looking for better net income and EPS, falling loan-loss provisions and lower charge offs. This all comes as investors are becoming more comfortable with the U.S. economy improving in 2012, despite a slower pace than many are used to. Should the economy improve, Barron's sees BB&T returning about 25 to 30 percent over the next two years, including a dividend that currently yields 3 percent.
Here's a few more numbers: BB&T trades for just 11.4 times 2012 EPS estimates and 9.5 times next year's outlook. Those are both below the 13 times BB&T has historically garnered. For the first three months of 2011, BB&T saw net profit rise 50 percent to $1.29 per share, while net interest income moved 2 percent to $4.1 billion. Profits grew as credit costs lowered and "good loans" continued to show growth. Average loan and deposit gains over the past five quarters rose 4.3 percent and 32 percent on an annualized basis, respectively.
BB&T's loan-loss provisions are also at about $1 billion, down from $2.6 billion in 2010 and nearing levels of $450 million before the financial meltdown.
Investors are likely to focus on BB&T's continuing average return-on-assets growth with fourth-quarter numbers. BB&T reported ROA of 0.51 percent in 2010, but that has strengthened to 0.67 percent through the first three-quarters of 2011. One analyst sees BB&T reporting ROA of 1.3 percent of so in a more normalized environment, the equivalent of $3 per share.
Fourth-quarter earnings for BB&T should come out on Thursday, with the Street expecting earnings of 53 cents per share.
The stock is up 1.1 percent early Tuesday.
Although BB&T continues to show strong profitability, Barron's points out overall market concerns tied to capital ratio requirements and news from peers has weighed on the stock. Since October 2008, BB&T shares are down 26 percent, compared with a 17 percent gain for the S&P 500 over the same period. At $27, shares are well off highs of $40 hit three-years ago.
But heading into earnings, Barron's believes BB&T's luck will change for the better. Specifically, Barron's is looking for better net income and EPS, falling loan-loss provisions and lower charge offs. This all comes as investors are becoming more comfortable with the U.S. economy improving in 2012, despite a slower pace than many are used to. Should the economy improve, Barron's sees BB&T returning about 25 to 30 percent over the next two years, including a dividend that currently yields 3 percent.
Here's a few more numbers: BB&T trades for just 11.4 times 2012 EPS estimates and 9.5 times next year's outlook. Those are both below the 13 times BB&T has historically garnered. For the first three months of 2011, BB&T saw net profit rise 50 percent to $1.29 per share, while net interest income moved 2 percent to $4.1 billion. Profits grew as credit costs lowered and "good loans" continued to show growth. Average loan and deposit gains over the past five quarters rose 4.3 percent and 32 percent on an annualized basis, respectively.
BB&T's loan-loss provisions are also at about $1 billion, down from $2.6 billion in 2010 and nearing levels of $450 million before the financial meltdown.
Investors are likely to focus on BB&T's continuing average return-on-assets growth with fourth-quarter numbers. BB&T reported ROA of 0.51 percent in 2010, but that has strengthened to 0.67 percent through the first three-quarters of 2011. One analyst sees BB&T reporting ROA of 1.3 percent of so in a more normalized environment, the equivalent of $3 per share.
Fourth-quarter earnings for BB&T should come out on Thursday, with the Street expecting earnings of 53 cents per share.
The stock is up 1.1 percent early Tuesday.
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