Fed Rejection of BB&T (BBT) Plan Provides for New Buying Opportunity - Barron's
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BB&T (NYSE: BBT) is off to a strong start Monday following a positive mention in Barron's over the weekend.
Having risen about 10 percent in the last year, BB&T is largely trailing segment peers. The bank saw its capital plan rejected last March following the Fed's Comprehensive Capital Analysis and Review, one of only two banks required to go back to the drawing board.
In the test, BB&T scored fifth in a key capital ratio segment and disclosed just 10 days before results of the test were released that it was re-evaluating its risk-weighted process for certain assets. The last-minute move might have prompted the rejection, Barron's notes.
BB&T has since resubmitted its plan and will hear back from the Fed by August.
Investors are also keeping an eye on BB&T's FDIC-brokered takeover of Colonial BancGroup in 2009. This type of transaction allows has loans purchased at a discount and gradually converted to earnings upon repayment. The purchase accounting accretion is expected to add 29 cents to earnings this year, from 51 cents last year and 13 cents expected next year.
Benefits to owning BB&T include a solid dividend, growth potential, and increasing profitability.
Loan demand is on the rise as well, though most banks would like to sees rates come off of historically-low levels.
Should BB&T be able to expand margins, applying a 12.5 times multiple to expected FY15 EPS of $3.36 equates to about $42, or upside of 27 percent over recent closing levels around $33.
Shares are up 1.7 percent early.
Having risen about 10 percent in the last year, BB&T is largely trailing segment peers. The bank saw its capital plan rejected last March following the Fed's Comprehensive Capital Analysis and Review, one of only two banks required to go back to the drawing board.
In the test, BB&T scored fifth in a key capital ratio segment and disclosed just 10 days before results of the test were released that it was re-evaluating its risk-weighted process for certain assets. The last-minute move might have prompted the rejection, Barron's notes.
BB&T has since resubmitted its plan and will hear back from the Fed by August.
Investors are also keeping an eye on BB&T's FDIC-brokered takeover of Colonial BancGroup in 2009. This type of transaction allows has loans purchased at a discount and gradually converted to earnings upon repayment. The purchase accounting accretion is expected to add 29 cents to earnings this year, from 51 cents last year and 13 cents expected next year.
Benefits to owning BB&T include a solid dividend, growth potential, and increasing profitability.
Loan demand is on the rise as well, though most banks would like to sees rates come off of historically-low levels.
Should BB&T be able to expand margins, applying a 12.5 times multiple to expected FY15 EPS of $3.36 equates to about $42, or upside of 27 percent over recent closing levels around $33.
Shares are up 1.7 percent early.
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