Compass Point Trims Numbers on BB&T Capital (BBT) Post Q1; Keeps 'Buy' Rating

Compass Point analyst Kevin Barker reiterated a Buy rating on BB&T Capital (NYSE: BBT) but lowered his price target from $43 to $42 following Q1 results.

Barker comments, "Overall, this quarter was weaker than expected due to a big decline in fee income, driven primarily by lower mortgage banking and other income. This was reflected in the core PPNR number of $861M compared to our estimate of $882M, even though this quarter benefited from a $23M timing change in recognizing insurance revenue. In addition, the company guided to a 5 basis point drop in core NIM due to continued pressure on asset yields. These events obviously pressured the stock, but several positive signs remain, including: further declines in expenses from cost saving initiatives and a pickup in loan activity heading into 2Q14. Also, management reiterated their expectation to increase operating efficiency every quarter throughout 2014 and to reach their efficiency ratio target of 56%. So, even though pressure on revenue will make it more difficult to grow EPS, especially with no share buyback program in place and little room to keep releasing reserves, the outlook for loan growth is improving and BBT is prudently managing its expense base. We are lowering our FY14E EPS estimate to $2.95 from $3.06 and our FY15E EPS to $3.13 from $3.32 primarily due to lower NII and mortgage banking income."

For an analyst ratings summary and ratings history on BB&T Capital click here. For more ratings news on BB&T Capital click here.

Shares of BB&T Capital closed at $37.93 yesterday.

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