This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

BB&T Is a 'Top Pick' for Investors: Citi

NEW YORK ( TheStreet) -- In the midst of a very strong market rally for bank stocks and an improving interest rate outlook, most large regional names are "no longer cheap," but BB&T (BBT - Get Report) remains a solid pick, according to Citigroup analyst Keith Horowitz.

Friday's market euphoria following stronger-than-expected job growth numbers pushed the KBW Bank Index (I:BKX) to a 52-week high of 63.94. The index has returned 25% this year, following a 30% return during 2012.

That's a remarkable run. At the end of 2011, it was fairly easy to look at large-cap U.S. bank stocks, with their remarkably low valuations, and say it was time to load up, but now things are getting more difficult.

On the positive side, long-term rates have increased sharply, with the rate on 10-year U.S. Treasury bonds increasing to 2.73% on Friday, from 1.70% at the end of April. This promises widening net interest margins for banks, but the large-cap banks will only see an "incremental benefit," according to Horowitz.

With "valuations that look full, very limited impact from higher rates on earnings in the near term and the forward curve already assuming 100 bp of rate hikes in 2015," Horowitz in a report on Sunday wrote that "we believe risk/reward is not favorable here and would not chase this rally."

Going With BB&T

There are three large-cap regional banks stocks that Horowitz considers "preferred plays heading into earnings," including BB&T, M&T Bank (MTB - Get Report) of Buffalo, N.Y., and Wells Fargo (WFC - Get Report). However, BB&T of Winston-Salem, N.C., is the only one the analyst rates a "buy."

BB&T's shares closed at $34.88 Friday, returning 22% this year, following a 19% return during 2012. Those, of course, are stellar numbers, but if you look at the one-year chart at the end of this article, you can see that the shares have significantly underperformed the KBW Bank Index and the S&P 500 (SPX.X) over the 52-week period.

A major reason for the underperformance has been investors' discomfort following the Federal Reserve's rejection of BB&T's 2013 capital plan in March, on "qualitative" grounds. The bank submitted its revised plan on June 11, and the Fed will respond by Aug. 25. An approval of the revised plan could serve as a catalyst for the shares.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BBT $38.05 0.00%
MTB $121.00 0.00%
WFC $54.79 0.00%
AAPL $128.46 0.00%
FB $78.97 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs