BB&T: Margin Guidance Loser

BB&T's third-quarter net interest income was a tax-adjusted $1.52 billion, increasing slightly from the previous quarter, and from $$1.45 billion a year earlier. The company's net interest margin net interest margin (NIM) -- the difference between the average yield on loans and investments and the average cost for deposits and borrowings -- was 3.94%, declining from from 3.95% in the second quarter, and 4.09% during the third quarter of 2011.

Most banks are facing pressure on their net interest margins, with the Federal Reserve keeping its target federal funds rate in a range of zero to 0.25% since the end of 2008, while the central bank in September significantly increased its purchases of long-term mortgage-backed securities, in an effort to keep long-term rates at historically low levels.

While BB&T's third-quarter margin held up nicely, what probably caused the most alarm for investors was the company's guidance, that the margin would fall "to the mid-70s% range in 4Q12," because of lower rates being earned on new assets, higher long-term debit cost, and the runoff of assets covered by Federal Deposit Insurance Corp. loss-share agreements.

BB&T's shares have now returned 22% year-to-date, following a 2% decline during 2011.

The shares trade for 1.8 times their reported Sept. 30 tangible book value of $17.02, and for 10 times the consensus 2013 EPS estimate of $3.05. Based on a quarterly payout of 20 cents, the shares have a dividend yield of 2.67%.

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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