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BB&T: Financial Winner

The shares trade for 1.7 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.6 times the consensus 2013 earnings estimate of $2.93. The consensus 2014 EPS estimate is $3.18.

Based on a quarterly payout of 20 cents, the shares have a dividend yield of 2.83%.

BB&T's dividend is certainly attractive for a stock in the low-rate environment, with the payout well-supported by a solid 12-month operating return on average assets of 1.04% through the third quarter, according to Thomson Reuters Bank Insight, and an estimated Basel III Tier 1 common equity ratio of 8.0%, as of Sept. 30.

Following the next round of Federal Reserve stress tests in March, Bank of America Merrill Lynch analyst Erika Penala expects BB&T to raise its quarterly dividend by penny, but not to request approval to buy back common shares during 2013. However, the analyst said in a Nov. 26 report that BB&T is among the banks "that still have the opportunity to lower their funding costs calling expensive debt as part of their capital planning process for '13, which could help partially mitigate margin compression."

Most large banks are facing narrowing net interest margins -- the difference between the average yield on loans and investments and the average cost for deposits and borrowings -- as the Federal Reserve has kept its short-term federal Funds rate in a target range between zero and 0.25% since late 2008, and has also been purchasing $85 billion in long-term mortgage backed securities and U.S. Treasury securities each month, in an effort to hold long-term rates at historically low levels.

Penala estimated net interest margin "accretion of 14bp for BBT," from debt redemptions and some new debt issues at lower rates, following the stress tests, which "would translate into an EPS boost of 15c (5%)" for the company in 2013.

The analyst rates BB&T a "Buy," with a price objective of $32.00.

BBT Chart BBT data by YCharts

Interested in more on BB&T? See TheStreet Ratings' report card for this stock.

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

>Contact by Email.

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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