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Betting on BB&T

That should bode well for BB&T's stock, especially if BB&T can reverse its weakness in residential and commercial lending.

BB&T also has to perform better in its cost-cutting measures. While management did well the first quarter in lowering expenses by 3%, it was not as meaningful as U.S. Bancorp, which was able to post a 1% increase in pre-provision net revenue (PPNR) - a measure of operating income - due to strong expense management.

BB&T posted an 8% year-over-year decline in PPNR. That's not horrible, but still it was the worst of all the major banks that have reported so far. Management has some work to do in this area.

Still, management has a strong track record. So I don't think these hiccups will linger for long. The bank has been willing to take chances on growth opportunities, including its acquisition of BankAtlantic last year.

I don't doubt that the next quarter will be better. The 8% decline in PPNR, however, remains a sticking point.

The stock appears to be fairly valued with a price-to-earnings ratio of 13.68, based on Friday's close of $32.55.

Can it go higher? I think it can. But each uptick will be met with resistance.

While I do believe that potential operational improvements are not yet priced into the stock, I don't see any justification to rush to take a position here yet. At least not until management can prove that it can get lending going again.

At the time of publication, the author held no position in any of the stocks mentioned.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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