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BB&T Focuses on Expenses as Revenue Declines

  • Third-quarter EPS of 37 cents, including 33-cent tax adjustment.
  • Adjusted third-quarter EPS of 70 cents matches consensus estimate.
  • Mortgage banking income down 31% from the second quarter.
  • Net interest margin narrows slightly.
  • Personnel and restructuring expenses decline.
  • Average portfolio loans grow 1% sequentially, 2% year over year.

NEW YORK ( TheStreet) -- BB&T (BBT - Get Report) on Thursday reported an expected decline in fee income that was partially offset by lower expenses.

The Winston-Salem, N.C., lender reported third-quarter net income available to common shareholders of $268 million, or 38 cents a share. The results included a previously announced tax adjustment of $235 million.

Excluding the tax adjustments, third-quarter operating earnings available to common shareholders were $503 million, or 70 cents a share, compared to $547 million, or 78 cents a share, in the second quarter, and $469 million, or 67 cents a share, in the third quarter of 2012.

The sequential operating earnings decline reflected a decline in mortgage revenue to $117 million in the third quarter from $168 million the previous quarter. This revenue decline was partially offset by a decline in personnel expenses to $805 million in the third quarter from $844 million in the second quarter. BB&T said the cut in personnel expenses was "primarily due to lower production-related compensation and other post-employment benefits expenses." That refers to the commission-based compensation for mortgage production staff.

The year-over-year earnings improvement mainly reflected a decline in the provision for credit losses, to $92 million in the third quarter from $244 million a year earlier. The second-quarter provision was $168 million. BB&T's loan loss reserves declined by $63 million during the third quarter.

BB&T's loan loss reserves covered 1.59% of total loans held for investment as of Sept. 30. This coverage ratio was down from 1.64% the previous quarter and 1.8% a year earlier. However, reserves covered 178% of nonperforming loans, increasing from 166% the previous quarter and 133% a year earlier.

Third-quarter net interest income on a taxable equivalent basis was $1.454 billion, up slightly from $1.452 billion in the second quarter but down from $1.520 billion in the third quarter of 2012. The net interest margin narrowed to 3.68% in the third quarter, from 3.70% the previous quarter and 3.94% a year earlier.

BB&T's average total loans -- excluding acquired loans covered by government guarantees -- grew 1% sequentially and 3% year-over-year, to $112.645 billion in the third quarter.
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