Although management has worked diligently to streamline the bank's operations while also bringing synergies to newly acquired BankAtlantic, I've never bought in to the premium that BB&T shares carried relative to other well-run regional banks like Suntrust (STI) and PNC Financial (PNC). Given the underperformance in BB&T's results, particularly in pre-provision net revenue (PPRN), I believe the stock was always expensive.
PPRN is the financial sector's equivalent of operating income. Investors are correct in pointing out that BB&T does post better revenue results than some of its larger global rivals. Even so, better-than-expected revenue growth has become a meaningless metric in this industry. Besides, the Street doesn't seem to mind the across-the-board revenue decline from all of the large money centers, including Wells Fargo (WFC) and JPMorgan Chase (JPM).
Thursday, BB&T will report fourth-quarter results, and management will have yet another chance to prove skeptics wrong. The Street will be looking for earnings-per-share of 72 cents on revenue of $2.37 billion, which would represent 6.3% year-over-year revenue decline. But as I've said, whether good or bad, it's pointless to measure these banks on revenue.To that end, for BB&T stock to make sense today management needs to show a strong outperformance in areas like net interest margin. A strong result there would increase BB&T's adjusted income and put to rest some concerns about poor capital utilization relative to the bank's debt. And this is especially important given that BB&T is still in the midst of incorporation BankAtlantic into the fold.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV