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BB&T Not Ready to Outperform

Fee income has been a struggle within the entire industry. BB&T has been no exception. That said, BB&T's fee performance has held up well when compared to its regional peers. In that regard, management deserves plenty of credit. I will also grant that unlike some of its larger rivals, BB&T is finding ways to offset sluggishness with strong performances in areas such as insurance.

Still, I never believed this to be enough to erase my trepidation with the bank's PPNR situation, nor the fact that it has (in the past) posted some meaningful shortfalls (a recurring theme). So, while the bank's operations are indeed on firmer footing, I can't ignore that much of this can be attributed to aggressive cost-cutting measures.

From the valuation perspective, the Street has expected much better execution. And I don't believe BB&T's mortgage lending results has been as impressive as some analysts have made it out to be. Along those lines, the Street has conveniently ignored the bank's struggles in both residential and commercial lending. I'm not blaming BB&T's management for this. The entire sector has experienced similar deficits. BB&T, however, has been priced as if those deficits did not exist.

That said, I do appreciate the difficulty in trying to grow a regional bank in the midst of a weak economy against much larger, deeper-pocketed rivals. In that regard, I'm willing to excuse BB&T's management for any weakness, especially as they work to extract value out of the BankAtlantic acquisition.

Nevertheless, while I don't expect that the bank's struggles will persist for very long, I can't bid up these shares until I see more justification that this current premium, which now has BB&T stock at its 52-week high, is deserved.

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

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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