NEW YORK (TheStreet) – With better-than-expected results coming in from other regional banks like PNC Financial (PNC) - Get Report , SunTrust Bank (STI) - Get Report and Comerica (CMA) - Get Report , investors should take a long look at BB&T (BBT) - Get Report , North Carolina's second largest bank.
With its shares down 8% year to date, compared with declines of 1.73% and 1.77% for the Dow Jones Industrial Average (DJI) and S&P 500 (SPX) , respectively, BB&T has had a weak start in 2015. But that's likely to turn around once it reports its fourth quarter results on Thursday. Here are a couple of reasons why.
First, BB&T recently received a price target increase by Barclays' analysts, who raised the target to $43 a share from $40. The analysts cited BB&T's improved profitability prospects, as a result of easing regulatory and legal burdens for the banking industry. With this price target increase, it suggests gains of more than 20% from current levels of around $35 a share. As GDP growth picks up, loan demand should increase, said Barclays.
Barclays is also bullish about BB&T's core business, adding, "We expect commercial real estate, home equity and credit card growth rates to all accelerate, while commercial and industrial [loans] and consumer growth rates remain above historical averages." All of which bodes well for BB&T's ability to grow fees and higher profits for its ever expanding footprint, which currently spans 12 states.
BB&T, which is headquartered in North Carolina, is largely centered in the Southeast, with an increasing presence in the Midwest, Southwest, Northeast and Mid-Atlantic states.
Secondly, to better compete with other regional banks like SunTrust and Fifth Third (FITB) - Get Report , BB&T has been actively snapping up other bank branches and banks. In November, for example, BB&T agreed to buySusquehanna Bancshares (SUSQ) for $2.5 billion.
Susquehanna, headquartered in Pennsylvania, bolstered BB&T's presence in the Northeast, in addition to helping it save approximately $160 million annually from this deal. And only a couple months before it acquired Susquehanna, BB&T had purchased 41 retail branches in Texas from Citigroup (C) - Get Report . Texas has been an important growth area for many banks, including BB&T. With its Citigroup branch acquisitions, BB&T is now one of the largest banks in Texas with more than $5 billion in deposits.
BB&T also struck a $1.6 billion deal for the Bank of Kentucky (BKYF) , which gave BB&T access to almost $2 billion worth of deposits and elevating BB&T to the No. 2 bank in the state of Kentucky.
Given BB&T's growth and Barclays projections for its potential to increase its loan generation, BB&T is a bargain at its current level, especially when you consider it has Barclays' 12-month price target of $41. And aside from paying a 2.68% dividend yield, analysts expect BB&T to grow earnings at an annual rate of 7% over the next five years. Moreover, this doesn't factor in the money it will save from finding efficiencies from its recent acquisitions.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.