BB&T: Financial Winner

NEW YORK ( TheStreet) -- BB&T ( BBT) was the winner among the largest U.S. banks on a weak Tuesday for the financial sector, with shares rising over 1% to close at $31.69.

The Federal Reserve released the minutes of its March 13 Open Market Committee meeting, and although the committee "revised up its forecast for inflation a bit compared with the projection prepared for the January FOMC meeting, reflecting recent data indicating higher paths for the prices of oil, other commodities, and imports," it said that the Fed's "staff continued to project that inflation would be subdued in 2012 and 2013."

The Federal Open Market Committee didn't change its language about the Fed's "highly accommodative stance for monetary policy," and expectations that economic conditions were "likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."

The Fed also seemed to downplay the prospects of another round of quantitative easing saying that only "a couple" of members would support additional stimulus under certain conditions.

The Commerce Department reported that during February, new orders for manufactured goods increased 1.3% from January, just behind the consensus estimate of a 1.4% increase, according to Briefing.com. The Commerce Department also said that factory shipments had increased for nine straight months, and were up 0.1% during February, to $462.6 billion.

The KBW Bank Index ( I:BKX) was down slightly, to close at 49.90

BB&T's shares have now returned 27% year-to-date, following an 11% decline during 2011.

The shares trade for 1.9 times the company's reported Dec. 30 tangible book value of $16.73, and for 11 times the consensus 2013 earnings estimate of $2.89, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $2.51.

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The company announced late Monday that it would redeem $94.75 million in trust preferred securities on May 2, for a total of $96.6 million, including premiums. Of that total, $46 million have an 8.9% coupon, $27.75 million had a 9% coupon, and $20 million had a coupon of 10.07%, so the redemption will save the company $8.6 million in divided payments, on an annual basis.

Following the completion of the Federal Reserve's 2012 bank holding company stress tests, BB&T on March 13 increased its quarterly dividend by four cents to 20 cents, and also said the regulator hadn't objected to "plans to redeem $3.2 billion of trust preferred securities beginning in 2012 without issuing any replacement capital." The shares now have a dividend yield of 2.52%.

Also on March 13, BB&T modified its deal to acquire BankAtlantic Bancorp's (BBX_) thrift subsidiary, agreeing to pay a premium of up to $316 million to acquire 78 South Florida branches, along $3.3 billion in deposits, while also agreeing to "assume BankAtlantic Bancorp's obligations with respect to its outstanding trust preferred securities, with an aggregate principal balance of approximately $285 million."

BB&T scheduled to announce its first-quarter results on April 19. The consensus first-quarter EPS estimate is 56 cents, increasing from EPS of 55 cents in the fourth quarter and 32 cents during the first quarter of 2011.

Interested in more on BB&T? See TheStreet Ratings' report card for this stock.

Morgan Stanley ( MS) was the loser among the biggest banking names, with shares pulling back over 2% to close at $19.37.

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The shares trade for 0.7 times the company's reported Dec. 30 tangible book value of $27.95, and for eight times the consensus 2013 EPS estimate of $2.31. The consensus 2012 EPS estimate is $1.89.

The Federal Reserve on Tuesday announced "a Consent Order against Morgan Stanley to address a pattern of misconduct and negligence in residential mortgage loan servicing and foreclosure processing at its subsidiary, Saxon Mortgage Services, Inc."

Morgan Stanley completed the sale of most of Saxon's assets to Ocwen Financial ( OCN) on Monday.

The Federal Reserve said that Morgan Stanley would be required to "retain an independent consultant to review foreclosure proceedings initiated by Saxon that were pending at any time in 2009 or 2010," for the purpose of providing "remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process."

KBW analyst David Konrad rates Morgan Stanley "Market Perform," although late on Monday he raised his price target for the shares by two dollars to $23.

Konrad expects Morgan Stanley to post a first-quarter a net loss of 32 cents a share, because of debit valuation adjustments, while estimating that operating EPS will come in at 48 cents, ahead of the consensus estimate of 43 cents.

The analyst also called Morgan Stanley "the most challenged stock for the quarter" among the five universal banks covered by KBW, saying the company "may offer less upside in operating earnings this quarter compared to peers, given that we expect its core strengths, investment banking and equity trading to be comparatively weak this quarter for the industry."

Interested in more on Morgan Stanley? See TheStreet Ratings' report card for this stock.

Shares of Bank of America ( BAC) declined 2% on Tuesday, to close at $9.49.

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The shares trade for 0.7 times the company's Dec. 30 tangible book value of $12.95, and for nine times the consensus 2013 EPS estimate of $1.06.

While a common equity raise seems to be off the table for the time being, with Bank of America passing the Federal Reserve's stress tests last month, Deutsche Bank analyst Matt O'Connor said on Friday that the company could eventually decide to raise common equity, in order "to repay the $5b of preferreds from Buffett (which won't count towards Tier 1 capital starting in 2013)."

Warren Buffett's Berkshire Hathaway ( BRK.B) purchased $5 billion in Bank of America preferred shares in August, with a relatively high 6% coupon, with Ban of America able to redeem the shares "at any time at a 5 percent premium." Berkshire's investment also included warrants to purchase 700 million Bank of America common shares "at an exercise price of $7.142857 per share," putting the company in the money by $1.6 billion at Tuesday's close.

KBW analyst Jefferson Harralson rates Bank of America "Market Perform," with a price target of $9.00.

Harralson estimates that Bank of America will report first-quarter EPS of six cents, which is behind the consensus EPS estimate of 12 cents. He estimates the company will earn 65 cents for all of 2012, followed by 2013 EPS of $1.20.

KBW said late on Monday that "the economy is our chief risk as BAC's consumer-laden book is affected by the unemployment rate," and that although the company "has largely addressed its capital needs," regulatory "risks still exist for BAC."

Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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