BB&T: Margin Guidance Loser

NEW YORK ( TheStreet) -- BB&T Corp. ( BBT) was the loser among the largest U.S. financial companies on Thursday, with shares sliding 7% to close at $29.98.

The Dow Jones Industrial Average and the S&P 500 ( SPX.X) saw slight declines, while the NASDAQ Composite index was down over 1%, after Google ( GOOG) seemed to mistime its earnings release for the third-quarter.

With the press release appearing unfinished, with a note at the top reading "PENDING LARRY QUOTE," for CEO Lawrence Page, Google reported third-quarter earnings of $3.01 billion, or $9.03 a share (on a non-GAAP basis, excluding stock-based compensation expenses and merger expenses from the Motorola acquisition), missing the consensus estimate of a profit of $10.65, among analysts polled by Thomson Reuters.

The Internet search giant's non-GAAP EPS declined from $3.35 billion, or $10.12 a share, in the second quarter, and $3.18 billion, or $9.72 a share, during the third quarter of 2011.

Google's shares declined 9% to $687.30, when trading was halted. PiperJaffray analyst Gene Munster -- who rates Google "Overweight," with a price target of $834 -- said that "the miss appears to be on the core search side as Google sites revenue was up 2.5% q/q after being up an average of 8% q/q the past two years," and that "in the short term (through December), we now believe shares may be more range-bound between $650 and $700 while investors wait to see improvement in Q4."

Please see TheStreet's Live Blog for coverage of Google's earnings conference call, scheduled for 4:30PM EST.

Getting back to the financials, the KBW Bank Index ( I:BKX) was down 0.5% to close at 50.79, with 13 of the 24 index components showing gains.

BB&T


BB&T of Winston-Salem, N.C., reported third-quarter net income available to common shareholders of $469 million, or 66 cents a share, declining from $510 million, or 72 cents, in the second quarter, and $366 million, or 52 cents a share, during the third quarter of 2011.

The company said that the third-quarter results were reduced by merger-related charges associated with the acquisition of BankAtlantic totaling $43 million pretax, or $0.04 per diluted common share."

Following the trend for several of the large regional banks as the refinancing wave continues, BB&T's third-quarter mortgage revenue increased to $211 million, from $182 million the previous quarter, and $123 million a year earlier. However, the sequential increase in mortgage income was more than offset by a decline in insurance income, to $333 million, from $393 million in the second quarter. During the third quarter of 2011, insurance income totaled $241 million.

BB&T's third-quarter net interest income was a tax-adjusted $1.52 billion, increasing slightly from the previous quarter, and from $$1.45 billion a year earlier. The company's net interest margin net interest margin (NIM) -- the difference between the average yield on loans and investments and the average cost for deposits and borrowings -- was 3.94%, declining from from 3.95% in the second quarter, and 4.09% during the third quarter of 2011.

Most banks are facing pressure on their net interest margins, with the Federal Reserve keeping its target federal funds rate in a range of zero to 0.25% since the end of 2008, while the central bank in September significantly increased its purchases of long-term mortgage-backed securities, in an effort to keep long-term rates at historically low levels.

While BB&T's third-quarter margin held up nicely, what probably caused the most alarm for investors was the company's guidance, that the margin would fall "to the mid-70s% range in 4Q12," because of lower rates being earned on new assets, higher long-term debit cost, and the runoff of assets covered by Federal Deposit Insurance Corp. loss-share agreements.

BB&T's shares have now returned 22% year-to-date, following a 2% decline during 2011.

The shares trade for 1.8 times their reported Sept. 30 tangible book value of $17.02, and for 10 times the consensus 2013 EPS estimate of $3.05. Based on a quarterly payout of 20 cents, the shares have a dividend yield of 2.67%.

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

>Contact by Email.

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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