BB&T: Financial Winner

NEW YORK ( TheStreet) -- BB&T ( BBT) was the winner among the largest U.S. financial names on Friday, with shares rising 2% to close at $28.04.

The Dow Jones Industrial Average and S&P 500 ( SPX.X) each rose slightly and the NASDAQ Composite rose 1%, after President Obama and congressional leaders expressed confidence that they would arrive at a deal to avoid the "fiscal cliff," which could lead to an expiration of tax cuts that were extended by the president in August 2010, as part of an agreement to raise the federal debt ceiling.

The 2010 deal effectively punted the issue of tax increases and spending cuts to the end of 2012, after which the tax cuts -- originally enacted when George W. Bush was president -- could expire, hand-in-hand with a massive cut in federal spending, which many economists fear could push U.S. economy back into recession.

According to a New York Times report, there was a "rare show of bipartisan bonhomie," among leaders of both parties following a meeting with the president, as "the four leaders - two Republicans, John A. Boehner, the House speaker, and Mitch McConnell, the Senate minority leader; and two Democrats, Harry Reid, the Senate majority leader, and Nancy Pelosi, the House minority leader - politely took turns at a microphone outside the West Wing, addressing each other by first names and describing the 70-minute session as constructive."

the KBW Bank Index ( I:BKX) rose 1% to close at 47.15, with all but three of the index components ending the week with gains.

The Securities and Exchange Commission announced that JPMorgan Chase ( JPM) and Credit Suisse ( CS) would pay over $400 million to settle allegations of misleading investors who purchased mortgage-backed securities. The SEC said it planned "to distribute the money to harmed investors."

JPMorgan agreed to pay $296.9 million to settle charges of misstating "information about the delinquency status of mortgage loans that provided collateral for an RMBS offering in which it was the underwriter," and also for "Bear Stearns' failure to disclose its practice of obtaining and keeping cash settlements from mortgage loan originators on problem loans that Bear Stearns had sold into RMBS trusts." JPMorgan acquired Bear Stearns in March 2008, in a deal facilitated by the Federal Reserve Bank of New York.

Later on Friday, a JPMorgan Chase said in a statement that the company was "unaware of any active SEC investigations into JPMorgan's RMBS activities beyond those we are resolving today."

The SEC said that Credit Suisse had "similarly failed to accurately disclose its practice of retaining cash for itself from the settlement of claims against mortgage loan originators for problems with loans that Credit Suisse had sold into RMBS trusts and no longer owned. Credit Suisse also made misstatements in SEC filings about when it would repurchase mortgage loans from trusts if borrowers missed the first payment due."

BankUnited ( BKU) CEO John Kanas said in an interview on the Nightly Business Report Friday that "low interest rates are clearly hurting bank profitability," as banks' net interest margins continue to get squeezed, and that "if banks are unable to create new capital and grow their capital bases," they will be unable to support economic growth.

BB&T of Winston-Salem, N.C., has seen its stock return 14% year-to-date, following a 2% decline during 2011.

The shares trade for 1.7 times tangible book value, according to Thomson Reuters Bank Insight, and for 10 times the consensus 2013 earnings estimate of $2.93 among analysts polled by Thomson Reuters. Based on a quarterly payout of 20 cents, the shares have a dividend yield of 2.85%.

BB&T perfectly illustrates the concerns of Kanas and bank stock investors over narrowing margins in the prolonged low-rate environment. 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% during the third quarter, which was a decline of only one basis point from the previous quarter, but BB&T estimated that the margin would narrow ""to the mid-3.70s% range in 4Q12."

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

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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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