Bank stocks showed some strength on Wednesday, after the Federal Reserve said it would continue to make massive monthly purchases of U.S. Treasuries, while also providing benchmarks for its economic policy.
BB&T's third-quarter 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 only one basis point from the previous quarter, but company estimated that the margin would narrow ""to the mid-3.70s% range in 4Q12." O'Connor said that "earlier this month, BBT noted 4Q's NIM was coming in slightly better than expected--at around 3.80%. However, low rates and run off of purchase accounting accretion is likely to put additional pressure on NIM in 2013/beyond." Today's announcement by the Fed won't do anything to ease BB&T's net interest margin pressure, but the continued monetary stimulus could help the company achieve its expected loan growth of 5% to 7% in 2013. O'Connor estimates that BB&T will earn $2.90 a share in 2013. The analyst said that "it's tempting to get more positive" on the shares because of a valuation to forward earnings estimates that is only slightly above peers, with expectations for above average loan growth, "driven by good business/geographic mix and execution." On the other hand, his firm still sees "modest downside to 2013 consensus estimates (of 2-4%) and our 2014 estimate of $3.00 is 6% below consensus (with additional downside if interest rates don't rise)." BBT data by YCharts Interested in more on BB&T? See TheStreet Ratings' report card for this stock.