BB&T: Financial Winner

NEW YORK ( TheStreet) -- BB&T was the winner among the largest U.S. banks on Tuesday, with shares rising 2% to close at $30.90.

The broad indices ended higher as investors looked forward to a slew of first-quarter earnings reports, although results for Alcoa late on Monday were mixed. The aluminum producer beat earnings expectations, but disappointed on revenue.

Investors were pleased that China's National Bureau of Statistics said Tuesday that annual consumer inflation in the country eased in March, as food prices retreated from nine-month highs and producer price deflation increased, giving hope that China can afford an easy monetary policy to stimulate growth.

The KBW Bank Index ( I:BKX) rose 1% to close at 56.10, with all but three of the 24 index components showing gains for the session.

First-quarter earnings season for the big banks will kick off Friday, with JPMorgan Chase ( JPM) and Wells Fargo ( JPM) scheduled to report before the market opens.

The consensus among analysts polled by Thomson Reuters is for JPMorgan Chase to report first-quarter EPS of $1.40 a share, increasing from $1.39 in the fourth quarter and $1.19 in the first quarter of 2012.

Analysts expect Wells Fargo to report first-quarter earnings of 88 cents a share, declining from 92 cents in the fourth quarter, but increasing from 75 cents in the first quarter of 2012.

Wells Fargo's mortgage loan origination and sale revenue is expected to suffer a major decline this year, although the drop may be largely offset by increases in loan servicing revenue and accounting adjustments.


Shares of BB&T of Winston-Salem, N.C., have returned 8% this year, following a 19% gain during 2012. The shares trade for 1.9 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.9 times the consensus 2014 EPS estimate of $3.11. The 2013 EPS estimate is $2.87.

BB&T in March had its 2013 capital plan rejected by the Federal Reserve, based on a "qualitative assessment." Guggenheim Securities analyst Marty Mosby said in an interview on March 15 that "we believe BBT was penalized for requesting a dividend payout in excess of 30% of earnings. The Fed had warned banks that any requests that exceeded 30% of earnings on dividends or 100% of earnings in total capital distributions would receive increased scrutiny and they backed up this warning by making BBT this year's example."

"This was a surprise, since BBT passed the quantitative part of CCAR with a 7.8% post-stress loss capital ratio and had sailed through previous reviews," Mosby said, adding that "BBT is not approved to execute any incremental capital distributions, including merger & acquisition requests," until its revised capital plan is approved. BB&T will submit the revised plan by the end of the third quarter.

BB&T has been one of the stronger regional banks through the credit crisis and its aftermath, with returns on average tangible common equity ranging from 8.22% to 20.45% over the past five years, according to Thomson Reuters Bank Insight.

The company will release first-quarter results April 18, with analysts expecting earnings of 62 cents a share, declining from 71 cents in the fourth quarter, but increasing from 59 cents in the first quarter of 2012.

JPMorgan Chase analyst Vivek Juneja has a "neutral" rating on BB&T, with a price target of $33.50, and said in a report on Tuesday that the bank is "growing revenues solidly, led by faster loan and deposit growth and increases in some fee-based businesses such as insurance brokerage."

"BBT is doing a good job at growing higher-yielding specialized loans and has also benefited recently from sharp reduction in credit costs," Juneja wrote.

Juneja has stuck with his "neutral" rating for BB&T, with the shares "trading at a premium to peers, which reflects its appropriate valuation."

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

-- 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 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.