BB&T: Financial Winner

NEW YORK ( TheStreet) -- BB&T ( BBT) was the winner on Thursday among the largest U.S. banks, with shares rising 1.4% to close at $30.63.

The Dow Jones Industrial Average and S&P 500 ( SPX.X) indices ended slightly higher, while the Nasdaq Composite ended with a 1% gain.

The Department of Labor reported initial unemployment claims for the week ended April 20 fell by 16,000 to 339,000, and that the four-week average for jobless claims declined by 4,500 to 357,000. Continuing unemployment insurance claims declined by 93,000 to 3 million. Economists polled by Thomson Reuters had expected new claims to come in at 351,000, with continuing claims of 3.06 million.

The KBW Bank Index ( I:BKX) rose 0.5% to close at 56.73, with all but four of the 24 index components ending the session with gains.

BB&T

Shares of BB&T of Winston-Salem, N.C., have returned 7% this year, following a 19% return during 2012. The shares trade for 1.7 times their reported March 31 tangible book value of $17.56, and for 9.9 times the consensus 2014 earnings estimate of $3.10 a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $2.89.

Based on a quarterly payout of 23 cents, the shares have a dividend yield of 3.00%.

BB&T on Thursday issued $450 million in noncumulative preferred stock, with a coupon of 5.20%. The depositary shares have a par value of $25, and each represent 1/1000th of the company's Series G preferred shares, with a par value of $25,000.

BB&T on April 18 reported first-quarter net income available to common shareholders of $210 million, or 29 cents a share, declining from $531 million, or 71 cents a share, in the fourth quarter, and $431 million, or 61 cents a share, in the first quarter of 2012.

The first-quarter results were lowered by a previously announced $281 million adjustment "recorded in connection with an unresolved disputed tax liability." The adjustment lopped off 40 cents a share in earnings, after tax.

BB&T's tax adjusted first-quarter net interest income was $1.459 million, declining from $1.513 million in the fourth quarter, and $1.472 million in the first quarter of 2012. The sequential decline was "primarily due to covered loan run-off," according to the company. The net interest margin (NIM) -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- narrowed to a tax-adjusted 3.76% in the first quarter, from 3.84% the previous quarter, and 3.93% a year earlier.

The bank saw sequential reductions in personnel expenses, with a slight reduction in headcount, and significant declines in loan related expenses and costs to maintain foreclosed properties.

A highlight for BB&T in the first quarter was a decline in total noninterest expenses to $1.414 billion from $1.488 billion in the fourth quarter, although expenses were up from $1.385 billion in the first quarter of 2012.

FBR analyst Paul Miller rates BB&T "market perform," with a price target of $33, and said in a note to clients on April 19 that "overall, this was a mixed quarter for BB&T as operating revenues declined, NIM continues to contract, and loan growth stalled while expenses fell, and the company reported strong mortgage production."

"We expect the pressure on the core NIM to continue given today's low rate environment; as such, we believe that it will be difficult for BB&T to continue to grow earnings outside of acquisitions, and with a premium valuation relative to peers, shares will likely remain range-bound in the near term until a more apparent catalyst for growth is visible."

Miller estimates the company will earn $2.44 a share for all of 2013, with EPS rising to $3.05 a share in 2014.

BBT Chart BBT data by YCharts

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

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

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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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