Mixed First QuarterNot much was expected from BB&T, which was a good thing because there was little to get excited about. The bank had a tough time with lending activity, which again was lethargic - albeit, consistent with the overall sector. Despite the weak lending environment, BB&T s managed to report a 4% increase in operating revenue. Net interest income fell 1% year over year and 4% from the prior quarter. Ordinarily that would be a concern, but BB&T's results were actually better than those of JPMorgan, whose net interest income fell 6% year-over-year and 2% from the prior quarter. Other than U.S. Bancorp ( USB), which saw a 1% increase, there weren't many banks that saw an uptick in net interest income. So I'm willing to excuse BB&T here. But that needs to improve to support a higher valuation.
BB&T posted better-than-expected results in fee income, which rose 11% year over year. That is despite weak results in mortgage banking. Fee income is an area where BB&T is outperforming the likes of Bank of America ( BAC) and U.S. Bancorp. These numbers weren't breathtaking. But they weren't horrible, either. The good news is that management expects better performances in the future and seemed to be optimistic about the rest of the year.
The stock appears to be fairly valued with a price-to-earnings ratio of 13.68, based on Friday's close of $32.55. Can it go higher? I think it can. But each uptick will be met with resistance. While I do believe that potential operational improvements are not yet priced into the stock, I don't see any justification to rush to take a position here yet. At least not until management can prove that it can get lending going again. At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense