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BB&T (BBT) Q2 Earnings to Gain From Loan Growth, Fee Income

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BB&T Corporation is slated to announce second-quarter 2018 results on Jul 19, before the market opens. Per the Fed’s latest data, commercial and industrial loans recorded solid growth, with the quarter witnessing an overall modest improvement in lending activities.

Notably, BB&T anticipates total loans, on an annualized basis, to grow 1-3% sequentially in the to-be-reported quarter. Driven by loan growth, earning assets are likely to rise too. The Zacks Consensus Estimate for average interest earning assets of $1.96 trillion for the second quarter indicates a slight rise sequentially.

Also, management expects GAAP net interest margin (NIM) to be stable on a sequential basis, while core NIM is expected to increase. Thus, BB&T’s net interest income (NII), one of the primary sources of revenues, will aid earnings growth. The Zacks Consensus Estimate for NII of $1.66 billion for the to-be-reported quarter reflects 1.5% growth from the prior quarter.

Now, let’s check out other factors that are likely to influence BB&T’s performance:

Improving fee income: Given the rise in deposit balances, BB&T will likely register a rise in service charge on deposits. The consensus estimate for service charge on deposits is $179 million, up 8.5% from the prior quarter.

Additionally, while rise in interest rates must have resulted in a fall in refinancing activity, overall mortgage originations seem to be decent in the second quarter. Thus, the Zacks Consensus Estimate for mortgage banking income of $108 million reflects an increase of 9.1% sequentially.

Further, as BB&T remains focused on increasing revenues from insurance operations, insurance income is projected to record a rise in the to-be-reported quarter. The Zacks Consensus Estimate for insurance commission of $475 million shows 8.9% growth on a sequential basis.

Moreover, the consensus estimate for bankcard fees and merchant discounts is $76 million, indicating a rise of 10.1% from the prior year.

However, investment banking and brokerage fees and commissions are likely to hamper fee income growth to some extent. The consensus estimate for the same is $109 million, reflecting a fall of 3.5% sequentially.

Overall, total non-interest income is projected to witness 5.1% growth as the Zacks Consensus Estimate for the to-be-reported quarter is $1.24 billion.

Lower expenses to support: Excluding merger-related and restructuring charges, and other one-time items, BB&T expects expenses to decline 1-3% year over year.

Asset quality is not of much support: BB&T expects loan loss provision to match net charge-offs (NCOs) in addition to providing for loan growth. Further, management expects NCO rates to increase sequentially and be in the range of 35-45 basis points on the assumption of no deterioration in the economy.

The Zacks Consensus Estimate for non-performing assets of $674 million for the to-be-reported quarter shows nearly 1% increase on a sequential basis.

Here is what our quantitative model predicts:

The chances of BB&T beating the Zacks Consensus Estimate in the second quarter are low. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be sure of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for BB&T is -0.01%.

Zacks Rank: BB&T carries a Zacks Rank #3. But we need to have a positive Earnings ESP to be sure of the earnings beat.

BB&T Corporation Price and EPS Surprise

 

BB&T Corporation Price and EPS Surprise | BB&T Corporation Quote

Notably, the Zacks Consensus Estimate for earnings for the to-be-reported quarter is $1.01, which reflects year-over-year improvement of 29.5%. Further, the consensus estimate for sales of $2.89 billion indicates 1.2% growth from the prior-year quarter.

Stocks That Warrant a Look

Here are a few bank stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases.

U.S. Bancorp (USB - Free Report) has an Earnings ESP of +0.23% and carries a Zacks Rank of 3. It is scheduled to report results on Jul 18.

State Street Corporation (STT - Free Report) is slated to release results on Jul 20. The company has an Earnings ESP of +0.28% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SunTrust Banks, Inc. (STI - Free Report) has an Earnings ESP of +0.21% and holds a Zacks Rank of 2 (Buy). It is scheduled to report results on Jul 20.

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