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BB&T Corporation’s third-quarter 2018 adjusted earnings of $1.03 per share surpassed the Zacks Consensus Estimate of $1.00. Also, the figure represents growth of 32.1% from the year-ago quarter.
Results reflected a rise in revenues and lower operating expenses. Also, the balance sheet position remained strong during the quarter under review. However, higher provisions hurt results to some extent.
Results excluded merger-related and restructuring charges. After considering these, net income available to common shareholders for the reported quarter was $789 million or $1.01 per share, up from $597 million or 74 cents per share in the prior-year quarter.
Revenues Grow, Expenses Decline
Total revenues were $2.93 billion, up 4% year over year. Also, the figure marginally surpassed the Zacks Consensus Estimate of $2.91 billion.
Tax-equivalent net interest income increased 1.5% from the prior-year quarter to $1.71 billion. Net interest margin fell 1 basis point (bp) from the prior-year quarter to 3.47%.
Non-interest income increased 6.3% year over year to $1.24 billion. The rise was due to an increase in almost all components of fee revenues except mortgage banking income and income from bank-owned life insurance.
Non-interest expenses of $1.74 billion fell marginally from the year-ago quarter. The decrease was due to a fall in almost all components of expenses except personnel expenses, software expenses and professional services costs.
BB&T’s adjusted efficiency ratio was 57.3%, down from 58.3% in the prior-year quarter. A fall in efficiency ratio indicates rise in profitability.
As of Sep 30, 2018, total deposits were nearly $154.56 billion, down 3.1% from the prior quarter. Total loans and leases of $147.71 billion were down marginally from the prior quarter end.
Credit Quality: A Mixed Bag
As of Sep 30, 2018, total non-performing assets (NPAs) were $601 million, down 11.6% year over year. As a percentage of total assets, NPAs came in at 0.27%, down 4 bps.
Further, net charge-offs were 0.35% of average loans and leases, unchanged year over year.
However, the allowance for loan and lease losses was 1.05% of total loans and leases held for investment, up 1 bp from the prior-year quarter. Also, provision for credit losses was $135 million at the end of the reported quarter, up 7.1% on a year-over-year basis.
Profitability Ratios Improve, Capital Ratios Remain Stable
At the end of the reported quarter, return on average assets was 1.49%, up from 1.16% in the prior-year quarter. Return on average common equity improved to 11.69% from 8.82% as of Sep 30, 2017.
As of Sep 30, 2018, Tier 1 risk-based capital ratio was 11.9%, stable year over year. BB&T's estimated common equity Tier 1 ratio under Basel III was approximately 10.2% as of Sep 30, 2018, in line with Sep 30, 2017.
Share Repurchases
During the reported quarter, BB&T repurchased $200 million worth of shares through open-market purchases.
Our Take
BB&T remains well positioned for revenue growth through strategic acquisitions. Also, expected growth in loans, along with an improving rate scenario, is likely to propel its organic growth trajectory in the quarters ahead. However, such acquisitions are expected to keep costs toward the higher end, which might hurt profitability to some extent. Also, the company’s significant exposure toward risky loans remains a concern.
BB&T Corporation Price, Consensus and EPS Surprise
Comerica’s (CMA - Free Report) third-quarter 2018 adjusted earnings per share of $1.86 surpassed the Zacks Consensus Estimate of $1.76. Higher revenues and improved credit metrics were recorded. However, lower deposits and loans remained an undermining factor. Also, higher expenses were a headwind.
The PNC Financial Services Group (PNC - Free Report) delivered a positive earnings surprise of 3.3% in third-quarter 2018. Earnings per share of $2.82 beat the Zacks Consensus Estimate of $2.73. Continued easing of pressure on net interest margin led to higher net interest income during the reported quarter. Though mortgage banking revenues declined, overall non-interest income witnessed year-over-year growth.
Driven by expense management, Citigroup (C - Free Report) delivered a positive earnings surprise of 4.8% in third-quarter 2018. Earnings from continuing operations per share of $1.74 for the quarter handily outpaced the Zacks Consensus Estimate of $1.66. Though investment banking revenues disappointed as strong advisory business was more than offset by lower underwriting fees on low client activity, reduced expenses and credit costs acted as tailwinds.
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BB&T (BBT) Q3 Earnings & Revenues Beat, Provisions Increase
BB&T Corporation’s third-quarter 2018 adjusted earnings of $1.03 per share surpassed the Zacks Consensus Estimate of $1.00. Also, the figure represents growth of 32.1% from the year-ago quarter.
Results reflected a rise in revenues and lower operating expenses. Also, the balance sheet position remained strong during the quarter under review. However, higher provisions hurt results to some extent.
Results excluded merger-related and restructuring charges. After considering these, net income available to common shareholders for the reported quarter was $789 million or $1.01 per share, up from $597 million or 74 cents per share in the prior-year quarter.
Revenues Grow, Expenses Decline
Total revenues were $2.93 billion, up 4% year over year. Also, the figure marginally surpassed the Zacks Consensus Estimate of $2.91 billion.
Tax-equivalent net interest income increased 1.5% from the prior-year quarter to $1.71 billion. Net interest margin fell 1 basis point (bp) from the prior-year quarter to 3.47%.
Non-interest income increased 6.3% year over year to $1.24 billion. The rise was due to an increase in almost all components of fee revenues except mortgage banking income and income from bank-owned life insurance.
Non-interest expenses of $1.74 billion fell marginally from the year-ago quarter. The decrease was due to a fall in almost all components of expenses except personnel expenses, software expenses and professional services costs.
BB&T’s adjusted efficiency ratio was 57.3%, down from 58.3% in the prior-year quarter. A fall in efficiency ratio indicates rise in profitability.
As of Sep 30, 2018, total deposits were nearly $154.56 billion, down 3.1% from the prior quarter. Total loans and leases of $147.71 billion were down marginally from the prior quarter end.
Credit Quality: A Mixed Bag
As of Sep 30, 2018, total non-performing assets (NPAs) were $601 million, down 11.6% year over year. As a percentage of total assets, NPAs came in at 0.27%, down 4 bps.
Further, net charge-offs were 0.35% of average loans and leases, unchanged year over year.
However, the allowance for loan and lease losses was 1.05% of total loans and leases held for investment, up 1 bp from the prior-year quarter. Also, provision for credit losses was $135 million at the end of the reported quarter, up 7.1% on a year-over-year basis.
Profitability Ratios Improve, Capital Ratios Remain Stable
At the end of the reported quarter, return on average assets was 1.49%, up from 1.16% in the prior-year quarter. Return on average common equity improved to 11.69% from 8.82% as of Sep 30, 2017.
As of Sep 30, 2018, Tier 1 risk-based capital ratio was 11.9%, stable year over year. BB&T's estimated common equity Tier 1 ratio under Basel III was approximately 10.2% as of Sep 30, 2018, in line with Sep 30, 2017.
Share Repurchases
During the reported quarter, BB&T repurchased $200 million worth of shares through open-market purchases.
Our Take
BB&T remains well positioned for revenue growth through strategic acquisitions. Also, expected growth in loans, along with an improving rate scenario, is likely to propel its organic growth trajectory in the quarters ahead. However, such acquisitions are expected to keep costs toward the higher end, which might hurt profitability to some extent. Also, the company’s significant exposure toward risky loans remains a concern.
BB&T Corporation Price, Consensus and EPS Surprise
BB&T Corporation Price, Consensus and EPS Surprise | BB&T Corporation Quote
BB&T currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Comerica’s (CMA - Free Report) third-quarter 2018 adjusted earnings per share of $1.86 surpassed the Zacks Consensus Estimate of $1.76. Higher revenues and improved credit metrics were recorded. However, lower deposits and loans remained an undermining factor. Also, higher expenses were a headwind.
The PNC Financial Services Group (PNC - Free Report) delivered a positive earnings surprise of 3.3% in third-quarter 2018. Earnings per share of $2.82 beat the Zacks Consensus Estimate of $2.73. Continued easing of pressure on net interest margin led to higher net interest income during the reported quarter. Though mortgage banking revenues declined, overall non-interest income witnessed year-over-year growth.
Driven by expense management, Citigroup (C - Free Report) delivered a positive earnings surprise of 4.8% in third-quarter 2018. Earnings from continuing operations per share of $1.74 for the quarter handily outpaced the Zacks Consensus Estimate of $1.66. Though investment banking revenues disappointed as strong advisory business was more than offset by lower underwriting fees on low client activity, reduced expenses and credit costs acted as tailwinds.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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