Back to top

Image: Bigstock

BB&T's (BBT) Q4 Earnings Beat on Higher Revenues, Costs Down

Read MoreHide Full Article

BB&T Corporation’s fourth-quarter 2018 adjusted earnings of $1.05 per share surpassed the Zacks Consensus Estimate of $1.04. The figure also represents 25% growth from the year-ago tally.

Results reflect increased revenues and lower costs. Loans and deposit balances improved during the quarter. However, higher provisions curbed the company’s bottom-line growth.

Results excluded merger-related and restructuring charges. After considering these, net income available to common shareholders for the reported quarter was $754 million or 97 cents per share, up from $614 million or 77 cents per share in the prior-year quarter.

Adjusted earnings per share for 2018 came in at $4.05, up 30% from the prior year. The figure also outpaced the Zacks Consensus Estimate of $3.99. Net income for the year was $306.3 million or $3.91 per share compared with $222 million or $2.74 per share recorded in 2017.

Revenues Grow, Expenses Decline

Total revenues came in at $2.94 billion, up 2.5% year over year. However, the figure marginally lagged the Zacks Consensus Estimate of $2.95 billion.

Total revenues for 2018 were $11.55 billion, up 2.1% year over year. However, the figure marginally lagged the Zacks Consensus Estimate of $11.57 billion.

Tax-equivalent net interest income increased 2.8% from the prior-year quarter to $1.73 billion. Net interest margin expanded 6 basis points (bps) from the prior-year quarter to 3.49%.

Non-interest income inched up nearly 1% year over year to $1.24 billion. The upside stemmed from increase in almost all components of fee revenues except mortgage banking income, income from bank-owned life insurance and other income.

Non-interest expenses came in at $1.78 billion, down 4% 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, merger-related and restructuring charges, and net professional services.

BB&T’s adjusted efficiency ratio was 56.5%, down from 57.2% in the year-ago quarter. A fall in efficiency ratio indicates rise in profitability.

As of Dec 31, 2018, average deposits were nearly $157.8 billion, up 1.4% from the third quarter. Total loans and leases of $147.5 billion were up 3.6% from the prior-quarter end.

Credit Quality: A Mixed Bag

As of Dec 31, 2018, total non-performing assets (NPAs) were $585 million, down 6.7% year over year. As a percentage of total assets, NPAs came in at 0.26%, down 2 bps.

Further, net charge-offs were 0.36% of average loans and leases, down 2 bps year over year.

However, the allowance for loan and lease losses was 1.05% of total loans and leases held for investment, up 1 basis point from the year-earlier quarter. Additionally, provision for credit losses increased 7.4% year over year to $146 million at the end of the quarter.

Profitability Ratios Improve, Capital Ratios Decline

At the end of the quarter, return on average assets was 1.43%, up from 1.19% in the prior-year quarter. Return on average common equity improved to 11.14% from 9.10% as of Dec 31, 2017.

As of Dec 31, 2018, Tier 1 risk-based capital ratio was 11.8%, down from 12% recorded in the year-ago quarter. BB&T's estimated common equity Tier 1 ratio under Basel III was approximately 10.2% as of Dec 31, 2018, in line with Dec 31, 2017.

Share Repurchases

During the quarter under review, BB&T repurchased shares worth $375 million through open-market purchases.

Our Take

BB&T remains well positioned for revenue growth through strategic acquisitions. Furthermore, anticipated growth in loans, along with an improving rate scenario, is likely to propel its organic growth in the quarters ahead.

Nevertheless, such acquisitions are likely to escalate costs, which, in turn, may dampen its profitability. The company’s significant exposure to risky loans also 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) fourth-quarter 2018 earnings per share of $1.88 surpassed the Zacks Consensus Estimate of $1.86. Also, the results compared favorably with the year-ago adjusted figure of $1.24.

PNC Financial (PNC - Free Report) reported fourth-quarter 2018 earnings per share of $2.75, which lagged the Zacks Consensus Estimate of $2.77. However, the bottom line reflected a 20.1% jump from the prior-year quarter, on an adjusted basis.

Citigroup (C - Free Report) delivered a positive earnings surprise of 3.9% in fourth-quarter 2018, backed by expense control and lower cost of credit. Adjusted net income per share of $1.61 for the quarter handily outpaced the Zacks Consensus Estimate of $1.55. Also, adjusted earnings climbed 26% year over year.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Published in