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BB&T's (BBT) Q4 Earnings & Revenues In Line with Estimates

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A notable rise in the top line drove BB&T Corporation’s fourth-quarter 2016 adjusted earnings of 73 cents per share. This was in line with the Zacks Consensus Estimate.

An improved net interest income and non-interest income as well as stable provisions supported the results. Further, loans and deposits witnessed decent growth. However, higher operating expenses remained a headwind, while credit quality was a mixed bag.

Results excluded certain merger-related and restructuring charges. After considering these, net income available to common shareholders was $592 million or 72 cents per share, compared with $502 million or 64 cents per share in the prior-year quarter.



For 2016, earnings of $2.77 per share lagged the Zacks Consensus Estimate of $2.80. However, it was up 8.2% year over year. Net income available to common shareholders was $2.3 billion, up 16.7% from 2015.

Revenues Improve, Expenses Up

Total revenue (taxable equivalent basis) for the quarter amounted to $2.77 billion, up 8.3% year over year. The figure was in line with the Zacks Consensus Estimate.

For 2016, total revenue (taxable equivalent basis) was up 12.3% from the prior year to $11 billion. The figure was marginally above the Zacks Consensus Estimate of $10.9 billion.

Tax-equivalent net interest income rose 4.2% from the prior-year quarter to $1.61 billion. However, net interest margin fell 3 basis points (bps) from the prior-year quarter to 3.32%.

Non-interest income jumped 14.5% year over year to $1.16 billion. Rise in all fee income components except income from bank-owned life insurance led to the growth.

Non-interest expense of $1.67 billion was up 4.4% from the year-ago quarter. This increase was driven by a rise in all cost components other than loan-related expense, professional services, foreclosed property expense and merger-related and restructuring charges.

BB&T’s adjusted efficiency ratio came in at 59.5%, up from 59.2% in the prior-year quarter. A rise in efficiency ratio indicates a fall in profitability.

As of Dec 31, 2016, average deposits inched up 0.4% from the prior month to $160.1 billion. Further, average loans and leases totaled $142.3 billion, up 0.8% sequentially.

Credit Quality: A Mixed Bag

As of Dec 31, 2016, total non-performing assets (NPAs) rose 14.2% year over year to $813 million. As a percentage of total assets, NPAs came in at 0.37%, up 3 bps year over year. Also, net charge-offs were 0.42% of average loans and leases, up 4 bps year over year.

However, allowance for loan and lease losses came in at 1.04% of total loans and leases held for investment, down 3 bps year over year. Further, provision for credit losses remained stable at $129 million on a year-over-year basis.

Improved Profitability & Capital Ratios

As of Dec 31, 2016, return on average assets was 1.16%, up from 1.03% in the prior-year quarter. Return on average common equity rose to 8.75% from 8.06% as of Dec 31, 2015.

As of Dec 31, 2016, Tier 1 risk-based capital ratio was 12.0%, compared with 11.8% in the year-ago quarter. BB&T's estimated common equity Tier 1 ratio under Basel III (on a fully phased-in basis) was approximately 10.2% as of Dec 31, 2016.

Share Repurchases

During the reported quarter, BB&T repurchased 7.5 million shares through both open-market purchases and an accelerated share repurchase program.

Our Take

We believe that BB&T’s growth trajectory will continue on the back of a robust loan and deposits improvement as well as a series of acquisitions. The inorganic growth will help the company generate operating leverage, going forward.

However, margin compression led by a prevalent low interest rate environment, weak cost-control and heightened regulatory issues will keep profitability under strain in the near term.

BB&T Corp. Price, Consensus and EPS Surprise

 

BB&T Corp. Price, Consensus and EPS Surprise | BB&T Corp. Quote

Currently, BB&T carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Major Regional Banks

U.S. Bancorp’s (USB - Free Report) fourth-quarter 2016 earnings per share of 82 cents came in a penny above the Zacks Consensus Estimate. Better-than-expected results were driven by growth in net interest income and non-interest income. However, a rise in expenses and higher credit costs were on the downside.

Comerica Inc.’s (CMA - Free Report) fourth-quarter 2016 adjusted earnings per share of 99 cents came ahead of the Zacks Consensus Estimate of 95 cents. Better-than-expected results reflect higher revenues and lower expenses. Moreover, fall in provisions was another tailwind. However, lower deposits and rise in non-performing assets remain concerns.

Among other Wall Street giants, SunTrust Banks, Inc. (STI - Free Report) is scheduled to report fourth-quarter 2016 earnings on Jan 20.

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