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BB&T (BBT) Q3 Earnings to Rise on Higher Loans & Fee Income

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BB&T Corporation (BBT - Free Report) is slated to announce third-quarter 2018 results on Oct 18, before the market opens. Per the Fed’s latest data, commercial and industrial loans recorded decent growth, with the quarter witnessing an overall modest improvement in lending activities.

Notably, BB&T anticipates total loans, on an annualized basis, to grow 2-4% 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 indicates a slight rise sequentially.

Also, management expects GAAP and core net interest margin to be improve on a sequential basis, supported by rise in interest rates. 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 $1.69 billion for the to-be-reported quarter reflects 2.1% growth from the prior quarter.

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

Fee income to provide support: Given the rise in deposit balances, BB&T islikely to register a rise in service charge on deposits. The consensus estimate for service charge on deposits is $182 million, up 1.7% 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 third quarter. Thus, the Zacks Consensus Estimate for mortgage banking income of $94 million is stable sequentially.

Moreover, bankcard fees and merchant discounts are estimated to be $74 million, indicating a rise of 2.8% from the prior year.

Also, investment banking and brokerage fees and commissions are likely to support fee income growth to some extent. The consensus estimate for the same is $111 million, reflecting a rise of 1.8% sequentially.

However, BB&T is expected to witness a decline in insurance income for the to-be-reported quarter. The Zacks Consensus Estimate for insurance commission of $451 million shows 6.2% fall on a sequential basis.

Overall, total non-interest income is projected to remain relatively stablefrom the prior quarter as the consensus estimate for the to-be-reported quarter is pegged at $1.22 billion.

Expenses to rise: Excluding merger-related and restructuring charges, and other one-time items, BB&T expects expenses to increase 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 $620 million for the to-be-reported quarter shows a marginal decline on a sequential basis.

Here is what our quantitative model predicts:

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

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

Earnings ESP: The Earnings ESP for BB&T is -0.36%.

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 quarter is $1.00, which reflects year-over-year improvement of 28.2%. Further, the consensus estimate for sales of $2.91 billion indicates 3.6% 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.

M&T Bank Corp. (MTB - Free Report) is slated to release results on Oct 18. The company has an Earnings ESP of +0.35% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

People's United Financial, Inc. (PBCT - Free Report) has an Earnings ESP of +0.30% and holds a Zacks Rank of 2 (Buy). It is slated to report quarterly numbers on Oct 18.

Ameris Bancorp (ABCB - Free Report) has an Earnings ESP of +1.11% and has a Zacks Rank #3. It is scheduled to report results on Oct 19.

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