On Feb 18, 2015, we issued an updated research report on BB&T Corporation (BBT). Consistent growth in loans and deposits continue to be a strength, while weak expense management remains a concern.
BB&T, which is one of the largest financial services holding companies in the U.S., continues to tread the expansion path through acquisitions as well as organic growth. The North Carolina-based company is looking forward to completing the acquisition of 41 Citibank branches, Susquehanna Bancshares, Inc. as well as Bank of Kentucky Financial Corp. this year, which are expected to boost its earnings.
Though BB&T reported a 4.1% revenue decline on a year-over-year basis for 2014, impressive improvement in average loans and deposits along with the expected completion of three acquisitions will likely prove to be accretive to earnings. Moreover, management expects average loans to grow 2–4% in the first quarter of 2015, which will support top-line growth.
Further, BB&T returns capital to shareholders through steady dividends. The company successfully continues to attract investors’ attention by frequent dividend hikes and is expected to further increase dividends with a target to achieve total payout of 60% in 2015 CCAR capital plan.
On the flip side, mounting expenses continue to keep BB&T’s profitability under pressure. The 1.4% rise in expenses in 2014 compared with the corresponding year-ago period emphasizes on the need for effective cost control efforts. Moreover, the expenses are anticipated to remain elevated this year on the back of expected pension costs of $72 million.
Though BB&T has the potential to capitalize on available opportunities on the back of a healthy capital position, the prevalent low interest rate environment along with amplified regulatory issues keep us apprehensive.
This can also be observed in the Zacks Consensus Estimate for 2015 and 2016, which declined by a penny each over the last 30 days to $2.97 and $3.36, respectively.
Currently, BB&T carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked finance stocks include Meridian Bancorp, Inc. (EBSB), Woori Bank Co., Ltd. (WF) and Provident Financial Holdings, Inc. (PROV). All these stocks sport a Zacks Rank #1 (Strong Buy).
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