BB&T Corp (BBT) Q3 Earnings As Expected, Revenues Rise Y/Y

BB&T Corporation’s (NYSE:BBT) third-quarter 2017 adjusted earnings of 78 cents per share came in line with the Zacks Consensus Estimate. Results recorded 2.6% bottom-line improvement from the year-ago quarter.

Results reflected an increase in revenues and higher expenses. The quarter witnessed a decrease in loans and leases and deposits. Additionally, provision for credit losses decreased, which was a tailwind.

Results excluded merger-related and restructuring charges. After considering these, net income available to common shareholders was $597 million or 74 cents per share compared with $599 million or 73 cents per share in the prior-year quarter.

Revenues Elevate, Loans & Deposits Fall, Costs Flare Up

Total revenues (taxable-equivalent) for the quarter came in at $2.85 billion, up 1.4% year over year. The figure also outpaced the Zacks Consensus Estimate of $2.84 billion.

Tax-equivalent net interest income rose 2.4% from the prior-year quarter to $1.69 billion. Also, net interest margin expanded 9 basis points (bps) from the prior-year quarter to 3.48%.

Non-interest income inched up nearly 1% year over year to $1.17 billion. Rise in service charges on deposits, bankcard fees and merchant discounts, operating lease income and other income led to the growth. These increases were mostly offset by lower mortgage banking income and income from bank-owned life insurance. Also, the quarter witnessed nil net FDIC loss share income.

Non-interest expense of $1.75 billion increased 2.3% from the year-ago quarter. The increase was primarily due to a rise in personnel expense, net merger-related and restructuring charges and other expense.

BB&T’s adjusted efficiency ratio came in at 58.3%, down from 58.7% in the prior-year quarter. A fall in efficiency ratio indicates a rise in profitability.

As of Sep 30, 2017, total deposits were nearly $156.1 billion, down from $159.9 billion in the prior-year quarter. However, total loans and leases were $144 billion, down around 1% year over year.

Credit Quality Improved

As of Sep 30, 2017, total non-performing assets (NPAs) were $680 million, down 19.3% year over year. As a percentage of total assets, NPAs came in at 0.31%, down 7 bps year over year. Also, during the quarter, allowance for loan and lease losses came in at 1.04% of total loans and leases held for investment, contracting 2 bps year over year.

Furthermore, net charge-offs were 0.35% of average loans and leases, down 2 bps year over year. Provision for credit losses was $126 million at the end of the quarter, reflecting a 14.9% decrease year over year.

Strong Profitability & Capital Ratios

At the end of the reported quarter, return on average assets was 1.16%, up from 1.15% in the prior-year quarter. Return on average common equity decreased to 8.82% from 8.87% as of Sep 30, 2016.

As of Sep 30, 2017, Tier 1 risk-based capital ratio was 11.8%, in line with the year-ago quarter. BB&T's estimated common equity Tier 1 ratio under Basel III (on a fully phased-in basis) was approximately 10.1% as of Sep 30, 2017, in line with the year-ago quarter.

Share Repurchases

During the reported quarter, BB&T repurchased $920 million worth shares through open-market purchases.

Our Take

We anticipate BB&T to remain well positioned for revenue growth through strategic acquisitions. These efforts will also support bottom-line growth in the near term. Moreover, expected growth in loans, along with an improving rate scenario, will likely 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. Also, the company’s exposure to risky loans continues to be a near-term concern.

BB&T Corporation Price, Consensus and EPS Surprise

BB&T Corporation Price, Consensus and EPS Surprise | BB&T Corporation Quote

Currently, BB&T carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Despite weak fixed income market revenues, Citigroup Inc. (NYSE:C) delivered a positive earnings surprise of 7.6% in the third quarter on prudent expense management. Earnings per share of $1.42 for the quarter easily surpassed the Zacks Consensus Estimate of $1.32. Also, earnings compared favorably with the year-ago figure of $1.24 per share. Notably, results included after-tax gain related to the sale of a fixed income analytics business.

Amid an expected trading slump, rising rates and loan growth drove JPMorgan Chase & Co.’s (NYSE:JPM) third-quarter 2017 earnings of $1.76 per share, easily surpassing the Zacks Consensus Estimate of $1.67. Also, the figure reflects an 11% rise from the year-ago period. Notably, the results included a legal benefit of $107 million. Solid loan growth (driven mainly by improved credit card loans) and elevated interest rates supported net interest income. In addition, rise in advisory fees supported the top-line growth. A slight fall in operating expenses acted as a tailwind.

Wells Fargo & Company’s (NYSE:WFC) third-quarter 2017 adjusted earnings of $1.04 per share were in line with the Zacks Consensus Estimate. Including previously disclosed mortgage-related discrete litigation accrual of 20 cents per share, earnings came in at 84 cents per share, comparing unfavorably with the prior-year quarter’s earnings of $1.03 per share.

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