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BB&T (BBT) Q1 Earnings Beat Estimates as Revenues Rise

Zacks Equity Research

BB&T Corporation ’s BBT first-quarter 2019 adjusted earnings of $1.05 per share surpassed the Zacks Consensus Estimate of $1.03. The figure also represented 8.2% growth compared with the year-ago figure.

Results benefited from growth in revenues. Moreover, loans and deposit balances improved during the quarter. However, higher provision for credit losses and rise in expenses were major headwinds. Shares of the company gained nearly 1.2% in pre-market trading following the release.

Results excluded merger-related and restructuring charges. After considering these, net income available to common shareholders for the reported quarter was $749 million or 97 cents per share, up from $745 million or 94 cents per share in the prior-year quarter.

Revenues Improve, Expenses Increase

Total revenues were $2.90 billion, up 3% year over year. However, the figure marginally missed the Zacks Consensus Estimate of $2.91 billion.

Tax-equivalent net interest income increased 3.9% from the prior-year quarter to $1.72 billion. Net interest margin expanded 7 basis points (bps) from the prior-year quarter to 3.51%.

Non-interest income increased 1.9% year over year to $1.20 billion. This upside stemmed from an increase in insurance income, service charge on deposits, bankcard fees and merchant discounts, and checkcard fees.

Non-interest expenses were $1.77 billion, up 4.9% from the year-ago quarter. This increase was primarily due to rise in net merger-related and restructuring charges, mainly relating to the announced merger of equals with SunTrust Banks STI.

BB&T’s adjusted efficiency ratio was 56.6%, down from 57.3% in the year-ago quarter. A fall in efficiency ratio indicates rise in profitability.

As of Mar 31, 2019, average deposits were nearly $160.05 billion, up 1.4% from the fourth quarter of 2018. Average total loans and leases of $148.79 billion were up marginally from the prior-quarter end.

Credit Quality: A Mixed Bag

As of Mar 31, 2019, total non-performing assets (NPAs) were $584 million, down 12.7% year over year. As a percentage of total assets, NPAs came in at 0.26%, down 4 bps.

Further, net charge-offs were 0.40% of average loans and leases, down 1 bps year over year.

Allowance for loan and lease losses was 1.05% of total loans and leases held for investment, unchanged from the year-earlier quarter. However, provision for credit losses increased 3.3% year over year to $155 million at the end of the reported quarter.

Profitability Ratios Worsen, Capital Ratios Mixed

At the end of the reported quarter, return on average assets was 1.43%, down from 1.45% in the prior-year quarter. Return on average common equity was 11.08%, down from 11.43% as of Mar 31, 2018.

As of Mar 31, 2019, Tier 1 risk-based capital ratio was 11.9%, down from 12% recorded in the year-ago quarter. BB&T's estimated common equity Tier 1 ratio under Basel III was approximately 10.3% as of Mar 31, 2019, up from 10.2% as of Mar 31, 2018.

Our Take

BB&T remains well positioned for revenue growth through strategic acquisitions. Its announced merger deal with SunTrust is expected to be accretive to earnings. It is likely to result in substantial cost savings. Furthermore, anticipated growth in loans along with higher rates is likely to propel its organic growth in the quarters ahead.

Nevertheless, the company’s significant exposure to risky loans 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

Driven by prudent expense management, Wells Fargo’s WFC first-quarter 2019 earnings of $1.20 per share surpassed the Zacks Consensus Estimate of $1.08. Higher net interest income and fall in expenses aided the company’s performance.

PNC Financial PNC reported positive earnings surprise of 0.8% in first-quarter 2019. Earnings per share of $2.61 surpassed the Zacks Consensus Estimate of $2.59. Higher revenues, driven by easing margin pressure and escalating fee income, aided results.

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The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report

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SunTrust Banks, Inc. (STI) : Free Stock Analysis Report

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