3 Reasons BB&T Is a Better Buy After Earnings
Jan 17th 2013 2:24PM
Updated May 14th 2013 4:50PM
BBT's fourth-quarter earnings of $0.71 per share were good enough to push the stock up slightly in early trading this morning. But that earnings tally is in the past. What's really important about BBT's release is what it says about the future. And I think savvy investors are looking at three reasons why BB&T is now an even better buy than it was before.
1. Record income for the year
BB&T posted record net income available to shareholders, topping out at $1.9 billion in 2012. And while it is true that these earnings are in the past, income for the bank seems to be heading in the right direction. In the past year alone, net income increased from $391 million in the fourth quarter of 2011 to $506 million in the fourth quarter of 2012, an increase of 29%.
What might be most amazing about this increase is that it happened with net interest margin declining 18 basis points over the same period. As we have seen in other banks this quarter, BB&T found income elsewhere in its banking business, primarily driven by an increase in noninterest income. Noninterest income increased 23% because of strong mortgage, insurance, and investment banking and brokerage results. The bank also saw an 8% decrease in its noninterest expenses, making it easier to see where the additional money came from.
2. Outstanding asset quality
When it comes to asset quality, BB&T is one of the best banks out there. As a percentage of total assets, nonperforming assets, excluding covered assets, decreased from 0.97% last quarter to 0.85%. Nonperforming assets have declined 37% since the end of 2011, and are at their lowest levels since the second quarter of 2008. While there doesn't seem to be a lot more room to improve this measure, BB&T has proven over the past year that it can, so the future could be even brighter as the bank continues to strengthen its balance sheet.
3. Continuing focus on community banking
One reason BB&T has so few nonperforming loans is its focus on community banking. Instead of offering mortgages to anyone who wants one, BB&T focuses its lending only in the communities it serves, which allows the bank to keep track of regional economic data and other factors while making loan decisions. Because of this focus, the community banking segment generated $220 million in revenue during the quarter, accounting for 40% of its total revenue, truly driving the performance of the bank going forward.
CEO Kelly King lauded the employees of the bank for winning "industry-leading recognition for serving our clients," and for assuming a "leadership role in advocating the importance of financial services to produce a healthier economy." BB&T is proud to say that it has always paid a dividend and never refused a withdrawal, giving the bank some goodwill going forward.
With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal, or if finance stocks are a screaming buy today. The answer depends on the company, so to help you figure out whether BB&T should be on your radar, I invite you to read our premium research report on the company today. We'll fill you in on both reasons to buy and reasons to sell BB&T, and what areas that BB&T investors need to watch going forward. Click here now for instant access!
The article 3 Reasons BB&T Is a Better Buy After Earnings originally appeared on Fool.com.Robert Eberhard has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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