BB&T's Margin Squeeze
Shares of BB&T of Winston-Salem, N.C., rose over 1 percent to close at $28.85. The shares have now returned 18 percent year-to-date, following a 2 percent decline during 2011.
The shares trade for 1.8 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.9 times the consensus 2013 EPS estimate of $2.93. The consensus 2014 EPS estimate is $3.18.
Based on a quarterly payout of 20 cents, the shares have a dividend yield of 2.77 percent.
After his firm hosted a series of investor meetings with BB&T CFO Daryl Bible, Deutsche Bank analyst Matt O'Connor on Wednesday reiterated his "neutral" rating for the company's shares, with a price target of $34, saying that the stock was "off 15 percent (underperforming the group by 700 basis points) since the recent Oct. 5 peak," through Tuesday's close, reflecting "estimate reductions (we've cut our 2013 by 10 percent) due to likely lower than previously expected net interest income (lower rates, slower loan growth, and run off of purchase accounting accretion)."
BB&T's third-quarter net interest margin (NIM) — the difference between the average yield on loans and investments and the average cost for deposits and borrowings — was 3.94 percent, declining only one basis point from the previous quarter, but company estimated that the margin would narrow "to the mid-3.70s-percent range in 4Q12."
O'Connor said that "earlier this month, BBT noted 4Q's NIM was coming in slightly better than expected — at around 3.80 percent. However, low rates and run off of purchase accounting accretion is likely to put additional pressure on NIM in 2013/beyond."
Today's announcement by the Fed won't do anything to ease BB&T's net interest margin pressure, but the continued monetary stimulus could help the company achieve its expected loan growth of 5 percent to 7 percent in 2013.
O'Connor estimates that BB&T will earn $2.90 a share in 2013. The analyst said that "it's tempting to get more positive" on the shares because of a valuation to forward earnings estimates that is only slightly above peers, with expectations for above average loan growth, "driven by good business/geographic mix and execution." On the other hand, his firm still sees "modest downside to 2013 consensus estimates (of 2 percent to 4 percent) and our 2014 [estimate] of $3 is 6 percent below consensus (with [additional] downside if interest rates don't rise)."
—By TheStreet.com's Philip van Doorn
Additional News: Citigroup Axes 11,000 Jobs, $1.1 Billion in Costs
Additional Views: Banks Heading Into Dividend Sweet Spot: KBW
CNBC Data Pages:
TheStreet does not permit any employees on its editorial staff to individually hold positions in individual stocks, though they are permitted to own stock in TheStreet.