) second-quarter 2014 adjusted earnings per share of 71 cents
lagged the Zacks Consensus Estimate of 75 cents. Further, this was
below 77 cents earned in the year-ago quarter. The current quarter
results included mortgage and tax-related reserve adjustments with
an after-tax impact of $88 million or 12 cents per share, and
merger-related and restructuring charges of $8 million or 1 cent
Lower-than-expected results were mainly due to a decline in
revenues as well as rise in non-interest expenses. Nevertheless,
improvement in credit quality and capital ratios were the
tailwinds. Profitability ratios however deteriorated.
BB&T's net income available to common shareholders was $425
million, down from $547 million in the prior-year quarter.
Performance in Detail
Total revenue came in at $2.31 billion, down 7.5% year over year.
However, it was in line with the Zacks Consensus Estimate.
Tax-equivalent net interest income decreased 5.1% year over year to
$1.38 billion. The decline was due to a fall in interest income.
Moreover, net interest margin (NIM) fell 27 basis points (bps) year
over year to 3.43%. The pressure on NIM persists primarily due to
lower yield on total loan portfolio, partially offset by a rise in
average earnings assets.
Non-interest income declined 10.8% year over year to $933 million.
The decrease was mainly due to a fall in both mortgage-banking and
other income, partially offset by rise in Bankcard fees and
Non-interest expense rose 3.7% year over year to $1.55 billion. The
rise was primarily prompted by an increase in loan-related expenses
and outside IT services, which were however, partly offset by a
decline in personal expenses, professional services and net
merger-related and restructuring charges.
BB&T's efficiency ratio in the reported quarter was 59.8%, up
from 57.6% in the prior-year quarter. An increase in efficiency
ratio indicates decline in profitability.
Average deposits inched down 0.3% year over year to $129.6 billion.
However, average loans and leases held for investment were $117.1
billion, up 2.5% year over year.
BB&T's credit quality continued to show improvements. As of Jun
30, 2014, total non-performing assets (NPAs) declined 28.2% year
over year to $916 million. As a percentage of total assets, NPAs
came in at 0.49%, down 22 bps year over year.
Similarly, excluding covered loans and government guaranteed loans,
net charge-offs were 0.40% of average loans and leases, down 35 bps
from the year-ago quarter. Further, allowance for loan and lease
losses was 1.27% of total loans and leases held for investment,
down from 1.57% as of Jun 30, 2013.
Profitability and Capital Ratios
Profitability metrics deteriorated in the quarter. As of Jun 30,
2014, return on average assets was 1.04%, as against 1.27% at the
prior-year quarter end. Moreover, return on average common equity
decreased to 8.03% from 11.39% as of Jun 30, 2013.
BB&T's capital ratios were strong. As of Jun 30, 2014, Tier 1
risk-based capital ratio and tangible common equity ratio were
12.0% and 7.7%, respectively, compared with 11.1% and 6.8% as of
Jun 30, 2013.
BB&T's estimated common equity Tier 1 ratio under Basel III was
approximately 10.0% at Jun 30, 2014, based on management's
interpretation of the final rules adopted in Jul 2, 2013 by the
Federal Reserve Board, which established a new comprehensive
capital framework for U.S. banking organizations.
Sluggish economic recovery, a low interest rate scenario and
various regulatory issues will continue to limit top-line growth.
Moreover, expense management will likely be more challenging due to
the company's inorganic growth plans.
However, BB&T's steady capital position and strong asset
quality will expectedly bolster its financials in the quarters
Currently, BB&T carries a Zacks Rank #3 (Hold).
Other Regional Banks
Among other major regional banks,
) posted second-quarter earnings per share of 80 cents, beating the
Zacks Consensus Estimate by 5.3%.
) reported second-quarter adjusted earnings per share of $1.24,
outpacing the Zacks Consensus Estimate of $1.08.
) is scheduled to report on Jul 24.
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