BB&T's (BBT) Ratings Affirmed by Moody's, Outlook Stable

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BB&T CorporationBBT and its bank subsidiary's ratings have been affirmed by Moody's Investors Service, a rating arm of Moody's Corporation MCO . Moody's affirmed the company's standalone baseline credit assessment (BCA) at a1 while its senior unsecured and subordinated debt ratings stand at A2. Additionally, BB&T's rating outlook remains stable.

BB&T's overall organic growth strategy remains impressive, with continued rise in loans and non-interest bearing deposits. Moreover, the company has a diverse revenue stream and limited concentration risk. It is on the basis of these positives that the company's ratings have been affirmed by Moody's.

In fact, Moody's is of the opinion that BB&T has an impressive track record in managing its risk profile. Moreover, given BB&T's strong credit quality, Moody's expects that it will outperform the credit quality of most of its peers.

Off late, BB&T has been trying to transform its deposit base to include more of non-interest bearing accounts, which are less sensitive to interest rate changes. Non-interest bearing deposits have seen a three-year (2015-2017) CAGR of 8.5%. This move materially strengthened the company's funding profile. It also provides incremental rating support.

Moreover, BB&T remains focused on growth of non-interest revenue sources as these are less susceptible to the volatility of capital markets. Notably, fee income recorded a three-year (2015-2017) CAGR of 9.1%, with the trend continuing in the first nine months of 2018 as well. Further, strength in investment banking will accelerate non-interest income growth in the months ahead.

However, BB&T recently signaled that it might alter its capital position in accordance with the expected changes to the bank regulatory capital framework in the United States. Thus, Moody's incorporated a modest capital reduction in the affirmation of BB&T's ratings. However, if BB&T's capital position falls significantly, there are chances that a negative rating pressure would emerge.

What Can Lead to a Rating Upgrade?

BB&T's ratings could be upgraded if its capital metrics and profitability improve substantially, without an increase in its risk profile.

What Can Put a Downward Pressure on Ratings?

BB&T's ratings could be downgraded if Moody's feels that the company's risk discipline has been eroded or if its tangible common equity to risk-weighted assets ratio falls materially.

Shares of the company have lost 14.1% over the past year compared with the industry 's decline of 20.4%.

Currently, BB&T carries a Zacks Rank #3 (Hold).

Stocks to Consider

A couple of better-ranked stocks from the finance space are Credit Acceptance Corporation CACC and Ally Financial Inc. ALLY .

Credit Acceptance's earnings estimates for the current year have been revised 3.4% upward, over the past 60 days. Its shares have surged 70.2% in the past two years. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Over the past 60 days, Ally Financial's earnings estimates for the current year have been revised 4.2% upward. The company's shares have increased 14.4% in the past two years. The stock currently carries a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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