Loan Growth, Fee Income To Support BB&T's (BBT) Q2 Earnings

BB&T Corporation (NYSE:BBT) is slated to announce second-quarter 2019 results on Jul 18, before market open. Per the Fed’s latest data , commercial and industrial loans (accounting for roughly 40% of the company’s total loans and leases) recorded modest growth, with the quarter witnessing slight improvement in overall lending activities.

BB&T anticipates average total loans held for investment to be up 4-6% sequentially (on annualized basis) in the to-be-reported quarter. Driven by slight loan growth, earning assets are likely to rise too. The Zacks Consensus Estimate for average interest earning assets of $2 trillion indicates nearly 1% rise sequentially.

Nonetheless, the Federal Reserve’s accommodative stance, flattening of the yield curve and steadily rising deposit betas are likely to hurt BB&T’s net interest margin (NIM). On a sequential basis, management expects GAAP and core NIM to decline 4-6 basis points.

The company expects net interest income (NII) to be up 2-3% year over year, driven by loan growth and an additional day in the quarter. The Zacks Consensus Estimate for NII of $1.70 billion is relatively stable with the year-ago reported number.

Now, let’s check out some of the other factors that are likely to influence BB&T’s results:

Fee income to improve: BB&T is expected to witness an improvement in insurance income in the to-be-reported quarter. The Zacks Consensus Estimate for insurance commission of $539 million indicates 5.7% increase on a sequential basis. The rise is likely to be driven by acquisition of Regions Insurance Group in 2018.

Also, bankcard fees and merchant discounts are estimated to be $75 million, up 7.1% sequentially.

Also, BB&T is likely to register a rise in service charge on deposits, as deposit balance is expected to increase. The consensus estimate for service charge on deposits is $183 million, up 7% from the prior quarter.

Further, low mortgage rates, seasonality and the central bank’s dovish stance seem to have led to an increase in refinancing activity during the quarter. Thus, the Zacks Consensus Estimate for mortgage banking income of $85 million suggests a jump of 34.9% sequentially.

Moreover, investment banking, and brokerage fees and commissions are likely to support fee income growth. The consensus estimate for the same is $114 million, indicating a rise of 2.7% from the first quarter.

Overall, total non-interest income is projected to grow 7.3% from the prior quarter as the consensus estimate for the to-be-reported quarter is pegged at $1.29 billion.

Besides, management expects non-interest income in the second quarter to increase 5-7% year over year.

Expenses not to be of much support: Excluding merger-related and restructuring charges, and other one-time items, BB&T expects expenses to remain stable or increase 2% year over year.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Asset quality to remain solid: BB&T expects loan loss provision to match net charge-offs (NCOs) in addition to providing for loan growth. Further, management expects NCO rates to increase sequentially to the range of 35-45 basis points on the assumption of no deterioration in the economy.

The Zacks Consensus Estimate for non-performing assets of $589 million indicates rise of nearly 1% from the prior-quarter reported figure.

Here is what our quantitative model predicts:

The chances of BB&T beating the Zacks Consensus Estimate this time are high as it has the right combination of two key ingredients — a positive Earnings ESP Filter .

Earnings ESP: The Earnings ESP for BB&T is +1.24%.

Zacks Rank: BB&T carries a Zacks Rank #3, which increases the predictive power of ESP.