Back in July, I thought BB&T (NYSE:BBT) looked a little rich from a valuation perspective, and the shares have sold off about 5% since then - modestly underperforming peers like U.S. Bancorp (NYSE:USB), Wells Fargo (NYSE:WFC), PNC (NYSE:PNC), and Fifth Third (NASDAQ:FITB).
Since that time, the company has increased its interest sensitivity a
bit, announced another acquisition focused on Pennsylvania, and
reiterated its commitment to grow by acquisitions while getting a little
more conservative on overall loan growth.
Looking ahead, I don't
think BB&T is done doing deals, but I don't believe the company is
as likely to pull the trigger in 2016 unless a can't-miss opportunity
comes along. Instead, I expect the company to prioritize the integration
of its recent acquisitions and particularly the realization of expense
synergies. At the same time, I would look for the company to try to
offset pricing pressure in its insurance brokerage operations with
greater volume and continue to develop its specialty lending operations.
I
would describe BB&T's current valuation as "okay". The company paid
up for its Pennsylvania acquisitions and its going to take time for
those deals to show their value, putting even more pressure on those
expense synergies. In the meantime, I like BB&T's strong credit
quality and its disciplined approach to loan growth. Investors willing
to take the elevated risk will find better banking bargains outside the
U.S., but with a fair value in the low $40's, BB&T might be worth a
look again today.
Read more here:
BB&T Has A Full To-Do List For 2016
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