Fee Income And Loan Growth Helping BB&T, But Asset Sensitivity Is A Growing Risk

BB&T (BBT) has done okay over the last quarter, slightly outperforming the regional banking averages since the first quarter. BB&T’s strong fee-generating businesses are increasingly valuable as net interest margin compression looks to intensify, and the bank’s merger with SunTrust (STI) appears on track for a Q3/Q4 close. Unfortunately, while the merits of the deal still look quite sound on a long-term basis, both banks have exposure to tightening spreads over the next year.

Factoring in the impact of rate cuts, tempered in part by loan growth and fee-based income growth, as well as the deal benefits, I believe BB&T is modestly undervalued below the mid-$50’s. Cost savings and loan growth will be invaluable offsets to margin pressures in 2020, but given the challenges seen with past mergers of equals in the banking sector, I expect a “wait and see” attitude from many investors on these shares.

Read more here:
Fee Income And Loan Growth Helping BB&T, But Asset Sensitivity Is A Growing Risk