By Stephanie Yang and Lisa Beilfuss
BB&T Corp. said its profit edged down 1.6% in the first
quarter, as low interest rates pressured the bank's net interest
margin and results missed Wall Street's expectations.
The Winston-Salem, N.C., lender on Thursday posted net income of
$488 million, or 67 cents a share, down from $496 million, or 68
cents a share, a year earlier. Excluding merger-related charges,
per-share profit was 68 cents, down a penny from a year earlier.
Revenue rose 1.5% to $2.34 billion.
Analysts, according to Thomson Reuters, had projected 70 cents
in per-share earnings on $2.4 billion in revenue. Shares fell about
2.4% in morning trading.
Mortgage-banking income at the lender jumped 48.6% in the
quarter to $110 million. Sequentially, mortgage-banking income fell
57% from the fourth quarter.
BB&T, one of the largest lenders in the southeastern U.S.,
said net interest income fell 2.6% in the quarter to $1.35 billion.
Like most other banks, continued low interest rates put downward
pressure on BB&T's net interest margin. The metric, an
important measure of lending profitability, slid to 3.33% from
3.52% a year earlier. The bank pointed to lower interest rates on
new loans and runoff of loans acquired from the Federal Deposit
Insurance Corp.
BB&T Chief Financial Officer Daryl Bible said on an earnings
call Thursday he expects net interest income to increase over the
year, assisted by pending acquisitions of Bank of Kentucky
Financial Corp. and Susquehanna Bancshares Inc.
Despite recent regulatory scrutiny of bank deals, executives on
the call were confident that both mergers would go through as
planned. The Bank of Kentucky deal is expected to close in the
second quarter, and Susquehanna in the second half of the year.
Chief Executive Kelly King said he expects the deals to "ramp up
revenue" over a shorter period relative to other traditional
mergers.
"Both opportunities are fantastic, and at this point we feel
more excited about them than the day we announced," Mr. King
said.
When asked about the bank's potential interest in GE assets, Mr.
King said BB&T is evaluating everything available in the
marketplace, but wouldn't be interested in any megadeals--unlike
Wells Fargo, which has shown interest in tens of billions of
dollars of loans in the GE Capital portfolio.
"We're fairly positive that some of those acquisition
opportunities will come to fruition," he said.
The bank said its noninterest expenses rose by $28 million to
$1.4 billion. BB&T said rising personnel expenses due to in
part to higher pension costs were partially offset by a decline in
loan-related expense.
During the quarter, the company's adjusted efficiency ratio
inched up to 58.5% from 58.2%. An efficiency ratio measures how
much it costs a bank to produce revenue--the lower the ratio, the
more efficient the bank is. BB&T had targeted a ratio of 56% by
the end of last year.
Average deposits slipped 2.4% to $784 million. The company said,
though, that its deposit mix improved, with average
noninterest-bearing deposits representing 30.6% of total deposits,
up from 30% in the prior quarter.
The bank was able to benefit from its fee-generating
noninterest-income businesses. Noninterest income rose 7.5% to $997
million, driven by higher mortgage-banking income and insurance
income.
Write to Stephanie Yang at stephanie.yang@wsj.com and Lisa
Beilfuss at lisa.beilfuss@wsj.com
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