By Rachel Louise Ensign And Lisa Beilfuss
BB&T Corp. said its profit rose in the second quarter as
loans grew and fee revenue strengthened, though a key measure of
lending profitability narrowed.
The Winston-Salem, N.C., bank, one of the U.S. Southeast's
largest lenders, reported net income of $491 million before paying
out preferred dividends, up from $461 million a year earlier. On a
per-share basis, earnings rose to 62 cents from 58 cents.
Excluding merger-related charges and a loss on the sale of a
business, earnings were 69 cents a share. Revenue rose 1.3% to $2.4
billion.
Analysts were looking for 69 cents in earnings per share and
$2.4 billion in revenue.
BB&T CEO Kelly King said Thursday that more deals are on the
horizon for the bank, a stance that stands out at a time when other
banks are largely staying on the M&A sidelines over regulatory
concerns.
"There are a number of institutions, let's just say in the five
to 20-billion dollar range, that I think are considering their
strategic opportunities and may present some availabilities," he
said.
The bank's chief financial officer said last quarter that
acquisitions of Bank of Kentucky Financial Corp. and Susquehanna
Bancshares Inc. would bolster net interest income. Mr. King said
the Bank of Kentucky transaction contributed $146 million in
average loans during the second quarter.
Low interest rates have weighed on regional lenders like
BB&T, but the bank joined competitors in signaling that the
burden may start to ease soon. While net interest margin, an
important measure of lending profitability largely tied to interest
rates, slid to 3.27% in the quarter from 3.43% a year earlier and
3.33% in the first quarter, BB&T said it thinks this measure
will stabilize during the second half of the year. U.S. Bancorp
made similar projections on Wednesday.
Net interest margin measures how much a bank earns from the
difference between what it pays out on deposits and what it
receives on loans and investments.
BB&T and other regional banks have tried to build up
fee-based businesses to provide a buffer against low rates. The
bank said these fee-generating businesses contributed to its rise
in revenue.
However, in BB&T's insurance business--its biggest source of
noninterest income and what the bank has called its biggest "fee
opportunity"--net income fell to $53 million from $57 million.
Average loans rose 2.5% from a year earlier despite what Mr.
King characterized as a tough competition in certain areas of
lending.
Community banking profit, meanwhile, the bulk of BB&T's
bottom line, rose 6.8% to $234 million.
Noninterest expenses increased 6.4% to $1.7 billion, because of
an early extinguishment of debt, higher compensation costs and
merger-related charges. The bank's efficiency ratio, which measures
costs as a percentage of revenue, rose to 59.2% from 58.5% in the
first quarter and 58.4% a year ago. Mr. King said managing expenses
and keeping the ratio low remains "extremely important."
Shares in the company, trading at their best levels since the
run up to the financial crisis, rose slightly in afternoon
trading.
Corrections & Amplifications
A previous version of this article misstated BB&T's
quarterly loan growth as 3.9%.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com and Rachel
Louise Ensign at rachel.ensign@wsj.com
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