3 Reasons to Buy BB&T

If you follow the financial sector as I do, you tend to identify certain banks and financial companies that you keep an eye on. A lot of the focus tends to gravitate toward the "too big to fail" banks like JPMorgan Chase (JPM 1.33%) and Bank of America (BAC 1.86%), but there are also a lot of smaller banks at the regional level that warrant attention.

One regional bank that garners a lot of attention is North Carolina-based BB&T (TFC 0.57%). A bank like BB&T helps illustrate that there are often great opportunities outside of the megabanks, and this article will provide you with three reasons why I think you should consider adding the bank to your portfolio.

1. Valuation
BB&T may not be the cheapest bank out there, but it compares favorably to many banks of similar size. With the exception of US Bancorp (USB 1.14%), all the banks below currently have market caps between $12 billion and $30 billion:

Source: Finviz.com.

I've previously outlined why I think US Bancorp is a buy; the others on the list, based on the information presented, all seem worthy of further study. However, I think BB&T presents an interesting opportunity. Though better values can be had the further you get below a P/B ratio of 1, lower P/B ratios could also indicate weakness in a bank's balance sheet. For example, while there is a strong bullish sentiment for Bank of America, its deep discount to book value makes some investors wary as well.

Furthermore, while it is possible to find a higher yield at other banks on this list, I see a potential increase to the BB&T dividend in the near future. The bank drastically cut its dividend at the height of the financial crisis in the summer of 2009, but it has steadily recovered since then, and the case for a higher dividend was buoyed when the bank passed the Federal Reserve stress test in March with flying colors. Should the bank dramatically increase its yield, it's only a matter of time before the share price rises as investors flood into one of the "good" banks seeking yield.

2. Focus on traditional banking
While a lot of the bigger banks have divisions focusing on investment banking or international operations, BB&T sticks close to its community banking roots. BB&T likes to focus on these roots and uses tales from the Great Depression to illustrate its dedication to its customers. It is proud that it has always paid a dividend and never refused a withdrawal, and also tells the story of a Brinks truck arriving at the bank with millions in deposits as a sign of strength. Instead of wary customers pulling money from the bank in fear of a failure, they saw the strength in the bank and actually deposited more money instead.

Anecdotes from nearly 80 years ago don't entirely tell the story of how much BB&T is focused on traditional banking, but it helps to get a sense of where its loyalties lie. While other banks are chasing the latest investment vehicle to increase earnings, BB&T has instead focused on increasing its mortgage lending, as well as the number of commercial and industrial loans they make, including nearly $200 million in Small Business Administration loans this year, nearly four times the amount committed in 2011. By focusing on revenue streams that it controls, BB&T should be able to continue its strong performance going forward.

3. Strong leadership at the top 
Just like my recent look at Regions Financial (RF 1.22%), I am impressed by the leadership at the top of BB&T. Though chairman and CEO Kelly King has only been at the top since 2010, he has been with the bank in various positions since 1972. He's not alone with experience at the bank, with COO Chris Henson at the bank since 1985 and president of community banking Ricky Brown working since 1977. Even a relative newcomer like CFO Daryl Bible, at the bank since only 2008, arrived after a 24-year career at US Bancorp. With such experienced leadership, investors can expect that the bank will be able to navigate any rough patches that may occur, potentially giving them a leg up on some other banks.

Just one Fool's opinion
While I may like what BB&T has to offer for investors, my opinion is but one of many that you should consider if you are thinking about adding the bank to your portfolio. I do hope I've given you a starting point as you delve deeper into your research on the company.