BB&T 2Q profit falls 7 percent on loss provision

BB&T Corp. said Thursday its second-quarter earnings slipped 7 percent as it increased the amount set aside to cover bad loans, but results were slightly better than Wall Street expected.

For the three months ended June 30, the bank reported net income of $428 million, or 78 cents per share, compared with $458 million, or 83 cents per share, in the year-ago period.

Excluding a $30 million gain from the sale of Visa Inc. stock, a $22 million gain from extinguishment of debt and $1 million in merger-related and restructuring costs, operating earnings for the second quarter totaled $377 million, or 69 cents per share. This compares with operating earnings of $461 million, or 83 cents per share, in the prior-year quarter.

Analysts polled by Thomson Financial, on average, estimated earnings of 68 cents per share. Analyst estimates typically exclude one-time, unusual items.

The bank set aside $330 million in the quarter to cover bad loans, compared with $88 million in the same quarter last year. Annualized net charge offs, or loans written off as not being repaid, were .72 percent of average loans and leases for the second quarter, compared with .35 percent in the second quarter of 2007.

The increase in the loan loss provision and net charge offs was mainly driven by challenges in residential real estate markets in Georgia, Florida and Washington, D.C., BB&T said.

Net interest income, the difference between how much it costs a bank to borrow money and how much it receives from lending money to customers, rose 11 percent to $1.07 billion from $966 million in the 2007 quarter. Non-interest income, or income generated from fees and other charges, grew 13 percent to $827 million from $729 million.

As of June 30, BB&T had assets of $136.5 billion and operated 1,489 banking offices in the Carolinas, Virginia, West Virginia, Kentucky, Georgia, Maryland, Tennessee, Florida, Alabama, Indiana and Washington, D.C.

Shares jumped $2.58, or 10.5 percent, to $27.09 in morning trading. Shares have traded between $18.71 and $43 in the past 12 months.