Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Shares of BB&T and SunTrust Traded Up in September

By Lou Whiteman - Oct 9, 2019 at 3:34PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Improving economic sentiment eased pressure on the financials.

What happened

Shares of merger partners BB&T ( TFC -2.87% ) and SunTrust Banks ( STI ) gained 12% and 11.9% in September, respectively, according to data provided by S&P Global Market Intelligence. The banks were helped by a positive turn in economic data that helped ease investor fears about financial stocks, and an optimistic outlook from BB&T's CEO.

So what

BB&T and SunTrust shares have largely traded in tandem since February, when the companies announced plans to combine to become what would be the sixth-largest bank in the U.S.

During the months that followed the deal announcement, bank stocks have frequently come under pressure due to fears the U.S. could be headed toward a recession. That's what happened in August, when financial stocks reacted negatively to an inverted yield curve.

A banker with two customers shakes hands with one.

Image source: Getty Images.

In early September the yield curve normalized, providing some relief to bank stocks. BB&T and SunTrust shares also got a boost from a midmonth presentation by BB&T CEO Kelly King that offered an optimistic outlook for the company.

King said he sees no "cataclysmic" turn to negative rates, an environment that would make it difficult for banks to make money. He said he expects BB&T revenue to be up 2% to 4% in 2019, outpacing expense growth of 1% to 3%, and average loans to be up as much as 4% year over year.

Now what

Shares of both banks are down 4% so far in October, giving up part of their September gains as economic sentiment has again taken a gloomier turn. BB&T and SunTrust should close their merger soon, creating a bank that will be rebranded as Truist Financial, and the tough work of integration will begin.

BB&T is one of the top operators in the sector, and over the long term I expect this company to be a winner for investors. But given the economic uncertainty and the challenges of combining two large banks, investors are likely to be better off watching from the sidelines until some of the dust settles.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Truist Financial Corporation Stock Quote
Truist Financial Corporation
$59.31 (-2.87%) $-1.75
SunTrust Banks, Inc. Stock Quote
SunTrust Banks, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.