North Carolina-based BB&T (NYSE:BBT) is the sort of stock that can test the patience of even a hardcore value investor. Nobody seems to question the quality of this regional bank, but its stock price has often been an issue. Quality doesn't often go unnoticed for long, and BB&T stock has never been quite cheap enough to entice this Fool to buy.
Perhaps I'll get a chance to revisit that question. While I don't believe the company's fourth-quarter earnings were bad, they weren't especially strong, and investors have sold the stock down by about 2.5% in Thursday's trading as of this writing.
Net income (according to GAAP) was up just 3% for the quarter, with per-share earnings climbing 4%. Though net interest income growth was respectable at 6.3%, and non-interest income growth was nearly 13%, non-interest expenses grew by an even larger 15.6%, sucking a lot of that income growth away from the bottom line. Not surprisingly, then, the bank's efficiency ratio worsened from 50.1 in last year's fourth quarter to 53 this quarter. Still, 53 is still a fine performance by most reasonable standards.
There was also decent growth in lending and deposits. Average loan balances rose more than 10%, and total deposits grew slightly less than 10% as well. Lending was strongest in the mortgage business, though the company did report that higher interest rates were slowing the home equity business.
Followers of this stock will also notice that the company has resumed its acquisition program, recently agreeing to buy Georgia-based Main Street Banks and Tennessee-based First Citizens. Both deals are expected to close in the second quarter of 2006. While management decried the high prices of community banks (odd, given the general perception about the state of banking stocks), they reiterated their interest in forging deals to bulwark not only their banking business, but also their wealth/asset management and insurance businesses. Given that insurance composes more than 10% of BB&T's overall revenue and is growing quite nicely, that would seem to be a wise strategy.
With so many bank stocks out there, it's hard to know where to begin, or which one or two to buy. After all, you have big-company choices like Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), or Bank of America (NYSE:BAC), and literally hundreds of smaller banks like TCF Financial (NYSE:TCB), BankAtlantic (NYSE:BBX), and CommercialCapital (NASDAQ:CCBI). Make sure you do thorough due diligence, and buy the stocks that best suit your income needs and risk tolerance.
More Takes from our Foolish vault:
- See BB&T's latest quarter by the numbers.
- BB&T Gets Crunk
- Citigroup: More Work to Do
- A Closer Look at Bank Stocks
Bank of America is a Motley Fool Income Investor recommendation.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
