Southeast regional bank BB&T (NYSE:BBT) will report Q4 2006 financial results on Thursday, Jan. 18. Here's what to expect.

What analysts say:

  • Revenues. Revenues are expected to grow 11% to $1.61 billion.
  • Earnings. Earnings, however, are expected stay flat at $0.78 per share.

What management says:
In last quarter's conference call, CEO John Allison seemed pleased with the blocking and tackling aspects of the business, particularly deposit growth, noninterest income, and loan quality. Allison did mention a "significant slowdown" in commercial real estate loans, a direct result of the cooling housing markets. I'd expect that slowdown to continue into the fourth quarter, based on the downbeat news coming out of the homebuilders.

Allison also noted that he would focus on organic growth, rather than acquisitions. However, he changed his tune a few weeks later. He is willing to consider a "merger of equals" with a bank or insurance company in the next five to 10 years.

What management does:
The net interest margin -- a key measure of bank performance -- has trended down over the last five quarters. BB&T is not the only bank feeling the heat; the dreaded inverted yield curve puts pressure on the spread that banks earn on their loans. BB&T, believing the Fed may be nearing the end of its tightening cycle, made some balance sheet adjustments, so look for the net interest margin to flatten out.






Net Interest Margin






Quarterly data provided by the BB&T website.

One Fool says:
Management's announcement of a possible large merger makes me uneasy. The market only rewards these types of deals when they make perfect sense, like the merger of Mellon (NYSE:MEL) and Bank of New York (NYSE:BK). In any case, I'm going to review the conference call for any guidance on management's future strategy.

In the past, I've been bullish on BB&T as a steady performer in some prime markets. As Stephen Simpson used to say, BB&T often sticks to its knitting. I'd be wary if management gets away from its community-based strategy to take on a large acquisition.

Wall Street has taken a negative view on BB&T lately. Fools who still believe in the BB&T story could take advantage of this pessimism, while others may want to look at Bank of America (NYSE:BAC) or US Bancorp (NYSE:USB) as potential dividend plays.

Further fiscal Foolishness:

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Financial services editor Joey Khattab does not own any of the shares mentioned. The Fool has a disclosure policy.