Not all banks are a source of negative surprises these days. Regional lender and Motley Fool Income Investor pick BB&T (NYSE:BBT) beat analysts' estimates for the fourth quarter by $0.03 a share, earning $0.51 per diluted share.
No surprise: Better-run banks perform better -- even in a crisis
Looking through the press release and the 8-K filing, the story looks much reminiscent of US Bancorp's report yesterday. Contrary to peers KeyCorp (NYSE:KEY) and SunTrust Banks (NYSE:STI), BB&T remained profitable in the fourth quarter, with an operating return on common equity of 7.3% -- not too shabby in one of the worst quarters in the history of U.S. banking.
At a time when bank capital is at a high premium, BB&T is solidly capitalized. Tangible common equity to assets ratio is 5.3%. For reference, US Bancorp's (NYSE:USB) is 4.5%, with JPMorgan Chase (NYSE:JPM) at 3.8%.
Finally, just like US Bancorp, BB&T is taking advantage of competitors' distress to make market share gains: Average loans and leases grew 7.1% year on year, and average deposits were up by 7.9%.
Back in June, I suggested that BB&T deserves to trade at a premium book value multiple relative to its peers. That is now the case, with BB&T shares at the top of the range in their peer group in terms of both price-to-book value and price-to-tangible book value. While the entire sector has been revalued downward massively since then -- the KBW Bank Sector Index lost 53.7% -- the loss on BB&T shares over the same period was only 16% (including dividends).
An absolute value
Beyond relative value considerations, are BB&T shares attractively priced on an absolute basis for investors with a 10-year horizon? I wouldn't continue to own the shares if I didn't think so. At 1.68 times tangible book value per share, you need to go back to January 1996 to find a lower multiple prior to the start of the credit crisis. For banks that are encountering historic difficulty on the scale of Citigroup (NYSE:C) or Bank of America (NYSE:BAC), that sort of comparison would be useless. For BB&T, which is profitable and well capitalized, it's a useful benchmark.
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