DBRS: BB&T’s 4Q Results Improved, Fee Income Growth Led by Higher Insurance Revenues

Summary:
• 4Q14 earnings to common shareholders of $557 million, up 7.1% sequentially.
• Improved QoQ earnings were driven by strong fee income growth, and lower expenses.
• DBRS, Inc. (DBRS) rates BB&T Corporation Issuer & Senior debt at A (high) with a Stable trend.

It is DBRS, Inc.’s (DBRS) view that BB&T Corporation (BB&T or the Company) delivered solid earnings results for 4Q14, reflecting positively on its deep and diversified businesses. Improved sequential earnings were driven by higher fee income and lower expenses.

Spread income dipped slightly, QoQ, as average total loans declined modestly, and the net interest margin (NIM) narrowed by 2 bps to 3.36%. Loan growth remains pressured by the Company’s decision to sell all of its conforming residential mortgage loan production, as well as the significant competition for quality loans. Nonetheless, and excluding residential mortgages, the Company reported broad-based sequential growth (average balance) across many segments including commercial and industrial loans, direct retail exposures, and commercial construction and development loans.

Improved fee income, mostly reflected higher levels of insurance, mortgage banking and investment banking income. Stronger insurance revenues were driven by higher property and casualty insurance premiums.

Expenses remain well managed, as adjusted expenses, excluding non-core items such as loss on early extinguishment of debt, decreased moderately, QoQ. During the quarter, expenses benefited from lower levels of insurance costs, full time equivalent employees and information technology expense.

Balance sheet fundamentals remained solid. Specifically, the Company reported sound and improving asset quality, underpinned by decreasing levels of non-performing assets and low net charge-offs, a solid capital position reflecting a Basel III common equity Tier 1 ratio of 10.3%, and solid funding and liquidity profiles.

DBRS rates BB&T Corporation Issuer & Senior debt at A (high) with a Stable trend.

Note:
All figures are in U.S. Dollars unless otherwise noted.