EUR 850.00 For Business Accounts Only

Morningstar | Digesting acquisitions should improve BB&T's operating efficiency in a low-rate environment.

Now that BB&T has largely digested its acquisitions from the past several years, the bank should begin to approach what we see as more normalized returns. Additionally, BB&T benefits from improving interest rates, recently enacted tax cuts, a conservative credit culture, and increasing scale.BB&T’s organic balance sheet growth has trailed that of its peers recently, which to some extent reflects the company's more conservative lending culture, as it has pulled back in areas where competition has been more pronounced. Overall, we don't see signs of a dramatic turn in the credit cycle and believe below-average charge-offs may continue over the medium term.To offset slower organic balance sheet growth and bulk up its market share in select regions, BB&T has completed a number of acquisitions in the past several years. Most recently, BB&T acquired Regions Insurance Group. BB&T has generally been a savvy acquirer, and we see the strategic value behind the moves, as scale and market share concentration will only increase in importance. With past banking acquisitions complete and regulatory relief occuring, management may be on the lookout again for a new target and has said it is not wary of crossing the $250 billion asset threshold.In addition to its traditional lending businesses, we believe the bank's ability to generate fee revenue is attractive, most notably through its insurance brokerage operations. BB&T has focused on expanding this part of the business and is roughly the fifth-largest insurance broker by revenue, a plus in an industry where the scope and depth of a brokerage network matter. The insurance market is also finally starting to firm up from a pricing perspective. With fee revenue accounting for more than 40% of total net revenue, we like that these businesses depend less on interest rates and tend to be more efficient from a regulatory capital standpoint. We also like the bank's focus on investment in technology and automation and believe that this, along with further branch footprint optimizations, should improve operating efficiency.