EUR 850.00 For Business Accounts Only

Morningstar | Strong Insurance Fees Driving Results Forward for BB&T; Rate Cuts on the Horizon

With BB&T having largely digested its previous acquisitions, the bank is now firing on all cyclinders, hitting profitabilty levels that represent the true earnings power of the franchise. The pending merger of equals with SunTrust is set to drive the next step up in profitability for the combined franchises. In the meantime, profitability improvement will mainly have to come from organic growth, as most of the other levers have been used up.BB&T’s organic balance sheet growth has bounced back recently, due to better revovling credit growth, retaining more mortgages, and strength within the bank's commercial operations. We believe the company still retains a conservative lending culture, as it has pulled back in areas where competition has been more pronounced, notably CRE.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, which appears to be going well so far, as growth and certain retention rates outpace the industry. 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.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.