Monday, financial services company BB&T Corp. (BBT) posted a sharp decline in third-quarter profit, dampened by a significant provision for credit losses and other costs related to the credit environment.
The Winston-Salem, North Carolina-based company's third-quarter net income available to common shareholders was $152 million, a decline of 57.5%, compared to $358 million in the prior-year quarter. On a per share basis, earnings plunged 64.6% to $0.23 from $0.65 in the same quarter of last year.
On average, 25 analysts polled by Thomson Reuters expected the company to post earnings of $0.22 per share. Analysts' estimates typically exclude special items.
Net interest income after provision for credit losses totaled $528 million, compared to $724 million a year ago, a decrease of 27.1%. Net interest income for the latest quarter was $1.24 billion, up 13.7% from $1.09 billion in the year-earlier quarter.
Net interest income, on a taxable equivalent basis, advanced 14.2% to $1.27 billion from the previous year's net interest income of $1.11 billion. Sixteen Wall Street analysts had a consensus revenue estimate of $2.15 billion for the quarter.
The net interest margin was 3.68% for the third quarter, up two basis points from 3.66% in 2008, reflecting the accretive impact of the Colonial acquisition and improved asset and liability pricing from BB&T's legacy balance sheet.
The third quarter results produced annualized returns on average assets and average common shareholders' equity of .40% and 3.90%, respectively.
Non-interest income increased 18.7% to $940 million from $792 million in the third quarter of last year, reflecting another strong performance from BB&T's mortgage banking operation during the quarter, as well as increased revenue from BB&T's insurance operation and other nondeposit fees and commissions.
Kelly King, President and Chief Executive Officer of BB&T, said, "Our revenue growth for the quarter was very strong at 16.1%, the net interest margin is improved, growth in noninterest-bearing deposits is exceptional and the impact from the Colonial acquisition is positive."
The provision for credit losses totaled $709 million in the recent quarter, an increase of $345 million from last year, and exceeded net charge-offs by $263 million. The higher provision increased the allowance for loan and lease losses as a percentage of loans held for investment to 2.29% at September 30, versus 2.19% at June 30. The increases in the provision for credit losses were driven by continued deterioration in housing-related credits. The largest concentration of housing-related credit issues continues to be in Atlanta, Florida and metro Washington, D.C.
Further, the company generated $144 million in mortgage-related revenue in the third quarter, an increase of 73.5% compared to the previous year, driven by continued strong production revenue from residential mortgage banking operations, including $6.9 billion in mortgage loan originations.
Insurance-related revenue were up 9.5% from last year, led by a growth in property and casualty and credit and employee-benefit insurance commissions, including growth from acquisitions. Other noninterest income totaled $23 million, versus $6 million in 2008, primarily due to an increase of $18 million in income from financial assets that provide for post-employment benefits.
BB&T's noninterest expenses grew 31.3% from the previous year. The increase included $96 million of additional foreclosed property expenses due to BB&T's foreclosed property strategy; an additional $35 million in FDIC insurance expense; and $17 million for increased pension costs. Excluding these items, growth from purchase acquisitions and significant items, noninterest expenses rose 2.7% from last year.
For the nine-month period, the company reported net income available to common shareholders of $544 million, down 55.2% from $1.21 billion in the year-ago period. Per share earnings fell 60.0% to $0.88 from $2.20 in the comparable period of the previous year.
Net interest income, on a taxable equivalent basis, improved 11.6% to $3.61 billion from $3.23 billion reported in the corresponding period of the previous year.
Among other players in the field, Bank of America Corp. (BAC) posted a third-quarter loss of $2.24 billion or $0.26 per share, compared to a profit of $704 million or $0.15 per share a year ago, reflecting higher provision for credit losses and a charge to terminate the its asset guarantee term sheet with the U.S. government. Total revenue, net of interest expense on a fully taxable-equivalent basis, grew 32% to $26.4 billion from $19.9 billion last year, driven by noninterest income growth.
Regions Financial Corp. (RF) is slated to release third-quarter results on October 20, with analysts forecasting a loss of $0.25 per share on revenue of $1.58 billion, while SunTrust Banks Inc. (STI) will publish its quarterly results on October 22, as Analysts are expecting a loss of $0.64 per share on revenue of $2.11 billion.
BB&T shares, which have been trading between $12.90 and $36.60 in the past 52 weeks, closed Friday's trading session at $28.25.
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