By Rachel Louise Ensign and Lisa Beilfuss
BB&T Corp. said its profit grew 7.1% in the second quarter
as its revenue and average total loans edged higher, though a key
measure of lending profitability narrowed.
Adjusted per-share earnings met Wall Street estimates.
The Winston-Salem, N.C. bank, one of the southeast's largest
lenders, reported net income of $454 million, or 62 cents a share,
up from year-earlier earnings of $424 million, or 58 cents a
share.
Merger-related charges and loss on the sale of a business
reduced per-share earnings by 7 cents, the company said.
Revenue rose 1.3% to $2.4 billion.
Analysts were looking for 69 cents in earnings per share and
$2.4 billion in revenue.
Net interest margin, an important measure of lending
profitability largely tied to interest rates, slid to 3.27% in the
quarter from 3.43% a year earlier and 3.33% in the first quarter.
The bank said the declines were due to lower interest rates on new
loans and runoff of loans acquired from the Federal Deposit
Insurance Corp.
BB&T's Chief Financial Officer said last quarter that he
expects the bank's acquisitions of Bank of Kentucky Financial Corp.
and Susquehanna Bancshares Inc. to bolster net interest income. On
Thursday, Chief Executive Kelly King said the Bank of Kentucky
transaction contributed $146 million in average loans during the
quarter. Average loans rose 3.9% from a year earlier.
Mr. King has said more deals could be on the horizon for the
bank, a stance that stands out at a time when other banks are
largely staying on the M&A sidelines over regulatory
concerns.
Second-quarter results were driven by strength in fee-based
businesses, Mr. King said Thursday. Like other regional banks
dealing with the effects of low interest rates, the lender has in
recent years invested in noninterest income businesses to help
offset interest-related declines. In the latest quarter, mortgage
banking income surged 51% on higher volume while investment banking
profit increased 17.4%.
In BB&T's insurance business--its biggest source of
noninterest income and what the bank has called its biggest "fee
opportunity"--profit during the quarter was unchanged from a year
ago at $422 million.
Community banking profit, the bulk of BB&T's bottom line,
rose 6.8% to $234 million.
Noninterest expenses increased 6.4% to $1.7 billion, due to an
early extinguishment of debt, higher compensation costs and
merger-related charges. The company's efficiency ratio, which
measures costs against revenue, inched up to 59.2% from 58.4%.
BB&T has said it expected its efficiency ratio at about 57%
into 2016.
Shares in the company, trading at their best levels since the
run up to the financial crisis, were inactive premarket.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com and Lisa
Beilfuss at lisa.beilfuss@wsj.com
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