$25.57
-0.62 (-2.37%)
BB&T Corp (BBT)
CAPS Rating:
A financial holding company that conducts its business operations through its subsidiary, Branch Banking & Trust Company. Its subsidiary provides a range of banking services to individuals & businesses, & offers loans to businesses & consumers.
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BB&T, while caught inevitably in the current disastrous credit situation, shows signs of being able to survive it and thrive afterwards. For one, the bank has been around in some form or another since Reconstruction, and the institution appears financially sound. Though growth has mostly been stymied, earnings and assets have not taken a particularly hard hit - most certainly not a hit hard enough to warrant the 42% price decrease in the past year. That dramatic run down is the reason that the PE, at an attractive 7.56, is at a five-year low, and is in fact lower than the dividend, a well-plumped 7.95%.The knife on this stock may still be falling, at least until the loan markets unscramble themselves, but when they do it's my bet that BB&T will still be around, paying a good dividend, and being a big part of the correction back upwards.
Your thesis is a common one for banking stocks and it relies on the premise that once the credit market and loans starts flowing again all will be good. Except no one can ever figure out when that will happen. The answer lies in looking at why banks are in trouble in the first place. Most agree it was residential and commericial construction loans. First the subprime. And now the primes are starting to default as these homeowners are underwater on their mortgage since many refinanced into ARM loans or got HELOCs on their house that doubled in value. Loans are becoming harder to get because banks are requiring more traditional standards. However, the construction industry is not going to magically re-ignite because the consumer is also tapped out. Personal debt is at levels not seen since the 1920s. So where is the liquidity going to come from to move the economy forward? The only other possiblility is other nations. But we have just recently since that Japan, China and Europe's economies are shrinking also. So there goes that long term solution. The answer is look at financial stocks in 1930s and 1940s since the severity of credit contraction is similar to this period. The financials will continue to perform very poorly and unlesss you have a 20 year time horizon it is foolish to put money here.
Thing is, I'm 18; I'm looking on a timescale that's about as long as they come. While nobody can know when the credit market will loosen up, the probability that it won't at some point is quite slim. And BB&T is fundamentally strong; they have little exposure to the subprime mess, and while the stock price may take a beating along with the rest of 'em, I'd be happy to collect that 6% yield for a few years.
Hope you didn't buy into that 6% yield in September, now it's 14% and growing every day. But I agree, I think BB&T will pull through in some form or fashion. Not all of us share an infinite time horizon to wait for it, though.