BB&T Corporation (BBT): Still The Best Bank In Town

Still One Of The Best
While BB&T performed well in deposits and loans, where the bank really shines is in their credit quality. BB&T’s non-performing loans were 1.2% of the total portfolio in the current quarter. The only peer bank that reported better results was U.S. Bancorp at 1.1%. By contrast, M&T’s and PNC can’t compete, with non-performing loan percentages of 1.52% and 1.75% respectively.

Another area where BB&T is performing well is covering their non-performing loans. The most conservative bank among the four we’ve looked at is U.S. Bancorp with a 218% coverage ratio. BB&T comes in second with a ratio of 146%, followed by PNC at 124%, and M&T at 91.68%.

A Value That Can’t Be Beat
As you can see, though BB&T might not be the best at each measurement, they have strong performance in all areas. Where BB&T is a standout is, the stock’s relative valuation compared to their peers. Since each of these banks pays a dividend, I like to use a Peter Lynch method of comparing the companies that he referred to as the PEG+Y ratio. Think of it sort of like an inverted PEG ratio, as you take the expected growth rate, add the dividend, and then divide by the P/E ratio. Unlike the PEG ratio, with this measure, the higher the number, the better value.

Among BB&T’s competition, using this PEG+Y ratio, M&T is the least attractive value. With an expected growth rate of 8.1%, plus a 2.68% yield, if you divide that total by the current P/E of 12.46, you get a PEG+Y of 0.87. Remember, the lower the number, the worse the relative value. By comparison, PNC comes in only slightly better at 0.89, and U.S. Bancorp scores a 1.01. The clear leader of the pack is BB&T with a score of 1.33. The reason is pretty simple, BB&T has the highest yield, and highest expected growth rate among their peers. The bottom line is, investors have yet another chance to pick up shares in this top performing bank, and get a much better value than their peers. Strong performance across the board, and the best relative value, makes BB&T the Best Bank In Town.

The article Still The Best Bank In Town originally appeared on Fool.com and is written by Chad Henage.

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