We are downgrading our recommendation on BB&T (BBT) to Underperform based on concerns related to rising non-interest expenses and deteriorating credit quality.
Second quarter 2010 earnings were in line with the Zacks Consensus Estimate. A higher non-interest expense was among the negatives. Current challenges related to housing market and pressure on the credit quality raise concerns on near-term growth.
Our six-month target price of $21.00 per share equates to about 17.9x our earnings estimate for 2010. Combined with the annual dividend of $0.60 per share, this price target implies an expected negative total return of 7.5% over that period.