We are downgrading our recommendation on BB&T (BBT) to Underperform based on concerns related to rising non-interest expenses and deteriorating credit quality.
Higher non-interest expense was among the negatives in BB&T’s second quarter earnings report. Current challenges related to the housing market and pressure on the credit quality raise concerns on near-term growth.
BB&T has significant exposure in residential mortgage loans, direct retail residential loans, sales finance and revolving credit loans. We are concerned about an increase in the provision for credit losses from these loans in the near- to mid-term.