U.S. financial institution BB&T (BBT) is reporting rising profits thank to an improving loan portfolio quality as the fallout of the Great Recession fades. Net income available to common shareholders came to $307 million in the second quarter of 2011, up 46 percent from the $210 million earned in the second quarter of last year.
Net revenues hit $2.2 billion during the quarter, up 28 percent from first quarter of this year although they were down 10 percent from $2.4 billion reported during the same quarter a year earlier.
Better credit quality and solid performances across all lines of the company's business boosted profits during the quarter, while revenues rose on falling funding costs, stronger insurance commissions, and lower losses from problem loans, the bank adds.
BB&T says its net interest margin, a metric that shows how well a company is investing compared to the level of debt it carries, is getting better.
"Our net interest margin improved to a very strong 4.15 percent in the second quarter compared to 4.01 percent last quarter," says BB&T Chairman and CEO Kelly S. King.
"Our acquired loan portfolios continue to outperform and have enhanced our outlook for the margin compared to last quarter. We currently project that the margin will remain in the 4.05 percent to 4.10 percent range throughout the remainder of 2011. In addition, the margin is also benefitting from a more favorable funding mix, lower cost of funds and wider credit spreads."
The banking industry, however, continues to struggle as the economy limps away from the worst recession since the Great Depression.
Moody's Investors Service says the outlook for the U.S. banking system remains negative due to weak economic growth as well as asset quality vulnerabilities.
"Despite some improvements in asset quality trends and capital levels, the tepid economic recovery coupled with limited job growth undermine the likelihood of a return to normalcy by putting pressure on home prices, consumption, and investment," says Moody's Senior Vice President Sean Jones in a report on the sector released in May.
New banking regulations, including those requiring banks to set aside more capital, could further hamper the sector.
"At the same time, regulatory reform and increased competition are negatively affecting bank earnings," Jones says.
Standard and Poor's, meanwhile, says its decision to strip the U.S. of its AAA ratings and slap a less attractive AA+ rating on the country won't yet affect BB&T and other institutions.
"None of the banks we rate in the U.S. has an issuer credit rating higher than the U.S. sovereign rating. The sovereign downgrade does not alter the government support assumptions that we factor into our ratings on four banks," Standard and Poor's says.
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