BB&T Corp.

BB&T Corporation (BBT) and SunTrust Banks (STI) announced on November 19 that they’d received the necessary regulatory nod for their merger.

Changes in technology have reshaped the banking sector. Banks are increasingly collaborating with fintech firms to improve their customer service.

Today, Sun Trust Banks and BB&T announced a merger that would create the sixth largest bank in the United States.

The big question is how many rate hikes we’ll see in upcoming quarters. In September, the Federal Reserve indicated that there could be four rate hikes in 2016.

Banks have seen compliance costs rise since the Dodd-Frank Act regulations took effect. For small banks, it’s been harder to absorb these costs.

Some elements of the Dodd-Frank Act may inhibit many potential homebuyers from obtaining mortgages for desired properties.

With ~50% of analysts recommending that investors buy, analysts appear positive about the sector in the long term and a rate hike in December.

Based on PE and PBV, Popular’s competitors have outperformed. The ETFs that invest in Popular have also outperformed Popular based on price movement, PE, and PBV.

Year-to-date, Popular’s price movement is a mixture of ups and downs. After its 3Q15 earnings report, Popular stock fell 3.6% and closed at $30.26 per share on October 23, 2015.

Huntington’s peers have outperformed the company based on EPS. However, Huntington Bancshares is way ahead of its peers based on forward PE and PBV.

The price-to-book value ratios of Synovus, BB&T, SunTrust Banks, Regions Financial, and Capital Bank Financial are 1.43x, 1.19x, 0.93x, 0.77x, and 1.37x.

First Horizon outperformed its peers based on the forward PE ratio and PBV ratio. The ETFs outperformed First Horizon based on the price movement.

First Horizon National has a market cap of $3.23 billion. After the earnings report in 3Q15, it fell by 1.2% to close at $13.80 per share as of October 16, 2015.

The peers outperformed Comerica based on the PBV ratio. However, Comerica is way ahead of its peers based on the forward PE ratio.

In this series, we’ll review the banking sector’s two primary indicators—loan and deposit growth. Total loans are generally made up of commercial and industrial loans, consumer loans, and real estate loans.

The MBA’s survey is based on applications for residential mortgages. It covers more than 75% of all US retail residential mortgage applications.

The yield curve has steepened a bit compared to where it was a week or even a month ago. Investors should consider the yield curve slope an indicator of bank performance.

When interest rates rise, banks typically increase the interest they charge for loans faster than what they pay on deposits. This gives an immediate boost to their margins.

Mortgage applications for home purchases are a leading indicator of home sales. The decline was driven by a rise in fixed 30-year mortgage rates.

Banks benefit from a steeper yield curve, which allows banks to lend on higher long-term rates and borrow on lower short-term rates. This boosts banks’ margins.

Lower interest rates on a sustained basis have negatively impacted the performance of the US banking sector. Banks are not able to use much deposit pricing strategies to boost margins.

According to the Fed’s data, total loans for all US commercial banks increased 7.9% in the week ending May 6. Loan growth is vital to banks’ income growth.

During 1Q15, Regions Financial (RF) repurchased $102 million of common stock—completing its $350 million 2014 repurchase program.

Regions Financial’s (RF) Wealth Management revenue increased 10% YoY. Going forward, It intends to focus on growing its wealth management business.

PNC Financial (PNC) successfully diversified its banking operations by extending offerings in asset management, consumer services, and investment banking.

In 1Q15, PNC Financial bought back 4.4 million common shares worth $0.4 billion. The purchase was part of its four-quarter repurchase program.

SunTrust Bank (STI) paid common dividends totaling $371 million or $0.70 per share in 2014.

The Wholesale Banking segment’s net interest income increased in 2014 compared to 2013.

SunTrust’s Mortgage Banking segment reported a net loss of $56 million for 2014 compared to a net loss of $527 million for 2013.

SunTrust Bank’s net interest income in 2014 remained stable compared to 2013 as strong loan growth offset the decline in net interest margin.

SunTrust Bank’s return on equity is 8%, which is 18% lower than the industry average.

SunTrust provides a broad range of consumer and wholesale banking, mortgage banking, and private wealth management services.

BB&T is more widely represented in ETFs focused on the banking sector. The SPDR S&P Bank ETF (KBE) has BB&T comprising ~1.6% of its portfolio.

BB&T’s loan and deposit growth is marginally below the industry average. Its ROE and price-to-book ratio are close to the peer average.

Dividend yield is a company’s annual dividend per share. It’s expressed as a percentage of its share price. Dividend yields are important if you want a regular stream of income.

Deposits are the cheapest funding source. Since deposits fund a major chunk of BB&T’s assets, the overall funding costs are low.

BB&T hasn’t acquired many banks since 2009. Completing the Bank of Kentucky and Susquehanna acquisitions might boost the bank’s loan growth.

BB&T’s Susquehanna acquisition will significantly expand BB&T’s Mid-Atlantic footprint. The deal is valued at ~$2.5 billion. It will close in the second half of 2015.

BB&T entered Texas in 2009 with the acquisition of Colonial BancGroup. BB&T is looking to expand its branch network in Texas.

The revenue from insurance services isn’t sensitive to interest. It isn’t subject to the credit cycle’s dynamics. It provides stability to BB&T’s revenue.

BB&T’s (BBT) Insurance Services segment has diversified revenue between retail and wholesale markets as well as by insurance product types.

BB&T is focused on expanding its corporate banking services. It’s adding new industry verticals for lending and investment banking services.

BB&T’s (BBT) Specialized Lending consists of businesses and subsidiaries that provide specialty finance products. The segment’s net income decreased 5.9%.

Easing underwriting standards across auto lenders is leading to an increase in subprime lending. Dealer Financial Services grew average loans by 10.5% compared to 2013.

BB&T’s (BBT) Residential Mortgage Banking segment’s net interest income for 2014 decreased, primarily due to lower average loan balances.

BB&T’s (BBT) Residential Mortgage Banking segment retains and services mortgage loans originated by the Community Banking segment.

BB&T’s Community Banking segment offers a variety of loan and deposit products and other financial services. The segment’s net interest income decreased in 2014.

BB&T Corporation’s (BBT) operations are divided into six business segments. Community Banking contributes 46% to the total revenue.

BB&T Corporation (BBT) is a financial holding company. It conducts its operations primarily through its bank subsidiary—Branch Bank.

Earnings are growing, but at a slow pace. Regions Financial’s (RF) net income increased by 1% in 2014—compared to 2013.

A substantial portion of Regions Financial’s growth has been through the acquisition of other financial institutions. The bank was formed in 1971.

Regions Financial’s loan portfolio can broadly be classified into business and consumer loans. Business loans account for ~62% of the total loan portfolio.

For a bank, the net interest margin is the difference between the interest income generated and the interest paid out as a percentage of interest-earning assets.

Regions Financial Corporation is a leading regional bank in the southeastern US. It’s the 17th largest bank in the US—based on assets.

The Three White Soldiers candlestick pattern is also a reversal pattern. It forms at the bottom of a downtrend. The pattern has three candles. All three of the candles are long and bullish.