BB&T Investors Shrug At SunTrust's Upgrade To Buy

BB&T Corporation BBT shares failed to get a substantial pop higher on Monday despite a notable upgrade from SunTrust Robinson Humphrey's Jennifer Demba.

The analyst moved her investment recommendation on the issue from Neutral to Buy and her price target from $36 to $40. The call came on the heels of a recent field trip to visit BB&T management.

"The company is focused on realizing efficiencies from the investments it has made over the past few years. Less acquisition related noise, an intense internal focus on expense control, and the realization of the cost savings from recently closed transactions along with some share repurchases should benefit the shares over the next 6-12 months," Demba said in a note Monday morning.

Interestingly, Demba also pointed to the fact that capital returns should increase. "Management is very focused on having one of the highest dividend payout ratios in the industry. BBT currently has a ~40% payout ratio versus the 30% payout level of peers."

She sees BB&T doing around $300 million in share repurchases in 2016 and $600 million next year. "With M&A on hold, share buybacks could be more aggressive than anticipated as the total payout ratio is only ~60%," Demba concluded.

Despite the favorable comments, BB&T shares outperformed the S&P 500 by only about a quarter point. The stock closed Monday's session up 1.25 percent at $33.53.