Facts are what you hang your hat on when the crowd's emotions are on overdrive. Here are some facts on BB&T
1) De Minimus Subprime exposure of only $375 million.
2) Non-performing loans and leases at only 0.42% of assets.
3) BB&T is focused on the economically strong mid-atlantic region, and Virginia and NC in particular. We expect a lot of baby boomers to move to the mid-atlantic, as insurance and property tax costs in FL look relatively unattractive.
4) Quickly adjusting portfolio to rate cuts. In other words, BB&T's net interest margin benefits immediately from any yield curve steepening that may result as the Fed cuts rates.
5)Huge fee business, which is > 40% of total revenue (the rest being net interest income). High fee income greatly reduces BB&T's earnings volatility.
6) Huge deposit base, which means it doesn't have to tap the capital markets (like a CIT for instance) for ST financing.
7) Historically attractive valuation based on P/BV and dividend yield.
The stock may well go lower in the ST on sentiment, but I expect that 5 years from now the stock will be much higher. Plus, you get a hell of a dividend while you wait.
Buying other banks' branches or building your own is six of one / half dozen of the other assuming the overall cost ends up being more or less the same. Either way, deposits grew at the same pace as loans over the time frame.
"BB&T had 87.9 billion in loans and leases (net) as of the most recent quarter and $85.2 billion of deposits, giving them a loan to deposits ratio of 103%. This is the same ratio they had back on Dec. 31 1999, but back then they only had $28.5 billion in loans and leases (net). So, somehow, despite having "no deposits available for lending" back in 1999, as you put it, they managed to quadruple the loans on their balance sheet over 8 years. Hmmm....perhaps deposits grow with loans?"
This occurred primarily through acquisitions.
Not sure we're even on the same subject and therefore discussion could further deteriorate. I'll leave it here. Happy investing.
Ah, now I see what the problem is:) You don't know what you're talking about!
Inverted Yield Curve (bad for banks) - this is when long rates are lower than short rates. In June, we did have an inverted yield curve, but that is not the case today.
Steepening/Normalizing Yield Curve (good for banks!) - this is when long rates are higher than short rates. This is where we are today thanks to the Fed's rate cuts.
Banks like steep yield curves because they borrow short and lend long. Got it?
You misconstrue what I'm saying. I'm guessing accidentally given the length of your post. Of course bank assets are supported by the cash flow from the underlying asset. Without cash flow we get write-downs of assets, which is presently occuring. But assets don't magically become liabilities. If I loan you money and you default on the loan, I don't suddenly have a liability. Look at the balance sheet under "Assets." I think you'll find things like "Loans" and "Securities."
"BBT does very little asset backed securitization and as a result, their loan portfolio is not very fungible."
This is not what I'm saying. If you have $100 in assets and $90 in liabilities you have $10 in equity. That $10 in equity is (partially) the other side of the $100 in assets. Which part is irrelevant (this is the fungibility I speak of). For instance, so what if Iran decides it doesn't want to sell us oil? They'll sell it to the Chinese, and the Chinese will buy less from Russia, who'll sell their excess surplus to us.
I don't know how you can argue BB&T makes no money. Anyone capable of going to sec.gov and looking at the financial statements can see that they make a boatload. This is a strange assertion.
"The loan to deposits ratio at BB&T is 118% and as a result, none of their deposits is available for lending, non interest bearing or otherwise."
BB&T had 87.9 billion in loans and leases (net) as of the most recent quarter and $85.2 billion of deposits, giving them a loan to deposits ratio of 103%. This is the same ratio they had back on Dec. 31 1999, but back then they only had $28.5 billion in loans and leases (net). So, somehow, despite having "no deposits available for lending" back in 1999, as you put it, they managed to quadruple the loans on their balance sheet over 8 years. Hmmm....perhaps deposits grow with loans?
Your missing the forest for the trees. The CP market is frozen which is why banks that mainly fund that way have been getting killed and risk insolvency. And of course BB&T lends long and funds short - that's the MO for any lender. BB&T has $85 billion in deposits and $11 billion in ST financing. Further, a good deal of its $19 billion in LTD is variable interest rate.
How BBT's stock performed in other times when the yield curve was steepening is irrelevant. Stock price changes reflect how performance was relative to expectations. Perhaps the stock price was over-valued in prior periods and though earnings growth was good, it didn't exceed what proved to be overly exuberant expectations. Given the current level of P/BV, I'd say expectations are extremely low right now, which portends good things for the stock price.
No one can predict future stock prices with any degree of precision. If you have in the past you were just lucky and are forgetting the 50% of times your predictions were inaccurate (hindsight bias). That said, I'd welcome a move to the 40s from here plus my 5%+ dividend yield.