I would have guessed NIM will increase, because of better terms and conditions on loans.
I am not as sanguine as you about the loan portfolio, but my opinion is based on the belief that CRE valuations are going down by a lot. I just think there will be too many sellers without enough money to finance the buyers.
"I am not as sanguine as you about the loan portfolio, but my opinion is based on the belief that CRE valuations are going down by a lot. I just think there will be too many sellers without enough money to finance the buyers."
I agree but bbt is not hard up for cash and is under no pressure to sell distress cre foreclosed properties.
John Allison has repeatedly made this clear that if cre tanks, they'll just ride out the cycle.
Let's look at a few facts:
1. Residential commercial real estate (homebuilder loans) nonaccruals at 9/30/08 were $195 million, up only 2% from the prior quarter. $195 million makes up a whopping .2% of bbt loan portfolio. All other residential cre delinquencies were flat 9/30/08 vs. 6/30/08 and comprised around .1% of bbt loan portfolio. About $500 million of bbt Allowance for Loan Losses at 9/30/08 is earmarked for residential cre. Imo, such a reserve level is very conservative.
What's Finnerman want?
2. Bbt tier 1 risk adjusted capital ratio at 9/30/08 was 9.43% and will probably increase to 12% by year end because of the $3.1 billion of tarp money. This makes bbt the best capitalized super regional bank by a big margin.
Given this, bbt will not sell any cre property at super distressed levels.
3. Bbt is a very secured lender. 80% of their loans are secured by real estate. This compares to just 41% for wfc and 25% for usb.
Karen Finnerman easily wins the Hank Paulson award for stupidity.