I'm sure most of you have seen bbt's vision which is frequently included in their presentations - that over the foreseeable future competition within the banking industry will be fierce resulting in massive consolidation driven by the need to realize cost reduction.
Bbt ending slide in their presentation clearly states that it intends to be a winner so I've always thought that the bank would attempt to acquire a large bank under the right terms and conditions.
Regions bank right now provides an exceptional opportunity.
The bank sells for $4 per share about 50% of their tangible common equity. The bank's net assets are about equivalent to bbt. Their footprint overlaps much of bbt's current territory. Huge cost reductions can be realized through a consolidation which would provide bbt with the potential to realize a quantum jump in eps.
Rf's nim stinks at 264 bsp largely because they never envisioned that fed fund rates would drop to 25 bsp and failed to set a floor on pricing. However, that is easily corrected particularly when entering into an environment of increasing fed fund rates ( in 1 year, likely that fed fund rate will be 300 bsp, which is still on the low end of the historic average).
Their underwriting standards have been considerably worse than bbt but the bank appears to be reasonably reserved at 3/31/09. If bbt is goosey about the adequancy, they could pull a Well's Fargo - writedown some of rf loans to very low levels as a condition of merger.
Based on recent events, I now question the sincerity of bbt's vision. I think Kelly King and the Board of Director's may simply be too conservative to take on a large bank merger. Perhaps, they are content to keep "things within the bank about the same".
I think vision put forth by bbt management and their board may ring hollow. Hope I'm wrong but I judge performance based on action and not words.
And so far I'm not impressed. Rf's been in the dog house now for many months and may be globbled up by compeition because of bbt's inability to seize the opportunity.
BBT's Vision is more like blurred delusional with rose colored glasses
It's called survival of the fittest. Those who identify our macro economic trends correctly will have more funds to buy asstet later on as we work our way through these tough times. This is no time to be a hero. Good luck.
i think you are probably the biggest idiot i have ever come across -- you're a complete fool
and you other LONGS listened to this turd??
i am so glad you have me on ignore so that you don't get to read my unbelievable S&P 500 LEVEL predictions so you can't make any money off my incredible ideas -- you idiot
Nice reversal moron....I think I could dig up enough posts from you and Spoor to wipe Rosy O'Donnell's big butt that said BB&T's dividend was safe because of Mgmt's great job with their clean conservative mgmt (blah blah blah) and that they had raised their dividend every year since the South lost the War (blah blah blah) and now you say the "dividend was unsupportable"
You're doin a hell of a job, Brownie" - W bush
"Reasonble people can disagree in a reasonable way."
Inlet - Yes, we do and that's absolutely ok. All viewpoints should be considered. Got a couple of comments:
"I see nothing deceptive or inconsistent in this. Given earnings the next 3-4 qtrs the dividend was unsupportable as it would have consumed a large per cent of earnings just to cover the dividend even with improvement in writeoffs."
I certainly do. 1st Qtr 09 eps was $.48. One time gains were plus $.15 per share. Provision exceeded net chargeoffs by a negative $.37 per share (assuming 30% tax rate).
1st qtr 09 eps before all the noise therefore, was $.70 per share so first qtr. 09 dividend consumed about 2/3 of earnings. Bbt policy historically has been that the dividend should amount to 40 to 60% of earnings.
So I certainly think it's inconsistent for Kelly King to say that's it's unlikely that 2nd qtr. 09 earnings will support the old dividend while still maintaining that net writeoffs for 09 year will be in the 140 to 150 bsp range vs. 158% 1st qtr. 09. Also, the 2nd qtr historically has been the strong qtr. for noninterest income while the 1st qtr has been the soft qtr.
As I said before, I think the truth is that King had to do this to satisfy the Fed so that could cut the ties to tarp.
The situation with rf is very unusual. Bbt has an opportunity to acquire this bank at a "bargain" price. And yes, rf may have much more in bad loans than reflected in their reserve. Should that be the case, it would be no problem to substantially increase the ALL given that rf common equity to loans is about 8%, roughly equivalent to bbt's ratio which is double the threshold set forth by the Fed. Just look a what wfc did with wb pic and pay loans - write down of $45 billion prior to the acquisition. That really sets the stage for wfc to report extraordinary earnings.
Now bbt can be slow and deliberate in analyzing rf but I don't think that makes a great deal of sense when their loan portfolio was just put under the tiffany spotlight by the Fed and all that data is accessible to any party interested in acquiring the bank.
Imo, a slow and deliberate approach gives folks like jpm to sharpen up their pencil and possibly make a run for rf which would probably up the anty.
I think the biggest obstacle to an rf acquisition is their net interest margin of 264 bsp. Definitely a big drag of earnings but imo, I think it can largely be corrected in 1 year particularly as fed fund rates return to reasonable levels.
Kelly King and the Board may surprise me but I have an uneasy feeling that management may not want to "rock the boat". The bank needs a quantum leap in earnings and not focus on small acquisitions given the current environment which we may never see again.
I totally agree with your assessment. Regions could provide a unique opportunity for them to secure sizable markeshare in Florida and Tennessee. KK and JA both have communicated that it would take a sizable acquisition for them to achieve a top 5 ranking in Florida....both stated that they would like to do another MOE. BBT approached Regions before so it's hard to imagine that they wouldn't look at them again w/ their depressed stock pricing. Tarp or no Tarp, the government would support a weaker institution mergering w/ a stronger one. Time for BBT to step up and pull the trigger.
Norm, you are a really great poster on this board. But KK isnt alone here, what role does JA still have? Chairman? He is still in the game. But I do indeed hear what you are saying.
Great to see you, still around boater?
I'm here Wilson. Hope your health has continued to improve. Not much to comment on here. Hopefully the TARP chapter can be closed soon.
Unlike some I feel that BB&T should avoid purchasing weak banks (ie RF) and focus on acquiring well run banks with a culture similiar to BB&T's. Why buy a used car (SuntrusT, RF) that needs repairs if you can get a shiny new one at a discount and avoid those expenses.
Have a good day.
BBT is a conservative bank that will acquire other conservative banks that did not engage in toxic loan programs. They will not want to taint their relatively clean loan base. I believe they will make several acquisitions and are sincere about their mission since they raised a substantial amount of funds with which to do so.
"BT is a conservative bank that will acquire other conservative banks that did not engage in toxic loan programs. They will not want to taint their relatively clean loan base. I believe they will make several acquisitions and are sincere about their mission since they raised a substantial amount of funds with which to do so."
I respectively disagree. Their sincerity imo is in doubt because of their inactions to date.
Virtually all large banks have some toxic assets - cdo, adc loans etc. so it is a certainty that bbt will not find a pristine bank with significant size to make a difference.
The future is now and it's time to achieve a quantum leap in earnings. If you're afraid of someone "stealing your cheese", you should not be the ceo or be on the board.
Bbt is looking at a gift horse in the mouth - regions bank. It's hard to imagine a better deal even though Dowd Ritter has been a rotten ceo.
My belief is that Kelly King and the Board are indecisive and have not put together a realistic projection of the quantum leap which could be realized through a biz combo.
If you're close to retirement, the easiest thing is to sit back and not rock the boat and I'm afraid that's exactly what is going on.
My confidence in bbt has been shaken. Kelly King and the Board need to perform now before other banks seize the best opportunities.