Here's my view:
Eps of $.26 per share, nickel above consensus.
Provision for loan losses will continue to accrue at 275 bsp almost double net chargeoffs. Nim of 359 bsp. Insurance income will continue to kick ass. Refi will continue to be strong. Fixed income good. Tarp warrants will result in charge of maybe a dime.
ADC reos will continue to increase. Bank carries them at avg. valuation less 31% which I think is around 75% of the original principal amount. Bank refuses to sell adc reos at market because speculators will only pay about 1/2 of the reo valuation.
Provison of 275 bsp is being driven largely from the shutdown in the adc market. No one knows how much bbt will ultimately realize from their reos. I'm comfortable with their current assumption but it's going to take time to unwind.
Since the adc market is almost shutdown, I look for other cre to hold up fairly well during this cycle.
Friday will be primarily about loan quality. Think bbt continues to make major improvements in this area. Increase in unemloyment won't impact bbt much because of their clientele and loan portfolio - not much in card cards.
Imo, when we come out on the other side, bbt ALL will be vastly overstated resulting in artifically low provisions - so we'll swing to the other side of the pendulum. All depends on reo realization.
Bbt has about 3300 adc customers and a big chunk of these folks have huge amounts of capital. I look for a major amount of the adc reos to be sold to these folks once the economy shows recovery.
Imo, bbt has a big opportunity to hook up with rf at a very cheap price. However, I believe that the Kelly King and the BOD does not have the drive/ambition to go after the quantum leap in earnings. The rf current situation is very rare. I agree that Dowd Ritter is an ass but his position has been weakened so severely I don't think he's a big factor in pulling off a cheap buyout. If bbt is concerned over rf loan portfolio and ALL adequancy, they can always pull a wells fargo when they acquired wachovia - prior to acquisition date.
Great post Norm. . .
I wonder if $0.26 will be seen as good news and a 24% beating of earnings or a let down since it's close to a 70% drop from last year?
Key to the CC will be as you noted "loan quality". It will be interesting to see how management spins the increased "realized" risk.
I think today is a good day to bail out of the S&P as well as US markets in general. S&P is up nice along with the rest of the market. Looks like a technical top to me. . .
Thanks. A few questions. You note a charge due to Tarp funds which we can accurately treat as a non-recurring expense going forward. Is there any income also associated with that transaction? If so, that also goes away in the future. In other words, is your estimated charge already a net number?
With Tarp (and associated govmnt strings) gone maybe we will see a little more aggressive behavior in M&A. Certainly the press seems to think that opportunities abound. It would appear to me that a target could count on a "double" in being acquired. By that I mean if it takes BBT shares at current prices as a swap for its shares, it should see a double in BBT within 3 years. Plus, the acquired might also get something above current stock price as its value as well. We would certainly expect that if a big bank were to take out BB&T.
I'd like any insight you have on BBT exposure to shakey commercial real estate and credit cards.
FYI, for folks who don't know, I just looked up the info for myself:
>>>>BB&T Corporation will release its earnings report for the 2nd Quarter of 2009 prior to market opening on Friday, July 17, 2009.
Go to the WEBCASTS page on this web site to link to a live conference call, hosted by Kelly King, CEO and Daryl Bible, CFO, beginning at 11:00 a.m. EDT, or to replay the call.
A replay of the webcast will be available until 5:00 p.m. (EDT) on Friday, July 31, 2009.<<<<