" BB&T is positioned to be an acquirer, not a target, according to Marty Mosby, a Nashville, Tennessee-based analyst for Guggenheim Securities LLC who rates the stock “neutral.”
“They are one of the consolidators,” Mosby said in an interview. “They have capital, they’re a strong franchise, the management team is generally respected in the marketplace.”
King joined BB&T’s management development program in 1972. He served as the bank’s chief operating officer from 2004 to 2008 and became CEO on Jan. 1, 2009. He holds a Bachelor of Science in business administration and MBA from East Carolina University, according to BB&T’s website, and is a director of the Federal Reserve Bank of Richmond.
BB&T’s shares have dropped 0.36 percent since King took over through Jan. 26, trailing the 19 percent advance in the KBW Bank Index. This year, the shares have risen 4.1 percent, the fifth-best performance in the 24-company index behind Capital One Financial Corp., JPMorgan Chase & Co., Bank of New York Mellon Corp. and Wells Fargo & Co.
Buy, Sell, Hold
Among analysts who follow BB&T, five have “sell” ratings on the stock, 24 say “hold” and 12 recommend “buy,” according to data compiled by Bloomberg. The skepticism has arisen from concern that BB&T may not be able to catch up to peers in terms of asset quality, Mosby said.
“Their products and their geographic mix pushed them to realize those losses late cycle,” he said. “As you came into the fourth quarter, the worry was about how asset quality was going to do and are they going to be able to turn the corner, because everyone else is making progress.”
King said an expanding economy will make mergers and acquisitions more likely. The real estate market is swinging back to normal in certain areas, such as Atlanta, Washington and the Gulf Coast of Florida, he said.
“If you look at the aggregate Southeast, parts of it are beginning to come back,” he said.
Cash and near-cash items totaled $1.4 billion in the fourth quarter, the lowest level since the first three months of 2001. The lender slashed its dividend from 47 cents to 15 cents in 2009 as the worst financial crisis since the Great Depression squeezed earnings and balance sheets at U.S. lenders.
Though the bank may consider increasing the dividend, investors should not expect BB&T to have a “huge payout increase,” King said during a conference call following the release of quarterly results.
Earnings growth may be hurt because of the Dodd-Frank financial regulatory overhaul, especially the part that regulates debit-card transaction fees, King said. The Durbin Amendment, which caps interchange or “swipe” fees at 7 cents to 12 cents each, is “negative for everybody,” King said. The Fed’s proposed limits may reduce annual revenue for U.S banks by more than $12 billion. King has declined to quantify the impact on BB&T.
“Singling out one part of a very complex financial industry is completely unreasonable,” said King, who told investors he expects Congress will make changes by July, when the caps are due to take effect. “This whole Durbin Amendment is an absurd intervention into the free-market system,” he said during the Jan. 21 conference call."