Today BBT is the only bank down in price. The dividend announcement is the reason, in my opinion. Market participants are making the assumption, as I am, that the dividend was not increased due to regulatory restrictions.
While I acknowledge that the dividend yield is among the best of the banks, it is still poor, and other banks will quickly catch up and pass BBT. It is disappointing that our CEO has continuously announced how the dividend would go up, starting as early as last October, when he is unable to convince regulators to allow an increase. It shows a lack of prudence. To announce imminent increases over a 6 month period and fail to follow through is a bitter disappointment. I can only hope that the next time he announces a dividend increase, he will only do so AFTER receiving regulatory approval and approval from the Board of Directors. His appearances on national business broadcasts touting a dividend increase without following through are severely reducing his credibility.
"Today BBT is the only bank down in price. The dividend announcement is the reason, in my opinion. Market participants are making the assumption, as I am, that the dividend was not increased due to regulatory restrictions."
Bbt always declares it's 2nd qtr dividend in February, payable May 1. The Fed is expected to address bank dividend increases in mid March 2011. The expected Fed guideline is 30% of eps. How could bbt approve an increase in February ahead of the Fed decision? You're entitled to own opinion but you might want to consider the facts more carefully.
Bbt is one of the most heavily shorted bank stocks on the NYSE. It's 2/11 short position was about 4.5%, almost 5 times higher than USB. Much higher than jpm and even bac.
Imo bbt does not command much respect from the investment community. Under a normal investment environment, loss severity on real estate loans were small. That was one of the big appeals of bbt - conservative lender who limited the downside with collateral. But in today's real estate world collateral in many case turned out to have small value making it almost equivalent to an unsecured loan. The real estate market will eventually recover but certainly over the last 2 years it's been almost non-existent resulting in massive losses for many secured loans.
Imo, many analysts are not properly taking into account bbt real estate portfolio. Adc, lot loans and commercial land loans are way down - 50/60% from their peak and the loan losses will drop off dramatically in 2011. These portfolios are very close to being "right sized".
Bbt annual charge-offs historically have averaged 50 bsp pts. Last year charge-offs and valuation adjustments were 5 to 6 times higher than history. 2011 will show an enormous improvement and I expect 4th qtr 2011 charge-off rate to drop to less than 100 bsp.
Given the 31 million shares currently short, bbt will ramp up big when the dividend announcement is made in March. That's my bet.
It might be worth noting that jpm mentioned this week that their commercial construction loans for the first 6 weeks of 2011 equalled their entire 2010 production. This bodes well for bbt.