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BB&T Corporation Message Board

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  • normlasky normlasky Oct 10, 2011 8:00 PM Flag

    Banks had a good day!

    "What I like about BB&T:
    Kelly King will beat the street over the next few quarters (using reserves if he needs).
    What I do not like:
    There will be no dividend increase in 2012.
    Didn't buy today. Probably a mistake. Don't believe we will see $18 nobank. Might need to up your offer a bit."

    King has already gone on record that the dividend policy is to payout 30% to 50% of earnings. The current dividend is $.64 per share. At 30% payout, you think eps for 2012 will be $2.13 or less? King at the barclay's conference said that the bank's roe should be 15% or about $3.75 share. At 30% payout ratio, the dividend for 2012 would increase to $1.13 per share up 77% from current level. At 50%, the dividend would approximate the amount paid out prior to the big cut. I favor the later. No share buyback. The best way to keep share price up is a payout ratio of 50%. At current price, the shares would yield about 9%. 50% payout would still generate about $1.4 billion per year of capital retention, more than enough to grow loans.

    Second, you realize the reserve will drop significantly because bbt credit metrics are indicating a normalized provision of about 60 to 70 bsp? It's not because King is robbing from the reserve to bolster earnings. That's the line used by the media for the banking sector last qtr - quality of earnings were artificially inflated - poor quality. BS.

    All good banks managed earnings during this last crisis. Accounting is an art - many shades of gray. They did this to prevent dilution.

    I have no quarrel with King on how he accounted for marks on bad land loans. Absolutely no one could have predicted that the market for land would be worth a small fraction of the original appraisal and remain depressed for so long. I do have an issue with King on how he presented the marks on the quarterly conference calls. He should have elaborated on the marks by category. I was confused by his comments and have been blown away by the $1 billion charge-offs via non-interest expense. I disagree with bbt selling off prime land for peanuts but I think the bank was forced into that position by the Fed.

    Of course this is just a fantasy but I think it would be cool if the bank took the entire profit on their investment security portfolio, reinvest the proceeds in other AAA securities and use the profit to wipe out the oreo balance of $1.1 billion in their 3rd qtr. release. Rationale would be to wait it out. God only made so much land. Prices will come back. I don't like seeing speculators making 2 to 3 times on bbt oreo purchases. Shareholders should be the ones benefiting from land recovery.

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