- You can add back all of King's one time charges but banking by its nature will always have one-off special charges.
- Agree OREO should be close to fairly marked -- finally.
- They just need to deal with the NPL/TDRs now which is why the provision is higher than your liking in my view.
- BBT will get close to 70BP provision just with portfolio loan growth over the next 4 quarters. There isn't going to be some huge provision erosion down to 76MM as you modeled previously for Q4-2011.
- MBS non-interest income will mean revert by Q3 imo. Bank CEO's asked about this mentioned a current refi boom that while still strong won't last. GOS spreads are at wides and volume is incredible at the moment. I believe it erroneous to project this out under the guise of 'market-share-gains'
Your $4+ EPS/1.5% ROA for 2013 isn't going to happen for BBT outside of some transformational acquisition.
Their 1st qtr. results were already close to the $3 eps pace you estimated for 2012. Certainly, there will be major credit improvement over the balance of 2013. Cre and adc nonaccruals make up 1/3 of their total. They'll dry up by year end. They're not making new cre and adc loans unless they are solid. Direct retail charge-offs are still running 150% higher than their normalized level - some of it is likely due to lot loans. This will also improve significantly by year end. Their provision will be close to 70 bsp by year end and foreclosed property expense will be minimal. That's the biggest driver to $1 eps per qtr.
I agree that their mtg banking income from refis is likely to drop and not be favorably impacted by gain on msr. But there are several items that offset this.
King said in the transcript that their mtg banking biz in April was still running at the same pace as the 1st qtr and the business is shifting from refis to new purchases. Also, their insurance revenues are well below their quarterly average due to seasonality in the first qtr. The crump and bbx acquisitions are acrretive to 2012 earnings. Additionally, King noted that their revenues were reduced because 1 less day in the first qtr. If they grow loans 6% annually their noni-nterest income should also increase.
$4 share eps equates to about a 15% roe. King said in a mid year presentation in 2011 he thought the bank could achieve that level once earnings normalize. The bank has achieved 15% roe historically.