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  • bill44syr bill44syr Apr 19, 2012 4:46 PM Flag

    Norm Rest of year?

    How do you see the rest of the year? What did you think of the quarter and conference call?

    Your insight is always greatly appreciated.

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    • Attack the man? I have pointed out Norm gets buried in the minute details of a company and loses site of the big picture.

      What you (and Norm) seem to miss - ECRI's indicator looks forward and is not a coincident indicator looking at current economic activity. The ECRI call back in late Sept/early Oct was looking forward 6-9 months (avg 6 months). Still too early to declare it a failure or success.

      So are you paying attention? The GDP rpeort this week - below estimates. Problems popping all over Europe (Netherlands, Spain, French elections, Great Britian back in a recession).

      Now all this is no guarantee of an economic pullback here, but it does tell us the odds of that are increasing.

    • Hey, don't attack the man when you run out of argument. Norm accurately points out your reliance on ECRI was ill timed (to say the least). So you got one wrong. Big deal.

    • Bill - isn't Notm great? You got to love his always upbeat positive outlook.

      One minor problem with that - BBT has gone nowhere the past year (one would have expected more given Norm's comments). Norm is positive (gotta love Norm's positivity) - BBT does nothing - gets kind of boring . Know what I mean.

      I got a feeling there is "love" in the air - Norm is in love with BBT. Hehe

      • 2 Replies to inlet_boater
      • On 11/7/11 you posted the following message to this board. If I were you, I would be a bit more humble. Indeed, I've had difficulty projecting the severity of bbt loan losses and timing but at least I've been on the right side of the United States macro picture. Don't recall anyone missing a forecast more so than ECRI. Your faith and trust in these guys was a huge mistake.

        "Two months ago, the ECRI made a very definitive and unwavering recession call going even so far to state that "there’s nothing that policy makers can do to head it off." Since then, the markets have rallied strongly on the heels of recent positive economic data, leading many in the mainstream financial press to accept that the U.S. has narrowly averted an impending recession and will begin to see growth. Not so, says Lakshman Achuthan, ECRI's chief economist and spokesman; citing under no uncertain terms that "nothing has changed our view".

        Who should I trust? Organizations like IMF, World Bank and others with very questionable records or ECRI?"

      • Under $27 a year ago, $31.58 Friday close >> better than 16% plus the dividends. I would love to bored like that every year.

        Roller coaster ride for excitement during the year, but that can be avoided by investing in T-Bills if that is your wish.

    • "Don't understand what's so magic about 1.5% roa levered 10 folds.

      Go back to say 2004/ 2005. I believe bbt roa was around 1.7% and their return on tangible equity was close to 28%. "

      From 1997-2007 the ROA and leverage breaks down as follows
      ROA >1.5% 27% of the time
      ROA >1.2% 91% of the time
      Leverage > 11x 45% of the time
      Leverage > 10x 63% of the time

      This period was during banking Boom Times - It didn't get much better than this period.

      To get your 4$+ EPS in 2013 your betting that either:
      1- ROA >=1.5%
      2- ROA ~1.2% and Leverage increases from ~9.75x to >11x

      Nothing magic about 1.5% ROA at 10x Leverage - Just not going to happen in 2013 for your $4+EPS in my view.

      Anyway I think we have done it to death.

      Spin

    • "Under the stress test scenario, bbt loan losses were 20% , 23% and 30% lower than pnc, usb and wfc respectively." That's because they aren't making many new loans

    • Don't understand what's so magic about 1.5% roa levered 10 folds.

      Go back to say 2004/ 2005. I believe bbt roa was around 1.7% and their return on tangible equity was close to 28%.

      Credit Suisse raised their price target on bbt to $36 - up about $11 from start of the year. They still got their provision in the 110 bsp range for the next 3 years plus foreclosed property expense remains very high. Anyone who can access Schwab can pull the bbt report prepared by credit suisse. Good information.

    • Don't understand what's so magic about 1.5% roa levered 10 folds.

      Go back to say 2004/ 2005. I believe bbt roa was around 1.7% and their return on tangible equity was close to 28%.

      Credit Suisse raised their price target on bbt to $36 - up about $11 from start of the year. They still got their provision in the 110 bsp range for the next 3 years plus foreclosed property expense remains very high. Anyone who can access Schwab can pull the bbt report prepared by credit suisse. Good information.

    • "Their 1st qtr. results were already close to the $3 eps pace you estimated for 2012. "
      --> 2013.

      "$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."

      Your $4+ EPS 2013 requires 1.5% ROA and 10x Leverage for 15% ROE. 1.5% ROA just ain't gonna happen for 2013. Therefor for your $4+EPS from 15% ROE, King needs to re-lever the Balance Sheet. Avg. Leverage is ~9.75 currently. King would need to relever the balance sheet ~30% to 12.5x to for 2013. And he won't do that as his B3 capital ratios reduce. (BBTs historical higher ROE you reference was driven by higher leverage than they carry currently)

      Not going to happen - 70BP provision + foreclosure expense savings don't get you there.

      $4+ EPS ain't on the cards for 2013 whatever way you cut it out side of a transformational acquisition.

      Spin

    • One other pt. worth mentioning and then I'll shut up.

      Fed recent stress test showed bbt with the lowest loan loss rate and strongest tier 1 common vs. its peers. I believed their analysis only included peers with $100 billion or more in assets.

      Under the stress test scenario, bbt loan losses were 20% , 23% and 30% lower than pnc, usb and wfc respectively.

      Worth noting that pnc's loan loss provision for 1st qtr. was 40 bsp plus
      (annualized) - vs. 110 bsp for bbt. PNC ALL is about 2.2% of loans - bbt is about 2.0% of loans.

      I would be interested in see mtb and hban results but they were not included in presentation. My guess is mtb results were better than bbt.

    • Suggest you read their 1/19 presentation found on their investor relations website. Also, read their transcript of earnings called.

      Imo, bbt is selling at about 7 .5 times next year earnings.

      Eps included about $.10 of eps charges - itemized in their presentation. Excluding these charges, eps for the quarter would have been $.71. Also note that their credit costs are still bloated - about $.20 eps reduction for quarter. First, their provision was 110 bsp almost equal to their net charge-offs excluding adc. I think their provision will drop to 70 bsp by year end. Their delinquencies - 30/89 days and 90 day plus drop 22%. Record low levels. (Don't know how you reconcile increased provisioning vs. record low delinquencies). Second, their foreclosed property cost still amounted to $93 million. Should drop to minimal amount by year end.

      Loans and deposits were very good. Bbt continues to increase their market share. One negative is their nim - will continue to drop - probably down to 3.7% by year end due to accretion runoff. However, their loan growth will offset this and once the Fed increases rates, bbt nim will expand. Also, note that some of the nim reduction is also offset by reduced fdic expense.

      Based on the content of the dialogue on this board, I have limited my participation. Bbt investor relations provides excellent presentation on their website. They are updated on a regular basis so if you're seeking info, suggest you check it out.

      • 4 Replies to normlasky
      • "Imo, bbt is selling at about 7.5 times next year earnings. "

        That's ~4$+ EPS and implies ~1.50% ROA. Ain't going to happen for 2013.

        I can get to ~$3 EPS 2013 which is a v. generous 1.2% ROA for this bank. I think in the last 20 years it did 1.2% ROA 1,2 or 3 years from memory. BBT overpay for acquisitions. Colonial was a good one Crump just under ~2x revenue ...not so good in terms of price paid.

        "Don't know how you reconcile increased provisioning vs. record low delinquencies"

        Provisioning isn't coming down as fast as you would like as the NPLs are still missmarked imo - They took the Corrective mark on the OREO Q4 but the NPLs/TRDs still have work to do.

        As King is now actively working to limit OREO Inflow all the chargeoff work has to be done at the front end(provisioning/chargeoff) vs bakend (foreclosure expense).

        Just by the fact they they grow the average loan balances 1.5-2%/Q the provision gets to their 60-80bp target.

        Spin

      • Norm, it is not what they say but what they don't say that is equally important. Did you hear them say they were capturing share in all their markets? That is not true. Loan growth for competing small banks is off the charts...larger super regionals like BB&T, Key, US Bank, PNC are simply not making loans at the same pace, and even one of these jackleg CEOs was on MSNBC confirming that small community banks are taking huge chunks of loan growth and share from all the incumbent larger banks, namely because the smaller community banks were making the loans that the larger banks "don't have to make," because "we don't have to," And why don't they have to? because these larger banks, like BB&T are sitting on billions in cash that was sourced originally thru Fed and Treasury giveaways. The NIM number will not automatically improve if the Fed raises the short end of the curve. Any rise in interest rates will crush any fragile recovery. NIM may go up, but loan growth will go negative and the entire economy will slip backward.

      • [NORM] "Also, note that some of the nim reduction is also offset by reduced fdic expense."

        Norm, what's reducing the FDIC expense? Based on the little reading I've done, I was under the impression the FDIC insurance rates were going up. That, along with building deposits, I would have expected their expense to go up.

      • Thanks Norm, appreciate the comments. There is one person, a former member of the senior management team that had the respect and admiration of every employee I knew (I was an employee for 30+ years). Henry Williamson was a brilliant banker and a great leader. Henry, those of us who knew you and were priviledged to work with and for you have really missed you. It would be great if we could hear from you on this board as no one has ever commanded the respect and complete credibility that you did. Your opinions would be very welcomed!

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