Norm Lasky's expertise in finance and banking is unsurpassed - and he has the credentials to prove it. Norm has been posting on various message boards for at lest the past sixteen years. I have followed his posts on numerous boards and I can attest to the fact that his interest is mainly helping others that have less knowledge and experience. It is pitiful that many individuals that post on these message boards fail to understand his intentions. How he continues to have the patience to inform and teach others - many of whom are impolite and obnoxious - is beyond my understanding. It does attest, however, to Norm's unusually high standard of personal conduct. He is a rare individual indeed.
For those of you that are mean and obnoxious in your posting, I have only one wish - that you short the devil out of BB&T stock.
Norm must be or was a school teacher. Once a teacher, always a teacher. Probably was a bookkeeping or accounting teacher.
The country could use a lot more good teachers, not just a body to be in the front of a class waiting for a pay check. I have known too many of these that just hated teaching.
"Me thinks you dont understand finance (or just dont like smarty's facts)."
I think you're too lazy to read their financials. Here are the facts on their $30 billion plus investment security portfolio.
1. 99% are gov't guaranteed.
2. The vast majority of the portfolio is mbs/gse. The duration is very short - 3 years. Therefore, any change in interest rates does not materially impact their financials.
3.. 30% of their investment portfolio is based on variable rates.
4. About 40% of their portfolio is held to maturity and therefore is carried at cost.
5. The balance are securities available for sale. They are carried at fair value. Any change in value is recorded as an unrealized gain/loss in other comprehensive income. It is not run through their income statement unless they sell the security. As the securities approach maturity, the securities are written up or down to par with the contra entry booked against other comprehensive income. No p&l impact.
6. The commercial banking system currently has unrealized gains on their mbs/gse portfolio of about $30 billion.
You, smarty and queefoo need to enroll accounting 101.
Me thinks you dont understand finance (or just dont like smarty's facts). Yields on treasury or GSE investments will go up (and a lot too), but the value gets marked down on the security itself. ..the net payments to BB&T dont change for what they hold, but the price collapses. The runoff as you it call will be impaired, as they will get far less on the liquidation/maturity of the insturment than what they are carrying it for now. When you add in transaction costs it is a net loss no matter how hard you try and explain it away. And for any increase in yield they may get on such securites in the future (after they realize the loss on sale), they will have a matching requirement to simultaneously pay depositors more for demand deposits, CDs, etc. When the portfolio gets clipped it is a hit to equity, which impairs the TNW you are so proud of. This is all bad for a bank. And you assume that BB&T is never going to take the proceeds of its cash and securities portoflio and lend it out....nice. How is that going to help grow its loan portfolio? Oh, I forgot, they only make loans to "creditworthy" borrowers and there must be a limitless supply of those.
You may also not understand how stress tests work with the Fed and CoC. The comment about home mortgage LTVs is well, bizzare, to you use your phrase. As if an implosion in the treasury, bond, and currency markets will not impact mortgage backed securities, because they have 80% LTV ?!?!? (and according to whom is that number attributable? Your friends at BB&T?) And who cares anyway? Were you on Mars in 2008-2009 when asset backed securites were valueless, even the ones that were ensured by the govt.
And buddy, you need to stop referencing what "BB&T says" to defend your arguments. Do your own work. Will NIM increase? maybe. Will loan growth plummet? maybe. Credit spreads will not necessarily widen (which is needed to grow NIM) just because benchmark yields go up. In fact in a rising interest rate environment economic growth will be so shallow banks will have to tighten spreads and relax credit quality to attract loan growth. NIM does not improve on match funded duration if spreads tighten...now if BB&T wants to fund itself in the overnight repo market, that's another thing entirely.....
And if BB&T decides not to tighten spreads to attract loans, their NIM may in fact be great...on the one or two loans they make in a year. It will be great for the loan officers, they can play golf all week becuase they sure wont be making any loans.
Please cover all the points, not just ape what BB&T wants you to ape, or some cut and paste job on arcane and meaningless stats on the internet designed to dazzle the uninformed on yahoo.
The vast majority of bbt investment securities are mbs government guaratneed. As a result the duration is short - around 3 years. Therefore, as interest rates increase, bbt yield on their investment portfolio will increase. They'll invest the runoff from their mbs portfolio at the market rate. So that blows your argument.
Your point about the Fed not marking down gov't securities is bizzare. We're not Europe - got our own printing press. Additionally, bbt overwhelming majority of investment securities are backed by home mortgages - 80% or less ltv with the guarantee of gse.
Last point, is that bbt is well poised for an interest rate increase. Read their 10-k. Their nim will increase appreciably. Look for the section on interest rate sensitivity.
Go get an education.
So when interest rates go up and all their holdings in their securities portfolio lose value, and they have to start paying their depositors interest (instead of just taking fees), and they feel compelled to raise spreads on loans that borrowers cannot even qualify for today and hence will have reduced loan growth...tell me again why that's a good long term play?
Fact is this nation is never again going to dole out money to banks. When the bond and treasury markets' bubble collapses, which it will, a lot of banks will fail, some banks will not, but their share prices are going to be eviscerated. Did you know that the Fed's stress test did not include a stress on the bond or treasury markets as part of a bank's health? The Fed knows what the Achille's heel is, but will not admit it. I dont know when this will happen. A year? 2? 3? But it is going to happen, and in the meantime you might get a divi increase in BB&T and a move in the share price, but once the market structurally corrects itself....any gains will be wiped out and this stock will be back in the teens. remember, there is a difference between trading and investing.