I read BBT as fully priced on a times book and
times earnings basis with the historical norms for this
industry. What is it that makes it a good buy in
anticipation of an acquisition by a larger bank? At 2.61 times
book currently, I don't see much upside in the
premium. Your thoughts?
There was not much of a rate incease through Q3,
I don't have the dates on hand but am thinking it
was September when the first bump occurred...may have
been October (help anyone:-)). Any increases would not
have much of an anualized effect on last years
earnings. I'm thinking more about the next few
quarters....though I (FWIW) think at year end we'll be where we are
now with respect to rates.
for your statement"BB&T is really quite
vulnerable to a rising rate environmrnt". I understand
no-one is bulletproof, but the reported facts on p.8 of
the press release financials showing an increasing
net interest margin tells me assets are repricing as
fast as liabilities for the periods indicated. And
these margins are better than the average for both
large-cap and mid-cap banks thru Q3. It seems a stretch to
assign more rate risk to BB&T than the group.
BB&T actually is quite vulnerable to a rising
rate environment. The strategy of buying small
community banks may bring deposits, but it also can bring a
wealth of low fixed rate loans. Banks gearing for a sale
(including SNB and UCB) will often bulk up assets with low
or even below market fixed reate commercial loans.
Likewise with many of the mortgages which came with the
S&L acquisitions of the past.
another large...or several small acquisitions in order to
continue to improve the efficiency ratio and continue to
increase non interest fee income. No Y2K spending going
forward will go straight to the bottome line however,
which will help.
BB&T's asset/liability mgt. system is highly
regarded and this year's result proves that BB&T and many
banks are much less sensitive to interest rate
fluctuations than the market is willing to recognize. The
quarterly net yield on earning assets during rising rates
this year has actually risen from 4.25% in March to
4.26% in Sept. to 4.28% in December. (see last line on
p.6 after clicking on "complete financial statements"
at the bottom of the earnings press release
available on bbandt.com
home page. Poss is also right
that simple hedge derivatives are used to balance the
risk position. It's a shame the analysts who follow
banks haven't been able to convincethe market of the
progress made in this regard. Also remember the community
banks bought by BB&T usually have a wealth of lower
cost retail deposits which helps the net interest
margin. I think
Note today: CIBC and Legg Mason
upgrade BB&T to BUY, stock is up 2 1/2 so far. Long and
OK......I'll take a shot at it...but without
taking the time to justify what I say by running through
all the mathematical comparisons.
as if BBT is a bit more dependent on retail funding
than are some of its competitors, such as say
Wachovia, which are more dependent on wholesale
funding.........medium-term wholesale funding. In a rising rate environment,
such as the one now existing, there is a propensity
for an inverted yield curve, with rates on short-term
deposits rising faster than rates on long-term funding.
Therefore, on a relative basis, BBT's net interest income
gets hit a little harder than does some of the others.
Of course, some of that can perhaps be offset by the
use of derivatives and the like.
A potential acquiror would already know about the
poison pill provisions. Therefore, what you have heard
presumes that an acquiror is WILLING to pay a price
acceptable to BBT. IMHO, then there is really no
BBT management is young. Any acquisition of it that
would be acceptable to it will depend on what kind of
solid gold employment and/or compensation arrangements
the acquiror may wish to make with
I'm would think that the payoff compensation lessons
learned by BBT's arrangements with Glenn Orr have not
been lost on Allison and company. However, I really
wouldn't think that an acquiror would be willing to pay
anyone at BBT $1.7 million forever.
BBT is a good
outfit, but it ain't that good.