KF does not do her homework and is ignorant of bbt's cre portfolio. 60% of their cre portfolio are income producing properties which have very low default rates. And those that default are almost always sold at book so losses are insignificant.
Per Fed Reserve reports, Bbt 9/30/08 delinquencies actually showed significant improvement in cre and c&i loans. Bbt has continued to shrink the residential acquisition and development portion of cre. Balance will be down to around $8 billion at 12/31/08 with maybe 5% 90 day past due. Bbt has a reserve of around $500 million on the $8 billion, so I don't see much pressure. Also, this reserve excludes any markdowns on cre already taken on cre loans which have not been foreclosed on.
Net interest margins will probably be flat at around 360 to 370 bsp. Loans will grow proably around 2% for the quarter. My guess is that eps will be in the $.60 to $.65 range.
KF knows nothing.
Looking forward to 12/31/098 short interest. Probably up a ton. What are the shorts going to do when investors begin to realize bbt earnings potential once delinquencies begin to normalize?
Norm, thanks for the reminder of details. I went to the BBT web site and reviewed the numbers and given the economic environment last qtr's numbers look OK. Long term of course they cannot continue to have profits decrease and defaults increase at the 3rd qtr rates. Even thoug I expect the 4th qtr to be in the same range as the 3rd qtr.
I was wondering about your estimate for increased loans of 2%. Is that qtr over qtr or year over year. Given BB&T should have gained as WB went thru the whole takeout process I would expect a nice bump in deposits and loan growth. So I am thinking your estimate must be qtr over qtr or a 8-10% year over year growth.
I would have guessed NIM will increase, because of better terms and conditions on loans.
I am not as sanguine as you about the loan portfolio, but my opinion is based on the belief that CRE valuations are going down by a lot. I just think there will be too many sellers without enough money to finance the buyers.
"I am not as sanguine as you about the loan portfolio, but my opinion is based on the belief that CRE valuations are going down by a lot. I just think there will be too many sellers without enough money to finance the buyers."
I agree but bbt is not hard up for cash and is under no pressure to sell distress cre foreclosed properties.
John Allison has repeatedly made this clear that if cre tanks, they'll just ride out the cycle.
Let's look at a few facts:
1. Residential commercial real estate (homebuilder loans) nonaccruals at 9/30/08 were $195 million, up only 2% from the prior quarter. $195 million makes up a whopping .2% of bbt loan portfolio. All other residential cre delinquencies were flat 9/30/08 vs. 6/30/08 and comprised around .1% of bbt loan portfolio. About $500 million of bbt Allowance for Loan Losses at 9/30/08 is earmarked for residential cre. Imo, such a reserve level is very conservative.
What's Finnerman want?
2. Bbt tier 1 risk adjusted capital ratio at 9/30/08 was 9.43% and will probably increase to 12% by year end because of the $3.1 billion of tarp money. This makes bbt the best capitalized super regional bank by a big margin.
Given this, bbt will not sell any cre property at super distressed levels.
3. Bbt is a very secured lender. 80% of their loans are secured by real estate. This compares to just 41% for wfc and 25% for usb.
Karen Finnerman easily wins the Hank Paulson award for stupidity.