Bbt's cfo recently gave a presentation and implied that net chargeoffs for the current quarter are about what had been expected - 150 bsp. Given that 30 to 89 day and 90 day and still accruing delinquencies both dropped by 10% at 3/31/09, I think the cfo comments are reasonable.
Also, talked to bbt ir recently and heard the same thing -"net chargeoffs are expected to be in the 140 to 150 bsp for the year."
This brings up an interesting question - the magnitude of provisons going forward. The 1st qtr. 09 provision was close to $.7 billion or $288 million more than net chargeoffs. As a % of loans, the provision equaled 277 bsp which is 75% higher than net chargeoffs.
So, it seems to me that if net chargeoffs for 09 average 150 bsp, imo the provision going forward should significantly drop from the first quarter level. In fact at some point, the provision should drop below net chargeoffs after the bank comes out on the other size of the recession.
Bank's eps for the first quarter was around $.48 and included about $.15 for one time items but it did include a charge of $.37 for the increase of the loan loss reserve.
So if the provision were to equal net chargeoffs of say $.4 billion, seems to me that eps for the second qtr. should be in the range of $.65 to $.75. The second qtr is seasonably strong due to insurance earnings.
But of course, this conflicts with the recent dividend cut of $.32 per share and recent statements made by Kelly King which may have been motivated by the bank's desire to get rid of tarp and gov't interference into the bank's affairs.
Definitely thinks Kelly King needs to do a better job communicating with shareholders and clearly articulating his positions.
"seems to me that eps for the second qtr. should be in the range of $.65 to $.75. The second qtr is seasonably strong due to insurance earnings."
.65 / .75 ??? Wow, that's off from my estimates by .50 / .60 respectibly. I have trouble justifying earnings above .20 for the quarter.
might be too high. The EPS would be triple the analyst estimates and equal to last years EPS. Of course, it would be great if true, you'd be talking about a $35-$40 dollar stock by next winter assuming the next two quarters met or exceeded those numbers.
"might be too high. The EPS would be triple the analyst estimates and equal to last years EPS. Of course, it would be great if true, you'd be talking about a $35-$40 dollar stock by next winter assuming the next two quarters met or exceeded those numbers."
No question about it. My eps range of $.65 to $.75 is definitely too high. It assumes that the provison for bad loans approximates net chargeoffs. It won't happen after the dividend was cut from $.47 to $.15 per share. Bbt will continue to build its ALL even though delinquencies have stabilized. Probably a deal it cut with the DEVIL to get rid of tarp.
Imo, 2nd qtr. eps is likely to be in the $.30 to $.35 range with net chargeoff estimated at $375 million and the provision for loan at $675 million resulting in a further build in the ALL of $300 million.
Reos will continue to grow as bbt will ride out the recession and will not firesale properties at distressed levels. I'm ok with bbt marks on foreclosed properties at average valuation less 31%.
Would like to know however how average valuation compares to average book value. This was the question Mike Mayo asked Kelly King during last conference call.
King promised that ir would supply him with info but now ir has clammed up saying info is material. Well of course, it's material and ir should have lived up to the promise made by King.
Thanks for the fact based analysis. Always appreciated. My sense is that the dividend cut may be part of the government's interfernce that KK has clearly resented if not disparaged. During the conference call before the last one, one of the speakers indicated that the bank could hold that dividend quite comfortably even with a substantial drop in net income. It appears to me that a bank holding Tarp money has to listen. Paying out about 1 billion in dividends annually while holding 3+ billion in government money probably caused someone in the government angst. If you are correct about write-offs, commercial RE loans don't go too badly, and the overall economic picture doesn't topple, cuts in dividends for a year plus the capital raised, plus net income should allow BBT to get out of Tarp and pay dividends as they have historically.
I don't think the dividend will be going up much anytime soon, but if it does, it will be slowly. While most companies were paying around 40% of their profits in dividends, BBT was paying between 50% and 60%. The deleveraging from debt crisis we have been building up for 20 years could take a decade or more to work its way through the system, and banks could be involved with bad loans for another 5 years. I see no relief for financials for a long time. Good luck.