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BB&T Corporation Message Board

  • ayscuew ayscuew Oct 21, 2011 5:53 PM Flag


    How does BB&T make money when all of the reserves are used up???? Assuming fed funds do not move, how does BB&T grow earnings in 2012??
    Make it simple guys. I am not an accountant.

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    • The provision for bad debt for the 3rd qtr. 2011 was $250 million per the statement of income. Multiply it by 4 to annualize it - $1 billion dollars. Bbt loans are about $100 billion. So the provision for bad debt annualized for the 3rd qtr was 1% or 100 basis points.

      Kelly King on the conference call said that the normalized provision for bad debt expense should be in the range of 60 to 80 basis point. Let's call it 70 basis point or .7% of loans. $100 billion in loans multiplied by .7% equals $700 million per year.. Divide by 4 to get a quarterly number - $175 million should be the quarterly provision for bad debt.

      So going forward, the provision will drop from $250 million to $175 million. Charge-off will also drop off to about $175 million per quarter.

      Clark Starnes, the credit czar on the conference call said that bbt would like to have a reserve for bad debts equal to 6 to 8 quarters of charge-offs. Call it 8 quarters of $175 million. The Allowance for bad loan should drop to $1.4 billion, down about $.9 billion from current level. Charge-off will run higher than $175 million for several quarters and will consume most of the $.9 billion.

      Hope this helps.

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