No sense in name calling. In my opinion, Mr. King can start repairing some of his lost credibility by specifically addressing some important issues:
1. Reos - Principal balance and carrying value by quarter and by loan segment. Since Lehman foreclosed property expense has been $2.1 billion. The vast majority has been due to much lower prices than projected when calculating final charge-offs. The $2.1 billion has been run through other income and expense. It is not part of the cumulative net charge-offs. Any graph of net charge-offs over time vs. competition is therefore, meaningless and is a misrepresentation of the truth. The 4th 2011 charge-off of $365 million was a whopper and frankly, I resent the comment made by Clark Starnes that "I'm pleased to report major reductions in reos for the quarter'. Let's call a spade - a spade and not dance around the issue. It also makes my blood boil when I saw the bonus paid to Clark Starnes when he was a primary architect of the adc mess.
2. Normalized loan loss provision. Non accrual loans, tdrs, 30-89 day past due and 90 day or more past due are much better than 1 year ago and yet the loan loss provision is about the same as 1 year ago. In the most recent quarter net chargeoff excluding adc (which is down to almost zilch) equalled the provision or around 90 plus bsp. Why is BBT provision 3 times higher than MTB provision even though their current bad loans on a relative basis are about the same? Why is it 2 times higher than PNC, HBAN, STI (without putbacks) and many other very large regional banks?
3. Net Interest Margin - Mr. Bible, CFO, has been forecasting that nim will drop to 3.75% for many quarters now. Through 2012 it's ranged between 3.94% to 4.09%. No question it's going to drop due to the accretion on Colonial. Each quarter BBT loses about $25 million in net interest income from Colonial runoff but according to Credit Suisse the Colonial covered loans will not go to 0 until 2015. Last quarter net interest income for Colonial was $175 million so maybe in the 4th quarter it will still amount to $150 million. Should this happen it will drop margins to around 3.88% with all other factors being equal. And yes, I understand refinancing of home mtg and the intense competitiveness of c&i is a drag on nim and $2 billion increase in mbs is a drag. But what about some positives going for the back? Specialized lending continues to grow a lot. Even though their gross margin has been in decline some, new loan growth in specialized lending is a big plus for net interest margin because of nearly double digit gross margins. How about CRE? It's coming back and margins have been improving. Why not buy some very high quality, solid margin loans made to American companies by European banks in need of cash?
4. Covered Loan Net Interest Income and Fdic Reimbursement - Last quarter Income dropped and reimbursement increased. Why?
5. Crump Insurance - BBT paid $576 million for Crump. The IRR is above 15% so it spins off $100 million annually of cash. Where is it by quarter?
6. BBT Earnings Headline - Credit Suisse says BBT earned $.73 before one time charges - primarily acquisition. This is 2 cents above the average estimate. Yet the headline read BBT earns $.66 so most folks thought BBT missed the estimate by a nickel. In the future how about putting an objective spin on the HEADLINE. If the average estimate excludes one time charges make sure the headline is reported on the same basis. Mr. King said on a cnbc interview the stock tanked largely due to nim comment which Bible has been talking about about 2011 but it has simply not happened as abruptly as projected. I think it was also due to the HEADLINE - major screw-up.
BBT has lost about $3 billion in market value in October. Shareholders paid Mr. King a $10 million bonus plus $1 million salary annually. We do not expect or accept our stock price tanking big due to self-inflicted wounds. Totally unacceptable.
That's why I've reduced my position significantly and hedged much of it at $30 strike price.
"Why is BBT provision 3 times higher than MTB provision even though their current bad loans on a relative basis are about the same?"
It should be no surprise by now Norm, we've been back-and-forth on BBTs backend loss strategy since what 2008? We'll this is what the backend looks like: a thousand small cuts driving disappointment in the Longs.
The NPAs aren't marked correctly and BBT have to keep gradually writing them down like a melting glacier --more bleeding to go via provisions and forclosure expenses but the worst is behind them. MTB/WFC/USB etc all took the medicine up front -- King decided to a/mismark the NPAs then b/ look y'all straight in the eye and firmly say 'Our underwriting is good and the marks are correct.' c/ then keep gradually charging off and using forclosure expense and hope no-one notices.
Funny how no other major bank seemed to have this issue with NPA valuations declining that BBT seems to keep falling back on to justify the continued gradual writedowns.
You'll endup driving yourself insane torturing yourself comparing BBT to a high quality banks like MTB/WFC/USB. King just isn't that smart.
"Investors need and expect answers."
King has already given you his answer - Focus on the new magic-metric invented by BBT this Q 'Core-NIM'
Q4 kitchen sink coming up. BBT love Q4 to shovel more bodies out the backdoor hoping no one will notice.
I appreciate your comments Spin but there is a big difference between net cumulative charge-offs and provision vs. reo foreclosed property expense. In the 3rd qtr. bbt net cumulative charge-offs ex adc were 96 bsp about the same as the provision even though non-accrual loans continued to declined significantly and compare very favorably to big tier banks.
The reo foreclosed property expense is a different story. It become a big joke. Kelly King has a responsibility to provide fair and honest disclosure. I want to know the principal balance of reo loans and their carrying value by loan category.
Cumulative reo charges have amounted to $2.1 billion and have almost doubled since 4/11 when I asked Kelly King at the shareholder annual stock meeting about this subject. Both of us know that there is no other major bank in the United States who have accounted for a major portion of their reo write-down through other income and expense.
As a personal investor I have decided to place a 10% discount on bbt share price due to my personal issue of fair and honest financial reporting. I'm lucky I hedged most of my bbt position with covered calls to absorb some of the shock.