LOL....how true. There were investors saying this in the late 90s and they could have bought US Treasuries and done better than owning this stock for 15 years.
The bank’s 2013 CCAR was objected to based on a qualitative assessment (the robustness of the institution’s capital adequacy process) conducted by the Federal Reserve. It would seem BB&T has sufficient capital since it was not rejected on a quantitative basis. Based on figures provided to the Fed on or before February 6 by BB&T, the bank had one of the higher Tier 1 common ratios of 7.76%, after planned capital actions in an adverse economic scenario, compared to a 6.56% average for the group of 18 participating banks. What was provided may be the crux of the matter. After further evaluation BB&T disclosed on March 6, risk-weighted assets stemming from unfunded lending commitments were understated by $4.6 billion. A higher level
of assets would decrease capital ratios and were not reflected in CCAR. In its 4Q12 earnings release, BB&T reported riskweighted assets of $126.5 billion, while a month later in the 10-K RWA equaled $131.1 billion. The amount of risk-based capital was unchanged causing the Tier 1 common equity ratio to drop from 9.7% to 9.3% as of December 31, 2012. To add even more confusion, BB&T had total assets of $181.9 billion at year end. Regulatory accounting requires weighting of on/off balance sheet items according to their level of risk as determined by regulators and is laid out in pages of compliance manuals. The greater the perceived risk the higher the weighting and the more capital a bank needs to protect against possible losses. BB&T plans to resubmit its capital plan to the Federal Reserve and anticipates the plan will address the factors which led to the Fed’s objection. Timing of BB&T’s resubmission and the timeliness of a regulatory
response is unknown.
You are only partially correct. Several years ago King was quoted, when asked why the bank had not made significant acquisitions during the depths of the recession (when so many banks were in trouble), as saying that BB&T had no idea how to value the assets. But yet, that is exactly what he and his staff are paid to know how to do. They did acquire assets, but not nearly in the scale they could have. Growth, though, is not effective if not made at the right basis nor if not financed properly. BB&T has never known how to effectively finance its balance sheet. Over the past 15 years its cost of capital has always been higher than the more profitable money center banks. It has been financed more like a 1970s-era thrift. Fear and luck have pulled BB&T thru this recession, not skill. To remain remotely competitive, they cling to silly expense controls and credit underwriting which simply reward mediocrity, attract mediocre talent, and provide mediocre returns. And their customer base is shrinking. Traditionally, BB&T catered to a more middle-class/lower middle class retail customer... those types of customers are broke (as is most of the middle class). Instead, they have attempted to swim upstream and gain both NIM and fee income by pursuing more commercial/corporate lines of business. Unfortunately, they mistakenly have believed they could underwrite and participate in this more complex financial universe with the same mediocre talent that formerly made car loans, HELOC loans, and handed out peanut brittle over the Holidays. It is a little different when pitching a $150M credit, and your only source of expertise is hiring lawyers who have handled such similar loan docs for other banks. This is why the bank's stock has been stuck for 12+ years. It is just not that well run of an institution. The only thing they did right in the past 20+ years was start pursuing bricks and mortar community banks in the early 90s when everybody else thought that internet based banking was going to replace the old "bank branch" model. Again, just lucky, not smart.
Norm, I must say I finally like one of your posts. This bank has regressed a long way from when Allison ran it back in the 1990s. They had a simple yet reasonable business model then. Trouble is, they thought they could retain those same community bank characteristics and also have $100B+ in assets, and a host of ancillary fee-based businesses. They also felt they could run such a beast with the same type of managers. Didn't work. What they failed to realize was this: when you get that big and pursue these different businesses, you need a different sort of VP/SVP level person running the store. They never figured that out. They thought the same old mediocre talent that used to make car loans could match wits with Wall Street financiers, manage insurance agencies, capital markets platforms, large unsecured credits, and the ALCO statement. For BB&T to succeed they simply need to sell, or split up and go back to their community roots, or gut their staff and bring in some much needed talent that can think (and did not go thru the BB&T Mgmt training program, which is where the bad habits start).
The end result of all this minutiae and contrived expense management is very simple. BB&T's vaunted credit model was not so good, and is not so good. Unless you change the cooks you will not get any different result. They have mediocre talent. I think I have said this now for five years. BB&T considered itself sooo smart for not getting in bed with the securitization and cds game, but in reality that was just luck...they didn't understood those products; but as history has shown, they also did not understand... (wait for it)....credit. Their lending was awful, but optically looked better than all the toxic securitized crap. Their assets are not as good as they would have you believe (for the last several years) and they simply have not taken advantage of market dislocation to grow good share and good assets from 2008-2011. Now you know why. But if you knew this bank, instead of just swallowing their press releases and investor presentations (and then repeating the same flawed content as gospel.. cough ....Norm) you would already be way ahead of the hounds. As somebody else pointed out recently, it has been 14 years of crummy results...I agree, and hate to say i told you so, but will say so and keep telling you same.
And this is surprsing how? Espically when banks complain about the new regs (unless they can redeem a security that they no longer want to pay the freight on)
"For those interested in bbt I suggest you check out the Federal Reserve 6/7/12 announcement and page 121 of bbt 10-k report"......and also check on page 12 of scroll 12a section C from Cave 42A of the Dead Sea Scrolls. A lot of valuable information there too, and not produced by BB&T either (but Norm does think anything from BB&T is gospel so maybe not the best example).
Ok, greengrass, I will need to break it down for you. First you are probably just another username for Stil, Norm, etc. We have seen this all from you before. We know you love this company regardless of how poorly it performs. And why, because you were a "30 year employee" That just about says it all, another mediocre employee with decades of tenure in a mediocre company. Just put in your years and come out on the other end with a pension. They used to call that "working for the company store." Or in today's lexicon, it is like working for the government. Be a good boy, get patted on the head and we will take care of you, just don't show any initiative or rock the boat, ok?.
The fact is BB&T had no clue about how any of the securitizations worked, CDSs, CLOs, CDOs, NIM transactions. Zero. Zilch, Nada. And they did not want to know because that would entail hiring a huge cadre of expensive bankers that would unmask what a bunch of hayseeds they all are. But if someone came to them with an exotic way to lower the taxes paid at the corporate level, they were more than willing to swallow that hook line and sinker without knowing at all what they were gettign into.
If you recall back in '09 one of the bank analysts asked BB&T on a earnings call why they were not gobbling up all these distressed banks and the reply was "we don't know how to value their assets." Now if they are so smart, and not just lucky, they would not have ever said that.
And as far as growing the bank from humble beginnings, so what? I have seen companies do that all the time, just use your stock currency. Big deal
Are you kidding? Where did you hear that? Not that i am surprised. Some troll sitting in a cube in WS making credit decisions about a loan in Florida is yet another brilliant move by these guys.
If they would just open the spigot on their cash reserves and their reserves held on deposit with the fed, there would be a bunch of new business.
But you are correct, relative organic growth is nil, compared to what they could be doing. The reflex action is to try and wring as much as they can from expenses. That strategy is pretty limited, BB&T already has pretty strict controls (that's why their mid to upper level talent is so weak; why would anyone worth a nickel ever want to work there when they dont even get paid a nickel?).
You quite possibly are dumber than I previously thought. I have some waterfront property in Arizona i would like to sell you. Stil gettin it?
Me thinks you dont understand finance (or just dont like smarty's facts). Yields on treasury or GSE investments will go up (and a lot too), but the value gets marked down on the security itself. ..the net payments to BB&T dont change for what they hold, but the price collapses. The runoff as you it call will be impaired, as they will get far less on the liquidation/maturity of the insturment than what they are carrying it for now. When you add in transaction costs it is a net loss no matter how hard you try and explain it away. And for any increase in yield they may get on such securites in the future (after they realize the loss on sale), they will have a matching requirement to simultaneously pay depositors more for demand deposits, CDs, etc. When the portfolio gets clipped it is a hit to equity, which impairs the TNW you are so proud of. This is all bad for a bank. And you assume that BB&T is never going to take the proceeds of its cash and securities portoflio and lend it out....nice. How is that going to help grow its loan portfolio? Oh, I forgot, they only make loans to "creditworthy" borrowers and there must be a limitless supply of those.
You may also not understand how stress tests work with the Fed and CoC. The comment about home mortgage LTVs is well, bizzare, to you use your phrase. As if an implosion in the treasury, bond, and currency markets will not impact mortgage backed securities, because they have 80% LTV ?!?!? (and according to whom is that number attributable? Your friends at BB&T?) And who cares anyway? Were you on Mars in 2008-2009 when asset backed securites were valueless, even the ones that were ensured by the govt.
And buddy, you need to stop referencing what "BB&T says" to defend your arguments. Do your own work. Will NIM increase? maybe. Will loan growth plummet? maybe. Credit spreads will not necessarily widen (which is needed to grow NIM) just because benchmark yields go up. In fact in a rising interest rate environment economic growth will be so shallow banks will have to tighten spreads and relax credit quality to attract loan growth. NIM does not improve on match funded duration if spreads tighten...now if BB&T wants to fund itself in the overnight repo market, that's another thing entirely.....
And if BB&T decides not to tighten spreads to attract loans, their NIM may in fact be great...on the one or two loans they make in a year. It will be great for the loan officers, they can play golf all week becuase they sure wont be making any loans.
Please cover all the points, not just ape what BB&T wants you to ape, or some cut and paste job on arcane and meaningless stats on the internet designed to dazzle the uninformed on yahoo.
You mean we a##holes who know more than you? Jealously is not a healthy thing. I won't call you that name, but what I will say is that if you are long this stock, have been for some time, and bought into the hype that everyone else is wrong, then more power to you. Some day you may be proven correct (but have not been for the last 15 or so years, regardless of Norm's, Stil's et al's valiant attempts to cut and paste data they find on the internet to support their thesis). And if proven correct, you may still need to account for years (or decades) of opportunity cost in owning this stock. You have a long way to go to cover a bad investment, good luck. Now if you want to trade this stock, that is another matter entirely, then we may have something to logically talk about.
Norm, it is not what they say but what they don't say that is equally important. Did you hear them say they were capturing share in all their markets? That is not true. Loan growth for competing small banks is off the charts...larger super regionals like BB&T, Key, US Bank, PNC are simply not making loans at the same pace, and even one of these jackleg CEOs was on MSNBC confirming that small community banks are taking huge chunks of loan growth and share from all the incumbent larger banks, namely because the smaller community banks were making the loans that the larger banks "don't have to make," because "we don't have to," And why don't they have to? because these larger banks, like BB&T are sitting on billions in cash that was sourced originally thru Fed and Treasury giveaways. The NIM number will not automatically improve if the Fed raises the short end of the curve. Any rise in interest rates will crush any fragile recovery. NIM may go up, but loan growth will go negative and the entire economy will slip backward.