Actually long term total market returns are more like 11%-12% per annum with liquidity. And Buffet doesn't make illiquid investments with 20+ year holding periods with the expectation of making an 8% pre-tax rate of return. If he did that he would not be the world's richest man...
You do realize that a 20 year hold is essentially illiquid and the kind of hold period for something like an office building. And you would expect more like a 15%-20% IRR for your trouble. 8% is pretty weak, and your annualized returns continue to shrink every year you hold. So if in five years this thing is still at $37 will you still be crowing the great investment?
Not a bad investment?...when buying a "risk free" treasury bond in 1998 provided a higher overall return than this common stock? Do you understand what total risk-adjusted return means? Me thinks you need to go back to school. By saying the "oh but this bank did not go under..." is like saying "my neighbor's house burned to the ground but my house still has a few studs remaining" Not like you came out on top either way. there were plenty of investment...tons of investments from stocks, bonds, and commodities that have done better than this thing. But inventors like you are exactly the kind BB&T loves....low information stockholders that dont demand anything.
As we close out the year. I see that going back 16 years to the day, this stock is up 1%. On an annualized basis, then, the capital appreciation in the stock price is essentially ZERO. So for long term holders, all you have gotten is the dividend. Looking back over those past 16 years, the dividend payment has averaged +/-$1.10 per share, meaning that the annualized total return for this stock, for the past 16 years has been something like 2.9%. 16 years ago you could have bought the US 30-year treasury bond and locked in a 5% yield. What is up with that? Yet the CEO makes $10M per year? Why doesn't the Board simply force the sale of this bank? How do they get long term holders the returns they deserve? 2.9% per annum is completely unacceptable for 16 years. If you add in the pernicious effects of inflation, the real inflation-adjusted return on this stock has been ZERO. So if you are a patient long term investor (i.e. sucker) who has held this stock for 16 years and adjust for the devaluation of the dollar over the same period, this company has delivered NOTHING.
I was going to post this exact same thing. Well said. It would have been smarter to buy US treasuries in 1998 than to buy this stock. Wow! A bank full of mediocre managers with mediocre skills, mediocre talent who cannot find a job anywhere else...so they work at the BB&T corp. welfare office. All those great minds from East Carolina University at work. I wonder if they understand the concept of annual compounded rates of return. And at the top of the heap is that gem Kelly King. What a mess, form their stupid scheme to avoid taxes that will cost 700M to bad land loans, a failed credit model, to ripping off pro football players, this is just a bunch of rank amateurs who try to make their numbers by over-managing expenses and massaging their loan loss reserves form 2006. The only winners here have been the EVPs and BOd for the last 15 years.
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)