Implementing a cost competitive Wells Fargo branch strategy as discussed in recent wsj article is much more important than reducing regional structure. Also, I think they have ignored the importance of discount brokerage. There are plenty of folks who trade daily at discount brokers. Many carry big balances in cash even though current rates are 1 bsp per year. Many folks are not going to flock into bbt wealth management and pay a large fee relative to their return to have their money "managed". Also, I have found their insurance services to be non-competitive. I use Liberty Mutual Insurance through Prudential and was able to reduce my house, auto and umbrella policies by 50%. I'm hooked into their online bill payment - otherwise I would consider switching my direct deposits and visa to another bank who provides services I want.
I've noticed some of the replies on selected posts have been deleted by Yahoo. The posts are still there by author but they are no longer listed as replies on the message board. Censorship? Why?
USB is raising their dividend to $.28 qtr yielding about 3.5%. They sell about 10/11 times earnings. They don't have qualitative issues with the Fed. The same is also true about WFC. Yes, BBT may end up getting Fed approval in late 3rd qtr. to increase the dividend to perhaps a 4% yield vs. current price which I think makes it a good buy but I have serious reservations about current management credibility and trust. No better example than the $2 billion of charges for additional mark taken on bad loans via noninterest expenese. No other bank in America reported relative charges approaching anywhere close to this magnitude via noninterest expense. Plus the lack of transparency into the detail of these charges is a further insult to shareholder intelligence. Shameful.
Kelly King needs to consider retirement. He's expanding the board from 12 to 19 directors. Probably loading board with more of his cronies. His plan, I think, is to stay on for another 5 years. That's unacceptable. He paid himself a $10 million bonus in 2012 - which should be clawed back given that he flunked the Federal Reserve capital plan. Plus, King sits on the Richmond Federal Reserve Board so it shows how badly he miscalculated the Fed's response to his proposed capital plan.
I'm also concerned about bbt branch consolidation. Recent Wall Street Journal article discusses wfc branches of the future - 50% reduction in operating costs. I don't see this on King's list of things to do. I like banks that are anticipatory, not reactionary. On a personal note, I'm a personal investor and bbt does not offer competitively priced products and services. I do most of my business with Schwab.
I'm putting my money of wfc and usb on a market pullback. Might trade bbt some but until they make management changes and talk about the importance of reducing branch costs, I won't add to my position which I've decided to maintain because of tax
Imo, this bank has a big credibility problem. I think the Fed shares my opinion. The reo valuation adjustment is just one example. Shareholders over the last several years have been bombarded with about $2 billion of charges via the valuation adjustment for additional marks. No other bank in America has reported relative charges anywhere close to this magnitude. Yes, I understand estimating adc liquidation values is very subjective but the transparency showed by bbt in this area is very fuzzy at best. In April of 2011 at the annual meeting - q&a session- I asked Mr. King directly about the valuation adjustment. His response proved to be inaccurate.
Their bonuses should be clawed back since they flunked the Fed capital plan. Expanding the BOD is not the answer - we need better management and increasing emphasis on wealth management, particularly discount brokerage, an area where bbt is not competitive. Expanding in Texas is fine but how about consolidating some in their core areas. Mobile banking will become more important - branches are losing importance. About 2300 branches shutdown in 2012 (nationwide), about 2.5% of the banking sector and an estimated additional 15000 branches will shutdown over the next decade. How many branches did bbt shutdown or will shutdown?
PS - S&P downgraded bbt but left their rating at 5 stars. Credit Suisse prepares much better and comprehensive reports than s&p.
Good luck. Bbt 1st qtr. results will not be too exciting assuming no accounting manipulations.
"Please keep selling"
You may get your wish. First quarter earnings are not going to be too exciting assuming no accounting tricks. I think you should seriously consider how this bank accounted for reos over the last several years. They took marks via the valuation adjustment totaling around $2 billion. I lost track of the marks on their reos but would not be surprised if it were 80/90%. This bank conceivably could have many hundreds of millions of dollars of prime adc properties carried on the books for pennies on the dollars. Wish I could quantify this area but the transparency has been very fuzzy at best.
Bbt flunked the capital plan likely on qualitative grounds. It was not due to capital levels. The pillars of this bank were built on integrity, honesty, trust. I believe the Fed has some serious questions - not only about the accounting of reos but other areas.
The bank has a responsibility to its stakeholders to come clean after they first receive authorization from the Fed. Flunking the Fed capital plan is a very serious subject. The bonuses paid to upper management should be clawed back.
Board of Directors urgently needs to fulfill its responsibilities and satisfy the concerns of all investors.
A short time ago suntrust or schwab were ripe for acquisition for their share price has increased appreciably in the last month. King has made a few small and safe acquisitions - the colonial deal was a gift from the fdic.
Unfortunately, he and his management team ignore major trends. For example, Charles Schwab last year added 900,000 new customers with assets of $112 billion. Their client base now has assets of $1.95 trillion. More investors are managing their retirement portfolios - bank charges average around 2% per year. This is a big trend.
I'm a Charles Schwab customer. Their service is great - nice research. They pay 25 bsp per year on savings. Bbt is something like 1 bsp. Schwab gave me a break on trading - $6.95 per trade. Bbt does not offer what I consider is competitive discount brokerage - fee is something like $20 trade. I trade daily so that cost difference adds up - around $20k per year. When I transferred my accounts to Schwab, they gave me significant cash bonuses.
Why do I need bbt? Schwab is a fdic bank as well as a discount broker. They offer direct deposit and mobile banking. I can get cash anywhere, anytime. They provide online bill payments, visa with pts, heloc etc. I have found that bbt insurance service is not competitive - Liberty mutual is half the cost for my house, car, and umbrella.
You can be a Stonier banking graduate but that does not mean you understand market trends and competitive advantage. I think bbt needs a real shakeup. Imo, there are too many yes men and not even independent thinkers. Also, the type of honesty and integrity I've witnessed on their conference calls and at shareholder annual meeting does not measure up to my expectations.
Bbt share price is likely to go up some and at that point I'll harvest them and move on.
Anyone who runs several billion of charges through foreclosed property expense with the vast majority of it relating to inadequate marks required to liquidate properties hurts his reputation and credibility. Go back by quarter and add up all the foreclosed property expense. Last quarter it was still significant - probably about a nickel per share. When is it going to stop? Bbt foreclosed property balance is not large but it may have a cumulative mark of 80 - 90% because of the valuation charges which shareholders have been bombarded with quarter after quarter. I've lost track. What really burns me are the stock options exercised at $16.88 per share by management. Imagine someone like Clark Starnes who was in charge of the adc $9 billion fiasco receiving large profits from stock options.
At one time King talked about holding $500 million of really good adc stuff which had no market. Does the bank still have this stuff and has it been completely written off. I need to be enlightened but I doubt we get straight talk. That's my opinion.
You're getting 2 dividends in the 1st qtr - 2/1 for $.20 and 3/1 for $.23 and probably 5 for the year.
Big questions are: how much did the Fed approve in 2012 - did they approve $.23 per qtr. and bank decided to hold back some - maybe because of acquisitions and expansion into Texas?; and how much will Fed approve in 2013?
Worthwhile exercise is to look at the combination of share buybacks plus dividends as % of eps at jpm, wfc and usb . How does bbt stack up? Need to take into account acquisitions - crump and bbx cost the bank around $900 million and will add to eps.
" they refused to mark their NPAs correctly and take the pain at the outset"
Their big problem was in their adc portfolio which topped out at $9 billion. Absolutely no one could have projected that the bulk of the $9 billion of adc loans ended up with loss severity rates around 80% or possibly even higher. Heck, the smart thing would have been to take 100% write-off on the adc land and hold it until markets recovered instead of selling the bad loans to speculators. As a side note I guess the personal guarantees on 85% of the adc loans which their investor relations department mentioned to me in several phone calls proved to be essentially worthless.
My problem with Kelly King is that he failed to provide proper disclosure of the charges run through the valuation allowance - $2 billion plus over the last several years is a huge amount of $$$ and "bragged" about bbt net charge-offs vs. competition. Note that this slide has been removed from their deck because even the bank knew it was outrageous.
Got other problems with bbt. They certainly need to learn how to write an EPS headline as evidenced by the recent stock shellacking after the 3rd qtr. cc. Don't blame it on 375 margin particularly when the bank has been touting about this for many quarters.
The quality of their loans has improved dramatically, yet they're still providing well above their normalized provision expense - say 70 bsp per year? Where's the 15% return on Crump insurance - $560 million investment should generate $100 million of net cash flow annually? Show me the quarterly flow of colonial gross interest income and fdic reimbursement - why does it vary so much quarterly? How much reo stuff does bbt have on the books which the bank will hold until markets improve? And for heaven sake, when is the valuation allowance going to stop? Why does the bank have a discount brokerage business which is not cost competitive - costing bbt a tremendous amount of revenue.
I look at bbt presentations. They talk about core values. They claim that they have been "super transparent" - believe that is the direct quote King used at the Goldman Sachs recent conference. I disagree. Lot of useful info but think they're presentations are too opaque in many key areas. Suggest they provide investors with straight talk.
First, the payout ratio is likely to stay at 30% for several years. The bank needs to build capital. It just retired $3 billion of trups. Basel 111 requires additional capital.
Last qtr. bbt earned around $.72 before one time charges (bbx acquisition). Assuming the provision for bad loans normalizes at 70 bsp per year and the ridiculously high foreclosed property expense stops, the bank should earn close to a $1 per qtr. There is no acceptable reason why the current provision should not be 20 bsp below current net charge-off rate. Exclude adc charge-offs from the equation because this portfolio should be at rock bottom.
I look for the bank to increase the dividend to $.25 per qtr. in the 1st qtr. of 2013.
Obviously, not happy with last qtr. eps headline which I think tanked the stock on October 19th. It was not the 375 bsp comment which is old news going back to 2011. It was the headline and they need to spin it right going forward - otherwise, they'll chase buyers away.
Additionally, they need to provide much more transparent in the press release and earnings call about some of the items I've previously mentioned in prior posts.
At current price bbt is a good buy but so are pnc, wfc, jpm and several other banks. Best of luck.
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.
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.
Investors need and expect answers.
Think your option purchase is a very good bet. Funny I've talked to JC Browns several weeks ago about doing the same thing you did yesterday. May do it on Monday if bbt does not rally. Friday I elected to buy jpm, wfc and more bbt. Jpm and wfc had very nice earnings report. Wfc grew their core loans by about 7% about the same as discussed by bbt in recent presentations. Only negative was nim shrinkage. I'm about 40% cash and have sold covered calls on about 60% of my equity positions. We're in for several years of slow growth driven by gov't austerity. We do have some positives though. Consumer indebtedness continues to go down. The Fed's Mortgage Finanical Obligations Ratio (mortgage, car and conumer debt plus homeowners and auto insurance plus property taxes divided by disposable income continues to drop. 2nd qtr. 2012 level is at the very close to the lowest level in 30 years. You can find it on the Fed's website. Yes, some of it is due to bank write-offs but much of it is driven by debt pay down and consumer refinancing. A second positive is auto sales. The average age of USA vehicles has increased every year for the last 10 years even when auto sales hit a record high of 18 million. Age is up to 11 years now vs. 9 years in 2002. Third positive is USA natural gas and oil. Since 2009 we have quadrupled the number of rigs drilling for energy in USA. Natural gas became so plentiful this year that it dropped below $2 per million btu. We're now exporting some of our oil. We're going to see a lot of new business develop in the USA over the next decade because of our plentiful supply of natural gas. That stage has already been set thanks to a federal gov't which greatly expanded drilling in spite of the BP oil fiasco.
So all is not bad in our country. Biggest problem is a Congress which is dominated by too many
members unwilling to compromise. Also some of them are out of their mind - i.e. Adam West, Joe Walsh, Michelle Bachmann. I disagree with Obama on about 25% of his agenda, particularly too many bank regulations. The liquidity and capital rules are fine but there are simply too many cross checks on everything which drives up the cost of business. Also, the gov't should keep its nose out of debit cards. Dick Durbin's amendment stinks. I like personal health responsibility - I'm tired of paying for other people's health care. I support the Affordable Care Act. I believe in kindness and am totally against altruism. Ayn Rand makes that distinction very well in Atlas Shrugged. Perhaps, Paul Ryan needs to reread that passage. Getting rid of Planned Parenthood is crazy Also, I'm dead set against Paul Ryan imposing his personal values into my life. I resent it. He has no right to take away personal freedoms.
Think the President will easily win. Governor Romney does not tell the truth on many issues. He certainly has violated core values of honesty and integrity. Frankly, he lies on just about everything subject. Don't understand how he can live with himself. Just because you're a politician it's not ok to demagogue. And that has become his speciality and he has really become good at it. What's so sad in my opinion is that a significant % of the American people are unable to determine truth from fiction. His 20% tax rate reduction with corresponding reductions in exemptions, deductions and whatever else is mathematically impossible. The top 1% get a $3 trillion tax rate reduction and you can eliminate 100% of their exemptions, deductions and loopholes and they still make a killing. Note that Romney has now prefaced his 20% tax rate reduction on growing the economy so it does not add to the deficit. Something new because he knows the exemptions and deductions are insufficient. So he's betting on the come and I view that as very high risk. Certainly, it's fiscally irresponsible and lacks conservative principles of sound judgement and objectivity.
If I could put one person in the White House I choose Jamie Dimon.
"I think some of the posters on this Board were actually one person (Norm, Inlet, Stil, etc.). He was pretty old so he might have died. "
I'm doing great! Don't think you have ever said anything on this board which proved to be correct.
"Update us on the economic growth (last I heard you thought it was great and going to improve). Sorry - unfair of me - you are buried in the minute details of BBT #s."
I said the economy was ok, not great. I also said that until housing improves a lot we're stuck in slow growth economy. I suggest if you want an update on the economy, go consult with your friends at ecri. They seem to be right on top of things. Last September, they made an absolutely sterling call on the economy.
I think by the 4th qtr. 2012, bbt will be earning $1 share. At $31 share, I like their risk/reward profile. 2nd qtr. 2012 loans for us banks were up $77 billion or 4.4% annualized. I think bbt gained market share in the second qtr. and likely increased net loans in the $2 billion range for the qtr (excluding covered loans).
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.
Since 2009 aggregate loans for small commercial banks are down around 16% or around $120 billion. Plus they now have to conform to basel 111 where their common equity has to exceed 4.5% of their risk adjusted assets plus they need a 2.5% buffer. That came as a big surprise today when the Fed made the announcement. I suppose the small guys can meet this over the next few year as their assets continue to shrink largely because they do not have products to cross sell.
But what do I know? I can't hold a candle to queenfooey, smarty, inlet and nobanker.
Good post gg. In addition, the bank has diversified its revenue streams - doing much more cross selling and taking major market share from community banks - 6/8/12 wsj - "Small banks have been on the retreat for decades. The share of industry assets controlled by lenders with $1 billion or less in assets has fallen to a recent 10% from 31% in 1992, according to Federal Deposit Insurance Corp. data. Smaller banks had a lower return on assets, 1.22% for the first quarter, compared with 1.52% for those with more than $1 billion in assets, the FDIC data show."
I live in south carolina. My representatives - Tim Scott and Jim DeMint keep on talking about how increased regulation have stymied the housing recovery - banks will not make loans to home builders.
Nothing could be further from the truth. Adc loans are simply not financially justified.
I get a kick out of Tim Scott. Six weeks ago he was pumping gas at an exxon station west of the ashley telling his constituents that gas was going to $5 gallon and Obama has no energy policy. He should have been well aware at that time that gas demand was down by 5% while US production was up 6%. These stats were available to Tim Scott via US Energy Dep't but he was too busy bashing obama. Also oil/gas rigs have quadrupled since 09. Best energy policy is America is free market capitalism.
I wish I could take Tim Scott to the wood shed. Irony is that he criticizes europe but his policies would kill our economy.