STRESS TEST PROFILE: BB&T Corp

Article excerpt

Byline: Christopher Whalen, Institutional Risk Analytics

BB&T Corp. (NYSE:BBT) is a multibank holding company with two primary bank subsidiaries, Branch Banking and Trust Co. and BB&T Financial FSB.

BBT just acquired the branches and some of the assets of Colonial Bank from the Federal Deposit Insurance Corp. As the final release of data from the FDIC approaches next week, let's review the ratings for BBT from the IRA Bank Monitor, looking both at current financial performance via our Stress Index and also how BBT looks based on "economic capital," a risk-based perspective on the bank's business similar to the Basel II regulatory framework.

As of Q1 2009, BBT had significantly lower levels of stress than the industry average in all categories and an overall Banking Stress Index score of 1.2,versus 2.4 for the entire industry. The base year for the Stress Index is 1995, which equals 1.

In key areas such as efficiency, ROE and chargeoffs, BBT has consistently outperformed its peers and displayed below-average levels of stress compared with the industry average.

Not surprisingly, the reported efficiency for BBT's bank units rose into the low 50% range from 49% in Q1 2009, indicating rising pressure on expenses.

BBT was still profitable in Q2 2009, with ROA and ROE still above peer average levels, but there will be continued pressure on earnings going through the end of 2009 as BBT and all U.S. banks attempt to manage through the worst credit environment in the country since the 1930s.

Looking at the preliminary Q2 Stress Index rating calculated by IRA, BBT shows elevated levels of stress in chargeoffs and efficiency compared with Q1 2009, albeit still below industry average levels.

For example, the stress score for chargeoffs for BBT's lead bank unit rose to 4.7 in Q2 2009 from 2 in Q1 2009. This result is consistent with the Q2 2009 financials released by BBT last week, which show chargeoffs at an annualized 1. …