BB&T discloses Dodd-Frank stress test results

Thu Mar 7, 2013 5:37pm EST

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WINSTON-SALEM, N.C.,  March 7, 2013  /PRNewswire/ -- BB&T today released the
results of its stress test under a hypothetical economic scenario determined by
banking regulators. The 18 large banking organizations that are subject to the
2013 Comprehensive Capital Analysis and Review (CCAR) are required to provide
these disclosures under Dodd-Frank.

Today's disclosure precedes BB&T's planned release of its Comprehensive Capital
Analysis and Review (CCAR) results, which are expected to be available on  March
14, 2013. The CCAR includes banks' planned capital actions for the year
including dividend increases, share buybacks or other potential actions.  

For 2013, the Federal Reserve Board (Fed) created separate processes for the
Dodd-Frank stress test and the CCAR. The Dodd-Frank stress test results are not
intended to be an indicator of the Fed's decision on a bank's capital plan and
investors should not make any inference about BB&T's CCAR capital request or the
likelihood of receiving a "no objection" from the Fed.

BB&T uses mathematical processes as the basis for stress testing its results and
has developed stress testing models specific to BB&T to consider each applicable
risk in the scenario.  These models are designed to capture BB&T's exposures and
the effect of the stress scenario on BB&T's performance in light of BB&T's
specific mix of assets and the specific effects on the markets where BB&T
operates.  

In addition, BB&T's stress testing framework uses qualitative components which
guide and supplement the process. The involvement of expert judgment in
considering the stress scenarios and possible outcomes enhances the risk
management process.  

BB&T's stress test results reflect the impact of different hypothetical risk
events prescribed by the Supervisory Severely Adverse Scenario. The hypothetical
risk events and the summary impact include the following:

* Changes in national, regional and local economic conditions and deterioration
in the geographic and financial markets in which BB&T operates could lead to
higher loan charge-offs and reduce BB&T's net income and growth.  
* Declines in real estate values and home sales volumes within BB&T's banking
footprint, and financial stress on borrowers as a result of job losses, or other
factors, could have further adverse effects on borrowers that result in higher
delinquencies and greater charge-offs in future periods, which would adversely
affect BB&T's financial condition and results of operations.  
* Changes in interest rates may have an adverse effect on BB&T's profitability
through net interest margin contraction or reduced loan originations.  
* Turmoil and volatility in global financial markets could have a material
adverse effect on BB&T's operations, earnings and financial condition.  
* BB&T's liquidity could be impaired by an inability to access the capital
markets, an unforeseen outflow of cash or a reduction in the credit ratings for
BB&T or its subsidiaries.  
* BB&T faces significant operational risks related to its activities, which
could expose it to negative publicity, litigation and/or regulatory action.

Summary of Stress Test Results - Capital

 BB&T - Projected Capital Ratios through Q4 2014 under the Supervisory Severely Adverse Scenario                                 
                                                                      Actual   Stressed Capital Ratios                        
                                                                      Q3 2012  Q4 2014       Minimum During Stress Scenario  
                                                                                                                             
 BB&T Corporation (Bank Holding Company)                                                                                     
 Tier 1 Common Ratio (%)                                              9.5%     9.6%          9.6%                            
 Tier 1 Capital Ratio (%)                                             10.9%    11.3%         11.3%                           
 Total Risk-based Capital Ratio (%)                                   14.0%    13.6%         13.6%                           
 Tier 1 Leverage Ratio (%)                                            7.9%     8.4%          8.2%                            
                                                                                                                             
 Branch Banking and Trust Company (Insured Depository Institution)                                                           
 Tier 1 Common Ratio (%)                                              9.7%     13.6%         10.0%                           
 Tier 1 Capital Ratio (%)                                             12.2%    13.6%         12.5%                           
 Total Risk-based Capital Ratio (%)                                   14.0%    15.1%         14.3%                           
 Tier 1 Leverage Ratio (%)                                            8.7%     10.1%         8.8%                            
                                                                                                                             
                                                                                                                             
 Note: The capital ratios presented in the table above have not been adjusted lower following a reevaluation of BB&T's processes related to regulatory guidance for calculating risk-weighted assets. The revised actual and stressed projections would reduce the tier 1 common ratios for the holding company by .34%, .34% and .34%, respectively; the tier 1 capital ratios by .39%, .40% and .40%, respectively; and the total risk based capital ratios by .46%, .44% and .44%, respectively. There were no changes to the 
 tier 1 leverage ratios. For Branch Bank, the tier 1 common ratios in the table above would be reduced by .37%, .50% and .38%, respectively, the tier 1 capital ratios were reduced by .46%, .50% and .47%, respectively, and the total risk based capital ratios were reduced by .48%, .51% and .49%, respectively. There were no changes to Branch Bank's tier 1 leverage ratios. 


BB&T's performance under the stress scenario resulted in significantly reduced
net income and loan balances because the scenario assumes higher levels of
unemployment, a decline in housing prices and other negative economic factors.
However, as presented in the table above, all of BB&T's capital ratios showed a
slight increase over the 9-quarter period of the stress test except the total
risk-based capital ratio. The increases resulted because lower average assets
and risk-weighted assets in the stress environment, offset by a continuation of
last year's dividend payments, drove capital ratios higher. The decrease in
assets resulted from greater loan charge-offs and reduced loan demand in the
stressed economic environment.

BB&T's capital ratios also increased under the stress scenario, with the
exception of the tier 1 common ratio, because the company issued  $450 million 
of perpetual preferred stock in the fourth quarter of 2012.

Capital levels were reduced by lower net income and the disallowance of a
portion of the company's net deferred tax asset. Also, BB&T's total risk-based
capital ratio was reduced because the portions of the allowance for loan and
lease losses and subordinated debt that are considered regulatory capital
decreased under the stress scenario.

Capital ratios at Branch Banking and Trust Company ("Branch Bank"), the
FDIC-insured depository institution subsidiary of BB&T, grew across the board
during the Supervisory Severely Adverse Scenario as presented in the table
above.  

In addition to the factors affecting the entire Corporation, Branch Bank's
capital ratios improved because the bank was projected to suspend dividend
payments to BB&T Corporation early in the scenario, allowing capital levels to
increase at Branch Bank despite the reduced amount of net income that results
under the stress economic scenario.

The redemption of REIT preferred stock assumed in the stress test and an equity
contribution by BB&T Corporation were projected to increase the tier 1 common
ratio at the bank.  Additionally, the merger with BB&T Financial, FSB, into
Branch Bank in the first quarter of 2013 created a boost in capital ratios for
Branch Bank.  

 

Summary of Stress Test Results - Income Statement

 BB&T Corporation - Projected Losses, Revenue, and Net Income Before Taxes through Q4 2014 under the  Supervisory Severely Adverse Scenario 
                                                    Billions of Dollars  Percent of        
                                                                         Average Assets5   
                                                                                           
 Pre-provision Net Revenue1                         6.2                  3.6%              
 Other Revenue2                                     -                    -                 
 Less                                                                                      
 Provisions                                         5.7                  3.3%              
 Realized Gains/Losses on Securities (AFS/HTM)      0.1                  0.0%              
 Trading and Counterparty Losses3                   -                    -                 
 Other Losses/Gains4                                0.0                  0.0%              
 Equals                                                                                    
 Net Income Before Taxes                            0.4                  0.2%              
                                                                                           
 1Pre-provision net revenue includes losses from operational risk events, mortgage put-back expenses, and OREO costs. 
 2Other revenue includes one-time income and (expense) items not included in pre-provision net revenue. 
 3BB&T Corporation is not subject to the market shock component of the stress test.            
 4Other losses/gains includes projected change in fair value of loans held for sale and loans held for investment   measured under the fair-value option, and goodwill impairment losses. 
 5Calculated on a cumulative basis over the 9-quarter period (not annualized).                 


The effects of the stress test on net income before taxes included higher loan
charge-offs, increased foreclosure expenses, and a higher provision for loan and
lease losses.  Additionally, the prolonged period of low interest rates in the
scenario combined with a reduction in new loan originations caused net interest
income to decline. However, as is presented in the table above, BB&T continued
to earn positive net income under the stress scenario.  

 

Summary of Stress Test Results - Projected Loan Losses

 BB&T Corporation - Projected Loan Losses by Type of Loans for Q4 2012 through Q4 2014 under the   
 
Supervisory Severely Adverse Scenario                                          
                                        Billions of Dollars  Portfolio Loss  
                                                             Rates (%)2      
                                                                             
 Loan Losses1                           4.5                  4.1%            
 First Lien Mortgages, Domestic         0.7                  2.3%            
 Junior Liens and HELOCs, Domestic      0.2                  2.8%            
 Commercial and Industrial              0.6                  3.7%            
 Commercial Real Estate                 1.6                  5.6%            
 Credit Cards                           0.2                  9.5%            
 Other Consumer                         0.9                  7.0%            
 Other Loans                            0.3                  2.8%            
                                                                             
 1Commercial and Industrial loans include small and medium enterprise loans and corporate cards.  Average loan balances used to calculate portfolio loss rates exclude loans held for sale and loans held for investment under the fair-value option. 
 2Cumulative loss rates over the 9-quarter period.                               


CAUTIONARY STATEMENTS

The capital ratios presented herein are calculated using capital action
assumptions provided within the Dodd-Frank Act stress testing rules. These
projections represent hypothetical estimates that involve an economic outcome
that is more adverse than expected. These estimates are not forecasts of actual
expected losses, revenues, net income before taxes, or capital ratios.  

The Dodd-Frank Act, signed into law in  July 2010, represents a significant
overhaul of many aspects of the regulation of the financial services industry,
addressing, among other things, systemic risk, capital adequacy, deposit
insurance assessments, consumer financial protection, interchange fees,
derivatives, lending limits, and changes among the bank regulatory agencies. 
BB&T, under Dodd-Frank, is deemed to be a "systemically important" institution. 
During 2012, federal agencies continued implementation of and rulemaking under
the Dodd-Frank Act.  Many of these provisions remain subject to further
rulemaking, guidance, and interpretation by the applicable federal regulators,
which will regulate the systemic risk of the financial system.  BB&T cannot
predict the additional effects that compliance with the Dodd-Frank Act or any
regulations will have on BB&T's businesses or its ability to pursue future
business opportunities.  Additional regulations resulting from the Dodd-Frank
Act may materially adversely affect BB&T's business, financial condition or
results of operations.   

BB&T is subject to assessment by the Fed as part of the Comprehensive Capital
Analysis and Review (CCAR) program.  CCAR is an annual exercise by the Fed to
ensure that institutions have forward-looking capital planning processes that
account for their risks and sufficient capital to continue operations throughout
times of economic and financial stress.  Following the submission of BB&T's
annual capital plans, including proposed dividend payments, strategic
considerations and share repurchases under different hypothetical economic
scenarios, the Fed may object to BB&T's planned uses of capital or may require
BB&T to modify its plans through a one-time limited adjustment to planned
capital uses. The Fed may object to BB&T's capital plans due either to
quantitative or qualitative concerns. BB&T cannot assure that the Fed will have
no objections to our future capital plans submitted through the CCAR program. 
Failure by BB&T to achieve a "no objection" following the CCAR review could
adversely affect our ability to increase dividends, enter into acquisitions and
repurchase our common stock. The Dodd-Frank stress test described herein, is
based solely on BB&T's analysis, does not include judgment or analysis of the
Fed, and is  independent from the CCAR process. Investors should not make any
inference about BB&T's CCAR capital request or likelihood of receiving a "no
objection" from the Fed based on the Dodd-Frank stress test results.

About BB&T  
BB&T Corporation (NYSE: BBT) is one of the largest financial services holding
companies in the U.S. with  $183.9 billion  in assets and market capitalization
of  $20.4 billion, as of  Dec. 31, 2012. Based in  Winston-Salem, N.C., the
company operates 1,832 financial centers in 12 states and  Washington, D.C., and
offers a full range of consumer and commercial banking, securities brokerage,
asset management, mortgage and insurance products and services. A Fortune 500
company, BB&T is consistently recognized for outstanding client satisfaction by
J.D. Power and Associates, the U.S. Small Business Administration, Greenwich
Associates and others. More information about BB&T and its full line of products
and services is available at  www.BBT.com.

 

SOURCE  BB&T


ANALYSTS: Alan Greer, Executive Vice President, Investor Relations,
+1-336-733-3021, AGreer@BBandT.com; or MEDIA: Cynthia Williams, Senior Executive
Vice President, Corporate Communications, +1-336-733-1478,
Cynthia.Williams@BBandT.com

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