BB&T 4Q15 Earnings Call Notes

Kelly King

C&I lending is very competitive but spreads are flattening out

“C&I lending was mostly in large participations as it was in previous quarters, so it’s very competitive, spreads are tight, but the spreads are flattening out. So that’s a good sign’

We think there’s a lot of overreaction going on

“Just a comment with regard to the overall economy, because that obviously impacts the loan production. There’s been a lot written and said over the last few weeks about the issues in the stock market. We believe there’s a lot of overreaction going on. It’s like you woke up January 2nd, all of a sudden everybody decided the world’s falling apart and we reject that. We don’t see any fundamental structural changes between the first part of December and the first part of January. The world just doesn’t happen that fast.’

Lower oil is stimulative

“Obviously a huge confluence of negative psychology going on, but we’re trying to look past that. So what we focus on is the fact that yes, oil is down and that is a factor in terms of the oil space, but oil is overall really stimulative. It’s stimulative to consumers. It’s stimulative to businesses. It’s stimulative to airlines. Oil is stimulative”

We don’t think the economy is tanking but it is slow steady as you go

“while we don’t think the economy’s tanking, we don’t think it’s going to be super robust either. It’s kind of a slow, steady as you go activity. ”

Seeing cap rates in these ranges:

“you’re seeing cap rates in the multifamily space in the 4 to 5.5 range rate properties, office would be in the 5.75 to 7.75 retail, down as low with 6, industrials low as 550, hospitality down to 6.”

Younger generations still want to see branches

“when you talk to Xers and Yers and the lineal’s they will still tell you that one of the top two preference items in terms of selecting a bank is the convenience of a branch. Fact is, people still want to be able to go into a branch and see somebody to have a complex product or have a problem and there is a little bit of just pure psychology that we’re eyed by the branch and that’s where are money is and it makes me feel good.”

Our company was built with a lot of mergers of small community banks which got funding from CDs

“you’ll recall that our company was built with a lot of mergers of small community banks and thrifts that had a huge portion of their funding from CDs. And so as we layer in these acquisitions, we’re constantly in a process of rationalizing those deposit structures because a good portion of those CD portfolios that we inherit each time are really, really price sensitive portfolios. And as we bring the pricing more in line with our normal pricing, a fair amount of those CD portfolios tend to exit.”

Daryl Bible

Credit quality remains very strong

“Our credit quality remains very strong.”

We don’t win many deals in real estate because we’re underwriting on expected long term cap rates

” We’ve said for several quarters as you know that the competition in the whole at CRE space has been very difficult. And that’s been really low cap rates being used and high advance rates. And so we’ve maintained our steady conservative underwriting. For example, everybody’s underwriting on these low cap rates. We underwrite on long term expected normal cap rates and that makes a big difference, how much you advance. So, we look at a lot of deals, we don’t get them, but we’re fine with that. We’re just not going to violate our risk appetite to get volume in that space”