BB&T 2Q17 Earnings Call Notes

Kelly King – Chairman and Chief Executive Officer

Main street continues to rebound

“I just want to mention to you again that Main Street continues to rebound. Our confidence is up. I’ve been in 23 of our 26 regions in the last few months. Every single region is reporting in terms of – and I’m talking to the people that are making the loans, everyone is talking about increased optimism on the part of small- and medium-sized businesses. Main Street, as I’ve talked about over the years, has been kind of dead in the water for the last seven or eight years.”

Using AI and robotics to reduce costs

“Finally, with regard to expenses, we are laser-focused on expenses. We have a number of expense initiatives. We are using, for example, artificial intelligence, AI, robotics and moving across our backroom. Just to give you a flavor for that, Daryl did a really nice job earlier this year in taking just one project, one smaller project where we have in the accounting area, account reconciliation one person with a computer, one software reconciling account that took two hours. We put robotics on top of that. And in a virtual period of time, the new robotics software could do it in 15 minutes. So we now have six or seven more substantial projects that we are moving through to further improve the case, after which we will be going enterprise-wide in terms of finding ways to take these repetitious activities and apply good digitization and artificial intelligence to find more efficient and effective ways to reduce our cost.”

Regulatory pressure is lifting

“We believe we have been through eight years of having to deal with an extreme amount of micro management regulatory pressure. We believe that is lifting. And we are going to be focusing on how to run our business based on what makes sense to us. And so I’m challenging everybody to go back and reconceptualize their business and, frankly, be prepared to run their businesses with less resources.”

Our current portfolio is clean as a whistle

“There are no credit issues. Our current portfolio is clean as a whistle. We just have these two portfolios, about $30 billion in mortgages and about $10 billion in auto, that are sub-optimizing in terms of performance. And so in a rising rate environment, you don’t exactly want to keep growing real fast your mortgage fixed rate portfolio, and I think everybody understands that. And the auto portfolio, we started 1.5 years so ago changing the nature of how we have our revenue-sharing arrangement with these dealers. We are an outlier in the industry, but it is a better, more consumer-friendly approach that we are taking.”

People are optimistic

“Everything we’re seeing in terms of commentary from the client, this is I’m getting from talking to our lenders. I’m getting it from talking to the business people. I’ve had 23 lunches where I’m sitting and talking to six to eight business people over the last few months. I’ve gotten this across our entire footprint. I’ve got a pretty good feel what the clients are directly saying. I’ve got a really good feel of what our production people are saying. And I’ve got a good feel for what the actual pipeline shows.

Can’t guarantee that Washington wont derail it but people not focusing on it. People are expecting a tax deal though

All of that is very, very positive. And can I guarantee that all the craziness in Washington will not derail that? No. But I’ll be honest with you as I’ve talked to business people out there, they’re not worried about all this craziness going on in Washington. They’re just focusing on growing their business. Now I will say I think they are expecting a tax reduction deal and, to a lesser degree, they’re counting on infrastructure. But if we get the tax reduction deal, they’ll continue.”

Comerica 2Q17 Earnings Call Notes

Ralph Babb

I think our customers are cautious given Washington

“I think what happens is our customers continue to be very cautious and especially in the way they invest and for the time that they invest in other words they may invest what they need per year to meet demand, but they are not going out as far as they used to go.”

Curtis Farmer

We are expecting growth

“But the rest of the portfolio, we are expecting growth. And so core middle market our technology and life sciences business, private banking, we’re seeing some growth in environmental services some of our larger businesses, our corporate banking U.S. banking for example. So really across the majority of our business lines, we are expecting growth toward the balance of the year. And I think you saw that reflected in the second quarter results. We had growth across all three of our middle markets led by California.”

Pete Guilfoile

CRE credit quality has been pristine

“As far as the credit quality within commercial real estate has been pristine. And so we have one relatively large credit that we did downgrade and this past quarter we have absolutely no concerns about the ability to repay. But there is certain things that have happened on it that require us to downgrade it, but we feel very good about the asset, we feel very good about the sponsorship and we do not feel there is any risk or loss there. And as far as the strength of our commercial real estate portfolios, it’s performing extremely well.”

Capital One 1Q17 Earnings Call Notes

Richard D. Fairbank – Capital One Financial Corp.

Domestic card charge off rate higher than expected

“Based on portfolio dynamics and industry conditions we observed in the first quarter, we now expect that the full-year Domestic Card charge-off rate will be in the high 4%s to around 5%, with quarterly variability. That is up from our prior expectation of the mid 4%s. With the benefit of more data, we have refined the expected shape and timing of credit losses on our front book programs booked over the last few years.”

Increasing competitive intensity in the industry

“Over the past year and a half, we have seen increasing competitive intensity, a growing supply of credit and rising consumer indebtedness. As we move through 2016, we tightened our underwriting around the edges. Our actions over the past four quarters have led to a deceleration of our growth, just as the industry is accelerating. We still think there is a growth window, but the window is gradually becoming smaller.”

A lot of supply out there

“Yeah, Don. So you probably heard us for, I would guess, four – this is like the fifth quarter now that we have been talking pretty vocally about supply out there in the marketplace. And the last few quarters we have pointed out the pretty striking growth rate of subprime itself. I don’t have the number right in front of me, but I believe it’s 14% year-over-year subprime growth for an industry that’s growing at half that overall. Now, again, Don, that’s off of – and I really want to stress this – it’s off a much lower base that retracted significantly after the Great Recession. But still, that certainly has our attention, that subprime growth.”

Card delinquencies are more telling than auto delinquencies

“Yeah, well, the first thing I want to say is that card delinquencies are a lot more telling than auto delinquencies. And so that’s point number one. So whenever you – I always just take as one part of a lot of pieces of information when you’re looking at auto what’s happening to delinquencies because the way that people pay, and, frankly, really what happens is they wait. A lot of people wait until the moment before a car would be repossessed. And then the key thing is the payment rate at that point. And that’s a lot more telling than the delinquency patterns that precede that. So that’s just more of a general observation. Whereas in the card business, delinquencies tend to just march on their way to charge-offs in fairly predictable ways.”

Cullen/Frost 1Q17 Earnings Call Notes

Phil Green – Chairman and CEO

Growth good overall

“Yes. I think the growth is good overall. As I said, consumer’s up 8. We’re seeing strong commercial real estate growth. There is a lot of activity there. We’re being little careful and selective as far as that goes. And we’re seeing good C&I growth. I would say, it’s a very broad-based growth in the portfolio overall. So, it’s just indicative of better activity.”

Jerry Salinas

Texas economy is accelerating

“The Texas economy is accelerating across the industry sectors and metro areas. Texas employment expanded at an annualized 2.4% in the first quarter of 2017. The Dallas Fed notes more hiring optimism in Texas than in recent years. Although Texas rig counts are rising, employment growth in the energy sector is a bit slower due to both increased efficiency and automation. For the first time in many years, the Texas unemployment rate is higher than the national average due to a sharp increase in the state’s workforce. The March unemployment rate in Texas is now 5% compared to the national average of 4.5%.”

BB&T 1Q17 Earnings Call Notes

Kelly King – Chairman and Chief Executive Officer

Main street has been struggling for eight years

“I just want to make sure you understand with regard to Community Bank, this is a bit esoteric, but over the last eight years, Main Street has really struggled and we are primarily a Main Street lender. As you know, most of the growth in the market over the last several years has been by large companies who have been to a large capital type restructurings and have just paid it actively a very strong international market, which we don’t participate in, but relative to a lot of our competitors, we had a harder go of it, because our focus on Main Street. Now we believe Main Street is changing, which I will talk about in a moment and getting better and so if it does, if it does get better and you should expect to see BB&T’s loan potential do relatively better than many of our competitors who have been depending on the long growth coming from a lot of the largest corporations and their international exposure.”

Things are happening to improve the hard data

“Well, I think there is kind of the big – really big question for us all right now. First of all with regard to why has the increased optimism not yet shown up in hard data, that’s not pricing it all to me because remember a period of time, we’re going to have 90 or sort of days, and it takes a period of time for that optimism to translate into evaluating what kind of projects you’re going to do or you’re going to buy, et cetera. But as I said earlier, we are already seeing that. We are seeing actual hard data were clients are talking to us about expansions, I can loan requests for expansions, but frankly out of rate we haven’t seen in eight years so that’s why we said our community banks having it’s best production ever, it is happening for us on Main Street.”

If DC doesn’t do anything could that stop it?

” Now the question implicit in your question is, if they don’t do anything in Washington do that chill it could stop it. And the answer is obviously yes. If they make no progress in Washington at all then eventually that optimism will turn to pessimism and now return into the reduction and spending and that were return into has more economic growth, and is it do really do a badly business sort of capable of then all return into recession.”

Companies want to invest and need to invest

“But here is the reason that the resiliency of the activity in the marketplace will be stronger than you might think. Remember that eight plus years these companies have not been investing. They’re using 20 year old computers. They’re driving trucks of 300,000 plus miles. At some point regardless of how frugal you want to believe you can’t got a replacement of few computer and buy few trucks. And then the other thing is kind of a psychology and that is after feeling bad and conservative and not invest in fair reviews [ph] you kind of want to invest. So number one, they need to invest, number two, they want to invest. So that’s why you’re seeing this really little excitement out there today.”

I would be worried if we do’t have progress by the end of the year

” I don’t think it will wine immediately, but by the end of the year let’s say if there’s been no positive movement on taxes regulation, healthcare and all that combined then I will be very worried to be honest. And so my message to Congress which I sent chance I get is, there’s a lot riding on them get their right together and you know we’re talking about a future for our kids and our grandkids, we have a wonderful opportunity here to grow this country at much faster pace and shame on them if they don’t execute.”

US Bancorp FY 1Q17 Earnings Call Notes

Andy Cecere – President and Chief Executive Officer

Us economy continues to improve

“The U.S. economy continues to improve. Interest rates are finally in an upward trajectory and consumer sentiment reflects optimism for potential actions by the new administration. So, there is a lot of change and potential opportunity on the macro front, much of which could be to the benefit of the banking industry. ”

Commercial loan growth sluggish but customers optimistic

” I believe we are well positioned for this next phase of the cycle. During the first quarter of 2017, commercial loan growth was sluggish across the industry. Our large corporate customers tell us that they are optimistic about the future, but are awaiting more clarity regarding potential changes in tax and regulatory reform, infrastructure spend and trade policies. Additionally, some of our clients are actively accessing the capital markets, which pulls some financing from the bank lending arena or result in reduced line utilization. However, we expect commercial loan growth to be better in the second quarter versus the first and we expect more robust commercial loan growth in the second half of the year.”

Second quarter should be stronger

“Sure. So first of all, our starting point is a little higher versus where we ended the fourth quarter. Secondly, our pipelines are stronger. As Terry mentioned, a lot of our corporate clients were accessing the Capital Markets, so that did put a bit of a damper on loan growth. But the seasonality on home equity, what we are seeing on auto and what’s going on with the corporate loan growth tells me that the second quarter is going to be stronger than the first quarter, but probably not as strong as what we achieved some quarters last year, but I do see acceleration here in quarter two.”

Comerica 1Q17 Earnings Call Notes

Ralph Babb – Chairman and Chief Executive Officer

Curtis Farmer

A lot of optimism even though that may have waned a bit

Steve, I think that, really, when you think about the loan portfolio, you’ve got to think about it more broadly, so across really all of our business lines, as Ralph and Dave alluded to, with the exception of mortgage banker and Energy. And when you think about sort of the path we’ve been on, there is definitely a lot more optimism than we saw in the third quarter or fourth quarter of last year, even though some of that may have waned a little bit. And really, across all of our geographies, across all of our business lines, we are seeing increased activity and increased optimism with our customers. Now some of that still is cautious on the part of many of those clients, but I think it’s a lot higher than we have seen in the last 6 or 12 months, and again, broad spread across all of our businesses and across all of our geographies, with the exception of mortgage banker and Energy.

Auto sales gliding down

“Yes. The SAR rate glides down slightly from its peak of over $18 million. We’re still expecting annual SAR rate somewhere in the $16.6 million range, which, by historical standards, it’s still very high. When you think about the floor plan business, actually, a little bit of slowing helps us because vehicles stay on the lots longer.”

Pete Guilfoile

releasing reserves in energy portfolio

“Scott, as you know, we’ve been releasing reserves on energy now for a few quarters and a lot of that has really been as a result of payoffs and pay-downs. Now we’re starting to see the risk rating upgrade. And I think you’re going to see that happen in an even bigger way this quarter. We have the redetermination process occurring this quarter. And of course, a lot of these credits are Shared National Credits, so they’re a little bit sticky to upgrades. So that whole process will probably take us through the end of the year. So I think throughout the end of the year, we’ll be – as long as energy prices remain relatively stable, we’ll be seeing upgrades and pay-downs approved as credits. And therefore, there will be an opportunity for us to release more reserves on Energy.

CRE performing extremely well

“No, actually, our Commercial Real Estate portfolio is performing extremely well. And it’s heavily weighing toward Class A multifamily construction, and we like that a lot because particularly how it performs not only in the good times, but in the downturns as well. We do have a small amount of retail, but the vast majority of that retail is in what we call neighborhood shopping centers, so vis-à-vis the construction of small shopping centers, the patrons of which are within 5 miles of the center. It’s the grocery stores, restaurants, hair salons, that type of tenants. And that portion of retail actually has been holding up pretty well and that would be a very large majority of that retail segment.”

First Republic 1Q17 Earnings Call Notes

First Republic’s (FRC) CEO Jim Herbert on Q1 2017 Results

Later in the credit cycle but credit excellent

“At the current point in time, we consider ourselves to be somewhat later in the credit cycle and we’re paying even additional attention to prudent lending and credit quality. To that point, our credit quality continues to be excellent. Non-performing assets were at a very low 7 basis points. Net charge-offs for the quarter totaled only $0.5 million or a single basis point.”

Mike Selfridge

Loan growth 17%

“Loan volume was up 17% compared to the first quarter of last year. Single-family residential lending volume was 40% purchase and 60% refinance during the quarter. While loan demand is strong, loan pricing remains very competitive.”

Economic activity in regions strong

“Turning to geographic markets, economic conditions are very good across our footprint and our clients are quite active. In our largest market, the San Francisco Bay Area, the diverse and very dynamic economy continues to be quite strong. Residential real estate prices are stable, with the market that remains supply constraint. While the San Francisco Bay Area represents just under half of our total loan portfolio, our markets in New York, Southern California, Boston, Portland and Palm Beach also continue to perform very well. Economic activity in our regions overall tends to be stronger than the rest of the United States as a whole and we continue to benefit from this strength”

Pipeline is strong

“I would — let me just say, overall, the pipeline is strong and it’s about where it was at the end of last quarter. It’s hard to say on commercial and multifamily. Those tend to be a little bit volatile. I will say, as I mentioned in my remarks, half our growth is coming from existing clients. They are quite active. It’s still call it inventory constrain. So it’s hard to find good deals. But they are out they are working hard and finding them. So we — I would say we feel good about our future prospects in multifamily and commercial real estate.”

Bank of Hawaii 4Q16 Earnings Call Notes

Peter Ho – Chief Executive Officer

The Hawaii economy remains healthy

“Thanks Mary. The Hawaii economy remains healthy through 2016. Our visitor industry earnings continue to grow and our statewide seasonally adjusted unemployment rate went down to 2.9% in December compared to 4.7% nationally. Visitor arrivals for the first 11 months of 2016 increased 3% and visitor spending was up 4.1% compared to the same period in 2015. The base of construction remains strong in both the private and public sectors and home prices continue to increase throughout the year. The median sales price for the single-family home on Oahu, our primary market, increased 5% in 2016 and the median sales price for the condominium increased 8.3% compared to 2015. ”

The economy remains pretty darn strong

” the economy remains pretty darn strong. There really aren’t any factors at this point pointing to a softening or a downturn in the local economy. So I think that’s, if you will, the tailwind that we are looking at from a loan perspective and a deposits perspective, frankly, from that standpoint as well. ”

Slowdown in mortgage repayments

“Yes. I think so, Jackie. There is a little bit of lag in the mortgage payoffs and interest rates really started to move up in the second half of the quarter. So I think you might see a little bit of a slowdown in payoffs and thus a reduced amortization as the year – as the first quarter progresses.”

Our CRE folks tells us they’ve got a good looking pipe

“Our CRE folks tell us they’ve got a pretty good-looking pipe looking forward into ‘17 which frankly was a bit of a surprise to me, but they are seeing that. The construction side is going to be interesting. I would have a year ago said that the high-rise, the luxury high-rise maturation of that cycle would really spell decline in the construction book. I think that maybe short-term, but there are also a lot of affordable transactions floating around the marketplace right now. And so as you know from prior conversation that there is fair amount of single-family housing to be built, with those projects are still a few years out. But I would say there maybe an opportunity for construction to blend in with more affordable projects as we move forward.”

A lot of the construction portfolio is winding down

“Well, the bulk of that portfolio is in higher end, high rise real estate transactions. And those, for the most part, are winding down. We have just a couple – we have one left. And so as that pays down, we will see a decline in that portfolio which has grown pretty significantly over the past couple of years for us. So that’s what I meant by the headwind.”

Silicon Valley Bank 3Q16 Earnings Call Notes

SVB Financial Group’s (SIVB) CEO Greg Becker on Q3 2016 Results

Markets are healthy, record breaking year for capital raising

“Overall, the markets for us and our clients are healthy, despite some lingering impact from the VC market recalibration in the first half of 2016. Venture capital continues to perform strongly, although activity remains concentrated on larger funds and larger later-stage investments. The National Venture Capital Association stated 2016 is on pace to be a record-breaking year for raising capital based on the $32.4 billion raised to date, a quarter of that concentrated in six funds larger than $1 billion each.”

Second biggest year for venture investment

“Likewise, 2016 is expected to be the second biggest year in a decade for venture investment, with $56 billion invested year to date in nearly 6,000 companies. This is despite the decline in completed financings in the third quarter. ”

Early stage is alive and well

“In spite of an emphasis on later-stage companies, early-stage investing is alive and well, although it has been dominated for the last few quarters by a growing group of angels and micro-funds making seed investments. In addition, corporate strategic investments are becoming mainstream as established companies invest in new technologies, products, and delivery mechanisms in order to remain relevant and competitive. In a growing number of instances, we’ve seen entrepreneurs bypass traditional venture capital altogether to accept large strategic investments from corporates.”

Expecting a recovery for early stage companies next year

“We are expecting solid performance with trends similar to those in 2016 and making the following assumptions: continued healthy activity among our clients; gradual recovery by the early-stage markets from the effects of the recent VC recalibration; stable U.S. economy and no dramatic changes in the regulatory environment. At the same time, we expect a low-rate environment and persistent competition to provide continued headwinds.”

Expecting no interest rate increases

“Consistent with our recent approach and irrespective of the forward curve, we assume no market interest rate increases between now and the end of 2017. Nevertheless, we expect solid performance with potential upside if rates do increase.”