BB&T discloses Dodd-Frank stress test results
WINSTON-SALEM, N.C., March 7, 2013
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
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
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:
oChanges 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.
oDeclines 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.
oChanges in interest rates may have an adverse effect on BB&T's
profitability through net interest margin contraction or reduced loan
oTurmoil and volatility in global financial markets could have a material
adverse effect on BB&T's operations, earnings and financial condition.
oBB&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.
oBB&T faces significant operational risks related to its activities, which
could expose it to negative publicity, litigation and/or regulatory
Summary of Stress Test Results - Capital
BB&T - Projected Capital Ratios through Q4 2014 under the Supervisory Severely
Actual Stressed Capital Ratios
Q3 2012 Q4 2014 Minimum During
BB&T Corporation (Bank
Tier 1 Common Ratio (%) 9.5% 9.6% 9.6%
Tier 1 Capital Ratio (%) 10.9% 11.3% 11.3%
Total Risk-based Capital 14.0% 13.6% 13.6%
Tier 1 Leverage Ratio (%) 7.9% 8.4% 8.2%
Branch Banking and Trust
Company (Insured Depository
Tier 1 Common Ratio (%) 9.7% 13.6% 10.0%
Tier 1 Capital Ratio (%) 12.2% 13.6% 12.5%
Total Risk-based Capital 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
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 Percent of
Dollars Average Assets^5
Pre-provision Net Revenue^1 6.2 3.6%
Other Revenue^2 - -
Provisions 5.7 3.3%
Realized Gains/Losses on 0.1 0.0%
Trading and Counterparty Losses^3 - -
Other Losses/Gains^4 0.0 0.0%
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
^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 Portfolio Loss
Dollars Rates (%)^2
Loan Losses^1 4.5 4.1%
First Lien Mortgages, 0.7 2.3%
Junior Liens and HELOCs, 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 balancesused to calculate portfolio loss
rates exclude loans held for sale and loans held for investment under the
^2Cumulative loss rates over the 9-quarter period.
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.
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.
Contact: 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,
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