Corporate Lending Provides Lift at BB&T

BB&T Corp. is starting to benefit from a recent push in corporate lending.

The company's volume of corporate loans rose 43% from a year earlier, while loan commitments from big companies rose 41%, said Kelly King, the $176 billion-asset company's chairman and chief executive, during a conference call Thursday.

"That strategy is really beginning to work for us," King said. "I think that the way it looks is [that] large corporations are doing well. Remember a lot of them are focused on international and China is doing well. … Large corporates are doing very well on the bottom line especially because they're doing a lot of restructurings."

Kelly said traction in corporate lending — a focal point for BB&T since 2010 — played a key role in total loan growth. BB&T's loan book grew 1.5% from the fourth quarter and nearly 6% from a year earlier, to $110.7 billion. The growth, fueled by commercial lending and residential mortgages, offset margin pressure.

Overall, BB&T's earnings rose 10% from the fourth quarter and nearly doubled from a year earlier, to $431 million, or 61 cents a share.

The results could have been even more stellar, had BB&T decided to scrap its conservative lending mentality, King said. "We could have a lot faster growth, to be honest with you," he said during the conference call. "We're about growing but we're about keeping high quality. During this quarter there were a lot of competitors that were doing a lot of leverage loans, which we don't do. A lot of asset-backed structured finance loans, which we don't do. That's a conscious decision on our part."

King also touted progress expanding the company's operations in Texas, where it gained a toehold in August 2009 after buying the failed Colonial Bank. Deposits in Texas have nearly doubled since then, to $1.5 billion. BB&T, which declined to pick up Colonial's Texas loans, now has $1.2 billion in loans in the state. "That's a huge market and it's growing really fast," King said.

BB&T is also finding it difficult to complete acquisitions in targeted markets, including the Lone Star State. Other banks have announced a handful of deals in Texas this year, but the premiums have far outpaced those in other states, giving would-be sellers hope to hang on for even better returns.

"Over time, you can expect to fill in the emerging Texas market," King said. "That's clearly where our primary focus is, but to be honest there's just not a lot of activity out there now. People are still seen very much in a waiting state. I think a lot of banks that have decided to do a strategic combination … want to see their prices go back up to what they thing they might get."

Again, King referenced conservatism as BB&T's guiding principle with deals. "We remain disciplined with regard to not taking on any material asset risk and making sure it is a good shareholder friendly transaction," he said.

BB&T's modified acquisition of BankAtlantic, which will make the company a key player in the Miami area, is expected to close during the second quarter.

The loan-loss provision rose 6% from the fourth quarter but fell 15% from a year earlier, to $288 million. Nonperforming assets fell 8% from the fourth quarter and 42% from a year earlier, to $2.26 billion, with the biggest decline occurring in foreclosed real estate.

Noninterest income fell 5.5% from the fourth quarter but rose 22% from a year earlier, to $871 million. The biggest gains came in insurance income and mortgage banking income. Those increases were offset by softer check card fees, which fell 40% from a year earlier due largely to implementation of the Dodd-Frank Act's Durbin Amendment. Service charges on deposits were flat compared to prior quarters. The first quarter also included $9 million of securities losses.

Noninterest expenses fell 14% from the fourth quarter and 1% from a year earlier, to $1.4 billion. The biggest decrease came in foreclosed property expenses, which fell 73% from the fourth quarter and 36% from a year earlier.