BB&T discloses Dodd-Frank stress test results

Mar 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 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


Stressed Capital Ratios

Q3 2012

Q4 2014

Minimum During Stress Scenario

 BB&T Corporation (Bank Holding Company)

Tier 1 Common Ratio (%)




Tier 1 Capital Ratio (%)




Total Risk-based Capital Ratio (%)




Tier 1 Leverage Ratio (%)




 Branch Banking and Trust Company (Insured Depository Institution)

Tier 1 Common Ratio (%)




Tier 1 Capital Ratio (%)




Total Risk-based Capital Ratio (%)




Tier 1 Leverage Ratio (%)




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



Other Revenue2







Realized Gains/Losses on Securities (AFS/HTM)



Trading and Counterparty Losses3



Other Losses/Gains4




Net Income Before Taxes



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



First Lien Mortgages, Domestic



Junior Liens and HELOCs, Domestic



Commercial and Industrial



Commercial Real Estate



Credit Cards



Other Consumer



Other Loans



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.


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



For further information: ANALYSTS: Alan Greer, Executive Vice President, Investor Relations, +1-336-733-3021,; or MEDIA: Cynthia Williams, Senior Executive Vice President, Corporate Communications, +1-336-733-1478,