BB&T 2012 Annual Report Download - page 10

2012 Annual Report
8
U.S. and international regulators have postponed more
stringent requirements on bank capital and liquidity, we are
very comfortable with our capital levels under those proposed
requirements. We estimate BB&T’s Tier 1 common, a measure
of tangible common equity and the ratio that regulators watch
most closely, at 7.9% under the proposed U.S. capital rules.
Under the proposed Basel III international capital rules –
established by a group of the world’s top regulators and central
bankers – we estimate BB&T’s Tier I common at 9.0%. Neither
ratio includes mitigating actions that we will take to improve
our capital ratios.
BB&T has submitted to the Federal Reserve our capital
plans for the Fed’s 2013 Comprehensive Capital Analysis
and Review, designed to ensure banks can meet their
capital requirements in various challenging hypothetical
economic scenarios that are more adverse than actually
expected. While there are no guarantees, we believe BB&T
will exceed all requirements, as we have for the last two
years after these “stress tests” were introduced in response
to the financial-markets crisis.
Consistent with BB&T’s shareholder-friendly philosophy for
capital deployment, our first priority is to fund organic growth,
as we are doing in 2013 with our expansion in Texas. We believe
strong organic growth provides the highest return and is in
our shareholders’ best long-term interest. Our second priority
is paying long-term, stable and growing dividends to our
shareholders. Strategic acquisitions such as BankAtlantic and
Crump that add to earnings are BB&T’s third priority. A fourth
priority is repurchasing BB&T shares. We believe repurchases
make sense only if the economy impedes organic growth
opportunities, if acquisitions are not reasonably priced – and if
the internal rate of return is superior to other options.
OUR KEY STRATEGIC OBJECTIVES FOR 2013
A core BB&T value is recognizing reality, so we cannot
ignore that challenges remain for our nation and industry.
U.S. economic growth is still slow, hampered by lingering
uncertainty about whether our political leaders can reach
agreement on pressing fiscal issues. As a result of indecision
in Washington, businesses are avoiding investments until they
have a clearer picture about the economy and taxes – coupled
with nervousness about higher regulatory and healthcare
costs. Artificially low interest rates are constraining banks’ net
interest margins, a key driver of profitability. Those concerns
are compounded by the banking industry’s higher regulatory
costs and intense competition.
At BB&T, however, we believe our long-term strategy – and
proven ability to consistently execute on that strategy – position
us to continue to prosper and outperform our peers regardless
of external challenges. For many years, we have invested in
diversifying our assets and markets to create stable revenue
and earnings, which in turn creates stable dividends and share
prices for our shareholders. Those strategies now are paying off
even in an economy with slow to moderate real Gross Domestic
Product growth.
In addition, we are reasonably optimistic that ultimately we
will see some positive leadership from Washington and at
least a modest agreement on fiscal issues. If that happens,
we believe the economy will gain momentum and businesses
that have delayed borrowing and spending for five years will
start to fund needed investments. In that scenario, BB&T’s
strategies will propel us to even better performance for
our shareholders.
The industry consolidation that we have long predicted has been
slower than anticipated. During the financial-markets crisis,
banks were reluctant to sell because of depressed share prices.
At the same time, regulators and even some former advocates
of mammoth financial services conglomerates are having
second thoughts about the benefits of bigness for bigness’ sake.
Moreover, many of today’s potential sellers are asking for prices
Current Dividend Yield of Stress-Tested Banks
BB&T Among Leaders in Dividend Yield
Source: Thomson Reuters