BB&T 2012 Annual Report Download - page 45

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BB&T also experiences competition from a variety of institutions outside of its market area. Some of these institutions
conduct business primarily over the Internet and may thus be able to realize certain cost savings and offer products and
services at more favorable rates and with greater convenience to the customer who can pay bills and transfer funds directly
without going through a bank. This “disintermediation” could result in the loss of fee income, as well as the loss of customer
deposits and income generated from those deposits. In addition, changes in consumer spending and saving habits could
adversely affect BB&T’ s operations, and the Company may be unable to develop competitive new products and services in
response to these changes on a timely basis or at all.
Catastrophic events could have a material adverse effect on BB&T.
The occurrence of catastrophic events such as hurricanes, tropical storms, tornados, and other large scale catastrophes could
adversely affect BB&T’ s consolidated financial condition or results of operations. BB&T has operations and customers
along the Gulf and Atlantic coasts as well as other parts of the southeastern United States, which could be adversely impacted
by hurricanes and other severe weather in those regions. Unpredictable natural and other disasters could have an adverse
effect on BB&T in that such events could materially disrupt its operations or the ability or willingness of its customers to
access the financial services offered by BB&T. BB&T’ s property and casualty insurance operations also expose it to claims
arising out of catastrophes. The incidence and severity of catastrophes are inherently unpredictable. Although BB&T carries
insurance to mitigate its exposure to certain catastrophic events, these events could nevertheless reduce BB&T’ s earnings and
cause volatility in its financial results for any fiscal quarter or year and have a material adverse effect on BB&T’ s financial
condition and/or results of operations.
BB&T faces significant operational risks related to its activities, which could expose it to negative publicity, litigation and/or
regulatory action.
BB&T is exposed to many types of risks, including operational, reputational, legal and compliance risk, the risk of fraud or
theft by employees or outsiders (including identity and information theft), unauthorized transactions by employees or
operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or
telecommunications systems. Negative public opinion can result from BB&T’ s actual or alleged conduct in any number of
activities, including lending practices, corporate governance and acquisitions, activities related to asset sales and balance
sheet management and from actions taken by government regulators and community organizations in response to those
activities. Negative public opinion can adversely affect BB&T’ s ability to attract and keep customers and can expose it to
litigation and regulatory action.
Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or
compounded before they are discovered and successfully rectified. BB&T’ s necessary dependence upon automated systems
to record and process its transaction volume may further increase the risk that technical flaws or employee tampering or
manipulation of those systems will result in losses that are difficult to detect. BB&T also may be subject to disruptions of its
operating systems arising from events that are wholly or partially beyond its control (for example, computer viruses or
electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss or
liability. BB&T is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations
(or will be subject to the same risk of fraud or operational errors by their respective employees as is BB&T) and to the risk
that BB&T’ s (or its vendors’ ) business continuity and data security systems prove to be inadequate.
BB&T relies on other companies to provide certain key components of its business infrastructure.
Third party vendors provide certain key components of BB&T’ s business infrastructure such as internet connections, network
access and mutual fund distribution. While BB&T has selected these third party vendors carefully, it does not control their
operations. Any failure by these third parties to perform or provide agreed upon goods and services for any reason or their
poor performance of services, could adversely affect BB&T’ s ability to deliver products and services to its customers and
otherwise to conduct its business. Replacing these third party vendors could also entail significant delay and expense.
Significant litigation could have a material adverse effect on BB&T.
BB&T faces legal risks in its business, and the volume of claims and amount of damages and penalties claimed in litigation
and regulatory proceedings against financial institutions remain high. Substantial legal liability or significant regulatory
action against BB&T may have material adverse financial effects or cause significant reputational harm to BB&T, which in
turn could seriously harm BB&T’ s business prospects.