DBRS Confirms BB&T Corporation at AA (low); Branch Banking and Trust Company at AA; Trend Remains Stable

Dominion Bond Rating Service (DBRS) has today confirmed the ratings and Stable trend of BB&T Corporation (BB&T or the Company) and its principal operating bank subsidiary, Branch Banking and Trust Company, as indicated in the table below. The rating action followed a review by DBRS of the Company’s operating performance and financial fundamentals.

Over the past year, BB&T has continued to produce stable earnings growth and good profitability from its diverse business mix while maintaining sound credit and financial fundamentals. Loan and core deposit growth rates have remained healthy, and non-interest income has continued to increase at a steady pace in both absolute terms and as a percentage of net revenues.

Funding reliance on more costly certificates of deposit, however, has risen sharply over the past year, and reversing this trend is considered by DBRS a challenge to sustain the prevailing strong profitability metrics. The Company heads into 2007 with positive earnings momentum, and its fundamentals remain healthy and consistent with those of its similarly rated peers.

BB&T benefits from a powerful banking and financial services franchise in a high-growth, southeastern U.S. footprint, including top-tier deposit market shares in many of its markets. The ratings reflect strong and stable earnings, robust profitability, ample liquidity and capital, and satisfactory holding company fundamentals. The Stable trend reflect DBRS’s view that the Company has the franchise strengths, resources and management skills to continue producing strong operating results while maintaining a low risk profile.

Earnings stability arises from a diverse community-centered commercial and consumer banking business, a broad range of fee-based products and services which contribute about 41% to net revenues (for full-year 2006) and a solid core deposit base. Profitability indicators – ROA, ROE, risk-adjusted return and NIM – are all at or above the respective medians for those banks in BB&T’s peer group. The strong profitability results from higher-than-peer group average loan yield, abundant fees and commissions, good operating efficiency, and low loan loss provisions.

Asset quality is good, as evidenced by continued low delinquency and net charge-off rates. The loan portfolio is sufficiently diversified by both asset type and geography, and is more granular than that of most peers. Other than a moderately high exposure to commercial real estate (at about 245% of tangible common equity excluding “owner occupied” loans at September 30, 2006), the loan portfolio lacks material risk concentrations.

Capital adequacy ratios, although trending down slightly over the past two to three years as a result of balance sheet growth and above-peer group average dividend payments and stock repurchases, remain sufficient and in line with those of financial institutions similarly rated by DBRS. Due to its strong earnings prowess, DBRS expects BB&T to continue generating sufficient capital internally to support its growth strategy.

The holding company’s stand-alone fundamentals are satisfactory. Double-leverage is moderately high at 120% (at September 30, 2006), however, unencumbered liquidity and operating income are sufficient to cover debt service obligations and operating expenses for nearly one year without relying on dividends from the regulated bank subsidiary

Notes:
The Trust Preferred Securities contain certain unique covenants that give them some equity-like characteristics.
All figures are in U.S. dollars unless otherwise noted