DBRS Confirms BB&T Corporation’s Issuer & Senior Debt at A (high); Trend Stable

DBRS, Inc. (DBRS) has today confirmed the ratings of BB&T Corporation (BB&T or the Company), including the Company’s Issuer & Senior Debt rating of A (high). At the same time, DBRS confirmed the ratings of its primary banking subsidiary, Branch Banking and Trust Company (the Bank). The trend for all ratings is Stable. The Intrinsic Assessment (IA) for the Bank is AA (low) while its Support Assessment remains SA1. The Company’s Support Assessment is SA3 and its Issuer & Senior Debt rating is positioned one notch below the Bank’s IA.

DBRS’s confirmation of BB&T’s ratings reflects the Company’s deeply entrenched super-regional banking franchise and strong credit fundamentals, including its robust earnings generation capacity, favorable asset quality, as well as sound funding, liquidity and capitalization. The ratings also consider the challenging operating environment and expected normalizing credit quality metrics within BB&T’s loan portfolio, particularly given its exposure, albeit modest, in subprime auto. Finally, the ratings acknowledge the Bank’s Consent Order regarding deficiencies within its BSA/AML compliance program that precludes the Company from making bank acquisitions, which has been an important part of its growth strategy and enhanced franchise strength over the long-term. Overall, DBRS sees BB&T as well-positioned within its rating category.

Led by a well-seasoned management team, the Company’s strong banking franchise is supported by a highly defensible deposit base, which covers the South and Mid-Atlantic regions. Overall, BB&T is the 8th largest U.S. financial institution, with top five deposit market share positions in eight of the sixteen states that it serves. The Company offers a wide array of products and services, providing significant revenue diversification. Notably, BB&T generates a comparatively high level of fee income, driven by its top tier insurance operations, as well as strong mortgage banking and capital markets businesses.

BB&T’s earnings power remains resilient, despite the still challenging operating environment. Bolstered by recent acquisitions, the Company has reported record revenues in recent periods. For 1Q17, exclusive of a loss on the early extinguishment of higher-cost FHLB borrowings, as well as merger-related and restructuring charges, BB&T generated a core return on average assets of 1.21%, which was among the highest in its peer group. DBRS notes that operating expenses remain well-contained even with continued investments in the Company.

Importantly, BB&T’s credit fundamentals remain strong, providing key support to the ratings. Specifically, the Company’s asset quality remains favorable, with low levels of non-performing assets and net charge-offs. Additionally, BB&T’s funding and liquidity profile, as well as capital position remain solid, with an LCR of 124% and fully phased-in CET1 ratio of 10.1% as of 1Q17.

BB&T Corporation, a bank holding company headquartered in Winston-Salem, North Carolina, reported $221 billion in assets at March 31, 2017.

RATING DRIVERS
Sustained improvement in core earnings generation and further franchise diversification could result in positive rating actions. Conversely, rating pressure could result from a sustained level of credit deterioration, or material reduction in capital levels.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are the Global Methodology for Rating Banks and Banking Organisations (May 2017) and DBRS Criteria: Guarantees and Other Forms of Support (February 2017), which can be found on our website under Methodologies.

The primary sources of information used for this rating include company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: Michael McTamney, Vice President – Global FIG
Rating Committee Chair: William Schwartz, Senior Vice President – Global Credit Policy
Initial Rating Date: 19 December 2005
Most Recent Rating Update: 10 November 2016

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.