Analyst Presentation September 4, 2002
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
September 4, 2002
Date of Report (Date of earliest event reported)
BB&T Corporation
(Exact name of registrant as specified in its charter)
Commission file number : 1-10853
|
|
| North Carolina |
56-0939887 |
| (State of incorporation) |
(I.R.S. Employer Identification No.) |
|
|
| 200 West Second Street |
|
| Winston-Salem, North Carolina |
27101 |
| (Address of principal executive offices) |
(Zip Code) |
(336) 733-2000
(Registrant's telephone number, including area code)
This Form 8-K has 36 pages.
ITEM 9.
REGULATION FD DISCLOSURE
BB&T Chairman and CEO John Allison's presentation to Merrill Lynch Banking and Financial Services Investor Conference, September 4, 2002.
BB&T
Established 1872
Merrill Lynch
Banking & Financial Services Investor Conference
September 4, 2002
Background
BB&T is a fast growing, highly profitable, regional financial holding company. The core of our business was created by the merger-of-equals between BB&T
and Southern National in 1995 and the acquisition of UCB in 1997. All three institutions 'grew up' as eastern North Carolina farm banks. This fundamental
and sound heritage is reflected in our culture. BB&T was organized in 1872 and is the oldest bank in the Carolinas.
BB&T has consummated 58 acquisitions of community banks and thrifts, 57 insurance agencies, and 20 non-bank acquisitions over the last fifteen years. The
employees, clients, shareholders, and board members of these institutions have considerably strengthened our organization.
Primary Market Segments
|
|
|
|
| · |
Small business (Best in America) |
· |
Trust ($20.4 billion) |
| · |
Commercial Middle Market |
· |
Investment Services |
| · |
Real Estate Lending |
· |
Asset Management |
| · |
Retail |
· |
Capital Markets |
| · |
Home equity (Market Leader) |
· |
Consumer Finance |
| · |
Sales finance (Best Quality Service) |
· |
Factoring |
| · |
Mortgage ($11.1 billion) |
· |
Asset-Based Lending |
| · |
Leasing |
· |
International |
| · |
Insurance (10th largest in U.S.) |
· |
Bank Card |
| · |
Treasury Services |
· |
Merchant |
| |
|
· |
Payroll Processing |
Market Coverage
Deposit Market Share
|
|
% of BB&T's Deposits |
Rank |
| · |
|
North Carolina* |
|
32 |
% |
2nd |
|
| · | |
Virginia | |
18 |
% |
4th | |
| · | |
Georgia | |
12 |
% |
6th | |
| · | |
South Carolina | |
10 |
% |
2nd | |
| · | |
West Virginia | |
9 |
% |
1st | |
| · | |
Kentucky | |
7 |
% |
3rd | |
| · | |
Maryland | |
6 |
% |
8th | |
| · | |
Tennessee | |
2 |
% |
11th | |
| · | |
Florida | |
2 |
% |
27th | |
| · | |
DC | |
1 |
% |
6th | |
*Excludes home office deposits
BB&T Culture
Purpose
Our ultimate purpose is to create
superior, long-term economic
rewards to our owners
(shareholders).
Purpose
| · |
|
However,
we can only accomplish this purpose with excellent client relations as our clients are
our source of revenues. |
| · |
|
To
have excellent client relations we must have outstanding employees to serve our clients.
To attract and retain outstanding employees, we must reward them financially and create
an environment where they can learn and grow. |
| · |
|
Our
economic results are significantly impacted by the success of our communities. The
community's "quality of life" impacts its ability to attract industry for growth. |
BB&T
Long-Term Strategy
Client-Driven
"Community
Bank" concept is the
foundation for local decision-making and
the basis for responsive,
reliable, and
empathetic client service.
Treat
Client as an Individual
BB&T's Management
Style
|
|
| · |
Participative |
| |
| · |
Team-Oriented |
| |
| · |
Fact-Based |
| |
| · |
Rational |
| |
| · |
Objective |
BB&T's Management
Concept
|
|
| · |
Hire excellent people |
| |
| · |
Train them well |
| |
| · |
Give them an appropriate level of authority and responsibility |
| |
| · |
Expect a high level of achievement |
| |
| · |
Reward their performance |
Financial
Results
Earnings
Performance1
($ in Millions Except for Per Share Information)
For Period Ended
|
|
|
|
|
|
6 Months |
|
1997 |
1998 |
1999 |
2000 |
2001 |
6/30/02 |
| Total Revenue |
|
|
$ |
4,175 |
|
$ |
4,702 |
|
$ |
5,195 |
|
$ |
5,949 |
|
$ |
6,183 |
|
$ |
2,983 |
|
| Net Income | | |
$ | 633 |
|
$ | 739 |
|
$ | 840 |
|
$ | 958 |
|
$ | 1,100 |
|
$ | 638 |
|
| ROA |
|
|
|
1.38% |
|
|
1.44% |
|
|
1.47% |
|
|
1.55% |
|
|
1.60% |
|
|
1.75% |
|
| ROE |
|
|
|
16.21% |
|
|
17.11% |
|
|
18.14% |
|
|
19.50% |
|
|
18.96% |
|
|
18.89% |
|
| EPS (diluted) |
|
|
$ |
1.42 |
|
$ |
1.64 |
|
$ |
1.85 |
|
$ |
2.10 |
|
$ |
2.40 |
|
$ |
1.34 |
|
|
|
|
|
(+ 15.4%) |
|
|
(+15.5%) |
|
|
(+12.8%) |
|
|
(+13.5%) |
|
|
(+14.3%) |
|
|
(+16.5%) |
|
| Cash Basis: | | |
| ROA |
|
|
|
1.44% |
|
|
1.53% |
|
|
1.59% |
|
|
1.67% |
|
|
1.72% |
|
|
1.80% |
|
| ROE |
|
|
|
17.57% |
|
|
19.71% |
|
|
22.33% |
|
|
24.39% |
|
|
23.58% |
|
|
23.70% |
|
| EPS | | |
$ | 1.46 |
|
$ | 1.72 |
|
$ | 1.97 |
|
$ | 2.24 |
|
$ | 2.55 |
|
$ | 1.35 |
|
|
|
|
|
(+ 15.0%) |
|
|
(+17.8%) |
|
|
(+14.5%) |
|
|
(+13.7%) |
|
|
(+13.8%) |
|
|
(+9.8%) |
|
1Recurring and restated
EPS Trend1
Total
Assets
Recurring
Net Income
As Originally Reported
Financial
Strength
($ in
Billions Except for Per Share Information)
|
|
|
|
|
|
|
| Period-end Balances: |
1997 |
1998 |
1999 |
2000 |
2001 |
6/30/02 |
| Total Assets |
$ 49.2 |
$ 54.4 |
$ 59.4 |
$ 66.6 |
$ 70.9 |
$ 76.3 |
| Total Shareholders' Equity |
$ 4.1 |
$ 4.6 |
$ 4.6 |
$ 5.4 |
$ 6.2 |
$ 7.1 |
| BV per share (EOP) |
$ 9.38 |
$ 10.33 |
$ 10.30 |
$ 11.96 |
$ 13.50 |
$ 14.99 |
| Leverage Capital Ratio (EOP) |
8.2% |
7.9% |
7.3% |
7.3% |
7.2% |
7.3% |
| Tier 1 Capital (EOP) |
11.6% |
11.5% |
10.3% |
9.7% |
9.8% |
9.7% |
| Total Capital |
15.0% |
15.1% |
13.4% |
12.2% |
13.3% |
12.8% |
| Equity/Assets (EOP) |
8.3% |
8.5% |
7.8% |
8.1% |
8.7% |
9.3% |
Generating
Fee Income and
Operating Efficiency1
|
|
|
|
|
|
|
| |
1997 |
1998 |
1999 |
2000 |
2001 |
6/30/02 |
| |
Noninterest Income/
Net Revenue (T/E) |
23.6% |
26.5% |
29.5% |
30.3% |
33.4% |
35.3% |
| |
| Cash Basis Efficiency Ratio |
53.5% |
53.6% |
53.4% |
50.9% |
49.5% |
50.2% |
1Recurring and restated
Credit
Quality
|
1997 |
1998 |
1999 |
2000 |
2001 |
6/30/02 |
Industry* |
| Net Charge-offs/ |
|
|
|
|
|
|
|
| Average Loans |
.35% |
.28% |
.26% |
.27% |
.40% |
.47% |
1.39% |
| Net Charge-off (Excluding |
| Specialized Lending) |
.32% |
.25% |
.22% |
.22% |
.34% |
.38% |
n/a |
| Nonperforming Assets/ |
|
|
|
|
|
|
|
| Total Assets |
.47% |
.39% |
.33% |
.36% |
.53% |
.52% |
1.05% |
Restated
*Source: FDIC Quarterly Banking Profile 3/31/02
BB&T
2002 Target Performance Objectives
|
|
| Fee Income growth |
25% |
| CB Efficiency Ratio |
‹ 50% |
| CB ROA: |
1.75% |
| CB ROE: |
24% |
| Leverage Capital Ratio |
7.0% to 8.0% |
| Consensus EPS Estimates |
$ 2.76 |
| (CB EPS $2.80) |
(+15.0%) |
| Consensus EPS Estimates (2003) |
$ 3.07 |
| |
(+11.2%) |
Long-term
Objective: CB EPS Growth of 12.0%
2002 Key
Strategic Objectives
| 1. |
|
Be
the World Standard revenue-driven sales organization |
| 2. |
|
Execute
the World Standard client service strategy |
| 3. |
|
Achieve
superior performance and profitability - Top 5%; realize performance potential of new
markets |
| 4. |
|
Execute
branch automation and electronic banking strategy; increase scale of selected fee based
businesses; optimize and integrate products, business lines, delivery systems and
information systems |
| 5. |
|
Integrate
past acquisitions and pursue strategic future acquisitions |
2002 Key
Strategic Objectives
(1) Be the World Standard Revenue-Driven Sales Organization
· Execute on BB&T Decathlon
| - |
|
Maintain
10 sales contacts |
| - |
|
5
or more service households |
· Execute on Integrated Relationship Management
2002 Key
Strategic Objectives
(2) Execute the World Standard Client Service Strategy
| · |
|
Long
term profit maximization through quality differentiation |
| · |
|
We
are a quality differentiated competitor: We sell quality not price. While price always
matters, we deliver the greatest value to the client. Value is the ratio of quality to
price. We focus on the quality component. |
| · |
|
Relationship
driven / Value added |
| · |
|
Reliable,
responsive, empathetic, competent |
| · |
|
Gold
Seal Standards - Systemized quality |
| · |
|
Execute
Client Service model |
| · |
|
Maintain
better service quality than our primary competitors |
2002 Key
Strategic Objectives
(3) Achieve Superior Performance and Profitability Goals Top 5%; realize performance potential of new markets
| · |
|
Achieve
a superior P/E ratio by superior cash basis earnings per share growth, superior cash
basis ROE, superior revenue growth while maintaining a sound financial position as
evidenced by leverage capital and asset quality ratios |
| · |
|
Maintain
pricing discipline |
| · |
|
Insure
excellent asset quality |
| · |
|
Realize
performance potential of new markets |
2002 Key
Strategic Objectives
(4) Execute Branch Automation and Internet strategy, increase scale of selected fee based businesses; optimize and integrate products, business lines delivery systems and information systems
| · |
|
Have
a passion for rational innovation |
| · |
|
Execute
creativity process and transfer best practices |
| · |
|
Expand
management development program |
| · |
|
Branch
automation / other systems enhancements |
| · |
|
Electronic
Delivery Systems |
| · |
|
Payroll
processing / HR benefit business |
2002 Key
Strategic Objectives
(5) Integrate past acquisitions and pursue strategic future acquisitions
| · |
|
Complete
integration of recent bank and non-bank mergers |
| · |
|
Pursue
banks and thrifts in the Carolinas, Virginia, Maryland, DC, Georgia, West Virginia,
Tennessee, Kentucky, Ohio and Florida with assets of $250 million to $10 billion |
| · |
|
Continue
aggressive insurance agency acquisition program |
| · |
|
Pursue
integration or roll-up of non-bank acquisitions |
Large
Market Share of Growth Markets
Valuable Franchise
Sound
Financial Position
Creates Low Risk
|
BB&T1 |
Industry2 |
| |
| Tier 1 Capital Ratio |
9.75% |
9.12% |
| |
| Nonperforming Assets/Total Assets |
0.52% |
1.05% |
| |
| ROA |
1.75% |
1.34% |
| |
| ROE |
18.89% |
15.04% |
1Recurring and restated - as of/for the period ended 6/30/02
2Source: FDIC as of/for year ended 3/31/02
Recognitions
| · |
|
Ranked
#17 (Top 4%) in Barron's 500 - 2nd highest ranked bank |
| · |
|
Recognized
by Business Week as the 3rd highest performing bank in U.S. and 81st best performer of
all S&P 500 companies (top 17%) |
| · |
|
Recognized
by CEO Magazine 1st in Market Value Added of any bank and ranked 61st (top 7%) of all
companies ranked |
| · |
|
Recently
picked by Smart Money as one of the Top 5 Income Stocks |
Long-Term
Trends
| · |
|
20th
Consecutive year of record recurring earnings |
| · |
|
20
Year compound annual growth in EPS 11.0%
15 Year compound annual growth rate in EPS 12.0%
10
Year compound annual growth rate in EPS 13.4%
(beginning with originally reported EPS) |
| · |
|
Paid
cash dividend every year since 1920 |
| · |
|
31st
Consecutive year of dividend increases |
Shareholder
Return
Owners as
Beneficiaries of
Corporate Strategy
| · |
|
BB&T's
10-year compound annual dividend growth rate is 15.8% as compared to 2.7% for the S&P
500 |
| · |
|
Over
the last five years, BB&T's total compound annual return to shareholders is 14.2%
compared to 3.7% for the S&P 500 and 4.4% for the S&P 500 Banks Index |
| · |
|
BB&T's
10-year total compound annual return to shareholders is 20.3% compared to 11.4% for the S&P
500 and 12.7% for the S&P 500 Banks Index |
Summary
Special
Strengths of BB&T
| · |
|
Superior
sales system / Superior revenue growth |
| · |
|
Different
and better model for community banking |
| · |
|
Unique
and successful acquisition strategy |
| · |
|
Great
markets / Great franchise |
| · |
|
Philosophy:
Rational / Objective |
Forward-Looking
Information
This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of BB&T. These
forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by
such forward-looking statements include, among others, the following possibilities: (1) competitive pressure in the banking industry increases
significantly; (2) changes in the interest rate environment reduce margins; (3) general economic conditions, either nationally or regionally, are less
favorable than expected, resulting in, among other things, a deterioration in credit quality; (4) changes occur in the regulatory environment; costs or
difficulties related to the integration of the businesses of BB&T and its merger partners are greater than expected; (5) changes occur in business
conditions and inflation; (6) expected cost savings from proposed mergers cannot be fully realized; (7) deposit attrition, customer loss or revenue loss
following proposed mergers are greater than expected; (8) required operational divestitures associated with pending mergers are greater than expected; and
(9) changes occur in the securities markets. The forward-looking earnings estimates included in this presentation have not been examined or compiled by
the independent public accountants of BB&T, nor have such accountants applied any procedures thereto. Accordingly, such accountants do not express an
opinion or any other form of assurance on them.
BB&T
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BB&T CORPORATION
(Registrant)
By: /S/ SHERRY A. KELLETT
Sherry A. Kellett
Senior Executive Vice President and Controller
(Principal Accounting Officer)
Date: September 4, 2002