BB&T discloses Dodd-Frank stress test results
WINSTON-SALEM, N.C., March 7, 2013 /PRNewswire/ -- BB&T today released the results of its stress test under a hypothetical economic scenario determined by banking regulators. The 18 large banking organizations that are subject to the 2013 Comprehensive Capital Analysis and Review (CCAR) are required to provide these disclosures under Dodd-Frank.
Today's disclosure precedes BB&T's planned release of its Comprehensive Capital Analysis and Review (CCAR) results, which are expected to be available on March 14, 2013. The CCAR includes banks' planned capital actions for the year including dividend increases, share buybacks or other potential actions.
For 2013, the Federal Reserve Board (Fed) created separate processes for the Dodd-Frank stress test and the CCAR. The Dodd-Frank stress test results are not intended to be an indicator of the Fed's decision on a bank's capital plan and investors should not make any inference about BB&T's CCAR capital request or the likelihood of receiving a "no objection" from the Fed.
BB&T uses mathematical processes as the basis for stress testing its results and has developed stress testing models specific to BB&T to consider each applicable risk in the scenario. These models are designed to capture BB&T's exposures and the effect of the stress scenario on BB&T's performance in light of BB&T's specific mix of assets and the specific effects on the markets where BB&T operates.
In addition, BB&T's stress testing framework uses qualitative components which guide and supplement the process. The involvement of expert judgment in considering the stress scenarios and possible outcomes enhances the risk management process.
BB&T's stress test results reflect the impact of different hypothetical risk events prescribed by the Supervisory Severely Adverse Scenario. The hypothetical risk events and the summary impact include the following:
The capital ratios presented herein are calculated using capital action assumptions provided within the Dodd-Frank Act stress testing rules. These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of actual expected losses, revenues, net income before taxes, or capital ratios.
The Dodd-Frank Act, signed into law in July 2010, represents a significant overhaul of many aspects of the regulation of the financial services industry, addressing, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, and changes among the bank regulatory agencies. BB&T, under Dodd-Frank, is deemed to be a "systemically important" institution. During 2012, federal agencies continued implementation of and rulemaking under the Dodd-Frank Act. Many of these provisions remain subject to further rulemaking, guidance, and interpretation by the applicable federal regulators, which will regulate the systemic risk of the financial system. BB&T cannot predict the additional effects that compliance with the Dodd-Frank Act or any regulations will have on BB&T's businesses or its ability to pursue future business opportunities. Additional regulations resulting from the Dodd-Frank Act may materially adversely affect BB&T's business, financial condition or results of operations.
BB&T is subject to assessment by the Fed as part of the Comprehensive Capital Analysis and Review (CCAR) program. CCAR is an annual exercise by the Fed to ensure that institutions have forward-looking capital planning processes that account for their risks and sufficient capital to continue operations throughout times of economic and financial stress. Following the submission of BB&T's annual capital plans, including proposed dividend payments, strategic considerations and share repurchases under different hypothetical economic scenarios, the Fed may object to BB&T's planned uses of capital or may require BB&T to modify its plans through a one-time limited adjustment to planned capital uses. The Fed may object to BB&T's capital plans due either to quantitative or qualitative concerns. BB&T cannot assure that the Fed will have no objections to our future capital plans submitted through the CCAR program. Failure by BB&T to achieve a "no objection" following the CCAR review could adversely affect our ability to increase dividends, enter into acquisitions and repurchase our common stock. The Dodd-Frank stress test described herein, is based solely on BB&T's analysis, does not include judgment or analysis of the Fed, and is independent from the CCAR process. Investors should not make any inference about BB&T's CCAR capital request or likelihood of receiving a "no objection" from the Fed based on the Dodd-Frank stress test results.
- Changes in national, regional and local economic conditions and deterioration in the geographic and financial markets in which BB&T operates could lead to higher loan charge-offs and reduce BB&T's net income and growth.
- Declines in real estate values and home sales volumes within BB&T's banking footprint, and financial stress on borrowers as a result of job losses, or other factors, could have further adverse effects on borrowers that result in higher delinquencies and greater charge-offs in future periods, which would adversely affect BB&T's financial condition and results of operations.
- Changes in interest rates may have an adverse effect on BB&T's profitability through net interest margin contraction or reduced loan originations.
- Turmoil and volatility in global financial markets could have a material adverse effect on BB&T's operations, earnings and financial condition.
- BB&T's liquidity could be impaired by an inability to access the capital markets, an unforeseen outflow of cash or a reduction in the credit ratings for BB&T or its subsidiaries.
- BB&T faces significant operational risks related to its activities, which could expose it to negative publicity, litigation and/or regulatory action.
BB&T Corporation (NYSE: BBT) is one of the largest financial services holding companies in the U.S. with $183.9 billion in assets and market capitalization of $20.4 billion, as of Dec. 31, 2012. Based in Winston-Salem, N.C., the company operates 1,832 financial centers in 12 states and Washington, D.C., and offers a full range of consumer and commercial banking, securities brokerage, asset management, mortgage and insurance products and services. A Fortune 500 company, BB&T is consistently recognized for outstanding client satisfaction by J.D. Power and Associates, the U.S. Small Business Administration, Greenwich Associates and others. More information about BB&T and its full line of products and services is available at www.BBT.com.
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