DBRS Confirms BB&T Corporation’s 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 its Issuer & Senior Debt rating of A (high) with a Stable trend. The rating actions follow a detailed review of the Company’s operating results, financial fundamentals and future prospects.

DBRS’s confirmation of BB&T’s ratings reflects the Company’s strong banking franchise, which was augmented with the recent acquisitions of National Penn, Susquehanna and Swett & Crawford. Additionally, the ratings consider BB&T’s strong credit fundamentals, including its resilient and improved earnings generation capacity, favorable asset quality and liquidity, as well as solid capitalization. Lastly, the ratings consider the challenging operating environment that includes prolonged low interest rates, heightened regulatory and compliance demands, as well as modest and uneven economic growth. Overall, DBRS sees BB&T as well positioned within its rating category.

Underpinning BB&T’s ratings is its large, well-entrenched super-regional banking franchise that is led by a well-seasoned management team. The Company provides a broad menu of products and services that create a high degree of revenue diversification, which is supported by a robust and highly defensible deposit base. Overall, BB&T is the 8th largest financial institution in the U.S. with a significant presence in the Southeast and Mid-Atlantic regions, as well as in Texas. Additionally, the Company holds a top five deposit market share position in eight of the sixteen states that it serves. Notably, BB&T generates a comparatively high level of fee income, which provides some stability to earnings, led by its top tier insurance operation, as well as strong mortgage banking and capital markets businesses.

Despite the challenging operating environment, BB&T’s earnings power remains resilient and was bolstered by recent acquisitions, with the Company generating record revenues and earnings in recent periods. Overall, BB&T reported a return on average assets of 1.10% in 9M16, which is among the highest in its peer group. In addition, expenses remain well-controlled even with continued investments in the Company.

Importantly, BB&T’s credit fundamentals reflect continued strength, 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 modestly-sized energy portfolio (approximately 1% of total loans) continues to stabilize, with related balances declining. Meanwhile, other balance sheet trends remain sound, including its funding and liquidity profile, as well as capital position, with an LCR of 122% and fully phased-in CET1 ratio of 9.9% as of 3Q16.

BB&T Corporation, a bank holding company headquartered in Winston-Salem, North Carolina, reported $222.6 billion in assets at September 30, 2016.

RATING DRIVERS
Sustained improvement in core earnings generation and further franchise diversification could result in positive rating actions. 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 (July 2016), DBRS Criteria – Support Assessments for Banks and Banking Organisations (March 2016), DBRS Criteria - Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2016), and DBRS Criteria: Guarantees and Other Forms of Explicit Support (February 2016), 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
Rating Committee Chair: William Schwartz
Initial Rating Date: 11 November 2005
Most Recent Rating Update: 11 November 2015

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.