BB&T (NYSE: BBT) is a large regional bank that offers full-service commercial and retail banking services.
During and after the financial crisis, it gained some attention for doing notably better than the overall banking industry because it largely avoided subprime mortgages.
Amazingly, BB&T remained profitable throughout the entire period and resented being forced to take $3.1 billion in TARP bailout money that it did not need (and pay the $250 million in interest that came with the loan).
BB&T CEO Kelly King speaks to IBTimes about taking advantage of the financial crisis (because of its status as a healthy bank) and the difference between BB&T and national banks like Citigroup (NYSE: C).
IBT: Can you give our readers a little background on the scope of BB&T's business?
King: We're a $157-billion financial services company with 1,800 branches primarily in the mid-Atlantic and Southeast area. We're about half retail and half financial.
IBT: How is BB&T dealing with the post-financial crisis environment? How is it dealing with things like increased regulation and the persistently poor jobs market?
King: The most significant impact on us and all other banks has been [the deteriorating quality of loans we hold on our balance sheets].
That's been our focus for the last couple of years and it remains so. Our credit quality has deteriorated during this cycle but [it] has been meaningfully better than [those of] our peers and the national average.
The other substantial challenge is that there is very little loan growth in the market place. This market has been contracting with the whole economy. Our loan growth is better than the national average but it's been slow.
Related to slow loans growth is the challenge in [growing] revenues. If banks don't have loan growth, they [won't have revenues growth].
IBT: What are you doing to address these problems or at least soften their impact?
King: We remain steady and committed to our fundamental value and mission over many generations. We didn't do a lot of the esoteric and high-risk activities that a lot of other institutions did. That served us well.
We're also focused on clients; our goal is to have them achieve economic success and financial security. Our clients have been suffering and challenged, so we've been trying to help them engineer through these tough times. As a result, our relationships with our clients have improved substantially. Our client service quality is at an all-time high, so that results in a very high value proposition.
The ultimate question of a business' success is what kind of value proposition they offer in the market place.
Value is a function of quality relative to the price you charge, so our prices have remained constant and our quality has gone up materially, so our [value] proposition has improved.
IBT: So you're doing some of the same things that made you successful in the past. What about things you're doing differently because of the new environment?
King: One area that we've focused on is the corporate banking area. One of the realities of the crisis is a number of financial institutions have gone away or shrunk in size. That has left an opportunity in the corporate banking space.
Likewise, the wealth management area has been a real positive for us. [Before the crisis], about six years ago, we decided to dramatically increase the service quality in the wealth management area, and we have been building that platform.
Fortunately, over the last two or three years, that [process] has been completed.
We've been reaching out to clients [in this area] and that has been received very well because of our [financial strength].
So we will focus on corporate and wealth. In addition, we remain steadfast in our long-standing focus on small businesses. In our [history of 138 years], we've basically grown up as a small business bank, so we remain sharply focused on that.
IBT: So have you taken away customers from some of your weaker competitors?
King: We absolutely have taken market share from some of the weaker competitors -- some of them have just gone [bankrupt or] merged away.
We're growing faster than the market, so therefore we know we're growing market share. Anecdotally, in terms of feedback from our bankers, we've moved a lot of relationships from weaker competitors.
We think some of our competitors will continue to have challenges. We also think there is a pretty big opportunity in terms of the consolidation of the banking industry. The whole industry is going to consolidate, so we'll participate in that positively either by acquisitions or from the turmoil in the market that's caused by other acquisitions.
IBT: How do you compare BB&T, and its prospects, to big national banks?
King: We are clearly client-focused whereas the large institutions tend to be very product-focused. So while our bankers get up in the morning trying to figure out what the clients need and find a solution, [those from large national banks] wake up in the morning trying to sell products they've already developed.
Both strategies can work, but we think client focus is the more effective focus in the long-term, certainly for BB&T.
IBT: How about community banks or thrift banks?
King: The small community banks have a client and quality focus similar to us. The difference is that they don't have the scale to have the efficiencies to be competitive in service offerings and prices [compared to us].
One thing that developed from the crisis is an extreme increase in regulation and regulatory cost, so scale becomes substantially more important in this environment. If you develop certain systems and processes to comply with regulatory rules, you can lever that same capability over $150 billion just like you can over $1 billion.
It doesn't mean small banks can't make it, but it's going to be very tough for them.
IBT: And BB&T is open to acquiring some of these banks in the future?
King: We've done a lot of acquisitions over the years and have developed a real expertise in doing them very well. We will certainly continue that.
With regards to the community banking concept, we try to operate like a community bank, because they do have good service quality. So we have a community banking approach [to our business] and delegate a substantial amount of authorities to our local [bank branches].
So we match up extremely with community banks.
IBT: Any final words or points you'd like to make?
King: I would say that as I look forward to 2011, I'm measurably more optimistic about the economy than I was over the last several years.
The [mid-term] elections were well received by the public, particularly the business community, because it provided a lot more certainty compared to the last couple of years.
The QE2 the Federal Reserve is pursing is a real positive in stimulating economic growth. The [Obama tax compromise] that was reached at the end of  was clearly a very big positive for individuals and businesses for making investment [decisions].
I think the overall economic climate looks much more positive, and that's good news for our country, our industry, and our institution.
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