* BB&T to move $1 billion in loans to held-for-sale in Q3
* Loans would be sold to investors in next 2 to 3 quarters
* CEO says bank's earnings can weather related writedowns
* Shares close down 3.9 pct
(Adds details, analyst comments, updates with closing stock
By Joe Rauch
CHARLOTTE, N.C., Sept 14 BB&T Corp (BBT.N)
Chief Executive Kelly King said on Tuesday the bank would sell
more than $1 billion in loans -- higher than expected, which
raised concern about bad assets and sent its shares nearly 4
"It was a surprise announcement that pretty clearly
indicates the next few quarters are going to be lumpy for the
bank's credit," said Michael Nix, principal at Greenwood
King, speaking at the Barclays Global Financial Services
Conference in New York, said the bank will reclassify some $1
billion in nonperforming assets as loans held-for-sale, and the
loans will be sold to interested parties over the next two to
Until second quarter 2010, BB&T had largely avoided the
massive loan sales and writedowns that plagued other major U.S.
regional banks since the housing crisis took hold in 2007 and
BB&T was one of three major U.S. regional banks that
remained profitable throughout the entire financial crisis and
recession, and one of the first to repay its 2008 U.S.
government bailout last summer.
But as part of the company's second quarter 2010 earnings
announcement, BB&T disclosed a large spike in bad loans it
would be looking to get off its books.
In the second quarter of 2010, BB&T sold $682 million in
problem assets -- half of those retail mortgages -- to
investors. The sale was six times higher than the $140 million
the bank sold in 2010's first quarter and the $102 million it
sold a year prior.
The bank said at the time it would continue to sell
distressed assets more aggressively, but King's announcement
was a surprise given the amount of loans that would be
reclassified as held-for-sale in third quarter.
"There's always been a sense that BB&T hasn't necessarily
revealed all of their problems, even as their competitors were
recognizing losses and sell loans," said Nix. "The bank clearly
took a stance they wanted to wait on asset sales."
Analysts said BB&T's late arrival to asset sales is driven in part by its loan portfolio. The bank's loans were
concentrated in areas such as North Carolina and Virginia,
where borrowers have been less affected by the foreclosure
crisis than in Florida or Georgia.
The bank attempted to sell the $1 billion pool of loans
that will be moved to held-for-sale in large blocks earlier
this summer, but received bids below what it wanted, analysts
Instead, BB&T will now sell the loans in small chunks to a
wider investor pool.
But the bank must quickly dispose of assets to catch up
with rivals that have already reported large loan writeoffs, or
risk a worsening loan portfolio as competitors begin to improve
after years of pain, analysts said.
"You don't want to go into 2011 in the back of the pack on
credit," said Marty Mosby, a bank analyst with Guggenheim
During the Barclay's conference presentation, King was
adamant the $1 billion loan sale is not indicative of deeper
credit issues at the bank and BB&T is instead trying to
maximize the value of its distressed loans.
"We are not in a rush to cut and dispose of assets at 10
cents on the dollar," King said. "But we are becoming more
aggressive in selling our problem assets."
King also said investors should not expect the bank to
report higher cumulative losses. Instead, he said, the bank is
"pushing existing losses forward."
The third-quarter writedowns would be absorbed by the
bank's earnings and the company's dividend would be unaffected,
he added. BB&T pays 15 cents per share, one of the highest in
The shares of the Winston-Salem, North Carolina-based bank
closed 94 cents lower, or 3.9 percent, at $23.43 on the New
York Stock Exchange. They posted the largest decline in the KBW
Bank Index .BKX, which fell 1.35 percent on Tuesday.
(Reporting by Joe Rauch; editing by Maureen Bavdek, Gary Hill
and Andre Grenon)