10-QPeriod: Q3 FY2008

TRUIST FINANCIAL CORP Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 6, 2008For Securities:TFCTFC-POTFC-PRTFC-PI

Summary

BB&T Corporation's third quarter 2008 report shows a decrease in net income to $358 million ($0.65 per diluted share) from $444 million ($0.80 per diluted share) in the prior year's quarter, reflecting challenges in the current credit cycle, particularly in residential real estate markets like Georgia, Florida, and metro Washington D.C. Despite these headwinds, the company saw growth in average loans and leases (7.7%) and deposits (6.9%) year-over-year. BB&T maintained strong capital levels, with Tier 1 leverage and tangible capital ratios well above regulatory requirements. The company also announced preliminary approval to participate in the U.S. Treasury's Capital Purchase Program, intending to sell approximately $3.1 billion in securities. The company is navigating a volatile financial market environment, marked by significant credit deterioration and increased provisions for credit losses ($364 million for the quarter). However, noninterest income increased by 17.3% to $792 million, driven by strong performance in insurance and mortgage banking. BB&T's net interest margin improved to 3.66% for the quarter, benefiting from a liability-sensitive position in a declining interest rate environment.

Financial Highlights

26 data points
Beta

Net Income

$358.00M

EPS (Diluted)

$0.65

Cash & Equivalents

$2.39B

Free Cash Flow

-$880.00M

Financial Statements
Beta
Interest Expense$705.00M
Net Income$358.00M
EPS (Basic)$0.65
EPS (Diluted)$0.65
Shares Outstanding (Basic)549.76M
Shares Outstanding (Diluted)553.54M

Key Highlights

  • 1Net income decreased by 19.4% to $358 million in Q3 2008 compared to Q3 2007, with diluted EPS falling to $0.65 from $0.80.
  • 2The provision for credit losses significantly increased to $364 million in Q3 2008 from $105 million in Q3 2007, reflecting credit deterioration.
  • 3Total assets grew by 3.3% to $137.0 billion, primarily driven by an increase in loans and leases.
  • 4Deposits increased by 1.9% to $88.4 billion, while long-term debt saw a notable increase of 14.1% to $21.3 billion.
  • 5Noninterest income rose by 17.3% to $792 million, bolstered by strong performance in insurance and mortgage banking.
  • 6BB&T announced preliminary approval to participate in the U.S. Treasury's Capital Purchase Program, planning to issue and sell approximately $3.1 billion of preferred stock and warrants.
  • 7Nonperforming assets more than doubled to $1.6 billion, with a significant increase in nonaccrual loans and leases.

Frequently Asked Questions

The decrease in net income is primarily due to significant credit deterioration and a substantial increase in the provision for credit losses, reflecting the challenging economic environment and weakness in residential real estate markets. Net charge-offs also increased significantly compared to the prior year.

BB&T maintains strong capital levels, with Tier 1 leverage and tangible capital ratios significantly above regulatory requirements. The company also received preliminary approval to participate in the U.S. Treasury's Capital Purchase Program, intending to sell approximately $3.1 billion in securities to strengthen its capital position.

The increase in noninterest income was largely driven by strong performance in insurance services and mortgage banking operations. Mortgage banking income saw a significant boost partly due to the adoption of new accounting standards (SFAS No. 159 and SAB 109) and favorable hedging results for mortgage servicing rights.

BB&T is experiencing ongoing challenges in its loan portfolio, particularly in residential real estate markets. Management anticipates that net charge-offs will remain elevated, estimating them to be between 1.00% and 1.25% of average loans and leases for the fourth quarter of 2008, suggesting continued pressure on provisions.