EX-99.5 6 lending_new.htm lending_new.htm - BB&T

Exhibit 99.5

BB&T Lending Group

Driving Superior Quality, Profitability and Growth

Investor Conference

February 11, 2009

Objectives

  		•

    Demonstrate long term superior credit performance by BB&T based upon well defined “points of differentiation”

  		•

    Address key concerns regarding BB&T’s current portfolio through increased disclosure

     

  • Real Estate

     

  • Other (non-real estate) segments

  		•

    Provide outlook for performance in 2009 and beyond, including risks presented by the economy and housing markets

    Key Messages

  		•

    Strategy, structure and process do matter

     

  • BB&T’s lending strategy enhances performance

     

  • Lending Group’s unique organizational structure and functions add value

     

  • Superior balance of credit quality, profitability and growth for many years

  		•

    Geography, product, channel and granularity advantages mitigate but don’t eliminate challenges in Single Family Residential Real Estate segments

     

  • Non-Real Estate (RE) segments fundamentally sound despite negative cyclical trends and some exposure to markets with severe housing problems

     

  • Real estate exposure is manageable under a range of realistic scenarios

     

  • Seeing high quality production, rational spreads in non-RE segments

  		•

    Continuing to leverage BB&T’s legacy risk management strengths to manage through the cycle and achieve superior long term performance

    Today’s Agenda

  		•

    Strategy, Organizational Structure and Lending Process

     

  • BB&T’s Long Term Lending Strategy

     

  • Lending Group Structure and Functions

     

  • Lending Process: Strategy, Transaction Management, Portfolio Management

  		•

    Peer Comparisons

  		•

    Portfolio Review

     

  • Current Performance – Total Portfolio

     

  • Non-Real Estate Segment Dashboards

     

  • Real Estate Segment Dashboards

     

  • 2009 Outlook

  		•

    Summary

  		•

    Q & A

    Strategy and Structure

    BB&T’s Long Term Lending Strategy

                                                 Strategy                                             Execution  Portfolio Results 
    • Corporate values drive strategy  • Select clients that identify with  • Lower risk; broader, deeper and 
         “value” promise     more profitable relationships 
     
    • Relationship focused  • Target market = prime credit  • Very little sub-prime exposure 
      • Originate to hold  • Work through problems vs. quick 
           charge-off 
     
    • Compete on value, not price  • Maintain risk-based pricing  • Better risk-adjusted returns (vs. 
         discipline     peers) 
     
    • Serve local communities in  • Target market = local  • In footprint portfolio 
       Southeast  • Branch based delivery  • High % direct origination loans 
     
    • Deliver sustainable, predictable  • Intense focus on transaction risk  • Very granular exposure 
    results over the long term     mitigation  • High % of loans secured and 
      • Avoid “trendy” lending and control     guaranteed 
         exposure in “hot” markets  • No concentrations, except SFR RE 
        • Traditional, non-exotic products 

    BB&T’s Long Term Lending Strategy

    (continued)

    Strategy                                             Execution  Portfolio Results 
    • Everyone in lending process is  • CCO involved in transaction  • No surprises (“we know what’s 
       accountable     approvals, problem loans and     going into the portfolio”) 
         approves charge-offs > $100k  • Conservative transactions 
      • Lenders “own the loan”   
      • Concurring co-approval (2   
         signatures)   
     
     
    • One company  • Shared culture, objectives and  • Balanced quality, profitability and 
         incentives for credit and sales     growth 
      • Consistent training, lending tools   
         and systems   
     
    • Improve financial security of clients  • Don’t do if you don’t understand it  • Increased customer willingness and 
         or can’t define client benefit     ability to pay 
        • Lower losses (frequency and 
           severity) 

    What’s Not in the Portfolio

    • Loans in high risk geographies outside  • Exotic products 
                 our footprint                     –  No Option ARMS, negative amortization, 
    –  No exposure to CA, NV, AZ (sand states),    reverse mortgages 
      rust belt, or Northeast                     –  Limited low doc (risk layered) mortgages, 
     
    • Loans generated through high risk    sub-prime mortgages 
                 business models                     –  No CDS 
                           –  No leveraged finance 
    –  No “stand alone” national products exposure                     –  No large condo, other CRE projects 
         –  No 3rd party/broker channel exposures in     
      home equity, CRE                     –  No large PUDs 
                           –  No fully underwritten syndicated loans (best 
    • Re-intermediation risk    efforts only) 
     –  No SIVs, other off balance sheet portfolios                     –  No covenant lite or enterprise value 
     –  No “hung loans” from originate-to-distribute    corporate loans 
      capital markets structured product   
      businesses, e.g., RMBS, CMBS, CDO/CDO2  • Large counterparty exposures
                           –  No large ones; limits very similar to 
    • Risky securities valuation marks    Commercial segment 
     –  Investment portfolio used for liquidity &     
      interest rate risk management, not leverage     

         BB&T Lending Group Unique Structure and Functions


    Fully Integrated Risk Management Lending Group + Banking Network


    BB&T Lending Process

    BB&T Lending Process


    BB&T Lending Process


    BB&T Lending Process


    Leverage Legacy Process with Analytics


    Leverage Legacy Process with Analytics


    Results = Superior Performance


    Peer Comparisons

    Nonperforming Assets / Total Loans

    BB&T versus Peers
    (Year ended December 31)

    Net Charge -Offs / Average Loans

    BB&T versus Peers
    (Year ended December 31)

    Total Loan Yield

    BB&T versus Peers
    (Year ended December 31)


    Risk Adjusted Yield



    Portfolio Review


    Total Portfolio: Product & Channel Mix


    Total Portfolio: Granularity & Limits


    Total Portfolio Quality, Profitability and
         Growth

    12/31/2008 Total Portfolio Scorecard

        4Q08     2008     2007  
        $Amt   %     $Amt  %     $Amt  %  
    Average Loans  $  97,224   100 %  $  95,195  100.00 %  $  87,952  100 % 
    Growth  $  1,281   5.34 %  $  7,243  8.24 %  $  8,639  10.89 % 
    Charge-offs  $  314   1.29 %  $  851  0.89 %  $  338  0.38 % 
     
    EOP Loans  $  98,669   100 %  $  98,669  100 %  $  91,686  100 % 
    30-89 DPD  $  2,047   2.07 %  $  2,047  2.07 %  $  1,354  1.48 % 
    90+ Still Accruing  $  431   0.44 %  $  431  0.44 %  $  223  0.24 % 
    Non-accruing  $  1,413   1.43 %  $  1,413  1.43 %  $  502  0.55 % 
    ORE  $  617   0.63 %  $  617  0.63 %  $  194  0.21 % 
    NPA  $  2,030   2.04 %  $  2,030  2.04 %  $  696  0.76 % 
     
    Yield        6.09 %      6.35 %      7.67 % 
    Risk Adjusted Yield        4.80 %      5.46 %      7.29 % 

    Total Portfolio: Flight to Quality & Production


    Non-Real Estate Dashboards





     

    Real Estate Segment Dashboards

     


    Mortgage Lending


    CRE Other


    SFR ADC


    ORE


    Outlook

    Real Estate Loss Mitigation Initiatives

    Intense effort to identify problems and accelerate resolution cycle 
     
    • CRE ADC   • Mortgage Lending 
     –  Progressive tightening beginning 3Q05                      –  Eliminated low doc products 
    –  Special portfolio reviews to ensure                      –  Tightened guidelines on standard products 
      conservative ratings on all loans                      
    –  Added resources to Problem Loan Admin,   –  Centralized risk management of 
    construction to perm loans and completely 
      placed in problem regions     restructured the product 
    –  Created new ORE group to manage disposal                      –  Closed small (incipient) alternative 
      of commercial properties and allow existing     mortgage business 
      ORE staff to focus on single family homes                      
    –  Added loss mitigation unit 
     –  Reduced CRE ADC outstandings $744MM   • Home Equity 
      for full year, including $177MM in stressed      
      markets                      –  Re-implemented and tightened existing 
            policies, especially LTV, loan size 
    • Other Commercial Real Estate                      –  Curtailed 2nds behind other bank 1sts 
     –  Tightened retail, office, hospitality guidelines                      –  Reduced authority of regions to 
      in 2Q08     approve/book exceptions 
     –  Tightened again for 2009                      –  Added loss mitigation unit 
    –  Special portfolio review begun 1Q09      

    Non-Real Estate Loss Mitigation Initiatives

    Take advantage of market opportunity to enhance quality and returns

    • All segments  • Specialized Lending Group 
    –  More assertive collection efforts  –  Reducing “book to look” ratio at Regional 
    –  Reinforcing adherence to existing policies    Acceptance (able to be more selective as 
      and procedures    other lenders have pulled back from 
     –  Limiting, centralizing authority to approve    market) 
      policy exceptions   –  Moving upstream to higher ticket, higher 
          quality leasing deals in Equipment Finance 
    • Sales Finance  –  Enhancing quality of book in premium 
     –  Lower LTV, shorter term    finance businesses 
    • Bankcard     
     –  Increased focus on line management     
    –  Reduced level of cash advances     
    • C&I, Governmental Finance     
     –  Scrutinizing new business for signs of     
      “adverse selection”     
    –  New business is high quality, fully priced for     
      risk     

    Allowance for Loan and Lease Losses

    12.08 Allowance for Loan and Lease Losses ($1,574MM)


    Outlook for 2009

  		•

    2009 forecast (financial plan baseline)

     

  • Continued deterioration in housing markets and overall economy through 1H09

     

  • Assumed deterioration rate = same as experienced in 2H08

     

  • NPL and NCO will increase, driven by increases from real estate segments

     

  • Continued ALLL build; provision expense > NCO; funded from earnings

     

  • ORE will go up; will resist “fire sales” to maximum extent possible

     

  • 2H09 expectations: beyond 1H09, course of economy will be primary driver

  		•

    Stress analysis

     

  • Baseline migration analysis suggests increase will be steady, but not explosive (absent unforeseen changes in migration rates/new external “shocks”)

     

  • Stress scenarios extend period of deterioration into 3Q09 and beyond, holding deterioration rate steady at 4Q08 level (which includes 4Q seasonal effects)

     

  • More pessimistic scenario than baseline; manageable outcome

    Summary

    Key Messages:

    Risks are real, but so are opportunities

    • Superior long term performance based on real differences

    • Managing through the cycle; intense focus on loss mitigation and problem resolution

    • Open for business (call Kelly) and making loans in segments where market conditions provide opportunities to book high quality, fully priced new loans

    • Leveraging legacy lending strategy, structure and process strengths to continue to produce superior quality, profitability and growth

    Q & A