Conservative is Suddenly Savvy - BB&T finds that its banking style is winning praise and boosting its reputation

BB&T Corp. enters the new year riding an envious wave of profitability and enhanced national recognition as a savvy, conservative bank.

But with the heightened reputation and ranking among the nation's top-10 banks come higher expectations within the industry, and possibly in Washington.

All of which could challenge the ability of BB&T and Kelly King, its top executive, to capitalize on its national stature while maintaining the methodical banking model that kept its nose mostly clean during the financial crisis.

King takes over as chairman today from John Allison, as well as entering his second year as chief executive.

The latest national boost comes from Time magazine, which ranked BB&T's federally assisted takeover of a collapsed Colonial Bank as the No. 3 business deal of 2009.

"After decades in the shadow of North Carolina empire builders Bank of America and Wachovia, BB&T emerged as the state's big winner in 2009," the magazine said in its recent report.

"It got a lot bigger after picking up the deposits and branches of Alabama-based Colonial Bank -- the biggest bank failure of 2009."

King said in a brief statement that the bank appreciates Time's recognition of the deal.

Analysts said that the Time ranking helps raise BB&T's reputation for savvy deals.

For example, BB&T had sought a major presence in Florida for more than 10 years.

But it passed on most community-banking deals because the asking prices were often too high compared with the risk of taking over home loans in an overheated housing market.

With the Colonial deal in August, BB&T gained $21.8 billion of assets, with the Federal Deposit Insurance Corp. covering $14.3 billion of those assets in a loss-share agreement.

The deal also made BB&T No. 4 in market share in Alabama -- having had just a token presence before -- and No. 5 in Florida after being 17th. It also tightened its grip on No. 4 in Georgia.

"The Colonial deal -- and the way it was negotiated -- definitely elevates the stature of BB&T into the elite group of top-flight banks in the United States," said Tony Plath, a finance professor at UNC Charlotte.

Time also credited BB&T for its conservative banking model, pointing out the contrast between the bank and the 2008 collapse and rushed sale of Wachovia Corp. to Wells Fargo & Co. and Bank of America Corp.'s "self-inflicted wounds" of 2008-09.

"While BB&T didn't escape the collapse of the commercial real estate market unscathed, it was in a healthier state than most of its rivals," the magazine said.

It wouldn't be a stretch to say that the Time recognition was a long time coming.

For a bank that has grown from $5 billion in total assets in 1989 -- when Allison became chief executive -- to $163.5 billion on Sept. 30, it hasn't had a lot of national press over the years. The only other mention of the bank on Time's Web site was a quote in June regarding BB&T's status as one of the first banks given permission to repay the loan from the federal capital-purchase program.

There are advantages and disadvantages to the national banking spotlight, analysts say.

BB&T is broadening its reputation as a preferred acquirer of banks beyond the Southeast.

"BB&T's reputation is spreading far beyond its home territory," said Thad Woodard, the executive director of the N.C. Bankers Association.

"In meetings I attend throughout the country, bankers who were only peripherally aware of BB&T in the past are now well aware of its good, solid conservatism and profitable operations," Woodard said.

But staying outside the Top 10 banks has kept BB&T executives off the radar screen when it comes to being summoned before Congress on a day's notice to testify on lending practices and executive-compensation largess.

Allison did earn praise in September 2008 for submitting a 14-point letter to Congress regarding the federal bailout program. "There is no panic on Main Street and in sound financial institutions," he wrote. "The problems are in high-risk financial institutions and on Wall Street."

Woodard said that BB&T should expect more finger-pointing with its larger national reputation.

"That's a natural outcome of getting bigger," Woodard said.

Plath said that BB&T likely "won't make the same mistake that other big banks have made in reading their press clippings and starting to believe them. That's what leads management teams to reach beyond their grasp."

"Kelly's simply doing the same thing that the bank has been doing for the last 30 years or so," Plath said.

"But now that the industry is in turmoil, the wisdom of that particular banking strategy is receiving national acclaim."

rcraver@wsjournal.com
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