Fitch: BB&T's Capital Position Not at Issue in CCAR Rejection
by Business Wire
BB&T Corporation (BBT) results under the 2012 Comprehensive Capital Analysis and Review (CCAR) process were unexpected in Fitch's view. BBT's capital plan was rejected based on process considerations rather than quantitative factors. Despite the rejection of BBT's plan, we do not see the action by the Federal Reserve as indicative of weaknesses in the bank's capital position or credit quality.
The Fed's rejection of BBT's plan follows the bank's 10K filing, in which it disclosed revisions made to risk-weighted assets (RWA), specifically in its calculations of unfunded commitments. Following the increase in RWA, BBT's actual 3Q12 Tier 1 common ratio decreased by 34bps. We view the misreporting of RWA as uncharacteristic for BBT. It was likely one of the qualitative weaknesses identified by the regulators in their assessment of BBT's stress testing processes.
We extrapolate that BBT's stressed Tier 1 common ratio at 4Q14 will remain very healthy at approximately 7.5%, even adjusting for the RWA change. Further, it is the third-highest ratio among the nine large regional banks included in CCAR.
As noted in the Fitch Wire comment "CCAR Results Point to Fed's Focus on Process, Governance," dated March 15, this year's process highlights the growing importance of qualitative risk assessment factors in the eyes of the Fed and other U.S. bank regulators. We believe that process-related factors will drive future capital plan reviews by the Fed.
BBT performed very well under the Dodd-Frank stress test, the results of which were released on March 8. In that test, BBT had the highest Tier 1 common ratio among the large regional banks. We recognize that BBT's internal stress test results were also very similar to the Dodd-Frank results. Although the CCAR results were unexpected and disappointing, BBT's overall credit profile is still underpinned by a conservative risk culture and consistent performance through the most recent downturn.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.