News Column

BB&T posts lower profit in 2nd quarter

July 21, 2014

By Deon Roberts, The Charlotte Observer

July 21--BB&T Corp. said Monday its second-quarter profit declined from a year ago as the lender set aside millions of dollars after learning the federal government will review its mortgage business.

Winston-Salem-based BB&T posted profit of $425 million in the quarter, down 22 percent from $547 million a year earlier.

In announcing its latest earnings results, the third-largest bank by assets in the Charlotte area disclosed that it has been selected for an audit of its compliance with requirements for mortgages insured by the Federal Housing Administration.

No claims have been made against BB&T, and the outcome of the review remains unknown, the lender said. The announcement of the review comes as banks nationwide continue to reach large settlements with the government over mortgages that soured and contributed to the financial crisis.

BB&T said it set aside $85 million in preparation for the review by the U.S. Department of Housing and Urban Development.

Other mortgage-related costs also hurt BB&T's results in the second quarter. The lender said it recorded a $33 million adjustment as it increased its estimated potential losses on FHA-insured loans that have not yet defaulted.

Revenue was $2.3 billion, down 7.5 percent from a year ago, in part because of lower mortgage originations.

A rise in interest rates that began last year has significantly lowered demand to refinance mortgages, sending banks searching for ways to offset lower revenues. BB&T's mortgage banking income fell 49 percent from a year ago, to $86 million.

On a Monday earnings call with analysts, CEO Kelly King said that despite a sluggish U.S. economy that continues to create challenges for lenders, the second quarter was "very solid."

In the quarter, BB&T's commercial and industrial loans increased to $39.4 billion, up 2.7 percent from a year ago.

BB&T, like other lenders, is also writing off fewer bad loans, an indication that more loans are being paid on time. Net charge-offs as a percentage of average loans and leases fell in the second quarter to their lowest levels since 2007, BB&T said.


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Source: Charlotte Observer (NC)

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