Disrupt or Die A Strategic Overview Chris Henson President and Chief Operating Officer. Investor Day 2018

Size: px

Start display at page:

Download "Disrupt or Die A Strategic Overview Chris Henson President and Chief Operating Officer. Investor Day 2018"

Shannon Lynch
5 years ago
Views:

1 Disrupt or Die A Strategic Overview Chris Henson President and Chief Operating Officer Investor Day 2018

2 Key Takeaways 1A diversified franchise in great markets Maintaining our long-term performance 2advantage 3Reconceptualizing our businesses 4Strong and experienced leadership 2

3 Well-Positioned for the Future Differentiated businesses driving top-tier operating performance Diversification produces stable, consistent and growing earnings Achieving targeted cost savings / intense focus on expenses Disrupt or Die investing in our company Client first mentality Strong, conservative credit culture Achieving positive operating leverage Committed to a strong and consistently growing dividend and a strong TSR Vision, Mission and Values 3

4 A Diversified Franchise 4

Premier Community Banking Model with Diverse National Businesses Founded in 1872 8 th largest

1 5 th largest insurance broker in the world 2 2 nd highest mobile app ranking 3 1,900+ bank

5 Premier Community Banking Model with Diverse National Businesses Founded in th largest financial institution in the U.S. 1 5 th largest insurance broker in the world 2 2 nd highest mobile app ranking 3 1,900+ bank locations 36,000+ FTEs 7.6MM clients 1 Deposit market share data as of 06/30/ Business Insurance US Rankings, July Dynatrace 3Q18 results 5

6 BB&T Corporation: A Growing Franchise 8 th Largest U.S. Financial Institution 1 State # of Deposits 1 Branches 3 ($bn) Deposit Rank North Carolina $30.4 Virginia Florida Pennsylvania Georgia Maryland South Carolina Texas Kentucky West Virginia Alabama Tennessee New Jersey District of Columbia Indiana 2 NM Ohio 3 NM NM NM Total # of Branches 1,958 1 Deposit market share data as of 06/30/ Excludes home office deposits 3 Branch totals as of 09/30/2018 Source: FactSet, FDIC, S&P Global 6

7 Among Leaders in Fastest Growing Markets Weighted Average Nominal GDP Footprint Growth vs. Peers Over the Last Three Years 4.5% 4.0% 4.1% 3.8% 3.6% 3.6% 3.5% 3.5% 3.5% 3.0% 3.1% 2.5% 2.5% 2.3% 2.0% 1.5% 2.0% 1.6% 1.3% 1.0% 0.5% 0.0% STI BBT RF PNC CFG WFC BAC COF MTB USB FITB KEY HBAN 0.1% Note: Reflects trailing average of nominal GDP growth by state annually for the last 3 years ( 15-17), weighted by deposits by state (pro forma for pending M&A) as of 06/30/2018 Source: BEA.gov, FDIC 2018 summary of deposits, S&P Global 7

BB&T is Well-Positioned to Leverage Opportunity 8 out of 10 of the Top 10 Cities for Economic Opportunity are in BB&T s Community Banking footprint 4. Louisville, KY 9.

8 BB&T is Well-Positioned to Leverage Opportunity 8 out of 10 of the Top 10 Cities for Economic Opportunity are in BB&T s Community Banking footprint 4. Louisville, KY 9. Charlotte, NC 7. Atlanta, GA 8. Dallas, TX 2. Austin, TX 5. Houston, TX 10. Jacksonville, FL 3. Miami, FL 1. Las Vegas, NV 6. Salt Lake City, UT Source: 3Q18 Yelp Economic Outlook 8

9 `` Diversification Drives Revenue and Net Income Revenue Diversification by Segment Superior Performance PPNR/average assets 10-year average (3Q08 2Q18) Financial Services & Commercial Finance 17% Insurance Holdings & Premium Finance 16% Community Banking Commercial 23% Community Banking Retail & Consumer Finance 44% 1.9% BB&T 0.3% 1.7% National Peers With Less Volatility 0.5% 1.6% Largest 4 Banks PPNR/average assets 10-year standard deviation (3Q08 2Q18) 0.4% BB&T National Peers Largest 4 Banks YTD as of 09/30/2018 National peer group: BAC, CFG, COF, FITB, HBAN, KEY, MTB, PNC, RF, STI, USB and WFC Largest 4 BHCs: BAC, C, JPM, WFC 9

What Do These Diversified Businesses Bring to BB&T?

broader product offering to clients while offering income diversification and stable

limited exposure while providing good returns and a perfect complement to BB&T

and institutional clients A full-service platform that offers clients strategic

Provides a fee-based business with attractive profit margins and little correlation

finance portal (third party and balance sheet), that generates diversified fee and

while providing strong risk adjusted returns for our shareholders Offers BB&T an

efficient OEM-sponsored distribution model Generates a granular and diverse stream of

10 What Do These Diversified Businesses Bring to BB&T? A leading risk and advisory firm providing valued risk management expertise and a broader product offering to clients while offering income diversification and stable revenues not subject to credit cycles Provides a strong collateralized loan with limited exposure while providing good returns and a perfect complement to BB&T Insurance Holdings Diversified fee income revenue streams connecting BB&T to wealth and institutional clients A full-service platform that offers clients strategic capital markets expertise coupled with the balance sheet strength of the bank Provides a fee-based business with attractive profit margins and little correlation to the credit or economic cycles A national, diversified commercial and multi-family finance portal (third party and balance sheet), that generates diversified fee and interest income Helps our clients achieve economic success and financial security while providing strong risk adjusted returns for our shareholders Offers BB&T an alternative channel to grow prime, direct retail loan production with a highly efficient OEM-sponsored distribution model Generates a granular and diverse stream of small business equipment finance receivables referred by the Community Bank, OEM sponsored programs and relationships with Equipment Dealers throughout the U.S. 10

Industry Leading Recognitions BB&T received 24 Greenwich

from Greenwich Associates for our overall satisfaction and

World s Most Admired Companies list in the superregional bank

100 on the Human Rights Campaign Foundation s Corporate

in America by Forbes Recognitions BB&T has been named a 2017

board diversity Training magazine recognized BB&T as one of the

BB&T Named Best for Core Deposit Growth Strategy in the 2018

11 Industry Leading Recognitions BB&T received 24 Greenwich Excellence Awards in Small Business and Middle Market Banking from Greenwich Associates for our overall satisfaction and outstanding client service in 2017 BB&T named on the FORTUNE World s Most Admired Companies list in the superregional bank category in 2018 BB&T achieved the highest possible score of 100 on the Human Rights Campaign Foundation s Corporate Equality Index BB&T has been named one of the 2018 Best Banks in America by Forbes Recognitions BB&T has been named a 2017 Winning Company by 2020 Women on Boards for our commitment to board diversity Training magazine recognized BB&T as one of the world s Top 125 Organizations for Excellent Training in 2018 BB&T Named Best for Core Deposit Growth Strategy in the 2018 Bank Director Ranking Banking study BB&T has the 2 nd highest mobile app ranking by Dynatrace 11

12 Major Accomplishments in the Last 4 Years Launched U by BB&T Positively impacted our communities for 10 consecutive years Successfully completed strategic mergers & acquisitions Extended the depth of Executive Management Implemented Financial Insights Built new Data Center New Commercial Loan System Launched client-focused rebranded image Constructed the BB&T Leadership Institute Designed new general ledger system 12

13 Our Long-Term Performance Advantage 13

14 Long-term Performance Advantage Return on Average Assets Return on Average Tangible Common Equity 1.50% 1.51% 1.48% 20.00% 20.08% 19.72% 1.30% 1.25% 1.24% 1.35% 17.00% 15.52% 14.20% 14.86% 15.72% 16.70% 1.10% 1.19% 1.08% 1.15% 1.14% 1.08% 1.12% 1.03% 1.01% 1.13% 1.09% 14.00% 11.00% 14.68% 9.32% 13.34% 14.59% 12.50% 12.20% 11.30% 13.99% 12.50% 8.34% 8.57% 8.25% 11.62% 0.90% YTD % YTD 2018 BBT GAAP BBT adjusted Adjusted peer median BBT ROCE BBT ROTCE BBT adjusted ROTCE Adjusted peer median Source: S&P Global Peers include BAC, CFG, COF, FITB, HBAN, KEY, MTB, PNC, RF, STI, USB and WFC; YTD 2018 as of 09/30/2018 annualized 14

15 Long-term Performance Advantage Fee Income Ratio Efficiency Ratio 45.0% 44.7% 65.2% 65.8% 42.5% 40.0% 40.5% 42.5% 41.8% 41.4% 40.2% 42.3% 42.2% 65.0% 63.0% 61.0% 59.0% 63.4% 62.5% 58.1% 63.4% 62.3% 61.8% 59.9% 59.5% 59.2% 58.0% 59.7% 59.0% 37.5% 38.2% 57.0% 55.0% 54.3% 55.6% 54.9% 57.3% 36.5% 53.5% 53.1% 35.0% YTD 2018 BBT Peer median 53.0% YTD 2018 BBT GAAP BBT adjusted Adjusted peer median BBT ex. Insurance Segment Source: S&P Global and company reports Peers include BAC, CFG, COF, FITB, HBAN, KEY, MTB, PNC, RF, STI, USB and WFC; YTD 2018 as of 09/30/2018 See non-gaap reconciliations included in the attached Appendix 15

16 Long-term Performance Advantage Risk Adjusted Net Interest Margin NPAs / Total Assets 3.25% 3.18% 3.19% 0.70% 3.09% 3.07% 3.11% 0.60% 0.60% 3.05% 0.52% 0.53% 2.96% 0.50% 0.42% 2.85% 2.87% 2.87% 0.40% 0.34% 0.37% 0.38% 0.39% 2.72% 2.70% 0.30% 0.28% 0.27% 2.65% YTD % /30/2018 BBT Peer Median BBT Peer median Reflects fully taxable-equivalent Peers include BAC, CFG, COF, FITB, HBAN, KEY, MTB, PNC, RF, STI, USB and WFC; 2018 YTD as of 09/30/2018 annualized Risk-adjusted NIM is calculated by subtracting annualized net charge-offs/average earning assets from net interest margin Source: S&P Global 16

17 Disrupt or Die 17

18 BB&T s 5 Phases Envision or Die 1988 Differentiate or Die Mid 1990 s Grow or Die 2008 Restructure or Die Today Disrupt or Die 18

19 Disrupt or Die: Investing in Our Businesses Rationalize / improve risk management systems FTE reductions No new major systems projects Branch closures (148 in 2017, 171 in 2018, ~150 in 2019) Consistent positive operating leverage Optimize branch network/ non-branch facilities Non-branch space reductions (7.2% in 2017, 4.7% in 2018, ~3.9% in 2019) Substantially increase digital client services and marketing Voice of the Client Small Business focus Enhance U Large increase in social media and advertising New branch products and strategies Regional Presidents drive commercial strategies and IRM Renew focus on commercial and retail community bank Reconceptualizing Our Businesses Restructure and digitize support services A.I. Robotics Agile DevOps Robotics process improvements IRM Improve Insurance profitability and grow faster (organic & acquisitions) Asset management and brokerage Expand wealth and fee businesses Increase national lending businesses IRM Corporate Sheffield Mortgage CRE Equipment Finance 19

20 Transformation in Technology Objective BB&T s Data & Technology Services (D&TS) is becoming more business line focused and transforming to support a more technology-enabled business Transformed organizational structure Enhanced productivity/ maintain quality $ Driving out cost and inefficiency with Lean management principles New Agile/DevOps delivery model Start date 1Q18 2Q-3Q18 3Q18-1Q19 1Q19 and beyond Ongoing Baseline assessments Workforce governance and new BIO org Workflow optimization and software productivity Scale up future operating model by building capabilities 20

Insurance Holdings Operating Model Transformation Objective To unlock significant value in Insurance Holdings over the next 2-3 years

model for the Retail and Wholesale businesses Align organization, processes and systems to become more competitive Governance Framework

superior performance Drive top-line growth Expand margins Start date 2018 2019 2020 2021 Expected completion date Design new industry

21 Insurance Holdings Operating Model Transformation Objective To unlock significant value in Insurance Holdings over the next 2-3 years through operating model transformation and a governance framework realignment Operating Model Transformation Define the most sufficient model for the Retail and Wholesale businesses Align organization, processes and systems to become more competitive Governance Framework Realignment Improve operating nimbleness and flexibility Take advantage of the strength of BB&T Leverage these two enablers to drive superior performance Drive top-line growth Expand margins Start date Expected completion date Design new industry based operations model Launch transformation with key wins to fund the journey Continue to execute on prioritized initiatives Full implementation 21

Organizational Simplification (Efficiency) Objective The design of an efficient

decision-making and further empowers our leaders Today BB&T s organizational

Sharper alignment to strategy Enhanced accountability Better associate morale

22 Organizational Simplification (Efficiency) Objective The design of an efficient and effective organizational structure that enables agility, promotes better decision-making and further empowers our leaders Today BB&T s organizational structure is complex Post simplification Agility and better decision making Sharper alignment to strategy Enhanced accountability Better associate morale Streamlined cost structure Distinctive client experience! 3Q18 Start date 1Q19 Expected completion date 22

Redesign of End-to-End Commercial Credit Process Objective The redesign of the commercial lending process to simplify it, improve client and associate experiences, enhance revenues and reduce costs

23 Redesign of End-to-End Commercial Credit Process Objective The redesign of the commercial lending process to simplify it, improve client and associate experiences, enhance revenues and reduce costs Front Office Middle Office Back Office Originations Portfolio Mgmt. Servicing Start date 4Q18 1Q19 2Q19 3Q-4Q19 Expected completion date Coverage model definition Credit baseline and operating model design Functional and org design and early wins Full implementation 23

24 Our Leadership Team 24

25 Deep and Experienced Executive Management Team BB&T has the longest-serving senior Executive Management team among the top 20 banks Average age of EM: 54 Average years of EM experience at BB&T: 27 25

26 Agenda Time Speaker Topic 8:00 AM Rich Baytosh Welcome 8:05 AM Kelly King Opening Remarks 8:20 AM Chris Henson Disrupt or Die A Strategic Overview 8:50 AM Brant Standridge The Road Ahead 9:20 AM David Weaver Evolving Our Differentiated Model: Community Bank Commercial 9:50 AM Refreshment Break / Exhibits Open 10:15 AM Rufus Yates Positioned for Growth 10:45 AM John Howard Not So Risky Business: BB&T Insurance Holdings 11:15 AM Barbara Duck Transformation in Technology 11:45 AM Lunch 12:45 PM Dontá Wilson Client Centricity 1:15 PM Clarke Starnes Enhancing BB&T s Risk Management Advantage in a Disrupt or Die Environment 1:45 PM Daryl Bible Driving Shareholder Value 2:15 PM Refreshment Break / Exhibits Open 2:30 PM Kelly King Q&A and Closing Remarks 26

Capitalizing on Untapped Revenue Opportunities Optimizing and

27 Brant Standridge President of Retail Banking The Road Ahead Organizing for Exceptionalism Enhancing the Client Experience Capitalizing on Untapped Revenue Opportunities Optimizing and Streamlining Our Businesses Creating a Long-Term Investment Roadmap 27

differentiated client experience Investing in and evolving our business to drive improved

28 David Weaver President of Community Banking Evolving Our Differentiated Model: Community Bank Commercial Maintaining and building strong client relationships Adding value through a differentiated client experience Investing in and evolving our business to drive improved financial results Improving processes and streamlining structure to drive greater efficiency 28

offer operating efficiency and market coverage growth Continued opportunity for new market expansion Investing in

29 Rufus Yates BB&T Securities President/CEO and Financial Services Commercial Finance Manager Positioned for Growth Strong revenue momentum Significant potential for C&I, geographic and industry diversification Platform consolidations offer operating efficiency and market coverage growth Continued opportunity for new market expansion Investing in technology to improve client and associate experience Wealth and Corporate platforms have matured, resulting in market share gain 29

contribution to BB&T and diversification benefits Key operational and

30 John Howard Chairman & CEO of BB&T Insurance Holdings Not So Risky Business: BB&T Insurance Holdings Who we are and what we do Review contribution to BB&T and diversification benefits Key operational and financial highlights Key changes in the market and our position going forward 30

cost New business model is giving unprecedented insight

31 Barbara Duck Chief Information Officer Transformation in Technology Transformation in technology is driving out cost New business model is giving unprecedented insight Gaining efficiency through automation Investments in cyber 31

32 Dontá Wilson Chief Digital and Client Experience Officer Client Centricity Voice of the Client Insights-driven client experience Revolutionary marketing Digital transformation 32

management Risk management programs must adapt and evolve Maintaining our

33 Clarke Starnes Chief Risk Officer Enhancing BB&T s Risk / Return Advantage in a Disrupt or Die Environment Our fundamental approach to risk management Risk management programs must adapt and evolve Maintaining our risk advantage Credit risk management Driving disruption, not being outpaced by it 33

34 Daryl Bible Chief Financial Officer Driving Shareholder Value Prudent organic growth Delivering top quartile profitability Optimal capital management Best-in-class shareholder returns 34

35 Key Takeaways 1A diversified franchise in great markets Maintaining our long-term performance 2advantage 3Reconceptualizing our businesses 4Strong and experienced leadership 35

36 Non-GAAP Reconciliations 36

37 Non-GAAP Reconciliations ROTCE YTD ($ in millions) Net income available to common shareholders $ 1,983 $ 1,936 $ 2,259 $ 2,220 $ 2,309 Merger-related and restructuring charges Loss on early extinguishment of debt Securities gains (losses) 2 2 (28) - (1) Charitable contribution Impact of tax reform (43) - One-time bonus Excess tax benefit on equity-based awards (35) - Mortgage reserve adjustment 38 - (19) - - Adjustments for FHA-insured loans matter and related recovery 53 - (46) - - Energy-related provision in excess of charge-offs Income tax adjustments (36) (107) (13) - - Net loss on sale of American Coastal Franchise tax adjustment (9) Allowance release related to loan sale (41) Reallocation of partnership profit rights Net income available to common shareholders-adjusted $ 2,111 $ 2,075 $ 2,309 $ 2,545 $ 2,360 Amortizaton of intangibles, net of tax 57 $ 66 $ 94 $ 89 $ 74 Net income available, excluding amortization of intangibles $ 2,168 $ 2,141 $ 2,403 $ 2,634 $ 2,434 Average common shareholders' equity $ 21,280 $ 23,206 $ 26,349 $ 26,907 $ 26,565 Estimated impact of adjustments Average common shareholders' equity-adjusted $ 21,360 $ 23,267 $ 26,383 $ 27,156 $ 26,613 Average intangible assets 7,388 8,194 10,215 10,402 10,406 Average tangible common shareholders' equity $ 13,972 $ 15,073 $ 16,168 $ 16,754 $ 16,207 ROCE As reported 9.32% 8.34% 8.57% 8.25% 11.62% ROTCE As reported 14.68% 13.34% 14.59% 13.99% 19.72% Adjusted 15.52% 14.20% 14.86% 15.72% 20.08% 37

38 Non-GAAP Reconciliations ROA YTD ($ in millions) Net income $ 2,206 $ 2,123 $ 2,442 $ 2,415 $ 2,452 Merger-related and restructuring charges Loss on early extinguishment of debt Securities gains (losses) 2 2 (28) - (1) Charitable contribution Impact of tax reform (43) - One-time bonus Excess tax benefit on equity-based awards (35) - Mortgage reserve adjustment 38 - (19) - - Adjustments for FHA-insured loans matter and related recovery 53 - (46) - - Energy-related provision in excess of charge-offs Income tax adjustments (36) (107) (13) - - Net loss on sale of American Coastal Franchise tax adjustment (9) Allowance release related to loan sale (41) Net income-adjusted $ 2,318 $ 2,262 $ 2,492 $ 2,740 $ 2,503 Average assets $ 185,095 $ 197,347 $ 218,945 $ 221,065 $ 221,817 Impact of above adjustments Average assets-adjusted $ 185,175 $ 197,408 $ 218,979 $ 221,314 $ 221,865 ROA As reported 1.19% 1.08% 1.12% 1.09% 1.48% Adjusted 1.25% 1.15% 1.14% 1.24% 1.51% 38

39 Non-GAAP Reconciliations Efficiency Ratio ($ in millions) YTD 09/30/18 Efficiency ratio numerator - noninterest expense GAAP $ 5,852 $ 6,266 $ 6,721 $ 7,444 $ 5,148 Amortization of intangibles (91) (105) (150) (142) (97) Merger-related and restructuring charges, net (46) (165) (171) (115) (70) Gain (loss) on early extinguishment of debt (122) (172) 1 (392) - FHA-insured loan matters and related recovery (85) One-time bonus (36) - Mortgage reserve adjustments Charitable contribution - - (50) (100) - Franchise tax adjustment Mortgage repurchase expense adjustment (27) Mortgage loan indemnification reserves (33) Efficiency ratio numerator adjusted $ 5,463 $ 5,824 $ 6,455 $ 6,659 $ 4,981 Insurance noninterest expense adjusted 1,310 1,311 1,449 1,508 1,134 Efficiency ratio numerator adjusted, excluding Insurance $ 4,153 $ 4,513 $ 5,006 $ 5,151 $ 3,847 Efficiency ratio denominator - revenue 1 GAAP 9,230 9,611 10,793 11,317 8,618 Taxable equivalent adjustment Securities (gains) losses, net 3 3 (46) 1 (1) Loss on sale of American Coastal FDIC loss share accounting Efficiency ratio denominator adjusted $ 9,401 $ 9,786 $ 10,907 $ 11,477 $ 8,689 Insurance revenues adjusted 1,747 1,674 1,797 1,855 1,440 Efficiency ratio denominator adjusted, excluding Insurance $ 7,654 $ 8,112 $ 9,110 $ 9,622 $ 7,249 Efficiency ratio GAAP 63.4% 65.2% 62.3% 65.8% 59.7% Efficiency ratio adjusted % 59.5% 59.2% 58.0% 57.3% Efficiency ratio adjusted 2, excluding Insurance 54.3% 55.6% 54.9% 53.5% 53.1% Revenue is defined as net interest income plus noninterest income. The adjusted efficiency ratio is non-gaap in that it excludes securities gains (losses), amortization of intangible assets, merger-related and restructuring charges and other selected items. BB&T's management uses this measure in their analysis of the Corporation's performance. BB&T's management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges. 39

Investor Presentation

Investor Presentation Daryl N. Bible Chief Financial Officer Fourth Quarter 2017 Forward-Looking Information This presentation contains "forward-looking statements" within the meaning of the Private Securities