BB&T CEO King Enjoys Luxury of Being a Selective Acquirer

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Kelly King is coming into his own in early 2012.

When he became chief executive of BB&T Corp. two years ago, he inherited it from the popular and successful John Allison, who had kept the Winston-Salem, N.C., bank profitable through the financial crisis.

King, who became the chairman last year, started off cautiously. BB&T bought the failed Colonial Bank from the Federal Deposit Insurance Corp. in August 2010, and it has remained open to a combination of acquisitions and organic growth.

In recent months, though, King has made bigger moves. In a wide-ranging interview Friday, the 40-year banking veteran confirmed that BB&T pursued BankUnited Inc., detailed how the $175 billion-asset company landed the BankAtlantic deal and discussed plans to open dozens of branches this year in states such as Florida, Maryland and Texas.

The following is an edited transcript.

How would you assess the health of regional banks?

KELLY KING: The overall health of the regional players is very good. They never had the challenges of the Wall Street banks in terms of heavy dependence on investment banking and trading, a lot of which has been volatile and attacked under the Dodd-Frank Act. Regional banks were kind of immune to that. On the other hand, regional banks were much more asset focused, so you get a good bit of variation in terms of how they are doing today. Some have certainly had greater credit challenges than others, but even those have substantially weathered it. I don't see any large regional banks not making it. Instead, it is a matter of how do they get to normalized profit levels and good returns for shareholders.

Could we see mergers among regional banks or will new regulation discourage it?

Regionals are already under enormous regulatory scrutiny. The challenge is going to be how to generate optimum profitability with substantial increases in regulatory and technological costs. … I think the regionals as a class are going to be fairly big winners over the next two years or so, but I wouldn't be surprised to see big combinations among the regionals as they begin to think about those economies of scale issues.

Would BB&T pursue such a deal?

We clearly believe scale is important. We want to grow organically as fast as we can but we believe acquisitions are going to be an important part of developing the kind of company going forward that will have the scale to have optimum profitability. We've always been aggressive with acquisitions - we'll look at anything that moves that makes common sense - but we'll be very conservative.

We're very selective. I've been very clear about our criteria: it has to be strategically attractive, we have to control the asset quality issues and it has to be economically attractive to our existing shareholders. Otherwise, why do it? Sizes will be a matter of circumstance. The target zone would be $3-15 billion [in assets]. Below $3 billion is hardly large enough to be worth the effort, and there just aren't a lot of deals above $15 billion if you think about it.

How did the BankAtlantic deal develop?

They presented the deal [as a carve out] with the holding company retaining the challenging assets. They wanted to sell a high-quality good bank. We looked at it. Strategically it is very attractive. It moves us to sixth in the Miami market. Asset quality issues were handled … and it is economically attractive based on the price. It is a classic good deal for us.

Was BB&T the only bidder?

It was a process. There were other people interested.

BankAtlantic is facing legal issues. Are there concerns that the deal falls through?

You always have regulatory approval and now you have litigation. So there would be a question. But our contract is directly with the holding company and all this other stuff that's going on is around the holding company. We hope and intend to close the deal but what the courts and regulators do is certainly beyond our control.

Did BB&T make a bid for BankUnited?

We were involved in the process, and we remained disciplined in terms of our three criteria looking at acquisitions.

How often do you see a company put itself in play and then change its mind?

It is very unusual. Typically, a company will do enough work with its advisors to where they have a really good feel for what it would sell for. When the world becomes aware that you're trying to sell and then you don't … when you do that you can never get those words back. Think about the employees and the clients.

Does it provide an opportunity for BB&T?

Anytime any company is undergoing any aspect of the merger process, even if they do it really well, it creates opportunities for the other good competitors. To the degree that they have glitches in the process, it creates even more opportunities.

What are you looking at in terms of organic growth?

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