BB&T in Winston-Salem, N.C., expects no hiccups securing regulatory approval for three acquisitions it plans to complete this year.
The $187 billion-asset company has agreements in place to buy Bank of Kentucky, Susquehanna Bancshares in Lititz, Pa., and 41 Texas branches from Citigroup in deals that are expected to add more than $20 billion in assets.
"There are no guarantees in this world, but everything is tracking along very normally and we anticipate no difficulties" getting the regulators' blessing, Kelly King, BB&T's chairman and chief executive, said during a conference call Thursday to discuss his company's quarterly performance. "We anticipate no problems."
Management also gave analysts an updated timeline for closing the deals, along with more details on how each purchase should help boost BB&T's performance. The Texas branch acquisition is on pace to close by the end of March, bringing in core deposits while allowing BB&T to eliminate higher-cost funding.
"The cost of funds is actually lower than our cost of funds," Chris Henson, the company's chief operating officer, said of the $2.3 billion in deposits included in the branch deal. "That should start to help."
BB&T plans to complete its purchase of Bank of Kentucky during the second quarter. That deal will add earning assets to the balance sheet. "They have a lot of good momentum going on" in the Cincinnati area, Henson said, which should make for "a really strong transaction over time."
Finally, BB&T is planning to close on Susquehanna during the third quarter. That deal is expected to boost fee income in addition to expanding BB&T's balance sheet.
"You are going to see a nice lift in net interest income and fee income from that acquisition," Henson said, noting that elevated expenses "will start to fade away" a year after the deal's completion.
BB&T also fielded several questions from analysts regarding its liquidity coverage ratio, which stood at about 130% at Dec. 31 but is expected to fluctuate as BB&T completes its pending acquisitions.
BB&T is set to implement daily reporting on the ratio later this quarter, Daryl Bible, the company's chief financial officer, said during Thursday's call. The goal is to keep the ratio about 20 points over any required minimums, which would be 90% in 2016 and 100% the next year based on a final rule from regulators.
"Long term, we should be in the 120 range, give or take," he said.
This year's acquisitions could help improve the liquidity coverage ratio over time by adding more low-cost funding. For now, BB&T has been buying more Tier 2 securities, including more securities from Fannie Mae and Freddie Mac, and its funding mix has continued to improve.
BB&T is also taking steps to monitor the ratio as it inches closer to $250 billion in assets, when it would be required to move beyond a simpler, modified LCR calculation. Pending deals, if completed, would push BB&T beyond $205 billion in assets.
The company is evaluating how the ratio would look, noting that the difference between calculation methods is about 40 points right now, Henson said. As a result, a 130% ratio would fall to 90% if a more complex method were required.
"So we're managing and monitoring in case we ever did get over [$250 billion in assets] in the next couple of years, so we won't be surprised or caught off guard," Henson said. "We're actually doing the calculations and monitoring it today."