BB&T Corp., North Carolina's second-largest lender, is cutting jobs in its securities unit while scaling back institutional equity sales and trading activity.
The bank also is ending equity research coverage, BB&T said Thursday in an e-mailed statement. BB&T, based in Winston-Salem, will dismiss 61 employees in Richmond, Virginia, as well as "a handful" in other offices, Brian Davis, a spokesman for the firm, said by e-mail.
BB&T is narrowing its concentration at the securities unit to businesses such as debt capital markets, mergers and acquisitions and private client advisory, according to the statement. Regional lenders have scaled back equity divisions as revenue has been hurt by the lack of initial public offerings this year and a shift by many investors to passive strategies.
"Their focus within capital markets and investment banking has generally been large corporate lending," said Stephen Scouten, an analyst at Sandler O'Neill & Partners. "The other divisions haven't been seen as profitable, and an effective use of their capital. I think they want to continue investing in those business lines where they have market power."
Changing Conditions
Financial firms distribute research reports to hedge funds and portfolio managers in the hopes of handling more trades and also being selected to underwrite stock offerings. Those fees have been pressured recently, causing many small banks to cut costs by dropping coverage of some industries.
"This restructuring within BB&T Securities is a response to the changing market conditions of the institutional equity business, which include reduced volume and compressed margins," Davis said in a separate statement to Bloomberg News.
BB&T has offered equity research since at least 1999 when it bought Scott & Stringfellow, a Richmond-based brokerage. It purchased Greenville, South Carolina-based broker-dealer Edgar M. Norris & Co. the following year and merged the two firms. BB&T has since expanded the research division as it built out services for its corporate clients. The bank's analysts covered more than 300 companies in at least eight industries.
'Minimal Effects'
Oppenheimer Holdings Inc. also cut stock analysts this year following a global slump in equity markets. Piper Jaffray Cos. scaled back coverage of financial companies as analysts departed the firm.
Chief Executive Officer Kelly King has been building BB&T by making deals in retail banking and insurance. The company agreed to buy Swett & Crawford for $500 million in cash to expand in the insurance-brokerage industry in February. The bank also purchased Susquehanna Bancshares Inc. in 2015 to expand in the Mid-Atlantic U.S.
The restructuring will have "minimal effects" on BB&T's other equity capital markets services, which include equity syndicate and share repurchases, the firm said.
"BB&T will make every effort to place associates whose jobs are affected by this restructuring into other positions," Davis said in the statement.
BB&T shares rose 0.4 percent to $37.09 at 2:28 p.m. in New York. The stock has slid 1.9 percent this year, compared with the 6 percent decline of the 24-company KBW Bank Index.
