Is BB&T Corp.s asset management division going out on a limb by saying this is a good time for investors to buy depressed stocks?
That depends on what the Winston-Salem, N.C., company hopes to get out of the recommendation.
BB&T Asset Management LLC released a statement Tuesday advising clients to increase the equity allocation in their capital appreciation portfolios.
Several major brokerage firms have issued similar advice that the market plunge has created a golden buying opportunity over the past few weeks. But by beating the drums to invest, invest, invest, BB&T could be risking far more than just the income of its new asset management unit, formed last autumn to manage the money of high-net-worth investors.
Raymond K. McCulloch, chairman of BB&T Asset Management, said that he did not think the banking company had risked its reputation.
That issue was discussed last year when his unit was launched, he said. The conclusion was that you cant be in the asset management business if you dont have an opinion, Mr. McCulloch said. And we have elected to be in this business.
Besides, I really believe most retail clients dont view BB&T as just a bank anymore, he said.
Executives at BB&T say they are using the public statement as a way to indicate the company is more than just a banking company, and that it is serious about the asset management business.
Kenneth L. Miller Jr., an executive vice president and corporate financial services manager at the bank holding company, said the advice reflects BB&Ts commitment to building its asset management unit.
We want to create a very active asset management practice that goes beyond the traditional trust position, Mr. Miller said. I wouldnt say were a competitor with Wall Street firms today, but were certainly trying to convey to current and potential clients that we have an active asset management strategy.
John A. Allison, BB&Ts chairman and chief executive, has also identified the unit as ripe for expansion. He has said he anticipates acquiring a number of boutiques that could be rolled into BB&T Asset Management.
Christopher W. Marinac, an equities analyst at Robinson-Humphrey Co. in Atlanta, said that getting its name out will help BB&T as it sets out to buy asset managers.
This is a step to build some recognition and some franchise over time, he said. Its part of sending a signal that theyre a player.
Mr. Miller said BB&T will use acquisitions to add assets under management and to move beyond its traditional, value-based investing strategies to growth strategies.
The companys eventual goal is to build its assets under management, currently at $15 billion, to match its asset size, which is now $61.7 billion, Mr. Miller said.
One reason for the current size disparity is that the company has grown largely through acquisitions of small banks and thrifts, most of which had little in the way of trust assets, he said.
BB&T also wants to expand its asset management business beyond individual clients to institutions, such as the many foundations where the company does business.
David C. Stumpf, an equities analyst at A.G. Edwards & Sons in St. Louis, said that while it is unusual for a banking company of BB&Ts size to weigh in with market advice, its largest competitors such as Bank of America Corp. and First Union Corp. both do so regularly.
I think were beyond the days where youre trying to protect the bank, he said. If anything, doing so presents an image that youre more than just a bank.
However, Geoffrey Bobroff, a consultant in East Greenwich, R.I., said that tying a companys name to market advice could be risky.
While clients at the larger wire houses tend to be more sophisticated investors, and therefore inured to market volatility, customers who invest with a banking companys brokerage tend to be less experienced, and might be far less happy about a missed judgment call, he said.
If a brokerage says something and its wrong, customers could take their brokerage business somewhere else, Mr. Bobroff said. A bank runs the risk of a negative halo, and banking activity may suffer as a result.
But if a company wants to position itself as a serious player as an asset manager, this is exactly the sort of step it must take, he said.