The number of banks in the U.S. has declined by 20% since 2012, but BB&T Chairman and Chief Executive Kelly King still believes that the industry is overbanked.
In an interview Thursday, King said that dramatic changes in the way banking services are delivered combined with relatively slow economic growth since the Great Recession have resulted in too many banks chasing too little business.
“It’s more competitive today than it’s been at any time in my career,” said King, who has been a banker for more than 40 years. “That’s why you’ve been seeing dramatic consolidation and why you will continue to see it.”
BB&T, of course, has been active acquirer over the decades, but in an earnings call with analysts Thursday, King said that M&A is not currently a high priority for the Winston-Salem, N.C., company. Given the fierce competition in the marketplace, he said BB&T’s main focus would be improving profitability and efficiency by investing heavily in technology and streamlining its operations.
BB&T closed 61 of its more than 2,100 branches in the third quarter and expects to close dozens more this quarter. To further cut costs, King said that the $220 billion-asset company is also likely to eliminate some layers of management by consolidating some of its 24 banking regions.
King added that BB&T would bulk up in businesses in which it believes it has a competitive advantage over its larger peers, including commercial lending and insurance.
“We are all searching for optimal utilization of relatively precious capital, so you have to be investing in businesses that can have superior short-term return,” King said. “If there’s not [superior return] then we should be looking at ways to exit that business and redeploy that capital.”
Though BB&T posted strong results in the third quarter — its year-over-year profit increased 5.3% — King hinted that investors should be prepared for some bumpy quarters in the future as the company aims to fulfill its strategic priorities.
On Thursday’s call, King said that while he is happy to answer questions about his bank’s most recent quarterly results, he made clear that he and other BB&T executives are focused on managing the company for the long-term.
“The most important thing for us to talk about is what’s going on the world, what’s going on in the industry, what’s going on in terms of our strategies,” King told analysts during BB&T’s third-quarter earnings call.
“The world has changed…and we need to be focusing on every aspect of our business to make sure that we are jettisoning old-time strategies and processes that don’t work and reinvesting in strategies and process that do work.”