BB&T 1Q profit drops 39 percent as bad loan writeoffs rise; co. sees credit problems easing

BB&T 1Q profit drops as bad loan charge-offs rise

WINSTON-SALEM, N.C. — BB&T Corp. on Thursday posted a 39 percent drop in first-quarter profit as it wrote off more bad loans, but the bank said credit problems appear to be easing.

For the three months ended March 31, the bank posted profit of $188 million, or 27 cents per share, compared with $271 million, or 48 cents per share in the year-ago period.

Analysts polled by Thomson Reuters, on average, expected profit of 23 cents per share.

Chairman and CEO Kelly S. King said the quarter’s results benefited from BB&T’s takeover of Colonial Bank in August. Montgomery, Ala.-based Colonial was shut down by regulators and its takeover was facilitated by the FDIC.

“Overall Colonial is exceeding our expectations,” King said in a conference call Thursday.

Net interest income, or money earned from deposits and loans, rose 15 percent to $1.31 billion from $1.15 billion last year.

Average deposits rose to $111.03 billion, up 18 percent from $93.93 billion in the 2009 first quarter. The increase was due mostly to the Colonial acquisition.

Noninterest income, or money earned from fees and charges, fell 18 percent to $844 million from $1.03 billion.

BB&T reduced its provision for credit losses — money set aside to cover souring loans — by 15 percent to $575 million from $676 million.

Average loans increased 5 percent to $104.47 billion from $99.72 billion a year ago. Excluding the Colonial acquisition, average loans decreased 4.3 percent.

Net charge-offs, or loans written off as uncollectable, rose 26 percent to $509 million from $405 million. However, the figure was 1.5 percent lower than the $517 million charged off in the December quarter.

Nonperforming assets, or loans and leases that are considered past due and in danger of being written off, shot up 62 percent to $4.46 billion from $2.75 billion a year ago. The quarter-over-quarter growth for this measure, however, was just 5.6 percent, representing a slowdown from prior quarters.

BB&T said its restructured loans increased to $1.7 billion. Kelly said during the conference call the bank does not to “significant or liberal modifications,” and does not offer big rate cuts.

Morgan Keegan analyst Robert S. Patten saw the efforts as a positive. “We believe that management is being prudent in working with its client base through the current downturn and these efforts should payoff longer term in stronger client relationships and lower eventual losses,” he wrote in a client note.

The increase in modifications may nevertheless have weighed on the stock.

In afternoon trading, BB&T shares fell $1.32, or 3.8 percent, to $33.79. The stock has ranged between $19.83 and $35.40 in the past year.