Updates for latest share price, comments from conference call.
Winston-Salem, N.C. (
CEO Kelly S. King expressed optimism Monday that the bank's credit losses are "nearing the peak."
"I would say, you certainly going to find the peak in the next two to three quarters. I suspect you will see nonperformers for the industry, and for us, continue to increase," but at a slower rate, King said during the conference call to discuss BB&T's third-quarter results. "I wouldn't call it a peak today, but I think it's not nearly as far away as it had been."
King added that as the economy stabilizes further banks will experience more distressed asset sales.
"As you see the economy begin to stabilize and grow you'll begin to see nonperforming asset sales increase," he noted. "You'll see demand for these products grow materially over the next six to 12 months."
Bank of America's
CEO Ken Lewis was also optimistic regarding credit losses during the Charlotte, N.C.-based company's earnings call on Friday.
"We believe we may have peaked in total credit losses this quarter," Lewis said during a conference call with analysts. He added that costs will likely remain "elevated" in future quarters, but not as high as they were in the last period.
Other large banks including
, which also reported earnings last week, took more cautious tones.
BB&T is considered one of the safer names among the large financial institutions throughout the crisis. Still the company's profit fell by 57% for the three months ended Sept. 30 on a year-over-year basis, despite the firm beating Wall Street's consensus expectation by a penny, and credit losses continued to take a toll.
Before the opening bell, the Winston, Salem, N.C.-based bank reported third quarter net income of $157 million, or 23 cents a share, down from a profit of $362 million, or 65 cents a share, in the year-ago quarter.
BB&T took a $709 million loan loss provision in the third quarter, nearly double the amount recorded in the same period a year earlier. It added to its overall reserves by $263 million.
Non-performing assets as a percentage of total assets increased to 2.48% at Sept. 30 compared with 2.19% at June 30. BB&T said early indicators of problem loans were largely stable compared with the second quarter.
The increases in non-performing assets and the provision for credit losses were driven by continued deterioration in housing-related credits, with the largest concentration of housing-related credit issues remaining in Atlanta, Florida and metro Washington, D.C., BB&T said.
Besides residential mortgage loans and residential construction loans, BB&T has sizeable commercial and commercial real estate portfolios, which experienced deterioration in the quarter.
King added that the firm is seeing a slowdown in loan growth, particularly in commercial loans.
"I know some times when people look at the loan growth numbers they assume because the banks are not willing to make loans," which is not true, King said. "We need to make all of the good loans we can possibly find."
The business community is kind of sitting on their hands kind of waiting," he said. "They're apprehensive about what's coming out of Washington about health care,
taxes in trying to get a sense of clarity around the economic direction."
The underlying metrics are turning, but whether it continues to turn will be a function of confidence," King added. "And we're going to need some positive leadership out of Washington to restore confidence."
BB&T shares fell 4.6% to $26.95 in afternoon action. Volume of 11.8 million was above the issue's three-month daily average of 9.2 million. The stock has more than doubled since scraping a 52-week low of $12.90 in early March but it still remains more than 25% below its high over the past year of $36.60 set last November.
--Written by Laurie Kulikowski in New York.