Sept. 21--BB&T Corp. projected Friday it would experience an overall $1.4 billion revenue loss if the U.S. economy were to go through a severe economic downturn from April 1, 2013, to June 30, 2015.
BB&T, like most large U.S. banks, is required to do stress-test assessments twice annually to gauge the potential impact on its operations and capital levels as part of the Dodd-Frank financial reform law.
The downturn scenario includes a near doubling of the current U.S. unemployment rate to 13.9 percent during the period, as well as a median jobless rate as high as 14.7 percent in BB&T's core 12-state markets.
Other projected shocks to the U.S. economy could include: up to a 52 percent decline in residential permit demand; up to a 34 percent decline in the S&P 500 stock market; up to a 23 percent decline in home prices; and a 5.2 percent drop in the gross domestic product.
Compounding the downturn would be interest rates remaining near current levels, keeping pressure on banks' loan revenue, but likely not low enough to keep demand for loans from dropping.
BB&T projected having $6.7 billion in net revenue during the period. The loss would come mostly from setting aside $8 billion in provisions for potential loan losses and foreclosure exposure, as well as $100 million in securities losses.
By comparison, BB&T is one of the few national and large regional banks to have been profitable in every quarter since the financial crisis began in late 2007.
" The models are designed to capture BB&T's exposures and the effect of the stress scenario on the company's performance in light of BB&T's particular mix of assets and the specific effects on the markets where BB&T operates," the bank said. It said its stress-test scenario was designed "to be substantially more severe than the Federal Reserve's assumptions."
BB&T said of a potential $5.6 billion in loan losses during the period, the biggest exposure could be commercial real estate at $2.2 billion and first-lien domestic mortgages at $900 million.
Still, the bank said it would have a minimum Tier 1 common ratio of 7.3 percent and a minimum Tier 1 capital ratio of 9.3 percent. The regulatory minimums are 5 percent for Tier 1 common ratio and 4 percent for Tier 1 capital ratio. Tier 1 common ratio is a measurement of a bank's core equity capital compared with its total risk-weighted assets.
Several BB&T competitors released their stress-test results Monday based on their own economic downturn scenarios.
Wells Fargo & Co. projected an overall loss of $3.8 billion for the period, with net revenue of $52.6 billion being offset by a $48.5 billion provision, $5.1 billion in trading losses that include mark-to-market transactions, and $2.6 billion securities loss.
Wells Fargo said of a potential $29.7 billion in loan losses during the period, the biggest exposure could be domestic junior liens and home equity lines of credit at $6.8 billion and first-lien domestic mortgages at $5.8 billion.
The bank projected a minimum Tier 1 common ratio of 9.9 percent and minimum Tier 1 capital ratio of 11.3 percent.
Bank of America Corp. projected $26.1 billion in losses over the period. It projected $45.9 billion in revenue, a $48.2 billion loan-loss provision, $13.9 billion in trading losses and $12.2 billion in other potential losses.
Bank of America said of a potential $36.8 billion in loan losses during the period, the biggest exposure could be credit cards at $14.2 billion and first-lien domestic mortgages at $7.1 billion.
The bank projected a minimum Tier 1 common ratio of 8.4 percent and minimum Tier 1 capital ratio of 9.7 percent.