BB&T Corp. said Friday that the Federal Reserve has approved its revised capital plan, after the Fed had objected to its original proposal earlier this year.
Under its revised plan, BB&T will not raise its dividend of 23 cents per common share.
“In light of several factors, we approached the resubmission conservatively and did not request a further increase in capital deployment at this time,” Kelly King, the CEO of the Winston-Salem-based lender, said in a press release. “We believe this approach makes sense.”
BB&T had to resubmit its plan after the Fed in March said its objection was based on a “qualitative assessment.” The comment from the Fed followed its annual stress tests of the 18 biggest U.S. banks.
As part of the tests of lenders’ health, they must submit to the Fed their plans to repurchase shares or pay dividends. The Fed has the power to turn down the capital plans if they would leave banks with too little capital to keep operating during times of “economic difficulty.”
Bank of America, Wells Fargo, BB&T and nearly all the rest of the banks passed the tests. Ally Financial did not. The Fed gave conditional approval to the capital plans of JPMorgan Chase & Co. and Goldman Sachs but objected to BB&T’s and Ally’s.
BB&T couldn’t implement its requested capital plan until the “deficiencies” were fixed, the Fed had said. But it remains unclear why BB&T’s capital plan was rejected in the first place.
The Fed disclosed few details on its rationale, and the bank said it was prohibited from discussing the Fed’s reasoning.
BB&T fared reasonably well under the severe economic-distress scenario proposed in the stress test. Its capital levels remained higher than peers like Regions Financial, SunTrust Banks and U.S. Bancorp – all of whom got the go-ahead on their plans.
Days before the Federal Reserve was to announce its decision on capital plans, BB&T disclosed that it would have to change some internal practices of calculating the asset portion of its capital ratios to comply with regulatory requirements, meaning its performance would be weaker than it had originally thought.
BB&T raised its dividend from 20 cents to 23 cents earlier this year after the Fed approved its 2012 capital plan.
Bank of America CEO Brian Moynihan came under scrutiny two years ago after pledging a dividend increase only to have the Federal Reserve reject that plan. The Charlotte-based bank hasn’t requested a dividend increase since; it’s still just a penny per share.
But the Fed gave Bank of America the OK this year to buy back shares and redeem high-cost preferred stock.
Also Friday, BB&T said the Fed also did not object to its plan to continue paying preferred dividends.
BB&T shares closed Friday at $35.76, down 0.42 percent.
Roberts: 704-358-5248; Twitter: @DeonERoberts Dunn: 704-358-5235; Twitter: @andrew_dunn
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