John Allison, the longtime chief executive of BB&T Corp., announced Wednesday that he will retire at the end of the year. He has led the bank for almost 20 years, overseeing its transformation from a small farm bank in eastern North Carolina to the country's 14th-largest by assets.
The 60-year-old Allison will be replaced by his right-hand man, chief operating officer Kelly King. Both are company lifers with deep ties to North Carolina. Allison's retirement is one of the last pieces of a five-year succession plan among senior managers.
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The announcement comes at a time when BB&T is faring better than most peers. Though the bank's earnings are down slightly over the year, Allison has steered it clear of subprime mortgages and the complicated financial instruments that supported them. “Esoteric” and “illogical” is how he describes CDOs, SIVs, and other investment tools now haunting many competitors. Allison, a Charlotte native, is also known for being fond of philosophy – he gives senior managers a copy of Ayn Rand's “Atlas Shrugged” – and skeptical of big government. In 2006, his bank made headlines when it said it would not lend money for commercial projects on private land seized by eminent domain. The government, Allison said, shouldn't have such vast control over individuals' property rights.
Allison will continue as chairman of the board through the end of 2009. He said the announcement of his retirement “comes with a lot of mixed emotions.”
“However, for BB&T and for me personally, this is the right time to move forward,” he said. “Nearly 20 years is certainly a long time for anyone to serve as CEO.”
When Allison became the CEO in 1989, BB&T had 219 branches in North Carolina and South Carolina. Now, the bank – the third largest headquartered in North Carolina, behind Charlotte neighbors Bank of America and Wachovia - has 31,000 employees and 1,500 branches in 11 states, and it's helped put North Carolina on the banking world's map.
“In the annals of North Carolina banking, there are a few legends that stand out, like Hugh McColl and John Forlines,” said Tony Plath, a finance professor at UNC Charlotte, referring to the well-known retired CEOs of Bank of America Corp. and Bank of Granite Corp. “You can put John Allison on that very short list. It's hard to overestimate what they did and what they built.”
Allison worries about the federal government's expanding role in the banking world. He thinks the government needs to rescue Freddie Mac and Fannie Mae, but only because their failure would destroy the United States' credibility among foreign investors. He blames the subprime mess on the government's effort to drive up homeownership rates beyond what the market – and lenders - would support. “Affordable housing sounded good,” Allison says, “but what we called affordable housing is now subprime lending.”
He thinks it's ironic that the Federal Reserve is gaining power, since it's made “a series of significant mistakes.”
“They drove rates too low, which helped create the housing bubble,” Allison said. “Then they held them too high.”
Allison says he wishes the economy wasn't in a downturn, but notes that it will cleanse the banking industry of any bad practices. “The crazy people have left the market,” he told the Observer. “The world's better now that Countrywide is gone.”
Countrywide Financial Corp., a California mortgage lender known for making exotic home loans, was bought by Bank of America last month.