BBT BB and T Corporation

By AnnaMaria Andriotis 

BB&T Corp. has the capital to keep lending in a severe economic downturn, the Federal Reserve calculated Thursday in the first stage of its annual stress tests.

At the low point of a hypothetical recession, BB&T's common equity Tier 1 ratio, which is a measure of high-quality capital as a share of risk-weighted assets, was 6.9%, exceeding the 4.5% level the Fed views as a minimum, the central bank estimated.

BB&T's Tier 1 leverage ratio, which measures high-quality capital as a share of all assets, was 7%, exceeding a 4% minimum.

The stress tests simulate a world-wide recession. The results were under the Fed's "severely adverse" scenario of financial stress, which this year includes a 10% U.S. unemployment rate, significant losses in corporate and commercial real estate lending portfolios, and negative rates on short-term U.S. Treasury securities.

The results will factor into the Fed's decision next week about whether to approve the bank's plan for rewarding shareholders with dividends or potential share buybacks. Banks whose capital ratios dropped close to minimum levels may choose to scale back their dividend or buyback plans before the Fed announces its final decision Wednesday. That day the banks can choose to announce whether they are raising their dividends or buying back more shares, important for enhancing shareholder returns.

Both these ratios -- common equity Tier 1 and Tier 1 leverage -- came in lower compared with last year, at 8.2% and 7.4%, respectively.

BB&T released results of its own annual stress test Thursday afternoon. The bank said in a prepared report that it would maintain capital levels sufficient to withstand a severe recession based on its performance in a "Supervisory Severely Adverse" scenario -- in line with the Fed's calculations. BB&T reported a common equity Tier 1 ratio of 7.1% at the low point of a hypothetical recession, slightly above the 6.9% reported by the Fed. It reported a Tier 1 leverage ratio of 7.6%, above the 7% from the Fed.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com

(END) Dow Jones Newswires

June 23, 2016 17:39 ET (21:39 GMT)

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