Longtime BB&T CEO to retire; merger of equals eyed

By Jonathan Stempel

NEW YORK (Reuters) - BB&T Corp (BBT.N: Quote, Profile, Research, Stock Buzz), the large U.S. southeast regional bank, said on Wednesday that longtime Chief Executive John Allison will retire from that position at the end of the year, and be replaced by Chief Operating Officer Kelly King.

Allison, 60, has been chief executive since 1989 and is the longest-serving chief executive at any of the 15 largest U.S. banks. He will remain chairman through 2009. Allison said his decision to retire is part of a plan BB&T began in 2003 to gradually turn over its senior executive team.

King, 59, has worked at BB&T since 1972, joined executive management in 1983 and became COO in 2004. He pledged in a statement to maintain the bank's strategic direction. BB&T said it will name a new COO later.

Since Allison became chief executive, Winston-Salem, North Carolina-based BB&T has increased roughly 30-fold in size, in part because of roughly 60 bank and thrift acquisitions. The lender has about $136.5 billion of assets and operates nearly 1,500 branches in 11 U.S. states and Washington, D.C.

BB&T said it is committed to remaining independent, but Allison and King in interviews said the bank is well-positioned for the "merger of equals" it has long sought, in part because its shares have fallen less than many rivals since the U.S. housing and credit crisis began.

Through Tuesday, BB&T shares were down 8 percent this year, while the 24-member KBW Bank Index .BKX had slid 30 percent.

"I think an MOE would be wonderful," King said. "You could consider an out-of-market MOE, but it's best in-market because of the consolidation and cost-saving opportunities. I'm not going to be building my future strategy on building an MOE. But if the question is, 'would you like to do one, well, yes.'"

Allison said BB&T had pursued such a merger last year but couldn't find one that worked. "There are only a few candidates left, but I think the probability has improved because the economics have improved," he said.

U.S. commercial banks with asset bases similar to BB&T's include Fifth Third Bancorp (FITB.O: Quote, Profile, Research, Stock Buzz), KeyCorp (KEY.N: Quote, Profile, Research, Stock Buzz), National City Corp (NCC.N: Quote, Profile, Research, Stock Buzz), PNC Financial Services Group Inc (PNC.N: Quote, Profile, Research, Stock Buzz), Regions Financial Corp (RF.N: Quote, Profile, Research, Stock Buzz) and SunTrust Banks Inc (STI.N: Quote, Profile, Research, Stock Buzz).

Part of BB&T's own growth came from what it called a merger of equals with the former Southern National Corp in 1995.

By avoiding exposure to subprime mortgages and other things that Allison termed "crazy stuff," BB&T has so far avoided some of the major credit problems that have forced rivals such as Charlotte, North Carolina-based Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) to raise capital and lower dividends.

In the second quarter, profit at BB&T fell 6 percent, though the amount set aside for loan losses more than tripled.

Allison and King said BB&T will try to buy more insurance brokerages, but is now shying away from community banks because it's hard to assess the quality of residential real estate assets. They said that market could bottom next spring.

"In the spring, summer or fall of 2009, there will be more vision in terms of the broad economy turning, and especially the asset quality of institutions," King said. "A number of institutions will be interested in some form of combination."

BB&T also faces pressure as rivals offer deposit yields of 4 percent and more. In recent months, these rivals have included Wachovia and Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz).