SNL Financial Analysis Finds Big Banks Get Boost From Finalized Basel III Rules

Share Article

According to research firm, SNL Financial, with a long runway to the revelation of final rules, six additional large banks provide capital adequacy guidance under Basel III.

Doing sort of normal mortgages for normal clients doesn't require us to put up additional capital for regular mortgages, as well as for home equity. And that's a big benefit for us.

With the exception of the trust banks and credit card banks, all the U.S. CCAR or CPR participants disclosed higher Tier 1 common ratios under the newly finalized Basel III rules. Additionally, with the arrival of the final rules, six institutions previously not disclosing Basel III Tier 1 ratio estimates have now done so.

SunTrust Banks Inc. disclosed the greatest quarter-over-quarter increase in its Tier 1 common ratio of 1.3 percentage points to 9.50%. Regions Financial Corp. reported the next largest increase of 1.19 percentage points over the same time period, followed by BB&T Corp. with a 1.10 percentage point increase.

As cited in a transcript of SunTrust's second-quarter earnings call, SunTrust CFO Aleem Gillani described the benefit SunTrust received from the final rules: "The new rules basically put all the mortgages into two tiers, 50% or 100%. And as a result, doing sort of normal mortgages for normal clients doesn't require us to put up additional capital for regular mortgages, as well as for home equity. And that's a big benefit for our portfolio."

He continued, "We also received benefits for our CRE exposure. I think what you ought to see is across the industry, you ought to see regional banks do better as a result of the new rules than money center banks. You ought to see regional banks do better than investment banks. And you ought to see banks that have mortgage exposures do better than banks that don't have mortgage exposures."

Speaking at the Barclays Global Financial Services Conference, Regions Financial Corp. CFO David Turner mentioned the effects of the final rules on his firm, according to a transcript: "You saw our calculation of Basel III after the rule came out in July. And we're pleased with the aspects of the proposal that were modified or removed that really helped us from a risk-weighted asset standpoint the most."

With the uncertainty of the final rules behind the company, he offered plans for deploying the excess capital in the form of loan growth, asset or whole company deals and then returning capital to shareholders. "All that leads to having more loans than securities," Turner said. "We'd love to deploy that capital to get that loan growth." He continued by providing alternatives in the absence of organic loan growth: "When that's not there, then we look for opportunities to acquire. We can look at acquisitions, whether it be banks or non-banks to help us deploy capital when the time is right and it makes sense to do so."

Read the full report here: http://www.snl.com/InteractiveX/Article.aspx?cdid=A-25117064-12086.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Christina Twomey
SNL Financial
212.542.8033
Email >
Follow us on
Visit website

Media