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BB&T tweaks guidance after hurricanes boost insurance business

BB&T Corp. raised its forecasts for fees and expenses, citing robust activity in its insurance brokerage business after a series of powerful hurricanes.

"Insurance is very strong," Chairman and CEO Kelly King said during an investor presentation on Sept. 10. Hurricane Dorian followed two previous "back-to-back" hurricanes that depleted insurers' capital and raised demand for coverage, leading to higher premiums and higher commissions for BB&T. King also said BB&T is outperforming competitors in part because of acquisitions, such as its 2018 purchase of an insurance business from Regions Financial Corp.

BB&T projected that its noninterest income would increase 4% to 6% year over year in the third quarter, up from its July projection of 2% to 4%. The bank also forecast that expenses would rise 1% to 3% versus its previous guidance that they would be flat. King said the additional expenses were related to higher activity in the insurance business and growing mortgage production as interest rates decline.

BB&T stuck to its forecast that its net interest margin would compress by 4 to 8 basis points in the third quarter compared to the second quarter. King said that deposits are growing, and deposit rates are declining.

"We've worked through the cycle," he added, noting that longer-term certificates of deposit are maturing.

Overall, King said BB&T is maintaining its expense discipline, and the company's pending merger with SunTrust Banks Inc. creates room to maneuver if the economy enters a deep slowdown.

"If you're heading into a difficult economic environment, having more opportunities to reduce cost is a good thing," he said. "And you never will have the kind of cost opportunity that you have in a merger of equals."