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Question 6.14: An analysis of the BHCPR reports on BB&T is presented in...

An analysis of the BHCPR reports on BB&T is presented in this chapter’s appendix. We examined a wide variety of profitability measures for that bank, including ROA, ROE, net profit margin, net interest and operating margins, and asset utilization. However, the various measures of earnings risk, credit risk, liquidity risk, market risk (price and interest rate risk), and capital risk were not discussed in detail.

Using the data in Tables 6-5 through 6-9, calculate each of these dimensions of risk for BB&T for the most recent two years and discuss how the bank’s risk exposure appears to be changing over time. What steps would you recommend to management to deal with any risk exposure problems you observe?

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Note to instructors: The Bank Holding Performance Report (BHCPR) is provided to each bank by the Federal Financial Institutions Examination Council. The BHCPR is prepared from the call reports of condition and income that are filed quarterly by all banks. It (the BHCPR) is for the use of regulators and management to assess how well the bank is performing relative to its internal goals and its peer group.

The user’s guide to the BHCPR is available from the FFIEC for a nominal fee and details the various ratios and comparative data contained in the BHCPR. The actual BHCPR is much more detailed than the example provided in the text as Tables 6-5 through 6-9. These exhibits are for illustrative purposes and do not contain all the information that is necessary to calculate all the risk measures described in the text. The instructor may find it helpful to use BHCPRs provided by a few local banks in class discussions. Those actual BHCPRs allow the students to calculate the full range of risk and return measures and expand discussion of the concepts and ratios considerably.

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