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lower pension expense as it reduces the overall discounted pension liability given that BBT remains one of the few large regional banks that still have defined benefit pension plans.

Potential for regulatory relief requires BBT to reevaluate risk/compliance spending. Management noted that 75-80% of its infrastructure budget is based around risk management and regulatory costs. Given the possibility of regulatory relief coming out of the new administration, management noted that it does not want to misallocate its expense spending. As such, management expects to redeploy some of those compliance related costs into revenue and service generation opportunities stemming from any regulatory relief.

Branches still have value, but the structure will likely change. Mr. Henson noted that he still sees value from BBT's branch network but increasing customer usage across its digital channels and with branch transactions down 4%, he expects continued branch consolidation at a pace of more than 2-2.5% over the next couple years. Moreover, management believes that future branches will be likely be smaller in nature and staffed with fewer people that are cross trained with multiple responsibilities. As an example of this, Mr. Henson noted that BBT has combined its teller and relationship banking role into one branch banker role.

Chart 18: What do you think is the biggest catalyst for BBT shares over the next 12-24 months?
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
41%
30%
15%
11%
4%
Successful integration of its recent deals and achieving synergy targets

Strong top-line organic revenue growth, regardless of macro backdrop

Expense rationalization

Accretive bank and/or non-bank deals

Continued outperformance in dividend growth and dividend yield

Source: BofA Merrill Lynch Global Research

Bank of Hawaii (BOH), B-3-7, Underperform

Solid loan growth on back of a strong HI economy. Chairman, President and CEO Peter Ho, Vice Chairman and CFO Kent Lucien and Senior Executive VP, Controller and Principal Accounting Officer Dean Shigemura were generally upbeat with regards to the operating outlook as we enter 2017. Management guided to achieving low double digit loan growth on the back of a robust Hawaiian economy. While management expects some moderation in C&I growth following a strong 3Q it sounded upbeat around the lending outlook given fairly healthy tourism activity. Management noted that while a de-emphasis on the Pacific Alliance, a priority for the Obama administration, was not a positive development, it remained fairly confident that strong military spending should continue to serve as a tailwind to the Hawaiian economy.

Credit outlook remains benign. Mr. Ho affirmed the credit environment has been benign and believes BOH's strong credit will remain intact in the near future. As loan growth improves, Mr. Ho acknowledged provisions should follow a similar trend, but nothing on the horizon suggests credit will worsen anytime soon. Management acknowledged reserve balances are hard to predict, but believes the

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2016 Future of Financials Conference | 17 November 2016

Bank of America Merrill Lynch

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