Good morning, and welcome to BB and T's 2018 Investor Day. My name is Rich Baytash with Investor Relations. Thank you to everyone who made a trip to Greensboro today and to those on the WebEx listening. We're very appreciative that you made the event.
And thank
you again for all who joined us yesterday for an evening at the institute. We trust you had an enjoyable time and learned about the mission. Regarding today's schedule, at registration, you received a brochure with the agenda for the day and a description of the exhibits. On your way into the auditorium, you noticed that the exhibits were open and they will be open all day during breaks and during lunch, but not during the presentations. We encourage you to stop by and learn as much as you can about each of these exhibits.
Now some housekeeping items. Materials for each presentation will be uploaded to vbt.com shortly before each presenter. There is refreshment set up in the back of the room and also outside for your enjoyment. And there's also a device charging station in the back of the room and as you exit the room, there's one off to the right. We have breaks scheduled throughout the day at 10 just shortly before 10 am and again at 2:15 pm and there will be lunch at 11:45.
We have a full schedule today and there will be time for Q and A at the end of this the presentations with the entire executive management team. And finally, we have our forward looking disclosure statement shown on the screen as well as in Darryl Bible's presentation. The statement covers all presentations and the Q and A session. Now with great pleasure, let me introduce our Chairman and Chief Executive Officer, Kelly King.
So perspective is a very interesting concept. I hope that little video gives you just a way to think about your perspective on life. How many times do we get bogged down and focused and concerned about all the challenges and all the issues and all the problems we have and how tough life is for us And then we get a different perspective and we realize just how fortunate we are and how blessed we are. So, we are very blessed, very thankful that you all are here. Thank you very much.
Thank you to all of you that came last night. Hope your stay was enjoyable. Thank all of you for joining us on the webcast. We really appreciate you joining us as well. What we tried to share with you last night is that BB and T is a different company.
We're a different bank. We really are focused on trying to make the world a better place to live. And we are doing everything we can in that context to execute on our vision and our mission and our values. Those are the three things about BB and T that are nonnegotiable, our vision, our mission and our values. That's important because everything else is negotiable.
The world is changing. The world is changing with blinding speed. We talked some about that last night, but I'll just reinforce to you that because the world is changing so fast, it is critically important for all that are going to survive and thrive to be willing to change in a court. So, at BB and T, you're going to hear a lot today about strategies and tactics. Last night we talked about philosophy.
Today we're going to talk about strategies and tactics. You're going to hear us talk about disrupt or die. You're going to hear us talk about building the new bank. You're going to hear us talk about pruning the old bank. And you'll see the transitional flow of that as we extract expense load from the old bank that is not needed today and invest heavily in the new bank, in digital, in new delivery platforms, in lots of new products that you're going to and approaches that you're going to hear about.
So this whole idea is about helping you understand better how we are transitioning from the old bank to the new bank to be positioned for this new world in which we live. And so very, very exciting, exciting time. You're going to hear us talk about some key concepts. One of the things that you'll hear about is us working with a number of consultants as we go across the business and reconceptualize and reconstitute our businesses. That's all a part of this disrupt or die strategy.
There are a couple of pet philosophies that I've had over the years that I hope you will hear threaded through this that I think are pretty powerful. One of those is it is better to have 100% execution of an 80% idea than a 50% execution of 100% idea. In other words, it doesn't have to be exactly right. It just needs to be really, really well executed. John Wooten used to say that to his basketball team, every time one of his new superstars would come in with all of his great personal plays and say, coach, we got to run my play.
And the coach would say, no, we're going to run these plays. And the player would say, well, coach, you've been running these same plays for years and everybody when they come to play you, they know what your plays look over. He said, that's right. I'll write it down and give it to him. Here's the reason we're going to win because we will be better focused, better trained, better shape, we will execute better, we will win every time even though they know exactly what our strategies are.
BB and T is really focused on good strategies, but we're really, really focused on good execution. Another key concept that you'll hear and that's threaded through all of these reconceptualization approaches, and this is a really important one and that is every function in the organization should be performed by the person who is the least qualified who can perform it effectively. Every function in the organization should be performed by the person who is the least qualified who can perform it effectively. That is a concept of empowerment. So, if you think about that, by letting the least qualified person do the job versus the most qualified, which is what happens in most companies, you're constantly pushing down empowerment, which means you're constantly growing people.
So we say at BB and T, everybody in our company has to have a growth mindset. And so by having a growth mindset and our commitment to empowerment and pushing down authority and responsibility, then we're constantly bringing up people into the organization. And as people below you come up and that allows you to move up and the whole organization is growing through that process. So this is a really, really powerful idea and it's one that everybody you're going to hear from is working on and I think you will find it to be very, very refreshing and reassuring with regard to BB and T. BB and T is a different kind of company.
We are a different kind of bank. We're building the new bank and we're building it in the context of our philosophy. Before I close and let the program get started, I want
to just remind you of
one thing I said last night. This is the day that all of us have to make the world a better place to live. Don't forget the Power of 1. Power of 1 is about living every day as if it is what it is which is the God given day you have to make a difference in the world. Don't get in the trap of worrying about yesterday.
Don't fall in the trap of waiting for tomorrow. You can't change yesterday and tomorrow is not promised. This is it. This is your day. Treat every person with dignity and respect that they deserve.
And realize the reality of life, the essence of life is about the fact that we interact with people, our families, our friends, our coworkers, people we don't even know. We interact with them all the time and every one of those interactions is an opportunity for us to make a difference. And as you make a difference in those individuals' lives, then you make a difference in the world. The butterfly effect can cause things to happen that you will never even be able to imagine and maybe never even know because you took the time, you made the effort to try to make a special positive meaningful impact on the lives of those people. Power of 1 is a really incredibly important concept to keep in mind and I hope you will do that.
So, again, thank you all for joining us. We're really excited about the day. We'll all be around as we take breaks for questions. You're going to see a dynamic team. I am so proud of each and every one of our team.
You're going to see some of us that have been around for a while. You're going to see a lot of new faces, new folks that are really, really adding major contributions to our company and I think you will enjoy every bit of it. And then at the very end of the presentation before we go into Q and A this afternoon, which I hope you'll stay for, we are going to hold questions to the end. So, we will take all the time you want to cover questions this afternoon. But I will tell you, at the last presentation, Daryl is going to be providing for you some enhanced and improved long term performance goals as we reflected on the recent changes in our environment.
So, we're off to a good day. Let's talk about BB and T building the new bank. Chris?
All right. Good morning. Pleasure to be with you all and give you a strategic overview of the company. And when I'm finished, I hope that you will take away 4 primary messages. 1, we operate a differentiated and diversified franchise in great markets.
We are in fact maintaining our performance advantage long term. We are, as Kelly said, reconceptualizing our business and we're going to talk a lot about that today. And we have a deep and experienced leadership team and hopefully you'll get to experience that firsthand. We do operate a differentiated set of businesses that really provide or strive for top tier performance. Those businesses really come together to produce diversification that offers really stable, consistent and strong earnings growth.
We set some targets over the last several years of cost savings. We have achieved those and it's through intense focus on expense control. Expense control is a huge part of disrupt or die. Disrupt or die is really about, as you just heard Kelly say, taking cost out of our existing company, the old company, if you will, to reinvest in and build the new company, all while maintaining a strong focus on the client. You going to hear that threaded throughout the day.
But focus on maintaining a strong disciplined credit culture, achieving operating leverage on a consistent basis, at the same time, a strong and consistent dividend with a strong TSR. But the driving force behind all this for us is to execute on our vision, mission and values. You heard a lot about that last night and that's the under line support of everything we do. So let's take a look at the franchise. As you know, we operate a community banking model.
We've been doing it for about 30 years. So we operate a diversified set of businesses throughout the country on a national basis. The company was founded in 18/72, 8th largest deposit institution or financial institution by deposits, 5th largest insurance broker and we are a broker, no underwriting, but a broker in the United States and in the world, 2nd highest mobile application ranking in the industry, over 1900 bank locations and just over 36,000 FT feet feet
feet feet feet
feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es serving 7,600,000 clients. If you look at our banking franchise, we operate primarily in 15 states well, 15 states primarily in 12 or 13 because we just spill over into Indiana and Ohio with 2 to 3 offices. But we have top 5 market share in the primary operating states, about half of those. If you look at our weighted average GDP growth in our footprint, it really gives you a view inside our markets. So over 3 years compared to our peers, our markets have grown 2nd fastest 3.8% average GDP growth over that period of time.
We also are in 8 of the 10 top 10 cities for economic opportunity in our banking footprint. This is really the differentiating slide as a part of our strategy and how we run our company. It's really about diversification. You can see on the left our diversification of revenue by segment and leads to the performance differentiation on the right. So far and away the largest is community bank retail, makes up 44 percent of revenue, commercial 23%, financial services 17% and insurance holding 16%.
But the most important point is what it does for us on the right side. In the upper left, you can see our pre tax pre provision net revenue over total assets for 10 years has grown faster than our national peers and our top four banks. And we've done it, as you see in the lower right, with less volatility. So, faster growing PPNR, less volatility, really result of running a diversified business and that is a key strategic difference for us. This takes a look at our business, but I'm not going to cover all these but give you a sort of a quick rundown of what the businesses bring to BB and T.
It's important to understand what they do, but it's also more important to understand what they bring us. Insurance Holdings provides the largest non interest income provider we have, provides just under $2,000,000,000 in revenue and it provides a broader product to rate. It helps differentiate our business and helps us act as a trusted advisor. Many times our bankers use this product as a lead product to call on a prospect. It happens every day.
The revenue stream is very diversified because it's not sensitive to interest rates nor is it subject to dynamics of a credit cycle. So in a downturn, this business generally stands tall and very helpful. A complementary business to insurance is AFCO CAFO, which is one of the largest insurance premium finance businesses in the country that we operate. And you'll hear John Howard talk more about those 2 later today. BB and T Securities and that broker deal, we operate really 2 businesses, BB and T Investment Services, which serves our consumer investment needs for our consumer clients throughout the footprint and it's primarily annuities and mutual funds.
Then we also operate Scott and Stringfell, our full service brokerage business. Interesting, 5, 6 years ago, we were in 2 or 3 states. Today, we're in all of our primary operating states. We've grown this business much faster on purpose to support our growing wealth business. We'll talk more about that in a moment.
They're actually Scott's actually growing about 15% year to date. If you look at Grandbridge, it's our national commercial real estate and multifamily business that does finance and does it through 3rd party placements primarily, but also some on balance sheet financing. So what it brings us is really strong fee income through placing in the secondary market and some on balance sheet net interest income. And Rupert Shates will talk to you more about those businesses. Regional Acceptance is our subprime and to a smaller extent near prime auto finance business and what it brings us is really strong risk adjusted yields and a controlled operating structure.
Sheffield is a small ticket equipment finance. You saw a kiosk outside. It does UTVs like you saw there. It does jet skis, motorcycles, etcetera. And then commercial equipment capital provides equipment financing generally under 250 for small businesses.
The point I would make about both Sheffield and CEC is they are national, but they're also point of sale businesses. So as the consumer demand changes to point of sale purchase and finance, we think it provides real good upside in revenue growth, again, national businesses. And Brandt will walk you through more detail about that. These are recognitions. I'll just hit a few.
24 Greenwich Excellence Awards in Small Business and Middle Market for overall satisfaction and outstanding service. At the bottom, we're real proud of this, named best for core deposit growth strategy, a 2018 bank director ranking and it's a result of growing DDA and you'll hear more about that today. Dynatrace named us as the 2nd highest mobile app ranking in the industry. This looks at a lot on this page, but I think it's an important page, major accomplishments over the last 4 years since our last Investor Day. Far and away, one of our biggest accomplishments is developing more digital capability and one of the primary items there is we launched our You platform, our digital banking platform, consistently ranked in the top 5 in the industry.
We've integrated 5 acquisitions Bank of Kentucky, Susquehanna, National Penn, 2 of our 4 largest insurance acquisitions, Sweatt and Crawford in 2016 and Regions Insurance Group, where we just converted November 2 this month. Really excited to implement Financial Insights, which is an automated platform that does financial analysis for our small business and commercial clients that really provides 2 benefits. 1, as our RMs walk through with our commercial clients step by step the performance of their company versus industry standards, it helps our relationship managers better understand their relationship and can properly offer product sets that are nice solutions for them and also provides insights to the clients at how they might improve their business. Many of them don't have CFOs and financial people. So we are de facto their CFO and we provide information that shows their performance versus their industry and point out ways they can improve their business and create value that stays with us.
And David Weaver is going to talk to you more about that. It's about 80% automated. We're going to continue to apply robotics and machine learning to it and we're going to take it to a fully automated model later on. As you all know, we spent about $1,000,000,000 on 3 infrastructure projects, a new general ledger, a new commercial loan system, a new data center, state of the art data center we opened year and we rolled out a new rebranding campaign with a new tagline, All We See is You and have really stepped up our digital marketing capability and you'll hear Dante talk more about that later. One of the best things we've ever done, we continued our Lighthouse project.
A Lighthouse project is a community effort where we have actually touched 16,500,000 people through the completion of 11,000 projects and over 640,000 volunteer hours of BB and T Associates. We've done it now for 10 years. If you all learn more about it, we have a kiosk about the lighthouse projects outside. One really big item for us we're really pleased with, we expanded our executive management team, added 5 new members in 2016 of which you're going to hear 3 of them today, kind of walk you through their initiatives. And then finally, we launched, constructed and launched, opened I guess you'd say, BB and T Leadership Institute this July.
Many of you got a chance to actually see that tour last night. But more important than just a building, it's what it does in order to help us execute our mission with our clients and our associates and our communities. So, we'll take a quick look at our long term performance advantage. If you look at adjusted return on average assets, I mean, currently we're at 151. We've maintained through the 4.75 year review period about a 10 basis point premium on average.
Adjusted return on tangible common equity was 20.1%. We generally have maintained about a 300 basis point premium through the review period. I think it was 1 quarter we might have been 200. Fee income ratio 42.2, generally about 400 basis points favorable to peers. Not the case in 2015 and 2016.
You'll recall we sold a company called American Coastal, that was $140,000,000 revenue company in the middle of 'fifteen and so that had an impact on those 2 years. Our adjusted efficiency ratio, really proud of improvement we continue to make there, 57.3%, about 170 basis points favorable to peers throughout that review period. Something you may not focus on if you were to exclude one of our businesses that is both very unique to BB and T and also very large, our insurance business, for what you might see as more of an apples to apples comparison. We're actually operating at 53.1%, which is about 500 basis points favorable to peers through the review period. If you look at risk adjusted net interest margin, we're at 3.19, about 23 basis points favorable to peers throughout the review period.
And then finally, NPAs at 27 basis points and have consistently been at least 10 basis points favorable to peers through that period of time. I want to drill down into how we're executing on disruptor die. I mean, you heard Kelly talk about that last night. You heard him cover this slide. I'm not going to cover this in detail because you've seen it before, but I want to make 2 primary points with you.
Yes, we are going through unprecedented change right now with technology. No question about it. But if we were in today any one of those prior four stages, we would have said the exact same thing. We're going through unprecedented change. The point is we had opportunities and took advantage of opportunities in each one of those time periods And we feel the exact same way about the one today.
We see it as an opportunity and we're approaching it in that way. 2nd point I'd make is 2008 in Phase 4 as we've gone through the downturn, the leadership team we had in place then for the most part is still in place today. So should we go through a future slowdown, our hope is that that would be a benefit to us because we have been through that once before. The core of disruptor die is really about reconceptualizing our business, as I said earlier, to reinvest in or to take cost out of our existing company or kind of our old company to reinvest in and build our new company. Now I'll give you a few examples.
If you look at the top left, it's really about optimizing the branch strategy. So we took out 148 branches last year. We're going to do 171 this year, 150 or so next year. It's a total of about 20% reduction in our branches over a 3 year period. If you look at the upper right, we've also been focusing at the same time on our non branch facilities.
So we've reduced square footage in our non branches last year 7.2%, 4.9% this year, 4.7% and a little less than 4% we anticipate next year. We already have a beat on next year. A total of a 16% reduction in square footage in the backroom, which is huge. We anticipate reducing our electricity usage by 20% to 25 percent and we're going to take a portion of those dollars then and reinvest in opportunities that you see around that page. One of the primary ones that we've made a lot of impact, as I alluded to earlier, is digital.
I mentioned that we're in the top 5 generally in most all publications and where we're ranked for our new platform. And I think it's because we have continued to iterate new enhancements every quarter and to keep it fresh. Last quarter, it was about new card controls. The quarter before that, it was about a new personal financial management tool for our wealth clients. And so the objective is to keep it fresh and relevant and we continue to invest in it.
We also begin this year through Dante's leadership to roll out something we call Voice of the Client, which is a new digital platform that helps all of our businesses, again, roll it up beginning this year all through the end of next. It gives our businesses near real time client feedback, which helps them better run their business and informs them on what digital investments to make in the future. We also made substantial improvement in our social media messaging and also our digital marketing. We will do over 300 campaigns this year. 95% of those will have a digital component to them.
And Dante will tell you much more about that. On the lower left, in insurance, we have a number of initiatives underway improving the performance and profitability of insurance. One of the ones that I would point out is robotics. We started 6 to 9 months ago really digging into how we might improve a real paper based industry still today. And through that, we have an implementation going in that we expect is going to save us significant dollars in 2019.
Refocusing on the community bank, about a year ago, Q4 last year, it became crystal clear to us that we had rich opportunities to really bring value out of the community bank. For example, this branch rationalization strategy takes a lot of time. It's really intense. Investing in new branches and growth opportunities, new marketing, be it digital or direct mail and a vast number of new products that you're going to hear Brandt walk you through. Or in commercial, we're standing up the financial insights program, remaking how we deliver small business, real focus behind SBA lending and ABL lending.
So what we did is we thought it made sense to double down in executive leadership in the community bank. So we asked Brandt Standridge to come in at the beginning of this year, lead the retail segment. We asked David Weaver to continue his focus on leading commercial so that we can get after those initiatives and realize value from them much quicker and it has worked great so far. So those 2 fellows work with me to ensure that we still present a unified community bank model to our associates, but also how we face the community and it's gone exceptionally well. We've been really pleased with the cost that we've been able to take out of the business and improvement Things like we just talked about, the branch rationalization strategy, the non branch facilities, implementation of robotics where we're really just in our infancy.
We're just getting started, tremendous opportunity. Last year, we had a system wide restructure. We took out 1600 FTEs, about 4% and 4.5% of our workforce. And while we have a bias against the use of consultants, we thought in the vein of turning over every rock because we were darn serious about making this happen, we did decide to bring in outside assistance to help us stand up for new projects and I'd like to introduce and walk you through those today. The first is technology.
So we brought in consultant to help Barbara and her team really begin to look at the business and technology and how we support the businesses from top to bottom. Started with the organizational review, went through a spans and layers review, reducing layers, increasing spans, taking out. We're going to use some of that money to reinvest in. While we're happy with our Agile effort, there's much more we can do with Agile and standing up DevOps to push it throughout the company. Also looking at implementing lean principles to do what we do more efficiently and took a hard look at our vendor relationships to take cost out.
So we are clearly taking cost out in technology and Barbara will walk you through that transformation. But very, very pleased with what we're doing to align the business to be more business focused and aligned. Secondly, John Howard and his team brought in a consultant in April of this year and really the objective was to look at the business from top to bottom, no holes barred and that entailed a review of the operating models from wholesale and retail. It involved looking at the backroom of still a paper based industry to automate what we can. And I would say that we have automation going in every single entity in some form or fashion in insurance today.
Secondly or thirdly, really looking at how the corporation interacts with this large business. If you think about it, insurance is larger in its industry than BB and T is in its industry. And how we interact is key so that we allow them to be nimble and flexible to be able to entrepreneurial industry. At the same time, bringing the HEF to BB and T to provide shared services where it makes sense, where we have expertise like data and analytics, real estate services, etcetera. So the purpose here is to unlock value for the next 2 to 3 years.
And there's never been a time that I have been associated with the insurance business that I feel better about the improved profitability potential we have over the next 2 to 3 years. And John will walk you through his transformation later. Thirdly, beginning in August of this year, we brought in a consultant to help us do a deep dive on organizational simplification projects. So we're starting at the top of the house, layer by layer, going through our management structure, reducing layers, increasing spans of control to design an operating structure that is more efficient and help us make better and faster decisions in this company so that we will be more nimble. It's tough.
We're about halfway through it. We'll finish it in the Q1, but it's absolutely worth it and it will make us better for having gone through it. And then finally, we're redesigning our commercial lending process from end to end truly from when we make the first call on the client to when the last loan is paid off at the end of that pay period. And the purpose here is really to simplify the process for our associates, our clients to enhance revenue and to take out cost. And while all of these have cost implications, this has about 2 thirds of this It will continue through the Q4 of next year.
So you can see 4 significant impactful projects we started the beginning of this year, we'll roll through the end of next year that will make a significant difference we believe in our company, enable us to reinvest more heavily in our company long term. Take a quick look at our leadership team and what you might expect from today. But before I do that, I just want to make a comment. This is a deep and experienced leadership team. We average 54 years age, 27 years with BB and T and we have 5 new members that brings in new fresh ideas and we've done that over the years.
It's a very effective team. And for one, I can tell you, I haven't been here 34 years, very proud to work with such a fine group of people. So agenda, I'll leave that for you to approve. First up is going to be Brandt Standridge. Brandt is one of our newest members, joined us in 20 16.
Brand is perfect fit for retail in that he started his career as a market leader or branch manager. He then worked his way up to retail banking manager running all the regions I mean all the branches in the region. He then later ran a large commercial shop. He subsequently went and served as regional president in both Atlanta and Dallas, comes back to us as a proven leader, very credible with the retail folks because he's been there and done it. They understand that.
And Brandt is a natural operator and he's got a lot of very good initiatives in place that he will walk you through to show you how he's in fact turning the growth in retail today. You'll enjoy it. Secondly is David Weaver. David is also one of our newest leaders coming in 2016. David spent his entire career in commercial lending, perfect fit for what he does.
Grew up as an officer, ran a large commercial shop, then ran the Triangle region of North Carolina for us. Later moved into a role, commercial executive role. He managed a third of the regions in the system before moving into the president of the community bank role. David also a perfect fit, very hands on leader, really working hard to improve the effectiveness and efficiencies and he'll walk you through his initiatives and how he's making that happen today as well. Rufus Yates joined us and joined Executive Management in 2012, leads our Financial Services segment.
You might recall that's a segment that includes large corporate and wealth predominantly and then all the businesses that support those two businesses. Rufus likewise of natural fit and he grew up as a corporate lender, he's a principal broker dealer that supports wealth and he's going to walk you through initiatives to show you why that corporate and wealth will continue to be the growth engine that it has been for our company over the last 7 or 8 years. And I think you'll find that to be very interesting as well. John Howard, our Chairman and CEO of Insurance Holdings came to us through the Crump acquisition in 2012 where he served as CEO and spent most of his career in the insurance industry, has been in this role for 3 years and is doing an exceptional job transforming this segment. And as I said to you earlier, there hasn't been a time that I feel better about the upside we have in this business from a profitability improvement perspective.
And he will walk you through the details of his transformation. Barbara Duck joined Executive Management in 2003, one of our longest standing executive management members. She spent time in operations and running production cycles in IT. She stood up our enterprise data office, which she's still responsible for today and also spent time in digital. So it was the perfect choice for CIO in 2016 when we wanted to elevate technology in the company by having it report into executive management.
And she will walk you through the transformation she has going on to better situate the company and align to support our business segments for growth as we go forward. Dante Wilson is our Chief Digital and Client Experience Officer. Dante also grew up in the community bank, spent time both in retail and commercial, most recently ran our region in Alabama then very successfully in Atlanta. Dante has a passion for the client and has also got the unique ability to reach out and touch large groups of people corporately to move initiatives through which is why he's cast in his role. You're going to see his passion come through as he really walks you through the digital marketing improvements we've made.
It's really helped us open online accounts faster today than we ever have. He'll walk you through the improvements we're making in client service and why and then also our digital investments and sort of what to expect going forward, you'll really enjoy hearing from Dante. You all know Clark well. Clark is, I believe, one of or is the longest running CRO in his respective position, the top 20 banks. His steady hand gets a lot of credit for helping us navigate the downturn as successfully as we did and he will walk you through all the risk initiatives that he has going on and the updates therein.
And then Daryl needs no introduction to this group. Daryl is also the longest running CFO of the top 20 banks and I think one of the most talented balance sheet managers in the country. Daryl will bring together after you've heard all the business presentations, all the numbers associated with that to give you an idea of kind of what to expect looking forward. And so I hope this has given you sort of a quick overview of the company and what to expect today. And I'll ask Brandt to join us and talk about retail.
Yes, I tell you every time I see this, I personally think about my own family and the journey that we're on. This is something we're really proud of. It was a partnership between our bank card business and Dante and his marketing team. And was intended to be rolled out as a part of our digital platform. We've delivered this through digitally and through social media predominantly and it's had a significant impact.
I would just share with you that this ad highlights 2 things that we're trying to do in our business. The first is that in a world that is obviously evolving quickly from a digital perspective, we have to find unique ways to connect with our clients emotionally. Kelly described it well last night. The quality quotient is changing and what used to exist in a relationship between a banker and a client inside a branch now exist in many other places and one of those places is digital and we have to use things like this to connect with clients emotionally. The second component that we're working really hard to do and this ad highlights is to think about what we do and the products that we provide, the services that we provide for the clients in the context of how they fit into the lives of our clients.
And so we think this ad does a good job of highlighting that. I would also just point out that the ad has been quite successful. In fact, this actually came out in early August. It was intended to accompany our rollout of new products in our bank card business. And since coming out in August, we've actually had over 65,000,000 unique impressions that this has generated.
And that has driven over 300,000 visits to bbnt.com and driven really substantial digital sales associated with our new card rollout. So we're very, very proud of it. I'm excited about being with you today and really talking around 4 themes. Kelly talked a lot about our responsibility to disrupt our businesses, to find ways to create differentiation and specifically in retail what is a very crowded space. And so what I want to spend a little time today talking about in addition to giving you a financial overview are what are our themes, what are the things that are guiding how we go about that disruption, what are the things that are guiding how we go about creating a differentiated space for BB and T in the marketplace?
The first of those themes is how do we organize? How do we ensure that we're organized appropriately to create the right focus and accountability? The second piece of that that we'll spend some time talking about is the client experience. Dante and I both are going to spend some time talking about the client experience. It's incredibly important.
And the bar is changing and Kelly described it really well last night and so we want to spend a little bit of time talking about how we're adjusting to that. Thirdly, we'll talk about some low hanging fruit, some revenue initiatives that exist today. As the world evolves, our ability to generate new revenue opportunities combined with the 4th theme of how do we optimize the existing business is what provides us the field to be able to invest in the future of the organization. And so we'll talk about those things as we go through. Just to level set and Chris has already covered this well, our retail bank and community bank retail and consumer finance businesses comprise 44% of the revenue of the company and 43% of the net income.
To give you a little bit further breakdown, there are 6 business units that comprise our Retail Community Banking Consumer Finance segment. The first is obviously the largest represents half of our revenue, which is what happens in the Retail Community Bank. Chris described it really well. That's one of our advantages in going to market in our branch network is the partnership that exists with our community bank approach, where we have all of our lines of business, whether they're commercial or wealth or many of our fee businesses are organized and really unified at the local level to deliver an integrated experience to our clients. And so our retail community bank is a big component of that.
We also have our what we call our card based services businesses, which comprised of our retail payments operation, our bank card operation and then we have a fairly significant merchant acquiring business that's a part of that. We also have our mortgage business. Our mortgage business is from a retail perspective located inside of BB and T's branch footprint, but we have a mortgage house lending and correspondent lending business that's nationwide. And then that's backed up by a fairly large servicing operation. We have our dealer retail services business, which is comprised of all our indirect auto.
That includes prime and subprime and includes a company that we have up in the Northeast called Hahn Financial. Chris mentioned already Sheffield and CEC and I hope you all will take a moment to peruse our booth for Sheffield. I understand that a little bit later they're giving rides on the 4 wheeler if anyone's interested. But this is a very unique business that we have that our clients in this business are first manufacturers. The vehicle or recreational vehicle that you actually saw in the lobby was made by a company called BRP and we have an agreement with BRP in which we finance their product with promotional financing across the country and Sheffield does that in a number of verticals and has been very successful.
And then lastly, commercial equipment capital is our small business, small ticket equipment finance business. One point I just want to make, when you think about these, there are a number of our consumer businesses that are actually national in scope and we think that provides us with a fantastic platform to continue to expand. From a financial perspective, I just wanted to give you a quick overview. First of all, we're pleased with where we see the trends going in our segment. I would start by saying that, we have been through a couple of years of optimizing some lower yield lower yielding portfolios.
You all are well aware of that. But given that we're reaching the end of that and some of the new products that you all are going to hear about and new revenue initiatives you're going to hear about, you begin to see and you see this in the top left that production trends are really moving in the right direction. That on the other hand is leading to balances that are now beginning to grow. A deposit perspective, we're also pleased with where things are going. Now when you look at the 2018 results, they're year to date and as you all know there's seasonality in deposits, but we're really pleased with how overall deposits are growing and specifically we're very pleased in how retail DDA is growing.
That's really the game going forward. And you all will see that since 2016, our retail DDA balances have grown at a compounded annual growth rate of 11.1%. Those that turnaround from a loan portfolio perspective, improving margins with our loan portfolio, increasing deposit margins led by holding our betas low as well as driving more DDA combined with modest fee income growth has led to the revenue growth that you ultimately see. You may ask where is the DEA growth coming from? And I would just point you to a statistic that we watch fairly closely, which is the number of net new accounts that we're generating.
Dante is going to talk a little bit later about our digital effort. You'll see we have over 3,000,000 clients that are on our digital platform now. And with the work that we're doing from a digital marketing perspective combined with the performance of our branch network, better attrition results are leading to a massive improvement in what we're seeing from a net new account perspective and you can relate that to a net new relationship perspective. The group is also doing a good job of managing expenses. You'll see in 2018, our expenses are going to come in lower than 2017 and that is predominantly driven by what's going on with the branch network.
We'll talk about that in a moment and the rationalization of that network. And that's ultimately leading to positive operating leverage. If you look at 2018, we're headed towards 3 plus percent operating leverage and very excited about our results. So that's a quick overview. I want to spend the rest of the time and just give you a sense of the road ahead and what are the how are those themes driving actions within the business.
And I'll start with our organization. And As Chris alluded to earlier, one of the things that we did at the beginning of last year was to organize our retail businesses together really centered around the client. In my view, this creates a higher level of focus, a higher level of accountability and frankly, as Chris described it, a lot more capacity to address the evolving needs of our consumer clients. And there's tremendous competition in the retail space. And so how are we best positioned to deal with that?
In my view, these organizational changes really give us 4 key opportunities. 1, it ensures that the products that we create, the direction that we take is consistently focused on the client. The second piece is how do we create amongst all these businesses who touch retail clients, how do we create a consistent experience? Thirdly, how do you take what is a very diverse set of platforms and utilize those platforms to provide a better experience across the board. And so we'll talk about some of the ways we're doing that.
And then lastly, this also provides a diverse set of clients and we have the ability. Some of those are local, some of those are national. And so how do we leverage that to continue to expand our business? In addition to formal organizational changes, we've also made some informal changes. At the beginning of this year, we set up a group of teams.
We organized around 6 different subjects. We're calling these teams revenue teams and each of these teams is comprised of folks from all walks within the organization. It's really everyone in the organization responsible for these efforts and that includes our compliance partners, our audit partners, our marketing partners, our second line credit partners. These groups get together once a month with the sole goal of what kind of progress or improvement can we make with either a product, a process or a policy to deliver better products and services to our clients and do that quicker. One of the things that we know is the world is evolving and changing and it's doing that quickly And we have to have the structure necessary to respond.
And we believe as you'll see in a moment, the structure has actually given us an opportunity to roll out products to the client, make changes in processes much faster than we would have been without this structure. The second component I would mention is the effort around our client experience. Dante is going to spend time talking about this as well, but I just wanted to make a couple of comments on how we think about it. And I think Kelly's description last night of the quality and what does quality mean in the retail banking space was exactly right. 15 years ago, it meant the relationship between the banker and the branch and the client that walked in.
Today, it's much broader than that. It's what does the experience look like at the ATM? How does it feel in the care center? And more importantly, what can I use your digital platform to be able to do? And so as we think about the client experience, I can share with you that as an organization, we're collectively working to ensure that in all of these omni channel points that we're providing a consistent experience to our client base.
Dante is going to show you some statistics a little bit later that show you the improvement that we continue to make and what clients are saying about the omnichannel experience they have with BB and T. I would also just highlight 3 examples of where this is taking shape. All three of these examples are digital examples. The first is in our card businesses, then providing our clients additional ability to control their cards and also providing our clients more access? And then in our subprime auto business regional acceptance, we had the ability through the work of Barbara Duck and her team to provide a payment application.
The team actually created this in 6 months, less than 6 months. And this is frankly made a big improvement on our borrowers' ability to make their payment. And in a business where that is a pretty important component, this has been not only good for our clients, but also good for the business. Lastly, I would just mention our online mortgage application process, which is we think a fantastic digital experience. And in fact, 23% of our new mortgage applications are actually coming through the digital platform.
So the businesses, our mortgage businesses partnership with Dante and also Barbara in our IT group has really allowed us to continue to evolve and improve this platform to drive even more of our mortgage experience through this. So those are three examples of things that we're doing to think about the client experience in a more holistic way. I want to take a moment and also talk about new revenue opportunities because as I said earlier, our ability to generate new incremental revenue opportunities and our ability to prune or optimize the old organization is what leads to our ability to invest in the future of the organization. So I just want to mention a few examples of what we're doing to generate new revenue. And the first is how do we create more differentiated products.
I mentioned to you earlier the work that our revenue teams are doing and that those revenue teams give us the ability to deliver product process faster. And these are just some of the examples that products that are either rolled out in the last 6 months are rolling out in the next 6 months that have substantial revenue impact on our retail organization. I'll give you a few examples. We have the ability to work with our deposit products team to create a new savings product that has been very successful since rollout in June. We also have the ability to rollout a small business free checking account, which has been incredibly successful in a short period of time.
And I'll talk about how that blends with our focus inside of our branches. I mentioned earlier the new bank card products and our digital ad that accompany those new products and I would just mention to you that our bank card business with help of those new products, new production is up over 40% over last year. So very excited about the progress that is continuing to be made there. I would also just mention quickly, you all may have seen yesterday a press release about our recreational lending business and we're going to begin to take that nationwide and that is not a new business for us. In fact, as you all know, we've been doing that in Sheffield for a number of years.
But one of the things we have not been doing in Sheffield is focused on the marine business. And as you all may have read, one of the things that's happening in the marine business is that the power sports companies Polaris and VRP are making a lot of acquisitions in that space. And so this is a great chance for us to frankly take what we a business that we really know well with manufacturers that we know well and expand that into the marine area. And so that's a significant new revenue opportunity for us. In addition to these new products, we're also investing in products that are already differentiated.
In 2,009, we launched in earnest what we call our financial wellness program and this is where we go into and provide financial education and financial wellness to the associates of our employers. To date, we have 125,000 employers that have allowed the BB and T team to come in and describe and provide financial education, financial wellness and also discounted banking services to their associates. We continue to enhance and you'll see the timeline of enhancements that have been made. But what's most impressive is that program has now generated $6,300,000,000 in new deposits, 45 percent of which are DDA. And if you look at the chart, you'll also see that the DDA balances since 2014 are growing over 14%.
Now, we view this as one of our versions of a virtual bank because this is not a branch dependent business. We have reps that actually go to the employers. And so this is a great platform for us to continue to expand and frankly a great platform for us to expand outside of our branch footprint. In addition to the work that we're doing in investing in existing products or platforms that are differentiated, we can actually use existing platforms to provide a better experience for our clients. So one of the things that we're going to do starting June 12 I'm sorry, February 12 is that our market leaders in the branches when they have an opportunity to finance a new vehicle, refinance a vehicle and someone comes into the branch.
In the past, we've had a group that has fulfilled all types of loans for our branches. They've approved and fulfilled those loans. Going forward, we're going to leverage the platform we already have in indirect auto. It's more efficient. It's more user friendly and it's faster.
And so we're going to take what has been for our branch associates and for our clients a day and a half process to close an auto loan and that now will be a 4 minute process. That's a pretty substantial improvement by leveraging a platform that frankly already exists and we believe that we will create a whole lot more auto opportunities when we have the ability to do it in the same time that a client could drink a cup of coffee. The last thing I would mention is that new revenue opportunities are also about redirecting our existing sales team. And our largest officer level sales team in the organization is our market leader team, the folks that manage our branch network. And one of the things that we believe we can use that team to do is to use our branch network to be advice centers for small businesses throughout our footprint.
We know that there are over 3,000,000 small businesses inside the market areas of our branches and we know that in many cases and Chris described it earlier, those folks do not have CFOs. They do not have the same level of advisement that many large companies have. We believe our market leaders can do this. And so beginning at the beginning of this year, we put a huge focus on them spending the majority of their time out of the branch calling on small businesses. And you'll see that our market leaders are now calling on 10,000 more small businesses a week than what's taking place in the past.
In addition to just being out, they're delivering, our small business version of financial insights and I'll share with you, I've had the opportunity to personally go on a number of those calls. And I will tell you the small businesses, they are not used to having that level of feedback from a banker. And so we think this could be a big winner for us in the future and a fantastic way for us to deploy our existing branch network. So those are just a few examples of some of the revenue opportunities that exist. And so I want to talk a little bit about optimization and the things that are taking place from an optimization perspective.
The number one that I know is on everyone's mind is what are we doing with our branch network. And you guys are aware and Chris shared the results earlier and what we've done in 2016, 2017 2018 from a branch closing perspective and I'll tell you that we will continue that in 2019. This just gives you a sense of the trajectory that we're on. And one question you may have and I know a question that has been raised is, well, what is the optimal number? So in order to answer that question, I think it's best to understand how we determine which of these we should close.
And so I wanted to share this detail with you. So for every branch in our network, we assign 2 scores. We'd assign a score that rates the viability of the individual branch and that is what are transactions look like and where are they trending. And the most important component is it said how is that branch doing and generating new revenue relative to its cost. And we assign a score of 1 to 5, 5 being most viable, 1 being least viable.
We also assign viability score. So when we look at our branches, we say, okay, what markets have the most opportunity for us? And so we could have some poor performing branches in really good markets and we want to be careful about closing the branches where we still have opportunity. You'll see in the graph here, the chart that the majority of our closures are taking place in the branches where there are low market viability and also low branch viability. But this chart also informs other components of our branch strategy.
And so in the great markets where our branches are not performing well that may mean we need to relocate that branch, that may mean we need different management in that branch, a different staffing component in that branch. We allow this to really shape how do we maximize that footprint. Now to the question of what's the optimal number. The answer to that is fluid. But because this metric is based on revenue versus cost, as revenue migrates to other channels then the number that are going to show up as fit in the equation and that you should close are going to it's going to increase.
And so this I think gives us a rational approach to how we look at rationalizing the network. I would also say we've been very focused on retaining clients when we close a location and we track every vintage of closures and you'll see the graphs here. We're very intentional about what we do with those branches. You'll see the site selection process is very intentional, the outreach, the marketing. We work very hard to migrate the clients of those closed branches to other channels and we give them incentives to do so.
And that effort has been quite successful. As you all will see that on average we retain 98.5% of the clients in a branch that we close.
So this is a big part
of what we're doing. It's significant dollars that can be applied to reinvestment and we're excited about what the future holds. I don't have time to go through all these today, but I did want to include in the slide just a quick breakdown on opportunities that are going on in all the business units. Frankly, we have significant opportunity in all of the high volume consumer businesses to do a better job with consolidation, with automation and you'll see in each of those that is in fact taking place and then that gives us the ability to make investments. So I wanted to end the conversation by just giving you a flavor of how we're thinking about the investment component.
So, Kelly described earlier and used the analogy of the home that you have a home that you've lived in, in quite some time and I just spent 20 minutes or so talking about that. But then you have to invest in what does the future home look like. And what I would describe to you over the next three pages is a general outline of the blueprint of the new home. And so I wanted you all to know that in each of the business units, we've actually spent the last year defining what that blueprint looks like. We know it'll change.
We know it'll evolve. But how do we have a thoughtful process about making the investments necessary for the future? And so here are just a few examples for you. On the top here, you see what we're doing in the auto business and it's obviously about finding places where we can improve margins. It's about taking some of the lost volatility out of the business.
It's a high volume business. So there's a enormous opportunity for automation and taking costs out. And then there's frankly revenue opportunities that we have been missing in this space. So we have a very detailed 5 year plan about how you get there. On the right hand side, you'll see our mortgage business and it's ultimately at the end of the day about people and how do we take back market share by expanding our retail network.
It's also about digital. A lot of the experience both in the front room and the back room that's changing the mortgage business as a result of what's happening with technology. We also know it's about data. We have $110,000,000,000 servicing book and so how do we use the data that exists there to better execute from a mortgage perspective? So the team has spent quite a bit of time thinking about what the future of that looks like.
We have the same thing going on in our card based businesses. In our card based business is about products. Do we have world class products and we just rolled out a new set, made a big difference. It's also about how do we optimize the portfolio. So how do we ensure we are top of mind for our clients and there are a number of things using data that our team is doing to do that.
And then ultimately it's about that's a high volume business, how do we optimize the business, how do we make it more effective and that is a combination of better execution and also technology. And then lastly, I would just mention to you the retail community retail bank and what does that look like. And one of the things that we've spent the last 6 months doing is actually going through a process. It's been very collaborative between myself and Donna Goodrich, Barbara Duntae Wilson, Bennett Bradley, a number of folks have been involved in this effort of how do we take what we believe to be the future of the retail organization and how do we deliver a blueprint for that, determine what our optimization opportunities are and then what are potential reinvestment opportunities. Now those could change, those will evolve over time, but we need to have a blueprint.
We need to start making those things in earnest. And so what I provided you here and we've called that plan that we've spent 6 months building retail reimagine and reinvestment plan for short we're calling it R3, but it provides a holistic view of the things that we would want to do to evolve our platform to meet the needs of the future. It involves things like additional marketing and we've had great success from the marketing that's taking place this year. And so how do we ramp that up? Our client care centers, how do we provide a more seamless experience to our clients using maybe larger care centers also frankly better technology and queuing the calls differently.
Our branch channel, Chris mentioned it earlier, but in our branch channel we got to continue to evolve the experience inside the branch, but we also frankly even though we're closing branches view branch expansion as an opportunity for us in certain markets. And so we're evaluating that and looking at where that might exist and R3 creates the opportunity for us to do that. Our digital and online account opening abilities, how do we expand those but also enhance the ones we already have? Dante and team and now part of the retail bank launched earlier this year the virtual banking center. One of the things that we know is that when you think about your retail clients, the more you engage them, whether it's through digital, whether it's through marketing or whether it's through a human, the more opportunity you're going to have with them.
And the virtual banking center gives us an opportunity to frankly engage clients that may not come to a branch or may not use a care center. And then lastly, our ATM channel. We view that in the future the ATM channel is an extension of your digital platform. Having a large ATM network also gives you ability to expand into certain markets and we have some significant opportunities there and a part of this plan is our ability to thoughtfully invest there.
I would just close where
I started. Hopefully, this gives you a quick overview of the things that we're doing as a group and the themes that are circulated around the actions that we're taking. I appreciate the time today. We're excited about what the future brings and excited about the trends that we're seeing from a results perspective. Thank you.
And at this time, I want to introduce David Weaver. David?
Well, good morning, everybody. It's great to be here. Certainly appreciate the opportunity to spend a few minutes with you this morning to update you on a number of the things we're working on in the commercial Community Bank. We are very excited about the opportunity we have to continue to evolve our business so that we can continue to do a fantastic job taking care of our clients, as well as continuing to differentiate ourselves in what has become a very crowded space in the commercial banking arena. And finally, finding ways to more positively deliver revenue in a very efficient and productive way.
What I want to touch on today, there'll be a lot of things I'll cover, but a core theme that I want you to hear that I think you've already heard a little bit about this morning is sort of the change we're undergoing in the commercial bank. First, we do operate a premier model for commercial banking at BB and T. It is a model that is focused on differentiation, a model that is focused on high touch, high client service. It is a model that focuses on really adding value to our clients' relationships every day. We'll touch on that in just a second.
But at the same time, the world is changing very, very rapidly. Our client expectations are changing. The competitive landscape changing. And we do recognize that we have a real opportunity to continue to drive efficiency so that we can maintain the level of quality that our clients expect. We're leveraging data.
We're digitizing processes. We're changing things very, very rapidly in order to be continue to be able to deliver that premier client experience. And we're not sitting idly by. We are taking bold actions. We're moving at breakneck pace and we're changing a lot of things to drive that perfect client experience.
BB and T, we do
offer operate a little bit of
a different model. We're organized into 24 Community Bank regions. Our Community Bank regions are led by a regional president. The regional president is responsible for managing the commercial business, but more importantly they are the chief integrator. They pull everything together from a client perspective.
You've heard that touched on a couple of different times today, but in our business it's about local decision making, local delivery and building those unique relationships at the client level. We do serve 155,000 clients in the Commercial Community Bank broken down in our small business commercial, commercial real estate and regional corporate segments. They are outlined here from a segmentation threshold before you from a revenue band perspective, which give you a good idea of how we serve those clients. We do represent a good part of BB and T's diversification strategy. We're responsible for 23% of the revenue, 33% of the net income.
And we also represent good diversification within our own space. Our portfolio which is now about $52,500,000,000 is 62% C and I, 38% CRE. And we have an excellent diversified deposit base. In fact, we represent a very stable and cost advantage funding source. We have about $60,000,000,000 in deposits in my group and 38 excuse me, 58% of those deposits are non interest bearing.
From a revenue mix perspective, we get 54% of our revenue from our deposit business, 30% of our revenue from our lending business and 16% of our revenue from our non interest income sources. Our performance has been very solid over the last few years. Loan growth has been good. On a comp annual basis, we've been growing the portfolio of that 4%. We're very happy with that growth rate.
Obviously, it's a very frothy market. We take a very disciplined approach to underwriting and we've adhered to that approach through this late looming cycle. We've also we think the 4% number stacks up very well from an data perspective and we feel like we fare well against our peers. Our deposit business is going very well. Our non interest bearing deposits have grown 4.4%.
I will tell you that has slowed a bit in recent quarters. We are still growing the non interest bearing deposit business, which is we think positively differentiated from our peers many of which have begun to shrink, but we are certainly continuing to grow that business. Loan production is doing well. It's up 5.7% over the last couple of years on a compounded annual basis. We are down a little bit this year and that's primarily because our tax exempt business has slowed pretty dramatically.
We're off about $1,000,000,000 this year in production given the tax law changes. So we're working on a number of different things to diversify our production strategy. I'll talk about that in just a second. And pre provision net revenues up 20% on a compounded annual basis to 1,650,000,000 dollars Revenues are up a little 4.7 percent almost $2,700,000,000 Our non interest income business is up 4.8% to $430,000,000 Pretax income is up 13.9 percent at $1,480,000,000 dollars and our efficiency ratio is down nicely to slightly over 37%. We've taken about 15 percentage points out of the efficiency ratio over the last couple of years, primarily by focusing on driving revenue, but also taking cost out of the model.
We've taken about 2 25 FTEs out of the model over the last couple of years. And we do think as we focus and continue to focus on generating positive operating leverage, we have a decent runway to continue to drive cost down and revenue up. The portfolio quality is outstanding. As you see here past dues at the end of the 3rd quarter 3 basis points. Our charge offs are at 6 basis points this year.
They were 6 basis points last year, 4 basis points the year before that. So we have a very, very clean portfolio and non performing loans are down to 57 basis points. We think we can deliver on that excellent performance primarily by the unique and differentiated model we have in commercial banking. It's a very client focused model 1st and foremost. It's all about putting the client first in everything that we do.
We focus on staying very close to our clients. We focus on building great relationships with our clients. It's about local decision making, local delivery. It's about really building on those relationships and adding value through the building of those relationships that differentiates us in the marketplace. We also run a very associate focused model.
We believe in having the best bankers on the street. We believe in empowering them. We believe in giving them the best tools and resources and letting them do what they do best, which is really taking care of the client. We're community focused to model. You've heard that here the last few days.
Certainly, we're focused on financial wellness. We're focusing on delivering leadership solutions through the Leadership Institute and we take a acute focus towards rewarding the shareholders. We maintain a strong credit and risk management culture, but we're very focused on growing revenue, growing the balance sheet and certainly managing expenses
at a highly disciplined level.
But when we go to market, what we really focus on is the client and it all starts with the client and delivering outstanding client experience is what we're really all about. As we said we're a relationship oriented company. Our clients appreciate that, but it's also gotten great recognition in the marketplace from people like Greenwich. Last year, as Chris pointed out, we did receive 24 Greenwich Excellence Awards. Over the last 9 years, we received 181 Excellence Awards in the small business and middle market space.
That's more than any other bank in our peer group. We're very, very proud of that. Through this first half of this year, Grundage has recognized us as delivering peer leading results in things like overall satisfaction, responsiveness, understanding the industries that we serve as well as an excellent credit delivery model. But one of the reasons we think we get the differentiated client experience level is our integrated relationship management strategy. That is a core fundamental strategy at BB and T.
It's not about delivering products and services to our client from that orientation. It is about building very deep relationships where we really figure out what our clients want, what are their hopes and dreams, what do we need to do to help support them to achieve economic success and financial security. It's a model built on trust and mutual support in this where we come together and we help them meet their needs. We deliver that primarily through our financial insights tool. You've heard that mentioned.
We do have a booth out front. We'd love to show you more about that. But this is really about changing the conversation with client. We don't go to the client and try to sell them something. We go to the client really and engage them in a very customized discovery process where we go through and have conversations with them so that we can gain very deep understanding of their industry, of their business.
It's about really drilling deeply into the financials and things that really we think take the relationship to the next level. One of the primary things we focus on through the Financial Insights process is helping our clients with their leadership challenges. All of you certainly had the opportunity or most of you did to visit the Leadership Institute last night. We're doing great things over there. And what we try to do with this with our commercial clients is help our clients with leadership development, talent development, team building, change management, engagement.
It's really about taking that to the next level. We think it is our duty, it is our responsibility as a partner, as a trusted advisor to help our clients become better leaders. And to the extent that they can do that, obviously their business thrives. We all win from that perspective. But it is a key way that we differentiate ourselves and take the conversation to the next level.
So don't just trust my word for it. I want to show you a quick video that has a few of our clients that highlight some of the impacts that we've made in their lives around Financial Insights and the Leadership Institute.
We have been in this business for 15 years. We sell all the sheet metal and trim for classic cars. I say I never deal with the banker who try to understand what you're doing before in 15 years of business. Business, this is
the first time. I've had several times where I've sat down with clients and they will say, man, how do you know this much about my And no other banker has ever done
this with me. We've been trying to transform our product line to a higher profit margin product. Look at our financial statement for last 2 years until we have our profit margin increased a couple of percent. That's huge for wholesale like this big. BB and
T's financial insights platform really has a lot of different uses and it's going to add a lot of value to the relationships that we have both with our clients and the communities that we serve.
Smoother is a manufacturing company. We make liquid rubber and liquid plastics. People see us all the time in movies for all the sets and scenery and special effects that goes on.
Financial insights really is kind of above, I believe, what a lot of our competitors are doing. It's really not about sales. It's about looking at what's first and we can provide that add value to move on.
With respect to Ron, I take personal pride in the fact that he always knows what's going on in real time. So we always have a war chest available. We're always able to be nimble and pick up opportunities as they become available. We identified resources that BB and T offered, but it was the addition of the Leadership Institute that really set them apart. This is a facility which allows leaders for the first time to really focus on themselves.
That was a huge insight for me.
The Leadership Institute, that was just an outstanding opportunity for us to show them what our bank is really about, and that never would have occurred without financial insights.
We provide a wide range of home health care services as well as assistance with activities in daily living. We just recently opened our first office outside of North Carolina in Myrtle Beach, South Carolina and plan to open a number of other offices moving westward across South Carolina.
I've been very impressed that BB and T takes the time to have a formal way to really take a deep dive into our organization and ask
the right questions. All banks offer loans, all banks offer deposit accounts, all banks offer debit cards, but yet very few distinguish themselves above the rest. This process through Financial Insights does that because it allows our clients to see how we can play a role in supporting them in their growth efforts. There's no other company who is reaching out to sit down with clients and understand their strategic plans
as though we were in
the planning session when they did it within their executive teams.
The depth of expertise really across the board makes them a tremendous advisor and a partner for us.
So while we're doing a lot of
things really, really well, there's an opportunity to always do better. And the fact of the matter is the world has changed. It's changing very fast and we have to change with it. It really starts from a client expectation perspective. One of the things we've been observing is client expectations are changing at a very, very rapid pace.
Call it the Amazon effect, call it whatever you want to call it, but our clients want solutions now. They want it on their time and they want world class execution. What we're trying to do to do that is change our bank. And we've heard a little bit about this morning. Clients have also told us they want to have trusted have a trusted adviser.
They want to have someone that challenges them. They want to have someone that is responsive and brings solutions to them. We believe that the banks that go through and do the tough things to change will be the banks that survive. We are going to rapidly change in order to meet our clients' expectations. At the same time, we're streamlining and simplifying processes through digitization.
The ease of doing business is key. It's the number one driver of satisfaction. We're striving to be the easiest bank to do business with. We're going to give our relationship managers more tools to enable their productivity. We're going to leverage and drive data more effectively.
And we're going to create better products. So how are we doing this? Our team came together earlier this year and put together what we're calling our big five commercial plan. And it's really about driving and continuing our differentiated client experience strategies. It's about finding more productivity and efficiency in our business.
It's about evolving our sales and service model. It's about using technology to support all of these things. And then finally, it's about enhancing our product offering and driving a more robust solution for our client.
So what
are we doing to drive client experience? Well, 1st and foremost, we feel like we have to strengthen the Financial Insights tool. It is a game changer. It's changed the conversation with our clients. It's significantly differentiated us in the marketplace, but we can do a lot more.
Earlier this year, we took the step of implementing robotics to enable us to certainly prepare and deliver many more of these presentations. We doubled our output from 400 to 800. We think we can do more from that perspective. But at the same time, we've got to enhance the content that goes into these solutions. We need to pull in things like news and social media.
We need to pull in things like industry articles and other things to help our clients see what they need to be doing in order to be more successful. We want to deepen the financial analysis. We want to take it to the next level. We're doing a good job today reviewing our clients' performance and how they benchmark against industry averages. But we want to take that to a best in class kind of an opportunity.
We want to challenge our business owners to look at what their peers, their competitors are doing and really help us craft solutions in order to help them drive their business to the next level using what if modeling and tools etcetera. We want to do a better job capturing knowledge. There's a lot of information that flows out of the Financial Insights process. We want to get that embedded into our centralized sales force system. We want to do a better job around creating client profiles.
We have a ton of data on our clients. How do we pull that together? How do we educate our bankers, prepare them more holistically for the call before they engage in these opportunities? We want to automate recommendations. We're using AI to begin to figure out ways to drive a more consistent delivery of the Financial Insights tool where products and services can come out of these interactions.
And finally, we want to support follow-up more holistically. At the end of the day, what we're trying to do with this is to implement robotics and AI in order to automate what has historically been a very paper manual based program in order to drive a better experience, in order to elevate the focus of our bankers, in order to really position us as a trusted advisor in the marketplace. It's a big, big opportunity. The same time, we want to improve our ease of doing business. As I said, we want to be the easiest bank to do business with.
We've been very focused on this over the last year or so. We've really started in thinking through ways to reconceptualize our lending process. The interesting point is as Greenwich tells us our lending process is very favorably perceived in the marketplace. Relatively speaking, we have one of the best experiences from a lending perspective in our peer group. But this isn't about coming from a position of weakness.
It's about coming from a position of strength and really skating to where the puck is going to be. We firmly believe that you have to be the absolute best at delivery in order to be effective in this space. So we started earlier this year with our commercial optimization council. We identified 26 process improvements. We implemented those.
That led to our collaborative laboratory process where we put 11 cross functional associates in a room with an objective to do one simple thing and that's how to make a loan faster at BB and T. Through process mapping, we realized it was taking us about 28 days to deliver an equipment loan at BB and T. We challenged this group to come up with a way to make that loan in 3 days. They did that. We've implemented that.
It's going extremely well. In fact, we get all kinds of positive accolades from our clients around this. We just heard a good story the other day. In the midst of the hurricane, one of our clients came to us a tree service company in Eastern North Carolina and said that they needed to buy new equipment in order to facilitate the cleanup of some of the hurricane damage. They applied on Monday afternoon.
We closed the loan Tuesday morning. That equipment was in the field doing work on Tuesday afternoon. That kind of responsiveness, that kind of turnaround has not been something we historically could have delivered on. So we're making great progress from that perspective. That leads us to our end to end process redesign something Chris mentioned just a moment ago.
We are super excited about the opportunity that will bring us relative to driving efficiency, but also more importantly driving a client experience that we think is can be unprecedented when we execute on that. It's not just about the credit process though. We're doing a lot around other aspects of our client engagement. It's around new account onboarding. It's around delivering treasury through an onboarding portal.
It's about streamlining the account opening process. We're looking at everything in order to improve our client engagement and certainly make processes that are more client friendly. From a productivity perspective, obviously, lots of opportunity there. Certainly, fundamentally, we believe that developing and hiring and retaining the best people, giving them the best training, giving them the best tools and resources is obviously fundamental. But we also want to drive more robust activity out of our associates.
We mentioned doing 800 Financial Insights a month. We're moving that to 12.50 as an objective. Talking about the client touches, we touch 1.3 clients a day. We're going to move that to 2 a day. That's 100,000 additional client touches a year.
Talk about prospecting, we have a huge opportunity to take our great story on the road. We're touching 0.5 prospects a day. We're taking that to 1 prospect a day, 75,000 additional touches annually. We firmly believe if you believe our model beliefs, behaviors, results which is absolutely fundamental to who we are driving behaviors will drive better results. Giving our bankers the tools to allow them to execute on driving those behaviors is something we're very focused on.
Certainly, leveraging our sales process is a big opportunity. Adhering to our segmentation, driving and leveraging our new incentive program in a big way. We have a new revenue based incentive model that is getting outstanding results. Our bankers are truly changing behaviors around that which is very, very important. And then driving deeper penetration of our core commercial products.
We've been able this year to increase our referral activity per banker by 25% and increase at the same time our conversion rates by 8 percentage points. So we're driving more referral activity, better quality referrals that are resulting in closed business for our company, which is something we're very focused on. And by the way, we think the Financial Insights process is a big driver of that success. Sales and service model evolution is a big deal and we're doing a lot of work around this currently. When you think about BB and T's portfolio in my space, it's a very, very granular portfolio.
78% of my clients owe us less than $1,000,000 So that is a very small business oriented kind of portfolio. That's a good thing from a granularity perspective, but a tough thing from a servicing perspective. And so we are reconceptualizing our small business delivery model, which is presenting a huge opportunity for us. It starts with revising segmentation. It also leads to building out a centralized sales team, providing more centralized credit support.
Just at the end of the day, what we're trying to do is find a more efficient and pleasurable way for us to serve these clients. This doesn't mean our small business clients aren't important to us. Quite the contrary, they're extremely important to us. But to the extent that we can serve them more efficiently, which at the same time will free up our bankers to move upstream to higher value clients presents a tremendous opportunity for us. We're also optimizing our market structures.
We're looking at geography. We're looking at spans and layers. We're looking at how we use player coaches. At the end of the day, what we're trying to do is have more bankers on the street driving revenue, touching clients, fewer managers, fewer backroom support. So we do believe that we have a huge opportunity there to certainly leverage the resources that we do have.
At the same time, we're differentiating markets based on opportunity. If you think about our footprint, we operate in very diverse markets. We are in high growth markets like Texas and Florida. We're in slower growth markets like Eastern North Carolina, Kentucky, West Virginia. Now that geographic diversity presents a lot of advantages to us and we feel very good about being in different markets.
We obviously get growth out of the growth markets, but at the same time we get stability and profitability out of some of the slower growth markets. They don't boom and they don't bust and that's a very good thing. But we have a tremendous opportunity which we're very focused on is migrating resources from slower growth markets into higher growth markets. As an example in Texas, we are staffed for growth. Our bankers carry smaller portfolios.
They have higher call objectives. They have higher objectives around developing business, more growth and we're getting it. We're getting double digit growth out of those markets. In Eastern North Carolina as an example, we have to focus on managing the book we have and staffing it accordingly and make sure we take great care of those clients and preserving those relationships, but also maximizing the returns that we can get out of those markets. Technology presents a huge opportunity for us.
It's certainly a tremendous opportunity for my business as well. It really begins with building an end to end online platform. Really, our clients deserve the ability to be able to self online deposit But having digitized onboarding is a big deal. How we online deposit how we onboard deposit accounts, how we onboard treasury, how we onboard the lending businesses, how we onboard many of our other products and services is a big deal. But this is also about how we use data more effectively.
We have a tremendous amount of information on our clients. And to the extent that we can capture that data, leverage it and certainly use it for doing automation around recommendations and advice is a big, big deal. We're going to leverage that primarily by taking more advantage of our Salesforce platform. We are a sales force enabled company and have been for 4 or 5 years. We're beginning to capture data and use that data to help us prioritize client and prospect outreach based on opportunities, based on activity, based on history, based on perceived needs.
We have to we have 155,000 clients. We have to do a much better job of making sure that we're touching all those clients in the proper priorities. We also want to integrate financial insights into the sales force platform. Again, the ability to harness and capture that data is a very, very powerful tool and we're making great progress relative to that.
We got a lot going on from
a product perspective as well. We're super excited about what we're rolling out in our small business and middle market space around this whole product bundle concept. What we're effectively doing, we've identified 14 industries. We're building product suites around those industries and then we're taking advantage of that by arming our bankers not only with a world class product offering, but at the same time leads, marketing, financial insights, the financial insights tool and we're attacking the market. We've started this quarter with veterinary practices, dental practices and medical practices.
We're seeing excellent response from the marketplace. We're seeing great opportunities, growth in pipeline around those opportunities. And we're going to roll out 3 more industries on each subsequent quarter until we have the whole platform launched. But we're really excited about that. We also got a lot going on from a lending perspective.
We have just launched a streamlined working capital solutions operating model. We firmly believe that to be a world class C and I bank, we have to be excellent at delivering asset based lending solutions and secured finance solutions. We launched the new model earlier this summer. We're seeing great progress there. That portfolio is growing now 15% in the back half of the year.
Our goal is to double production in 2019, which we think is very achievable. We also launched our dealer commercial services platform, a growth plan earlier this year. It's been a good business for us for a number of years, but we really have seen that We think that has good runway as we move forward. We've expanded our SBA lending program. Production is up 33%.
And we've leveraged our single family platform in a number of growth markets and we're seeing that portfolio grow nicely after many years of decline. The deposit business is doing really well. I showed you some of the statistics around that. We do have an opportunity in rolling out a new product offering in the 1st part of the year, which we think will fill a void and fill a gap. So we're really looking at maintaining the momentum we have in the non interest bearing production from a non interest bearing production perspective.
And we're going to make sure we keep that momentum as we move forward. We also are really excited about some of the opportunities we have in the treasury space. 2019 is a big product launch year for us. We have our cash manager online platform being revamped. We have a single sign on portal on the docket.
We're going to finish the journey on real time payments. There's a lot going on from a treasury perspective. And I'd say I'm super excited with the recent alignment of treasury and commercial deposits and association services within the Community Bank commercial area. We're going to do great things from a deposit perspective and we're going to continue to drive that forward very positively. So we do feel like in the Community Bank, we are well positioned to evolve to grow.
And we do think that driving performance is a big element of our focus. We've made good progress. We've got a lot long way to go and we're really excited about the opportunity. At a real fundamental level, however, it's about people process and product. But we think there's 4 things that we need to stay focused on in order to for us to execute on our mission.
1st and foremost, we got to maintain and build strong client relationships. Our clients are key. And to the extent that we can do a great job continuing to take care of them to the extent that we can bring in new clients, tell our story in the marketplace and aggressively focus on business development, we think we will be successful. In order to be successful at doing that, however, we got to continue to find ways to add value through differentiation. Differentiation is very, very important in our space.
Obviously, our products are not largely different from the next banks. And so how we present ourselves, we go to market, how we add value to our clients is a big, big deal and we're very focused on that. We're going to obviously continue to invest in the business. We're going to continue to evolve the business. That's a big opportunity.
And finally and probably most importantly, we're going to find ways to improve processes through streamlining structure. I cannot speak to this how important this is for us. To the extent that we find opportunities to continue to leverage what we're doing to expand on the offerings that we're making every day and doing in a more efficient and holistic way is a big, big opportunity for us. So if we do these four things, we are very, very confident that we will continue to drive the financial results in a very positive way that I showed you before. So thank you all very much.
Enjoy the rest of your stay. We look forward to engaging with you at the breaks and lunch. Take care.
At this time, we're going to have our morning break. The exhibits are open, and the restrooms, as you leave the auditorium, are to your right. Refreshments are outside and available for you. And we're going to begin promptly at 10:15 a. M, so a little over 35 minutes.
Thank you.
I mean, if you think about it, where else can you spend a day hearing about the success and growth of 1 of the country's finest financial services companies and also get a turkey call. So for those of you who picked up your turkey call or if you haven't, I'm sure you will, let me give you an additional forward looking disclosure. If you're counting on that for next Thursday, you better not wait until Wednesday to try it. So I would say jump on it quickly. I'm Rupus Yates, manage the Financial Services and Commercial Finance Businesses for BB and T and I really want to go over with you the differentiating products and services that we incorporate in this group of companies to serve our clients both supporting Brant's retail initiative, David's commercial and regional corporate initiative and our own large corporate and institutional platform.
There's 4 real takeaways on this segment. One's revenue growth, you'll see a lot of diversified fee income that comes from managing client invested assets. You'll see asset diversification. We have meaningful C and I books of business that both bring us industry expertise and diversification as well as geographic diversification. And then we've got bankers scattered now all over the country realizing the advantages of diversified books.
We also support through our wealth segment growing really high quality retail relationships and our industry expertise is a core differentiator for us. In a world of financial sameness, what do you really do to differentiate our service proposition, our value offering from the competitors? You've got to have insightful focused advice to give clients. But at the end of the day, it's about helping our clients achieve economic success and financial security. And I'll tell you we are focused and diligent about that.
We spend a tremendous amount of time consulting with our partners in the community and commercial and corporate bank to make sure the team members that this group represents come in and really add material value to those Today, we really are a powerhouse Investment Management business. If you think about how we segment, this just gives you sort of the spray of how we serve these clients. The mass affluent clients building more of a digital solution, self-service. We are spending a lot of time with our digital partners enhancing that solution. The affluent, the $5,000,000 to $2,000,000 really those clients are being served through centers of excellence that are centrally located, served by regional advisors and then you get to the more customized solutions through our high net worth and of course our institutional platform, full complement of products and services.
There are no gaps today in the service delivering system that we have there. When you think about how do we differentiate from a wealth perspective, we have a planning centric business model. We bring clients in individually and go through personal financial plans with them. We fully believe every client should have a financial plan. When we do that, they then bring the whole power of the integrated bank to play.
They bring both the BB and T Securities Financial Advisors, the Capital Markets Solutions, maybe it's a strategic M and A transaction, commercial banking in the community bank. When we deal with private clients in the C suite and the owners of those companies, we're able to go in and do a personal plan, while David's team is doing a strategic plan, financial insights plan for the business. Our life insurance partners, insurance is a core component of financial planning. We have strong partnership with our insurance partners to provide financial advice there. What's the opportunity really look like for us?
Forrester did a survey. There's 126 approximately, 126,000 retail households in the country. Forrester surveyed them to see how do they segment from the way we deliver our business. You see the math affluent segment here on the left, Forrester suggests 26% of retail households would fit this 1,000 to 500,000 investable asset. Today, we serve 125,000 of those clients in our own house.
We know there's 320,000 that we've identified and profiled. So we're serving only about 40% of what we know. If we look at Forrester's guidance, it would suggest there's 1,300,000 clients today in BB and T system where if we can identify where their assets are, we can be their mass affluent advisor. Looking at core in the middle, this is where we really built our wealth platform today. You see we're serving 76% of our known clients using Forrester's research which suggests there's 300,000 of those clients.
So, we're only serving 26% of the potential. Now these aren't clients that we've got to go into the market and find. These are clients who are already customers of BB and T. We just need to bring their assets in the house. And the ultra high net worth, the $25,000,000 and greater, we have a very high penetration rate, 95% of the known clients.
Farce it would suggest there's another 3,000 of those out there. So, the opportunity is here. The opportunity is meaningful and the clients today are seeing great value from the advice that we're providing.
What are we going to
do to grow this business? Improve the client experience. You're going to hear a lot more about Looking at our digital platform, the YOU platform, today our clients go in, manage their financial lives. For the wealth segment, we really want to create a portal where you will go in and see your entire financial life. You'll have your financial plan embedded through the You portal.
You'll be able to bring all of your other financial assets that are housed in other institutions, aggregate them on your desktop and see your full life. You'll be able to handle all of your payments. You'll have a document vault where you'll put all of your important papers. In other words, the wealth client will have a holistic financial experience. They will come to BB and T site to see every aspect of their life.
Bringing our trust and brokerage platforms closer together, making it seamless our trust clients and our brokerage and advisory clients when they are using both products will be able to move transport and see performance reporting in a consistent way. Digital advice, building digital supported solutions with advisors. You hear the term robo a lot. We want digital assisted advice. We are building the infrastructure to be able to bring early stage investors into this channel, but we're also going to make absolutely certain the client will always have the opportunity to opt into a higher level or higher touch advice.
We've enhanced our wealth lending capabilities in direct partnership with the community bank to build the tools, the products, the services that meet the unique and borrowing needs of the wealth client, robotics, chat enablement, all of the things that you will hear us talk about for the commercial and retail systems will also be very important differentiators for us on the wealth side. Advisor Mobility. This is a big issue for us, giving our associates the ability to transact with their clients where they are to be able to take the financial planning tools that we provide and put them and allow our associates to have digital enabled tablets, so they will be able to sit down and manage clients' relationships remotely with them. Client communications, Dante is working very closely with us as we up tier our financial insights and our perspectives communications, sending targeted information to clients about issues that matter to them, particularly in the wealth segment where there's transaction issues around economic cycles, around industry issues, we're going to deliver solutions electronically that way. So, building those early stage client investors, very important.
Helping clients get started on the dream journey of building their wealth, working through our centrally located advisor channel. We've now initiated and stood up a retirement resource center so that there is a place to go inside the organization for clients and associates to be able to learn more about how to manage their retirement needs and expanding in core markets. You will see us opening jointly wealth offices that have brokerage and full service advisory in partnership. Now, as we have built this business, I thought you might find it interesting to really hear a client experience. And so I'm going to look forward to sharing with you one of our clients, Jeremy.
Jack, so my relationship with BB and T has developed over a number of years. It's been a tremendous relationship. It's almost 30 years old now. There's a range of services that BB and T offers me. My relationship with BB and T started with a guy named Rick Springer.
When we first went out to try to get a loan, we went to 4 companies. Rick took a chance on my company, made a loan to us. The commercial line of credit became very valuable to us. So I decided at that point that BB and T is my bank forever. The most important way to earn trust with clients is to sit back and to listen.
I want to hear their story, what they have to say and find out what their needs are.
Jack and I met through
the business relationship, through Rick Springer. So that made a perfect connection for us to move forward. When my company started, we had 3 offices and 25 employees. As we grew over the years, we had 86 offices and 1,000 employees.
When I went to sell the
business, it was a very emotional time for me. That was the time when BB and T became the most beneficial. We had really professional guy named Keith Prusek. He knew exactly what he was doing. He got the very best price for me for the company.
We were able to develop a strategy, negotiate a price, reduce the taxes that Jack and his family would be responsible for and make sure everybody was taken care of moving in the future. After the sale of my company, Mike Thompson has become extremely important. He made sure that I was comfortable because all
of a sudden, I didn't
have a business. As their wealth advisor, we sit on the same side of the table. We are their advocate. There's something in the DNA of many of our clients, our entrepreneurs, where they will just never slow down. I just had interest in the challenge of starting a new business and getting new things rolling and having successes.
BB and T looks and evaluates these investment opportunities with me. There's a lot of math, a lot of economic modeling that goes behind, okay, if I invest this amount of money in this venture, what does that do to my comprehensive planning? We have an annual trust meeting here in Jupiter, Florida every year. From the BB and T side, we have at least 4 people come down. We also talk about my personal planning and also any other businesses that I'm looking to start.
It's a time when I realize the great attention that BB and T gives to myself and my family, and we really appreciate it. BB and T provided the financing for Jack's dream home. There's a beautiful sunset here almost every single night, and we love having our friends over and entertaining here. When Jack or any of the clients that I work with achieve their goals, that's a sign of my success. Jack is the story that every bank wants to be able to tell.
There's never been a time in my history with BB and T that didn't feel like I was their most important customer.
It's a great example of how our advisory business partners with the various parts of the Financial Services Group to bring the value proposition to life. This company was built. We advised on the banking side. When he was ready for a strategic decision, we took him to market and then we managed the wealth on the other side. And as he expands and grows other businesses, we will be his bank.
Now moving to the corporate and institutional business for us, our driver here is to really become more meaningful provider of solutions to clients as we grow our balance sheet commitment. As we up tier in the corporate and institutional platform, we're able to earn the right to provide fee based services and solutions. Today at $672,000,000 year to date, it's tracking to about a $900,000,000 company. 36% of our C and I book is represented with this part of our business, 14% of our commercial deposits at $9,000,000,000 and all driven by 3,000 clients, served by 677 associates. So a high yield when you bring these relationships into the organization.
Full service financial delivery today. There is not a product gap with this group when we bring and we represent BB and T as a corporate partner. We can bring every capital solution that they might need. Our leading fee based partners insurance, you're going to hear a lot from John about the build out there. Treasury, capital markets, access to the debt markets as well.
The Leadership Institute is a real differentiator for this group. And then as you think about the partnership with corporate, our equipment finance businesses today, when we look at our equipment, our large ticket leasing business, it's about a 65% overlap with our corporate book. So we've really brought those businesses together and aligned them in a common distribution platform giving us a great amount of leverage. Where do we really grow the C and I book and how does it offer industry diversification? Today retail is about 17% of our portfolio.
Retail for us, if you think about it, is really driven by our supply chain, finance business, our automotive aftermarket. It's driven by our food, beverage and ag businesses. This is not big box retail. This isn't retail competing with Amazon. This is distribution companies whether it's food or drug or the AutoZones types of the world.
Financial services driven really by our exposure to high grade public REITs. Healthcare, 3% of our portfolio, but the majority of our healthcare and senior living support here and educational support is done in partnership with David and Brandt and the Community Bank. So the portfolio really resides there. Our industrial platform sort of the core part of the business for us, 35% is smoke stack America, people who make things, extruders, aggregate managers, energy for us, upstream E and P, producing performing upstream clients and then our high grade utility business would fit there as well. The segment that we're underrepresented in really is the Business Services and Technology.
So, we started an initiative to really learn more about that business. We brought in associates all on the West Coast who are really guiding us through a process of looking at where we can introduce our financial service solutions to that part of the business. Today, we participate on the distribution side, but we'll be spending more time going forward looking at all aspects of technology and business services. So what have we done to the balance sheet? What have we done to our commitments as we've gone through this?
This graph, let me I'll just try to explain that the hash line here is BB and T's peer it's at our allocations and shared national credits. It's where our average would be. So the far right hand side, we today sit in year to date 2018, our average commitment and a shared national credit is about $54,000,000 This compares us to the peers who participate in the same transactions. So the point that I would make here is we've got great opportunity to continue to grow our participation in these large corporate deals without outsourcing the organization in comparison to our peers. Now this does not include JP Morgan, Wells Fargo.
This is really regional competitors. So at our 54, you see the highest you would see as 8, 90,100. So we're still tracking in the bottom third of aggregate commitments. So conservative, well managed credit culture with meaningful opportunity to grow there. What have we done with our national coverage?
I mentioned that we were expanding our reach nationally with our loan production offices. Today, we're seeing our LPO strategy generate about 13% to 14% year over year growth. A disproportionate amount of our net new clients are coming from clients outside of the core bank branded franchise. So this chart just shows you clients greater than $500,000,000 in revenue. What's our share of the client book?
How many clients would we know? This suggests a little less than 10% on the West Coast are clients of ours. Huge growth potential today with the over 500 segment there. And this just traffics across how we quadrant the country and how we cover. It would suggest there's opportunity in every market.
What's optimal for us here would really traffic more towards the 30% to 40%. A large portion, the remainder would be clients that either structure or pricing would not be attractive to us or maybe an industry that we wouldn't lend into. So meaningful opportunity for continued growth as we expand this national coverage. We've expanded our San Francisco, Denver, Texas markets that can introduce us to net new clients and our BB and T's balance sheet is a very attractive partner for these clients. So we're getting nice up tier lift from those.
You see that our focus on technology using the new team that we brought in on the West Coast to really look at that segment that will cover the country nationally with that group and our opportunity to continue to up tier existing relationships. Today, this business represents about 40% of their income comes from the fee opportunity that's driven off of these credit commitments. We'd love to see that percentage rate increase and we think it can as we become more strategically important to these clients as a credit provider, we will be rewarded with higher participation rates on the fee side. And this is just a quick example of how that works. Ryder Systems, a transportation logistics company, asset based company, we materially increased our credit commitment to Ryder and then we were rewarded after that commitment with the ability to come in and provide an M and A advisory solution for them.
So we had a successful M and A transaction. We then were invited to participate in their public debt issuance. We've now done 4 transactions with Ryder since increasing our credit commitment. And now we've engaged our equipment leasing team to be a more meaningful provider of equipment finance solutions for Ryder. So as we up tier, it brings the whole value proposition to a much higher contribution level with these clients.
So we're very pleased with the success that we've had as we've grown these clients nationally. So, that brings me back to sort of where we started. Diversification around revenue, fee income driven from growing client invested assets, asset diversification through industry focused C and I lending, geographic diversification through the office that we have from New York and Boston now through San Francisco and LA. The national platform has been successful. 40 percent of the C and I book today in the corporate arena outside of the franchise, still meaningful room to grow.
You saw our penetration rates. We've got the ability to materially up tier and increase our client counts in those markets. Wealth, high value proposition for retail, bringing those wealth clients in, providing the full service financial advisory, incorporating our trust powers and building the ability to serve those clients through generational wealth transfer really is a differentiator. And it allows us to not only serve those who are growing their wealth, but those who are in a position now to think about distributing their wealth. Philanthropic services, which is part of our institutional services platform, allowing clients to give back to the communities that have empowered them to grow their wealth.
And then industry specific solutions, again, a diversification key for us is do you bring intellectual advice to the table that makes you look different in a world of financial sameness to our client base and we do that through the expertise of our industry teams and our targeted marketing strategies. So, we're very pleased with the growth that we've had in this business and we think it positions us nicely for continued growth for the future. Now, I'm very pleased to introduce John Howard, who's going to talk about our insurance capabilities.
Good to know that BBT not only supports us, but they're also out in the neighborhood giving to distribution centers, giving to neighborhoods that don't have anything, that have been completely washed out. It does good to know that our company, even though it's a large company, still cares. And we all just try to do what we can to give back to our communities and that's
the greatest thing we can
do. Most people's homes are
the greatest asset that they they'll have their entire life. One step at a time, we're going to help them rebuild.
Good morning. That video is a good example of the importance of what we do. Within insurance, we are currently helping more than 5,000 of our clients recover from the devastating effects of Hurricane Florence and Hurricane Michael. When I think of the vision of BB and T and making the world a better place to live, that's a vision that we execute on every day because insurance is helping people and companies protect against economic loss. It's a risk transfer mechanism that allows them to invest and grow and contribute to our overall economy.
Insurance is a business that has a history that goes back to biblical times. There were benevolent societies that would help people recover from economic loss. Since then, the industry has evolved tremendously. I think you would probably agree with me that we live in a world today that presents ever increasing risk. When I think about the way that we have developed properties, we continue to develop properties along the coasts.
We continue to develop properties in low lying flood prone areas. We've developed properties in more remote and rural areas. So when we have occurrences like hurricanes, there's much greater exposure, same with floods, same with the forest fires that we're hearing about in California as we stand here today. So that risk is greater than it ever has been before. Of course, it's aggravated by climate change.
If you think of the past 8 years in the United States, we've had 12 1000 year flood events. If you think of Houston, in just the past 3 years, we've had 3 500 year flood events. So, there's a tremendous amount of risk that we're able to help protect. That's only in property. If you take a minute and step back and think about casualty, think about the cyber exposure that exists today that continues to expand every year.
Industry estimates are that more than 90% of that cyber risk is uninsured today, presents a tremendous opportunity for us to help our clients. If you think about other types of risks that are emerging, whether you think of the Me Too movement or you think of active shooters or you think of workplace violence, all horrific events, all big risks, all things that we can help our clients protect against.
When I
go through my presentation today, I hope there are at least 4 things that you'll take away from it. The first is that BB and T Insurance Holdings is the 5th largest insurance broker in the world. It's a very unique business. The second is that we have favorable market conditions today. For several years, we've had headwinds that we've had to overcome.
Right now, we have tailwinds. And then 3rd, we have a transformation underway. This is a resilient business and we are working very hard to improve the earnings trajectory from it. And then 4th, this is a client first business. We are very, very focused on providing world class advisory services to our clients, and that gives us a great growth trajectory in future years.
If you look at BB and T Insurance Holdings, I think one of the things that's important to recognize is we're not an insurance carrier. I titled this presentation Not So Risky Business, 1, because I thought it was a neat play on words But 2, because I wanted to make it very clear, we're not an insurance carrier. We are not responsible for paying claims. We don't have that risk on our balance sheet. We are an advisor.
We are consultants. We work with our clients to help them understand the risks that they have, some of which they may not even realize. And then we help them design insurance programs to address those risks. We help them place those insurance programs with insurance carriers and then we help our clients manage the overall cost of that risk. And in the case that they have a loss, a covered loss, a valid claim, we advocate on their behalf to ensure that those claims are paid correctly.
So when you think about this business, I think of it as an income statement business, not as a balance sheet business, the commission and fee business. It's a business that has a 96 year history going back to 1922. BB and T began insurance a long time ago. We've actually acquired businesses that have even longer histories than that. This year we'll place $26,000,000,000 in insurance premium.
That represents 1,000,000,000,000 of dollars of insurance coverage for our clients. You'll see we're the 5th largest broker in the world. One of the unique aspects of our platform is due to our ownership by BB and T, we have permanent capital behind us. The private equity industry considers insurance brokers to be very attractive properties and has a 20 year history of investing in insurance brokers and rolling up insurance brokers. Chris mentioned earlier that I joined BB and T 6.5 years ago when BB and T acquired the company that I led.
That was a company that was sponsored by private equity firms. So I am in a position to have firsthand experience and know that with private equity ownership, it's not permanent capital, it's temporary capital. With permanent capital, we're able to provide assurance to our associates and assurance to our clients that we're committed to this business and they know what the ownership is going to be
of the business and they
know of our wherewithal to invest throughout the cycle. It's a really big advantage in our industry. Our culture is focused on our clients. You've heard it from BB and T. It is very true in BB and T Insurance.
It is a client first mentality. We have very strong relationships with the largest insurance companies in the world. And if you look at BB and T Insurance Holdings, we have 230 offices across the United States and about 7,500 employees. What do we do? Well, we go to market through 3 main verticals.
So the first is retail. Retail is work where we work directly with the purchaser of insurance. So we are advising that purchaser on their risks, on what insurance coverage is available to address those risks, how they should design an insurance program, how we can place that program and then how we can lower their cost of insurance and ensure that claims are paid. Within our retail business, we have 2 major components today, McGriff Insurance Services and McGriff, Siebel and Williams. McGriff Insurance Services is the combination
of what was called BB and
T Insurance Services and Regions Insurance Group. In early April this year, we announced that we were acquiring Regions Insurance Group. We closed on that acquisition at the beginning of July. I should mention that last weekend, we completed our wholesale system conversions. Conversions went smoothly.
And the weekend prior to that, so 2 weekends ago, we completed our retail system conversions. Those conversions also went smoothly. With the Regions Insurance Group acquisition, one of the most important things was ensuring that we retained the key talent with that acquisition. And I'm pleased to report that we've retained 99.5% of the key individuals from the transaction. So as a result of retaining the key people, having a good plan, having smooth conversions, we've been able to outperform our acquisition model for that business.
One of the key dynamics was, of course, Regions Bank and BB and T Bank are competitors. So Regions had some concerns about selling their insurance business to a competitor. One of the ways that we addressed that concern was by saying that we would rebrand the business, that we wouldn't brand it BB and T, which is how we came up with the McGriff Insurance Services name for the combination of BB and T Insurance Services and Regions Insurance Group. It's building off of a fantastic retail brand that we have in McGriff, Siebel's and Williams. McGriff is known throughout the insurance industry.
It's highly respected, highly regarded. And this was an opportunity for us to leverage that brand. Another advantage to the branding strategy is it creates better separation between our retail businesses and our wholesale businesses. I'll describe our wholesale business in more detail in just a minute, but the thought I'd like you to retain is that our retail business is a customer of our wholesale business and competitors of our retail business are customers of our wholesale business. So naturally, it was advantageous to create more separation from a branding standpoint between those businesses.
Within retail, McGriff Insurance Services deals more with what I would consider mid market clients, certainly personal lines clients, small business clients, but also midsized commercial accounts. It is a regional platform. So it is strong from the Mid Atlantic through the Southeast into the Midwest and then we have a good presence in California as well. But McGriff Insurance Services isn't a national platform today. McGriff, Siebel's and Williams is a national platform and it focuses on serving larger size commercial accounts.
So more complicated risks, more complicated placements. Shifting over to our Wholesale division. Wholesale Insurance is a business that is designed to support difficult placements for retail insurance brokers. Retail insurance brokers on a daily basis are out prospecting and building and developing relationships and they can't be experts in every risk category and every insurance carrier in the marketplace. What our wholesale business does is it develops very strong relationships with retail insurance brokers and then provides the expertise that they need for difficult placements to serve their clients.
Our wholesale insurance business is wholesale property and casualty broker the country. Amrisk is the largest provider of wind coverage for hurricane exposed properties and Crump Life is the largest wholesale distributor of life insurance and related products. When you think about the geographic coverage of those businesses, CRC is a national platform. Amyrisk, since it's providing coverage for hurricane exposed properties, is really a Southeastern platform. And Crump Life is a national platform.
Then the 3rd component of our segment, insurance holdings and premium finance is premium finance, where we have about 25% market share. So we're clearly an industry leader. And with Premium Finance, what we do is we provide a vehicle for companies to pay their insurance premiums and not to have to pay them all at one time. So they're able to finance those premium payments. We're able to build it into many of our quoting processes so that it is an easy path and an easy alternative for our clients to use.
So when I think of these businesses, I think that there's a lot of synergy that comes from having a really strong retail business that works with a really strong wholesale business that work with a really strong premium finance business. That is a unique combination. When you think about our contribution to BB and T Corporation, we're one of the 4 segments that BB and T reports externally. On a year to date basis, we're 16% of BB and T's revenue, we're 7% of BB and T's net income. So when I talk about the transformation that we're going through and our focus on improving profitability, this slide highlights the opportunity that we have.
When you look at our peer group, we're the 5th largest insurance broker in the world, the 6th largest insurance brokers in the world. They're all public companies. When you look at those public companies, they trade at multiples that are quite a bit higher than the multiples that banks trade at today. So when I look at insurance holdings within BB and T, I think of it as this hidden gem that BB and T shareholders own at a multiple that is favorable to the multiples that our peers trade at. Then when you go down the list, if you look at USI and HUB, those are private equity backed brokers.
And as you go even further down the list, you see more and more private equity backed brokers. So when I think about our position in the marketplace, I've already said the advantages that I believe we have from permanent capital. I also believe that we have significant advantages from the overall scale of BB and T and the resources that it can provide, and I'll go into those in more detail in a few minutes. I commented on how we have a unique combination of businesses. When you think about the large retail organizations on this platform, they don't have wholesale components in the United States.
In fact, Marsh's wholesale broker, they sold a few years ago, we own. Aon's wholesale broker, they sold a few years ago, we own. Willis' wholesale broker, they sold a few years ago and is one of our primary competitors. Arthur J. Gallagher has a wholesale broker but is a much smaller portion of their overall insurance brokerage business.
Brown and Brown, the same is true. They own a wholesale broker, but it's a much smaller portion of their overall business. So when you look at having Another thing that is a unique characteristic of our business is our growth organically and our growth through acquisitions. If you go back 15 years to 2,003, this is a business that was about $400,000,000 in revenue. Now we're pretty close to $2,000,000,000 in revenue.
So over the past 15 years, we've grown more than 500%. And then if you just go to a more recent time frame, if you go back to 2011 until today, we've more than doubled in size over that period of
time, a lot of it
through organic growth, some of it through acquisitions. We've done our 4 largest acquisitions over that time frame as well. And when I think of those acquisitions, every one of them has been very successful. So the Crump Group acquisition that I mentioned earlier, we were able to combine with other businesses that BB and T owned previously to create this powerhouse wholesale platform that I mentioned. And then you see in 2016, we were able to complement that by buying Sweatt and Crawford to really create a wholesale powerhouse.
With the Regions acquisition in 2018, we have a catalyst for our retail insurance business that puts us on a path for transformation there. And if you look at the American Coastal sale that Chris And it gave us increased ownership in Amrisk, which is a best in class underwriting platform, underwriting on behalf of 10 leading insurance companies because of the expertise that we have in underwriting wind risk for hurricane exposed properties. That is an income statement business. So it is a high margin, high growth vehicle, especially when you look at the frequency of storms exhibited recently as recent as this year as well as last year. So when you think of this growth rate, I think that it puts us on a wonderful path because we've been able to have a great history of organic growth as well as grow through acquisitions.
We've acquired more than 100 businesses. And I mentioned with regions, we retained more than 99.5% of the key associates. With Swett and Crawford, we retained 99% of the key associates. With the Amyrisk American Coastal transaction, it was 100%. With the Crump transaction, it was more than 95%.
Those are best in class numbers for our industry. This is something that we're really good at. When you think about the diversification that we provide to BB and T Corporation, in 2,007, we were 13% of BB and T's revenue. Today, we're 16%. I'm hopeful that we'll be an even more significant contributor in the years to come.
And then if you think about the diversification of our business, in 2007, our wholesale business was only 30% of our insurance brokerage revenue. So our retail business was considerably more than half of I'm sorry, considerably more than double what our wholesale business was. Today, you see that our wholesale business is about half. So it's grown significantly. And you see that we're better diversified across product categories.
If you go back to 2007, we didn't even have life insurance. And today, life insurance is 10% of our product mix. So we've actively managed the diversification of this platform as we've grown it organically and grown it through acquisitions. When I talk about being a resilient business, a big part of why this is a resilient business is because we are so well diversified, uniquely diversified in our industry. When you look at our capabilities, they're very broad.
The specialties and practice groups that I list across the top of this slide are examples. They aren't the only ones that we do, but I wanted you to be able to picture the types of clients that we serve. We have expertise in these industry verticals so that we're able to truly advise those clients on the risks that they may or may not be aware of and how they can effectively address those risks. We have very broad product capabilities that you see in the boxes across the middle of this page. Often when I talk to people in an introductory meeting, they'll say, what kind of insurance do you do?
Do you do life insurance? Yes. Do you do property insurance? Yes. Do you do casualty insurance?
Yes. Do you do health insurance? Yes. You do title insurance? Yes.
Do you do personal lines insurance? Yes. We have very, very broad capabilities. And then another thing that positions us uniquely industry is the breadth of clients that we serve. So everything from individuals all the way up to the largest, most sophisticated companies, That isn't common in our industry.
Within our industry, firms tend to specialize within a certain type of clients. Having such a broad client set is another contributor to that resiliency that I mentioned. If you look at our contribution to BB and T, when we showed the video and commented about the more than 5,000 clients that we're helping recover from hurricanes Florence and Michael. I think that's one example of our contribution to BB and T because we're helping to make the world a better place to live. But if you look at statistics, we help by providing income diversification to BB and T.
We're not exposed to the same credit cycle as BB and T's lending businesses. We're not exposed to the same interest rate cycle as BB and T's other businesses. So we provide a nice hedge and a nice balance. We're an area of growth. When you look at the insurance business cycle, I'll give you more information on that in a minute, But we can perform well in scenarios where lending businesses don't perform well.
This is an income statement business. It's not a balance sheet business. So we have very limited capital requirements. And then when you look at our product offerings, we're able to help. You've heard in Rufus' comments and Brandt's comments and David's comments about the complementary nature of our businesses.
All of their clients buy insurance somewhere. We can make it easier for them to purchase insurance. Very few people that I talk to say, hey, I'm really looking forward to going out and buying insurance. To the extent that we can make that process easier and that we can provide excellent support and service to them, it's a real value add and it's a real demonstration of our client first mentality. When I think about our new business within our retail segment for insurance, approximately 25% of that comes through BB and T's integrated relationship management program.
That's leveraging the relationships that BB and T has across the enterprise. Comment about the insurance industry cycle for a few minutes. The first thing that I'd point out to you is it's different than the interest rate cycle, it's different than the credit cycle. What it's largely related to are insurance loss scenarios because it's basic economics, supply and demand. There are reinsurance companies and insurance companies that have capital.
When they have an abundance of capital, they're competing with each other to underwrite risks. It causes the price of that underwriting to decline. When capital is eroded through losses, that means there's less of it. It means that there's less competition for new business and prices tend to rise. So if you go back historically, you see a very good example of a hard market in the early 2000s.
And in insurance, we tend to refer to markets as being hard or soft. When you think about the peak of that, look at the amplitude. It was very significant. You had better than 30% price increases. And then look at the duration of it.
You had a multiyear period of time that you were in a hard market scenario. And then you went through a soft market. Again, look at the bottoms of those troughs and look at how long they lasted. One of the things that I think is a major change in insurance is what's happened with the insurance business cycle. When you think of hard and soft markets, they don't have the amplitudes that they had before.
They don't go up as much and they don't go down as much. They also don't last as long. The reason for that is there's other capital that is It comes from a variety of sources. Sometimes it's hedge funds, sometimes it's pension plans, sometimes it's institutional investors. But what they're all doing is they've identified an asset class that isn't correlated with interest rates, isn't correlated with equity market returns.
And by allocating a portion of their investments to the insurance asset class, they're able to move out on the efficient frontier and earn higher returns for their investors. That's attracted capital into the insurance business, which means that the law of supply and demand that I mentioned earlier is different today because you have more capital that flows into and out of the industry more easily than it did in the past. So when I look at the insurance industry, it's a lot more stable than it was historically. It's also a lot more resilient than it was historically. I mentioned earlier that I think market conditions are improving for us, that we have faced a headwind in recent years.
If you look at this chart on the top part of the page, this is an index that reflects global insurance pricing. If you think from 2013 through 2017, insurance prices were decreasing. So we were fighting through headwinds. Every renewal that we were doing, every piece of new business that we were placing, the prices were going down on. Since we're a commission and fee business, that means the commission and fees that we were collecting were going down.
What you see happen in 2018 is you see that, that turns the corner and that prices are beginning to rise. It's not a hard market like what we saw in the early 2000s. If you look at prices increasing, it's probably around 2% on average. So not terribly exciting,
but it's nice
to have a tailwind instead of the headwind that we've had to overcome for the past 5 years. The other thing that's nice is if you look at the red line on the bottom chart, you see that unemployment has been declining. You're all familiar with that, But what you might not think about is that as businesses employ more people, they have to insure more people. So they have to buy more insurance. And then if you look at the gray line on the bottom of this chart, you see that GDP has been accelerating.
You're familiar with that as well. But when GDP accelerates, it means that there's more construction. It means that there's more investment. It means that there's more trade. It means that there's more transportation.
It means that there is more to insure. So when you think about the tailwinds that I'm describing in our business, we're ensuring more economic activity, we're ensuring more employees and we're ensuring them at higher prices. If you look at our performance through the cycles, I guess one thing that I would point out is that if you see that our organic growth improved from 2016 to 2017, It's improved from 'seventeen to 'eighteen, and it's improved sequentially in every quarter in 'eighteen. So I really like the momentum that I see in our business.
You also see that we have
a long term history of outperforming the changes in rates. So when you look at it and say, well, rates are increasing around 2% or so on average, we have a history of having a nice spread against that rate increase. The organic growth that I mentioned is something that I'm particularly excited about. If you look at our 3rd quarter results that we reported recently, we reported 6.7% organic growth. Our peer group reported an average of 4.8 percent organic growth, so significant outperformance.
And if you look at it on a year to date basis, we're at 5%. Our peer group average is at 4.8%. As I mentioned, our organic growth has been accelerating each quarter of this year. So I hope to see our organic growth rate for the full year continue to expand our lead against our peer group average. If you look at our performance as a business year to date, there's a fair amount of information on this slide, but what I would highlight for you is that we have strong performance on a broad basis across our business.
Our results aren't being driven by 1 part or 2 parts of this platform. If you look at our new business statistics, we're up 12% year over year. That's the best new business growth that we've seen in a very long time. Our retention is also very strong. So when you have strong retention and you have strong new business, it leads to strong organic growth.
That organic growth has allowed us to overcome a very significant headwind that we faced this year. We received profit commissions related to business that we've written in prior years. It's not related to activity that we do in the current year. Well, as you are well aware, there were significant storms last year that eroded profit commissions that we would have earned this year.
That was about a
$34,000,000 revenue headwind that we had to overcome through organic growth. And you see from our non interest income numbers that we were able to overcome that. And then even more significantly, those profit commissions are very high margin. There's very little expense that goes against those profit commissions. So not only were we able to overcome them on a revenue basis, you see that from a margin standpoint, we were able to overcome the erosion of those profit commissions as well.
I commented earlier on Regions Insurance, what a good fit that is. It's really a great combination. When you look at their producer profile, their client profile, the carriers that they work with, their geographic coverage, the systems that they use, it's a perfect fit with our retail business.
And as I
mentioned, the conversions have gone very, very well. We've launched a transformation across insurance. So we've engaged consultants that have helped us put together a plan to further accelerate our organic growth and expand our margins. We have more than 30 initiatives across insurance in our retail business, in our wholesale business and our life insurance business that have specific activities, specific roadmaps, specific ownership that we believe will lead to higher organic growth, higher margins, which will translate into higher earnings for BB and T shareholders. You see some of those key bullet points mentioned here.
When I think about the overall strategy in addition to higher organic growth and higher margins, it's that we want this insurance broker to be dynamic. It is a world class platform. We want it to have the flexibility to be able to compete with our peer group. And through that, we have really evolved the governance relationships with BB and T, recognizing that this isn't a balance sheet business. It isn't a credit business.
It's a commission and fee income statement business. And we have the ability to continue to leverage BB and T's scale and services so that we're, in my opinion, well ahead of our peer group in terms of things like cybersecurity, in terms of things like data centers and disaster recovery plans. I think the robust nature of those things at BB and T is a real advantage for our business and for our clients. One of the things that we're focusing on in this transformation is data and analytics. I wanted to take a minute, and I'll be quick, to share with you a couple of examples of what we're doing there because a lot of people talk about data and analytics.
But unless you have a really clear idea of what you're doing, you may not get any value from it. We have a pretty good idea of what we're doing. So this example is from CRC, our Wholesale Property and Casualty business. If you look at the traditional model for the wholesale property and casualty business, it was very transactional. You would have a retail broker that would have a wholesale broker, that would have a relationship with an underwriter at an insurance carrier.
And based on those relationships, they would be able to place coverage for an insured, but a very transactional business model. What we have done and we're considered the industry leader in this space is several years ago we began to capture the data on all of the placements that we make. So today we have 280,000 total policy records, $17,000,000,000,000 of total insured value, dollars 6,500,000,000,000 of gross sales, 1,600,000 locations, 40,000 loss records that's in our data warehouse, we're able to take that information, we're able to share it with insurance carrier partners so that they're able to more efficiently quote on risk. They're able to price better because they have better information. We're able to share that information with the retail clients of CRC.
We provide benchmarking solutions to our clients. We provide an analyzer to CRC's retail clients so that they can more efficiently manage their business. And we're able to efficiently place small business. That's a challenge that the industry has had for a long time. We in fact more than 1,000,000 small business accounts a year And that's another unique space that we are in.
So in summary, I said that there were four things that I hoped you would take away from this presentation. The first is not only are we big, sure, we're the 5th largest insurance broker in the world, but we're unique. We're differentiated. We're very different than the other insurance brokers that you saw in that league table. 2nd, our environment is improving.
We're going from having headwinds to having tailwinds. 3rd, we've got a transformation underway to really improve earnings. And 4th, this is a client first business. It's focused on growth. So I think it's a very powerful, unique, resilient platform.
Thank you very much for your time today. And I'd like to introduce Barbara Duck.
Remember when being the best was good enough? Not anymore. Now we have to go further. Company executives want proactive advice. They want to know we understand their business.
That's why we introduced BB and T Financial Insights. Financial Insights lets each of our bankers collaborate with clients to help them grow their business. We talk with them about their company, their goals, the issues they're facing and the services we can provide. We work together to create short term and long term solutions and they walk away with a timeline and an action plan to mitigate risks and grow the business. It's been a great success.
4 of, while Financial Insights really connected with our customers, it was labor intensive. You would spend 45 minutes or more to create the presentation for each customer. There just wasn't time and the execution suffered. So what's the answer? Robots.
With our partners in intelligent automation, we streamlined the process. We configured digital workers, a. K. A. Robots, to create the presentation.
The robot receives a request, aggregates and commutes varying types of data from various systems and locations in varying formats and builds a BB and T branded deck. Within minutes, they send back the presentation to review and share. It's called digital labor and it lets us do what used to be impossible. Today, we have 8 robots saving us time and money doing the presentation for us. That means hundreds of associates can focus on what they do best: delivering the presentation, bringing intellectual capital and providing the perfect client experience.
This is the future of Commercial Banking at BB and T. Our challenge now is to make sure it becomes embedded in every conversation with every business executive every day.
Good morning. I'm Barbara Duck. I'm our Chief Information Officer for BBNT. T. On behalf of our executive management team, again, we appreciate so much you all being here today.
And I hope that you've had an opportunity to visit some of the kiosks that we have available to you. This is just one example of some of the things that we're doing both in the Financial Insights area as well as some of the automation that we have throughout our company. And we have great individuals to share some of those success stories with you out and available. Well, I want to talk to you this morning about transformation in technology and some of the things that we are doing to prepare for our digital future. And I think each of our executive managers who've spoken to you already today have done a great job of really setting up the opportunity for why it's important for us to transform our technology operations at BB and T.
One of the things that I is important is to recognize the great job that our teams are already doing. And Chris spoke to you this morning about some of the major accomplishments accomplishments that had technology intermingled with those, things like our U platform, the implementation of our commercial lending system that we call CLIP. You also heard about the data center and the new installation there as well as you also heard about our general ledger platform, all areas where our technology associates were heavily involved in making those such a success. And then sprinkled throughout the presentations that you've heard this morning, you've heard about the importance of our technology future and where we're headed. You've heard many executives talk about the importance of the future of the digital transformation that we need to make and how we need to embed that together.
It is really more important now than it has ever been for us as a technology organization to be uniquely aligned to our business partners. So let me tell you how we're going to do a transformation in technology. Four key takeaways that I would share with you today as we walk through this presentation. 1, we want to talk about our transformation in technology and how that is driving cost optimization in our business, how we are actually taking cost out to reinvest in these important opportunities. The second area I want to describe to you is our new business model and the way that we're working with our business partners to be tightly aligned.
The 3rd area that we want to cover and focus on is to talk about automation, lean process improvements and other things that we're doing in the technology area to make our business easier to do business with and more efficient. And then lastly, we want to talk about how we're fortifying our cyber defenses and other things to make sure that we protect the assets of both our clients as well as our company. So we started on a journey called transformation in technology about this time last year. So we've been on this journey for about a year. We've got about another year to go.
In that process, one of the things that we felt was very important for our associates to have is a connection not only to the vision and the mission of our organization, but also a connection to how we as data and technology services associates would help that vision and mission of our corporation come to life. And so we put together really a tagline or a vision for our associates that's listed for you here. It says, Enabling Tomorrow Today. And you might look at that and say, well, that's very short, very simple. And it is, but it's also very memorable and it leaves for our associates every day a challenge for them that they need to achieve and accomplish.
And the first word I think is very powerful for us as Data and Technology Services Associates and that's all about enablement. How do we enable all of that business change that you saw on the previous slides and with the previous presenters? How do we enable that to actually come to life? It's one thing to dream it. It's another thing to build it and make it happen and that is what we are partnering to do.
The last two elements of the way we describe this when we talk about enabling tomorrow today is really about how do we pull forward those dreams and goals and hopes in life that we want to provide to our clients in the future and execute on those as rapidly as possible to deliver that value to the client sooner. You can see here our mission is really about providing superior value to all of our constituents in our mission statement and making sure that we do that by creating a distinctive Wow! Experience. And I'll just pause on that just for a minute. Again, it sounds maybe simplistic say we're going to create a wow experience.
But I would challenge you to think about your own life and what you do every day. Each of you have a device of some kind, many of you have multiple devices of many kinds with you today. They enable you to do what you do in life. They enable you to do your job. They enable you to connect with your family.
They enable you to create the experiences that you need to provide. I doubt you go home at night thinking about what's my bank going to do for me today through their great website and application. But what you do think about is what experience am I trying to provide to my family, to my friends, to myself and how am I going to make that possible? And we are trying to create engaging and dynamic platforms that will provide you and others like you that are clients the ability to do that and live your life in a way that was so eloquently described in the commercial that Branch showed you earlier. So as we're trying to create this Wow!
Experience, one of the things that we felt it was important to do was really vision out the horizons and the impacts that we expect to see from a technology perspective. And there's 3 important horizons that we are focused on. The first one that you see here is around stability and risk management. This is all about ensuring that our platforms as well as our systems have strong production stability as well as making sure that for large project implementations that we do those in a coordinated fashion, a timely fashion and executed with precision. The second horizon that you see here is really about setting the foundation for the future.
It's about our infrastructure and our applications and making sure that they're scalable, that they're flexible, that they can 3rd horizon that you see here is about And the 3rd horizon that you see here is about enabling our company to really stay at the forefront of our industry. It is critical for us to be able to compete to make sure that we can provide those technology services that our clients and our lines of business need to make sure that they are successful. In our Transformation and Technology program, we have several opportunities to make sure that we not only change the technology business, but we also give the opportunity to do continued investment in digital transformation. And so I'm going to describe to you in our short time before lunch 4 primary areas. We're going to talk about cost optimization.
We'll talk about our new business model, we'll talk about our new delivery model, we'll spend a few minutes talking about lean and process automation. And underlying those from a foundational component are 2 primary areas. 1 is all about data and the importance of data and what we're doing in that area and also our continued focus on cybersecurity. It is really a component of all of these things, the aggregation of these 6 items that will give us the results that we're looking for, which is all around having a more technology enabled business. So where did we start?
In the December time frame of last year, we partnered with McKinsey and Associates to assist us in looking at the cost in our technology organization. We did a baseline compared to peers and other technology organizations to see where we were doing a good job, a great job and areas that we might need to improve upon. And it was really those foundational elements that we went through that leveraged for us then an opportunity over the next year to partner again with Mackenzie to say how do we take advantage of the things that we're already doing very well and then how do we also take cost out of our business to make sure that we can reinvest those things to drive digital transformation. You'll see that we did this baseline component and then we began to do the hard work of implementing those changes. 1 of the key primary areas that we have been focusing on is called workforce management or what we would also call smart sourcing.
Over 40% to 50% of the cost that is in our technology organization is all about the people that we have. It's around the workforce we have, the associates we have and the outside labor whether that be contract or whether it be outside offshore professionals that help us get work done. So it is important that we examine that and make sure that we have very crisp processes to make sure that we align the right people at the right time to accomplish the objectives that we have as an organization. And then we were looking at how do we scale up for the future. And again, this is about how we look at making sure that we process optimize our business.
And this is a component that we are heavily engaged at the current moment and I'll give you a few examples of that shortly. So let me describe for you our new business model. Again, we felt it was more important now than ever to closely align to our businesses to make sure that we can deliver. So we aligned in the first half of this year, we designated Business Information Officers. Think of those as many CIOs that are aligned to the businesses that you've heard present today.
The 6 that you see up on the left hand side of this chart show you things from everything from our digital services and marketing teams all the way through our financial services group, we are aligned to them. Now what does that really mean? It means that those many CIOs or BIOs that we have in our organization now have organization alignment. So instead of being aligned in a very siloed way, which is traditional for IT or technology shops where you might have security, infrastructure, application development and maintenance and support. We've brought all of those resources and aligned them directly to the businesses.
So think of them as a mini agile team put together, working around the table, so to speak, together to support Rufus, for example, or Brandt. So that when they have an idea that they want to bring to life, we can come together as a technology partner and make sure that we deliver on that from end to end in the fastest way that we can do that. It really does make it easier to do business with us and it makes it faster to deliver on products. I was actually talking to one of our clients, meaning one of our associates that runs one of our businesses just a few weeks ago. And he used words like amazing, great experience and I could not be delivering to my clients today the things that I'm delivering without this new organizational structure where I have someone who is aligned to my business.
It gives them much more of a feel of being in a small business environment where their technology partners are embedded with them every day focused on their objectives and getting it done. And those teams are certainly supported by a strong shared services organization. But it is not enough to be aligned just from a business information officer perspective. It is critically important not only that we be aligned correctly, but we have a delivery model that can support that fast delivery system. And so we have engaged in a process to help bring to each of those business information officers the ability to do software development in an agile way also to bring DevOps to them as well as Infrastructure as a Service.
Think of this obviously as the ability to deliver software either in an internal cloud, external cloud, public cloud environment. It's making those applications have the ability to deliver in that way. So when we think about agile, we think about it's all about discovering the right thing at the end of the day. It is about taking those big ideas that our lines of businesses have and break them down into what we call little big ideas. And taking those little big ideas and actually being able to deliver on them faster.
At the end of the day, our digital transformation is really all about the delivery of software. If you don't have code designed to do what you need to do and be able to deliver it quickly, RAC mobile app that you saw earlier. You can't get to enhancements in the new platform for our wealth clients. We have to be able to deliver the software code in quick, reliable increments, and that is what agile does for us. But agile alone is not enough.
It's not about just discovering the right thing. It's also about the ability to deliver the right thing. And we do that through DevOps and Infrastructure as a Service. It's about taking the things that you see, the software code that has been delivered and making sure that we can do frequent delivery of that software code through automated pipelines that are secure and stable. This gives us not only the ability to deliver faster, but we have risk mitigation in the process, reducing the number of touches and reducing the number of errors that could be in that particular product, which means that we can deliver faster to our clients.
So we've talked about taking cost out of the business. We've talked about a new business model. We've talked about a new delivery model and all of those things are critically important. But at the end of the day, if we don't change the process within which our teams work to make sure those processes are streamlined and make sure that they are effective, it's very difficult to get work done. You should really think of a technology shop as a very large factory.
And each of you, if you had an order that you wanted to provide to me to get work done, you would all bring me that order in various ways. Let's say that you put them in front of the stage here and you'd say, we need for you to get this work done. I need a way that I can bring that work in, organize it very effectively and make sure that I see that it goes through the factory in a timely fashion. You don't want the product to stop at one place and build up or it won't be able to continue and you don't really get any value out of the technology shop until you can deliver the product on the other end to touch either the associate or the client to make the process better. And so the process optimization work that we are embarking on is critically important for our organization.
We are embedding lean experts within all of our teams so that this will be a constant re improvement and reinvention process that we will be able to do on an ongoing basis. There's a lot of different things on this slide that talk about the different areas that we are going to focus on and where we're going to do process improvement. But let me just give you one example of where we're working currently. In each of our development areas, we have both application maintenance as well as application development teams. We have gone in and worked with one of those teams to do some initial lean process work to improve the visibility of the work and how the work will actually flow through the process.
In doing that, we have found that we can get an increase of 10% to 15% additional work throughput through those teams. We think that's critically important for our future because it gives us the ability to deliver faster and actually deliver more work to our lines of businesses so that we can actually do this digital transformation that you have been hearing about. On the foundation of all those things that I've laid out for you are 2 additional items I'd like to share with you. One is around data and the other is cyber. So data is the way of the future.
We have to have strong data elements that we can deliver to our businesses. You heard John just speak about data and how important that is to his business. Data has always been something we've been good at, but data is something that we need to be great at. And if you see here some of the things that we have from a data strategy perspective, we have goals to automate everything around our data. The more it's automated, the faster it's available, the more likely we can give to our business partners real time information for them to be able to execute on whether that is delivering on a client so that they can have a needs analysis and we can get them the next best product or delivering on a report information so that we can do collections faster.
Whatever it might be, it is important for us to make sure that we are automating the data that we have. The second component that we want to do is make sure that we democratize that data. We need to make it available for our teams. We need to make it readily in their hands so that they can slice and dice it, analyze it and execute on it. They don't need to wait in line for someone to run them a report.
And then lastly, in the data space, we need to make sure that we optimize the operations that we have, making sure that we have a very streamlined process to make sure that we are delivering quickly on the data information. Cybersecurity is also a very important component for us to deliver on and continue to make investments in. Our team in particular, Kelly has been very outspoken in regards to cyber and the importance of making sure that we are protecting our financial institution as well as making sure that we're protecting our clients. We continue to invest in this area. And over the next few years, you'll continue to see investments in this space in particular on these three items.
One is making sure that we are focused on access control and making sure that that access control is tightly controlled. It is very, very important to make sure that you are protecting your most important information from a privileged access as well as who else can get access to that information. We also want to make sure that we're focused on capability acceleration, in particular focusing on fortifying our cyber and protection. And lastly, we want to make sure that we're focusing on ensuring that we have the right skills and talents to make sure that we can continue the development and growth in the cyber capabilities that we have within our organization. This shows you a quick look at what our cyber investments have looked like over the past few years.
It shows you a growth in our expenses here from around $23,000,000 to over $100,000,000 in investments both baseline and projects across the different teams. I will also add that we have investments in other parts of our business that may not show up here when you think about infrastructure around firewalls and those types of things. Those things would be listed separately. So the number is actually higher than what you see here. You also see the investments in our staffing growing from 50 associates back in the 2,009 time frame to over 269 associates that we'll have at the end of 2018, a critical area for us to continue to invest and make sure that we have the protections that we need.
One of
the last things I want to share with you is about where do we focus and invest from a technology perspective with our financial dollars. We've been given here about $1,100,000,000 to invest across our technology organization. It's critical for us to make sure in that investment realm that we did absolutely the best investment across that and optimization of those dollars as we can. You'll see a good portion of our dollars is in what we call infrastructure spending about 61%.
This is
the things that you think of as lights on doors open, production types of things that we do to run our business. Then you'll see that we have about 20% of our dollars are invested in innovation and innovative projects that we are working on and then an additional 14% on other types of important fundamental portfolio projects that we have across the organization. So in summary, I would just like to close with saying you can see how critically important it is for our organization to make sure that we have a technology organization that can enable our business, ensuring again that we take the cost out where appropriate to reinvest from a digital standpoint, making sure that we have a strong business support model for our lines of businesses, ensuring that we have cost optimization and lean process automation across the teams, and lastly, making sure that we are continuing to invest from a cybersecurity standpoint. I thank you for your time this morning. I'm now going to turn it over to Rich to give you instructions for the rest of the afternoon.
Just a quick announcement. Because of the flight delays yesterday, we've made arrangements for those of you that were not able to make it to the tour of the Leadership Institute. This afternoon, when we're done with our session, we will have shuttles taking you to the airport, but there is going to be a shuttle at 3:15 that's going to take you to the Leadership Institute, allow you the time to take the tour and then from there take you right to the airport. So if you look at your schedules, you'll see tour shuttles going at 315 and 345 to the airport. Those are still in place, but there will be another shuttle that will take it to the Leadership Institute and then on to the airport.
So at this time we're going
to break for lunch and a member of our executive management team is going to be seated at each one of the tables and their name will
be on the table. So this is going to give
you an opportunity if you have specific topics you want to discuss to sit with that executive. And our team out the door there is going to direct you to where we're going to have our plated lunch. And we've added about 15 minutes of time to lunch to allow you more time to look at the exhibits. So we're going to begin the afternoon session promptly at 12:45. See you then.
Well, good afternoon, everybody. Dante Wilson, happy to be with you all today to talk about client centricity. So what is client centricity? Client centricity is a energy. It's a passion.
It's a deep commitment and focus on the client. It's not about just putting the client first, but it's really about putting the client at the center of everything that we do. So today, I'm going to talk to you all about 4 strategic deployments that we have going on to create client centricity. And but embedded in those 4 strategic strategies that we are deploying, there's 4 key takeaways. 1 of the first key takeaway is that we're creating a client centric client experience of distinction.
Number 2, we're inspired by the voice of the client, inspired by the data that we're receiving to make better decisions to assist our clients in their financial dreams. Number 3, we're empowered by dynamic technology. And number 4 is how we're growing digital accounts and digital revenue. The 4 strategic areas that we're focused on right now are 1, our enterprise voice of the client program 2, our insights driven client experience, which is super important for us. Going to share today with you some revolutionary marketing things that we are deploying that are really, really working for us in a major way.
And then we're going to talk a little bit about digital transformation, give you update on where we are and a little bit of vision casting, so you can see where we're going. I get the chance to wake up every day to work with a group of very passionate and really client obsessed, I mean absolutely obsessed associates around creating client distinction. And these burgundy hexagons represent those teammates that do this every day working side by side with our business segment partners to do a couple of things. 1, to bring client insights 2, to co develop strategy and 3, to aid in execution. So let's talk about how we're doing that together with our business segment partners.
The Voice to Client program. What we really believe is that if you're going to elevate your game to really be a leader, continue to be a leader in client experience, you have to move beyond just syndicated studies and benchmarks. It is great to see where you stack up against your peers, which is very, very valuable. But it's even more important to know how do your clients feel about you. Your peers don't bring you accounts.
Your clients bring you accounts. So for us, when we move beyond client benchmarking and syndications, it's about really getting more robust feedback information directly from our clients. So in 2018, we rolled out an enterprise wide voice of the client digital platform to enable us to do that. It's multi channel and multi lines of business where we get real near real time feedback from our clients that are doing business with us. What that enables us to do is that we're able to get information and be able to coach our associates in a very valuable way.
We're able to push a button. Right now I can push a button on my iPad or iPhone and tell you what our overall satisfaction scores are at the bank level. I can tell you what it is at the regional level. I can tell you what it's at the branch level, at a mortgage loan officer level or at a branch bank level. So we have very valuable feedback that gives us information so we continuously are able to improve our overall client experience.
So how are we using the voice to client program today? There's a couple of things we're doing. We're able to identify our clients near real time that are at risk. So if they give us a bad feedback on one of the surveys that we present to them through their mobile device or through the telephone, we have a client delight team that calls them immediately to try to solve for that particular issue. We're also very focused on reading and understanding all the verbatim comments.
Because we just check a box around what your problem is, you might not get to the root cause. So we're using text analytics to get at what the real root cause of the problems are so that we can correct them. We're using really good linkage analysis where we're taking performance metrics and we're taking client metrics and making better business decisions. And then we're also using as I mentioned the voice of client information into coach. So the coach is doing a good job.
We're able to high five and say that's a really, really good job to reinforce a great behavior. And it didn't do a good job, it gets opportunity to come up with a culture plan to improve it so they could do a better job on the next experience. Equally important, we're looking at the trends and evaluating the trends that we're seeing will happen across our multiple lines, our multiple lines of business so that we can make real time correction. Once you know what your trends are, you know what your systemic problems may be potentially across your lines of businesses and across your channels, then you have to do something about it. So what we did, we launched this group called the Client First Solutions team.
It's basically a problem solving SWAT team. This is a group of team that's a cross functional team that work together in an agile way to eliminate client friction and client effort in near real time as possible. So they meet every couple of weeks and every month we make decisions to improve the business and to improve the client experience for our particular clients within BB and T. There's 3 primary things that they work on. One, they work on items related to policy.
2nd, items related to process. And 3, items related to product. And so from a policy perspective, then we've done things such as enhance our authorities within our local community bank. So that the people that are working directly with the client can respond a lot quicker. From a process perspective, we've done things like introduce intelligent automations to our whole process.
So we can have more accurate, more speedy responses and client friendly hold scenarios without introducing any risk. And you'll see here on this deck that we reduced the holds within the 1st 2 weeks 67% by having an intelligent automation system aid our human associates that are in our branches. And the third reason things relates to products such as our ClickVue. So one of the main reasons why clients would call was when they had an overdraft. They call it care centers or call it branches because they didn't understand the sequence of what caused their overdraft.
So now we have available to our clients, we developed this in a couple of months, the ability to be able to push on their iPhone and touch the overdraft and be able to sequential order be able to tell what caused that overdraft. So these are the type of things that we're bringing to our client experience to elevate it on a continual basis. We've introduced 33 of these year to date, which have all been phenomenal and are making a big difference in our business. So let's take a look at the big difference that it's making in our business having a complete all in client focused opportunity here. So, we've got 2 things that we're measuring our voice to client program.
1 is the net promoter score. Our net promoter score, if you look at the chart to the left, what it is, you take the clients that give you top box scores. So that's 9s or 10s as it relates to would you recommend this to a friend of a colleague. And then you subtract all the delta out of the detractors. So those would give you a 6 or less.
So you'll see in the month of September, we had 70% of folks gave us a 9% or 10% and then we had 11% give us a 6% or below. And that delta is a 59%. And what we've seen is that although we already had good net promoter score, we've been able to improve that score with this type of focus on our clients year to date. So it's really, really impressive. And it relates to Net Promoter Score, I know you all follow that, but just for those that may not follow us closely, the net promoted score is on a negative 100 to a positive 100 scale.
So if you get a 1, that's considered good. You get a 50, it's considered excellent. So for us to have these type of scores we're really excited about that and looking to continue to improve that over time. When you look at the overall satisfaction score, overall satisfaction score just basically says your overall experience, your omni experience, how satisfied are you with BB and T. We started the program as early as February.
We were already at 6% to 8% of folks giving us a 9% or 10%. And you all know how tough it is to get a 9% or 10%, a perfect 10% as it relates to anything. And so they're saying we were at a 9% or 10% at 6% to 8%. We've improved that number year to date and have our highest scores yet at 73%. So we're very excited that both of these opportunities allow us to continue to elevate our game as it relates to client experience.
It's also making a big difference in our book of business. So we look at our attrition numbers and look at gross attrition year over year, we're down 4% on gross attrition. So it's making a significant difference to our business and having business results, which create revenue recapture opportunities for us. Let's talk a little bit about being an insights driven client experience disciplined organization, which is super important. What we're doing, you hear a lot of talk about data analytics.
It's a popular buzzword. And definitionally, if you're doing data analytics, you're looking at past behavior and using that past behavior and you're really trying to do some predictive modeling in most cases to try to create a better outcome for your client. But we're really trying to move from and have already begun the process of moving from data analytics to really data synthesis but you can be near real time as possible. So we want to make sure that we're taking this what we call rich data and turn it into wealthy data. Data that will really have an opportunity to create a solution for a client as soon as we can for that particular client.
Couple of things that we're doing. So if you go if you take a look at this slide here, you'll see that we've launched the client data lake. Client data lake for us is a centralized repository for data. It's a data processing tool in which we're able to take from hundreds of sources all the data we have on our clients be it transactional, be it behavior, be it third party and put it in one place so we can create a better experience for our clients. So we're able to offer real near real time information to the right client at the right time, the right information with the right channel.
Just to give you an example of the difference between data synthesis and data analytics. If you use the kind of data analytics type model and you're doing marketing, you may have took a group of clients that had these opportunities and they modeled they would be great credit card leads. And by the time you go send that email, use your e automation to market to those clients, what if yesterday they called and had a client complain in your care center? Would they be really excited about getting an email about a credit card? Probably not.
So what your data lake allows you to do is embed that client feedback So real time, if it says, oh, they just got a we just had a call about a concern around client service, instead of that lead going through and you're marketing to that client, it would trigger maybe someone from a virtual banking center to call. It would trigger someone from maybe one of our branches to call. The same thing would be true if we had a credit card lead for that same group of folks and that day they put $1,000,000 of deposits into our banking system. Instead of sending that credit card, what would happen near real time is Intel Automation would tee up that the most likely best call at the moment is probably to one of our wealth advisors or someone that can help them with that deposit they just made versus the credit card. That's what the data lake would empower us to do is use new be able to have near real time opportunities and solutions for our clients.
There's a lot
of other things we're doing as it relates to insights analytics. I'll just call out one here that's listed, which is around our analytics and predictive modeling, really using machine learning to offer what we call the next best action. So our branch bankers and our market leaders today in the branches, when they walk in we're able to provide to them their client base and have a top 6 in order of what is the best conversation to have next with your client. We're also doing this and in the works of rolling this out for our commercial business as well. But our officers now can have call efficiency as it relates to prioritization of who should I call next and when should I call them.
So we're doing data analytics and data synthesis and talking directly to clients, but we're also enabling our officers to be able to have better call prioritization, we get the best of both worlds. Let's take a look at some things we're doing as it relates to revolutionary marketing. There isn't a better time to be a marketer than it is today. The 4 Ps of marketing have not changed. What has changed is the dynamic inputs that go into the 4 Ps and how do you apply the 4 Ps in a more digital environment.
We're super excited to see the progress that we're making as it relates to understanding that and really it's a game changer for us because at the end of the day those that can do this best are going to have the best opportunities to create future revenue. So I want to share with you what we believe is our ultimate client experience as it relates to market. This is a vision that we casted 2 years ago. A vision of going from one way communication where we just put up a billboard and hope someone reads it or we just send them a brochure and hope that we sent it to the right people to really trying to engage in the client's life, have a full integration where we're responding and talking to the client simultaneously based on their behaviors, based on their transactions, based on what they're doing with the website and we're serving up content at their particular convenience. So what I want to do is show you this vision that we've casted and that we've been working on through Lisa.
So you'll see Lisa have a series of communications with us and let's have a series of communication with Lisa and at the end of the day how many solutions she selects at the convenience of her phone without even having to come into the branch. So this is what we're calling always on. This is our North Star. When you see the two way communication, we're fully integrated into Lisa's life. She got a credit line preapproval on our mortgage opportunity, we gave her some traveling tips, we also were able to offer free insurance quotes so that she can make her complete transaction or move more successful.
That's our vision. But as you all know vision without execution is hallucination. Let me just tell you what we've done so far. So we've moved from traditional marking where we had this vision we were just kind of one way communication to we're about middle of the road where we're doing more solution based, more triggers and activities. So if someone uses Venmo today, by tomorrow we could send them an email because it's going to trigger to them to send them opportunity to try out our Zelle opportunity.
But when we unlock the potential of the data lake when it's fully stood up, which is in process of being stood up today in 2019, it will be fully stood up. We'll be able to of being stood up today in 2019, it will be fully stood up, we'll be able to have full convergence where we're going to have the right message at the right time. And that is the real game changer. So we're making lots of good progress. The teams are working really, really hard.
Let me just show you some of the progress they've been making year to date, I mean, since 2015. I like to direct your eyes to the first bullet point in each of the years. So in 2015, we were executing we executed on 108 campaigns.
If you
look at 2018, we have executed or would have executed on 332 campaigns, so significant increase in activity. Looking at emails, we first started with email automation back in 2015, 3.2 emails that we sent out to touch our clients. Year to date, we've already sent out 63,000,000 emails to touch our clients. But even direct mail, still have direct mail solution. So direct mail, we've sent out 3,400,000 email pieces.
We would have sent 18,000,000 email pieces by the end of this year. So dramatic increase in activity. I'd like to call out a couple of things. In 2017, you heard Chris talk about earlier, where we had a brand refresher, where we introduced the new tagline, All We See is You, just really letting the world know that we are very much focused on being client centric, that they are the most important piece of our business. They are a Y in addition to make the world a much better place to live.
I'd also call out in 2018 that we've launched a campaign. It's a 5 year campaign that we call Ignite. And we've already brought in 46,000 new to bank households. And we look at those new to bank households, which is phenomenal. So I know you all have been asking some of the questions around, well, what is your CPA, your cost per acquisition?
You see folks in the marketplace with $500 incentives. We've been able to move this business with $130 type of incentive on average when you look at the blend. So we're doing much better with our spend, much more smarter, better techniques to be able to move over these type of households and we're getting good account growth from that. So we're super excited about that. We're also getting youthful account growth.
So when you look at our new to bank clients, the average age of our new to bank clients at median is 34 years old. The mode age which is the most popular is 18. So if we look at the future of the business and you see we're bringing in that type of client base that will really fare well for us in the future. Another thing I'd like
to call out here is
the 10 always on campaigns we've already deployed. And so there'll be thousands of those. We've already got those up and running and they're offering great benefit to us. And then the last thing would be the returns that we're getting on marketing. So we're getting to 2:1 from a revenue to expense ratio on our marketing.
And the reason why that's unlocking that particular opportunity is because you have the digital which is much more efficient and allows you to do that.
We still do a good deal
of traditional marketing because your digital marketing will always be important. That's kind of how you build your brand awareness so people can know who you are. They have to know who you are before you can actually do something digitally where they could take action. And we're doing things like billboards and we're also doing TV. What we find in our marketing cocktails where we have traditional marketing and digital marketing, we're seeing up to 2 times more success rate and responses in those marketplaces.
So, the perfect opportunity to have the right cocktail. That being said, digital marketing is where it's at. So I want to congratulate Barbara Duck and her team with the website optimization. So we have responsive designs, which you see on your desktop, you see on your mobile device, you also see on your iPad, which is important. We also have accessibility design, which allows us if we have clients that are visually impaired, we can allow them to also enjoy quality banking.
Our social media game has really picked up. We've had 3 times more social media followers than we started off with in 2015. So we're doing a lot in that particular area. Our search engine marketing has really took on. We've had great results from that.
We've always had search engine optimization, but really never did do search engine marketing. That's where you go out and you go on broker words. It's a blind brokerage. So you might choose the word Winston Salem, you might choose banking, you might choose student. Someone else is in the marketplace.
We put $50 in each word, someone put $100 on each word, and they're going to show up on the front page. Well, we were showing up on no page, on page 8, on page 9. How many of you all ever bought something on page 8 or 9? It just does not happen, right? So you have to be on the front page and because we're active with that and doing it very effectively, we're getting great results.
And then our e mail market, our e automation, we said 63,000,000 e mails sent. So if you look at, well, how much do you have to spend to be successful? Can you spend enough to be really, really good at this business? And we're showing that we're demonstrating that our response rates, our click through rates, open rates are at 27% and the industry is at 21%. So again, it's about your technique and your skill in addition to being present.
At the end of the day, content is still king. So you can have parity with technology, you can have parity with technique, but who can send the most relevant content to get a client to respond? You saw some of those responses or you heard about those responses or impressions that Brant mentioned earlier from one of our emotional led campaigns, which is a client journey type campaign showing clients how the products fit in their life. We also have brand campaigns. We also have product features.
It's not good enough just to have the products. You have to tell the world what products that you have. And then we have one of my favorite, which is brand journalism, which is really talking to the good work you do in your community. And as you know, millennials and Gen Z, they really value the difference that you're making in your community when you're selecting partners for business. So I wanted to show you a couple of these commercials.
You've already seen one. But take a look at our brand commercial, which really focuses in on client centricity. So that's really designed to reemphasize our attention to our client to client centricity. This next one is really one of my favorites. We are on our 10 year anniversary of BB and T Lighthouse project.
We've touched 16,000,000 lives. And this is just a way to tell that story to the marketplace, which is called brand journalism.
It's really easy to be a
marketer being brand journalism when you have real associates making a difference. So that's all associates making a difference in community and we wanted to share it with the world. So let's talk digital transformation. Digital transformation is really, really important. Digital transformation takes great strategy.
And what we want to do is to give you some insight to let you see how we see the world. So just take a look at our lens on what digital transformation really is. So for us, digital transformation can be summed up into 4 I's. The first one is inspire. So we want to inspire our associates to create client distinction.
The second one is about innovate. We want to innovate with client centricity and operation efficiency as a priority. The third is around invest. We want to invest for the future, but we want to invest now. The pace of change has been as fast as we've ever known it, but forward looking.
Tomorrow, it will be as slow. Today will be as slow as we ever noticed. Each day, it gets faster. Then we want to ignite. And we want to make sure we're doing things that will ignite and ultimately generate household growth and also revenue growth.
So let's talk about Inspire. So we're Inspire from 3 different categories. 1, we're inspired from our clients. We talked about the voice to client program and other feedback. So we want to build and transform based on what your clients want, not just for transforming, just to transform.
The second is associate inspired. So we have groups like our client first solutions team and other associates gives us feedback because they're dealing with the client on a daily basis. We take that feedback and we try to respond and build things for our clients based on that feedback. The third is co inspire, where we co create the solutions with our clients, which I think is one of the most meaningful ways to be able to build a business. So this is an example of kind of co creation.
Couple of things that we do as it relates to our digital platform. So we have feedback that we get. We have over 41,000 pieces of feedback that we may get from the Apple rating store, Android rating store, the CEO lines, social media. We take that into consideration. We get feedback from the platforms whenever someone opens up an account on one of our online application platforms, we get immediate feedback.
So we get 62,000 of those that we've had in 2018. And then we do benchmark performance evaluation. So we want
to make sure that when
we change something, we're actually improving the process. So most recently, with our prequalification application in mortgages, we're able to reduce and study process. And so if we can't improve the performance, we don't create the change. And so we try to track and study all the things, so we make sure we're making a difference in someone's life. As well as the digital future experience, we do a couple of things.
1, we have a digital community, 2,000 of our clients. We've had 29 1,000 sessions with clients where we give them a chance to give us feedback based on the usability assessments or asking them survey questions about what we're building. We also have usability testing where we bring clients in and we have sessions. You'll see we have 150 sessions where they interact with our type and we get to watch them and interact with them to see and make sure we're building the right thing. And the third, we have the beta testing where we allow clients to be able to test the product before it goes public.
I kind of call this mama's kitchen, because it reminds me of being in the kitchen with mom on Thanksgiving when she's making cake and she'll give you a little bit of the cake batter. So how does it taste? They add a little bit more sugar.
She add a little bit
more sugar, how does it taste? And when the cake comes out, the cake was perfect because she got feedback along the way. So I call this kind of our mama's kitchen approach, but it's important so we don't develop product without knowing that the client would actually want it or actually use it. When you look at how we innovate, we do innovation in 2 different forms. 1 is internal innovation.
So we launched a test and learn team. So test and learn team, they do proof of concepts. 1 of those we were successful with this year was our chatbot. So we tested that with our care centers and our branches and we'll be moving to deployment in 2019, but a use case for that. We also had a hackathon in July.
We had 63 of associates come in and had a hackathon and really creating an innovation culture there, so we could see what ideas they have that was successful. Then we do external things such as sponsorships of the accelerators and incubators of FinTechs. So you have to be where innovation is. That also has led to us launching under Bennett Bradley's leadership our BB and T Ventures, which is our arm that is designed to invest in and or acquire digital emerging technology. We made our first investment in September in a data as a service company called Enigma.
You all probably read about that and they're already out offering real value to us that we're benefiting from. We're going to continue to accelerate and bring in innovative talent. We're going to continue to accelerate our FinTech investment and we're going to form more alliances in order to help this transformation go a lot quicker in the future. Our investment themes are here as follows. So, we're investing with a purpose, things that help client experience marketing, data analytics, commerce, faster payments, intelligent automation, digital capabilities or innovation.
So, those are the themes of investments that we're looking to invest in. And we have accelerated our digital investments. So, from 20 7, 2019 through 20 19, we would have spent $300,000,000 as it relates to digital acceleration. We have 20 strategic projects that that encompasses, things like our platforms, we have things like our digital marketing tools that we're using. So we're making these big strategic investments.
But if you look at 2018, we're also doing things at also out from value that's not considered strategic projects. So we had 1500 digital platform releases in 1 year. So we're learning and innovatively changing and making a difference in clients' lives kind of real time. And we talked about the up to $50,000,000 FinTech investment that we've committed to make. We look at our performance.
So what are the results out of this? Does the metrics matter? So what are you doing to actually grow the business? You look from a digital opportunity. If you look at your top left hand side and you look at the retail checking, what that pie chart represents is total checking and the 15% the slice represents out of all of the checking accounts that are open at BB and T, 15% are open through digital acquisition.
If you look
at the Arrow belief that shows that we had a 24% year over year growth in digital acquisition, which is phenomenal. You look at business checking, it represents 7% of all of our checking accounts that we're opening are open online. So 36% increase year over year, which is also phenomenal. And you look at bank card, we're having great success there, represents 15% of total production and it's up 62% year over year. So we're showing great success.
Look at our digital users,
we have lots of mobile momentum. We're up 19% year over year. So we're doing a good job with the momentum there. If you look at the things that they're using from the digital capabilities perspective, look at our mobile check deposit activity. So it's up 40% over last year because we're listing the clients and we're innovatively making it better.
They want to make the ability to take the check better, we fixed that. They wanted to make sure that they have better availability, we fix that. They had some questions around limits, we fix that. And that's how you get 40% year over year growth. Look at the accolades we're getting from our app perspective, we have a 4.8 on our mobile app on the Apple.
That's fantastic. We're number 1. We're best in class. If you look at Android, we have a 4.5. We broke into the top 3.
So again, BEST, we're in the top 3 in class and there's some other ratings here to show that we have one of the best digital platforms in the world.
If we
look at looking at digital as a line of business for our revenue, trying to see the impact on your overall business, here's some statistics that we look at and that we track. From a business perspective, so the marketing really paying off. How many visits are you getting? We got 143,000,000 visitors to our website, which is phenomenal. 11% of that represents prospects.
So those are your opportunities. You continue to get better at conversion. That's your real big opportunity to create more success. So then you move over to the middle pie chart and what success are you having. So if you look at our net new performance, I know earlier we shared our net new performance with you.
So what's contributing to that net new, 47.3% of all our net new accounts had a digital acquisition. If we look at just breakout retail, 56% of our retail net new were through digital acquisition and then commercial 20%, which is really strong when you think about the commercial business now following the retail business. Look at what type of success we're having on a CAGR perspective, we've grown at 16.6% over the last 3 years. And if you exclude mortgage, our year over year date year to date year over year growth is 18%. So we're getting strong metrics and performance from the investments we're making from a digital revenue perspective.
This slide right here just really shows you all the things that we're doing. It's so important to make sure you're active as it relates to digital transformation. You're making the right investments for these things that have already been lifted or that are in flight. But what's really important about here is not how much you're spending and how many things you're doing, but are you doing the right things that can make a difference for your client and to drive the business. It's a good little story that I like to think about when I think about how do we compete against maybe larger competitors that are announcing their big investments.
And it's a story about David and Goliath. So you had David and Saul wanted to have David put on his armor and Saul said David said, no, I don't wear that. I got to use what I'm used to be able to win. He took 5 stones in a slingshot, but only took one of those stones and he was able to win. So it's not about how much you're doing, but you're doing the right thing.
You have the right stones the right approach to making your business successful. And that's what we're focused on. This represents that and how we're supporting the business.
So I want
to thank you for listening today. The key takeaways here again that we're creating client distinction by being client centric. We're inspired by the voice of the client and all the data that we're able to make take from being rich to being wealthy. We're also empowered by dynamic technology and we're growing our digital revenue and our digital account acquisition. Thank you all for listening.
All right. And I'm going to turn it over to Clark Starnes.
Good afternoon, everyone. Thank you for participating in our conference today. We're very proud historically of our risk program at BB and T. So, 4 key areas I want you to focus on today. Number 1, that we have historically consistently produced best in class risk adjusted returns.
As we look forward in the future though, there are structural industry innovation issues that are creating new and unique risks that we have to give due consideration to. And so we are adapting our risk and control programs to take advantage and embrace that opportunity in a safe and sound manner. And most of all in today's environment credit risk is always important and BB and T is going to continue to maintain our conservative through the cycle approach to risk taking with an intense focus on diversification and granularity. So, I want to talk to you a little bit about our fundamental approach to risk management and how we view risk appetite. And so, there's 3 key elements on.
One is a through the cycle perspective. I'm sure you hear that a lot. It means different things to different people. I think for some people it means I went to the market through the cycle and markets can change in their wide degree of risk acceptance. But for us it means trying to create a diversified business operation that is less sensitive to swings in the economy.
So for us, what we're really trying to do is to create a mix of businesses that have low relative variability and much higher relative resiliency under stress no matter what the cycle is. And we know to be able to do that you've got to be intensely focused on diversification. And we have an intentional bias toward granularity in really all aspects of our business operations. And what that's yielded for us is some really strong results. I've charted for you here lower relative non accruals in our credit book.
But also something we don't talk as much about, but is highly relevant in this new world is our ops losses. We have some of the lowest op losses in the entire industry. You can see this in the ABA ops loss consortium data. So again, a very low risk operational risk profile, which again a lot of new operational risks are coming out of this digital innovation. This is my favorite slide for you all.
I've charted I think this is the most objective scorecard of our cumulative risk positioning. This looks at the most recent DFAST results. And what I've charted for you is our net PPNR over baseline losses relative to our net stress losses over baseline. And this is in the severely adverse scenario. And I'll just show you we have the best risk return positioning in the peer group.
And we're the only bank in our peer group who's been in the Northwest quadrant, as I like to tell our folks, for every CCAR cycle since it started. So again, that's the level of consistency we're trying to produce and this is, I think,
in a very objective way to look at it.
We want to continue those great results, though, and still embrace innovation and all the great business opportunities you heard my colleagues talk about today. But we have to be mindful that this fast paced environment that we're in does present new and unique risk considerations, particularly a lot of non financial risks and operational compliance strategic and reputational side. Obviously, we're not avoiding those changes. We want to embrace that in our disrupt or die strategy, but we have to make sure that we have a good risk and control system to take advantage of these opportunities in a safe and sound manner. So I want to think we have to think about our risk programs differently.
So if you really fundamentally pull back and think about most traditional risk and control frameworks, they were they've been highly linear in nature, very gated, almost a waterfall approach. And so, what is not necessarily very agile or client friendly may have been effective in the old world, it's not going to be so effective if we're trying to be innovative and react to client demands in this new world we live in. So, we have to think about how can we reposition our risk controls in a manner that is different. So, some of the things that we are doing and thinking about, for example, is thinking about embedding our risk design and risk controls earlier in the process. So, for example, embedding in things like agile sprints, reusable risk and control utilities that have already been standardized.
They've been audited. They've been validated, tested that we can reuse those in different types of products, not just a customized solution in every case. We've got to use different sorts of surveillance and real time monitoring tools. I'm going to give you a great example I'm very proud of today. Our first FinTech investment was a company called Enigma.
It's a very sophisticated data aggregation utility. We've been able to take that and co develop a data aggregation and surveillance program in our AML world that's going to substantially improve the traditional rules based programs you see out there today using a lot much greater usage of our various data sets. And then we've combined that I think Rohan showed that to you out at one of the kiosks. We've combined that with an RPA solution that will substantially improve the efficiency of the workflow around working all of those alerts. That's an example of something we can do today we could not do a year or 2 ago.
And the neat thing about it is we can reuse that approach in many other applications as well. So, it's reusable across many, many different dimensions. So, what we're really trying to do is be more insightful and strategic as we think about risk and enable the business transformation that we have laid out for you well in these other presentations. But again, we don't want to fool ourselves. You have to think about new and unique risks.
And the risks may manifest themselves differently in today's world than you've historically experienced. So, I've kind of laid out a number of the things that we're seeing out there that we are considering, But we have to think about particularly the level of operational compliance, privacy risk, etcetera that comes up and that we've got to make sure that we adapt our risk and control components to address those. Many of these risks may you may actually create more risk by trying to solve another risk. So, you may be trying to reduce fraud through an authentication profile, but you find out that that authentication profile is discriminatory and creates compliance risk. So how do you deal with that?
So you've got to understand those relationships and avoid unintended consequences. So, let me just get Paru through and give you a few things that we're focused on right now. I'm really excited about. First, really prevalent in all of these areas of innovation are 2 key risks. This would be thematic issues for the entire industry you've really got to be focused on.
One is just overall you need a comprehensive and sophisticated change management protocol. But just because of the speed and pace of the things that you're doing. Historically, again, it's slow in nature. We've got to move faster, but there are a lot of things going on at once as well. So we've also got to think about aggregate change risk.
Many of these other initiatives I've mentioned involve 3rd and 4th parties to a degree never seen before. We don't develop all of our solutions. So, there's a number of innovative non bank companies that we all partner with. Those they operate in the public cloud. They're the heavy use of APIs, a number of considerations that you have to really think about.
So a couple of things that we are doing that I think are serving us well. We are actively participating in some co development of some shared utilities through the industry around 3rd party vendor management. We think that will create some industry certification standards that we don't have today when they enable the banks to come together and more efficiently and effectively get to market with some solutions that will be more difficult for us to do on our own. Barbara did a great job and the others that have spoken before me around the innovation around digital and technology. And so certainly at the forefront in everyone's mind has been the security or the cyber side.
But I would tell you as a CRO, I'm very concerned about technology risk and aggregate being one of the big new risks that you really got to get your hands around. And it's far beyond just InfoSec.
So, it looks at some of the
things Barbara talked about around application stability and availability, cyber resiliency, data protection and privacy and how all of those things fit together. So one of the things that we are doing, many others very similarly, but we can't just depend on Barbara's group to do that by herself. And so, historically, that's been under the technology risk has principally been under the CIO or the CISO in the technology group, but we've actually elevated a very strong independent risk function in the second line of defense in my world. And these are staffed by former CIOs, CISOs, CTO people with those kind of pedigrees that come in and help us oversee the rapid programs that Barber is putting into place and provide appropriate effective challenge and oversight and reporting. So, I'm very excited.
We just hired our 1st CTRO and he's on board today and doing a fantastic job. The other thing you also have to think about the convergence that's occurring. So, for example, in our Financial Crimes program, historically been around money laundering and then had separate programs around basic fraud. And also you have things like security alerts going off in Barbara's CTOX center on the cybersecurity side. Well, many times the bad actors are trying to get through any way they can.
So, you may be triggering multiple alerts in disparate parts of the bank. So, we're trying to think about how we can bring all that together either physically through common platforms or decisioning tools or through virtualization. So, what we're trying to do is create a more integrated view of the financial crimes risk that's out there. And it's very prevalent in the new applications in the digital world. Also compliance and privacy that's historically been a very manual audit like function.
That will not work in today's world. There are new heightened areas of consideration around privacy and compliance that are actually originating out of these new applications. So, we have to think about that differently much more constant surveillance and monitoring. So, we're putting in a brand new integrated GRC tool to help us utilize much more robust data monitoring, quantitative modeling and things like common risk taxonomy. So, it allows you to really unleash the power of the data and manage compliance risk in a much better way.
Final thing I want to talk about from a risk and control area though is really goes back to our culture. And Kelly really hammered that hard yesterday as he should have. And that's it's great to innovate. And you can put all the risk and controls you want to, but you can't control it all. I don't care how much automation you have.
So, at the end of the day, we have 36,000 employees that we have to depend upon to execute our processes and serve our clients and take care of all of our stakeholders. You cannot do that if you don't have a strong corporate culture. And so, for us, having this absolute passion for ethics and corporate behavior is really, really important. And what comes out of that is a very, very strong risk culture. And so I sleep very well at night because I feel 33,000 associates assisting us in risk management.
A couple of things that we are doing new that I think are enhancing all of this. We have a program, I didn't put it on here, that we call voice of the associate. Kelly asked me to implement the last couple of years. I personally chair a call every quarter with all levels of associates in the company on an anonymous basis to really get at do you have real concerns about risk issues, behavioral issues, ethics events, are you comfortable escalating to management. We want to know what's going on all the way down into the company.
It's been a very valuable process. And frankly, it's nothing more than reinforce to me how strong our culture is. Another thing we've recently done is we've elevated to the highest level a new culture and conduct risk committee that's made up of most of the members of executive management. And again, the whole idea is to bring together the various programs we have around ethics and behavior so that we can make sure that we never have any unintended consequences no matter how large that we grow. And I would just leave you with this.
While it may be self evident that that lowers things like compliance and reputational risk, frankly, just lowers risk overall. If you have a strong culture, you're going to have people doing the right thing. So, what I want to spend the remaining amount of my time on is certainly a timely topic around credit risk and our approach to lending, which has always been disciplined, relatively conservative, but mostly very, very consistent. So, obviously, I've laid out the elements that are foundational to our lending approach around client selection, around just very strong transactional based underwriting and then very, very disciplined portfolio and servicing. So I want to give you a couple of thoughts around credit where we are in the market.
We've always had consistent performance. I've laid out for you some data you certainly could get yourself, but this looks at our results over really over the last 30 years or so. And certainly, we've outperformed on a risk adjusted basis both from a loss taking and a return standpoint. But what's really interesting is throughout the cycle we will still outperform. But obviously as you get potentially later in the stages of the cycle you see a lot more convergence.
And we're at the all time tightest level of there's very little differentiation in credit results right now. But I would remind you that the gray shading is the distribution of the results among the peers. So, you can still see while the averages may not tell the whole story, you can see there's a wide degree of performance really in a year. And particularly as things turn, it gets much wider. So, we're very mindful that while we're not calling any sort of late stage cycle necessarily now, we do see a lot of behavior out there in underwriting and risk selection that just feels very characteristic of late stage cycle dynamics.
And we've listed some of those there. Obviously, everybody's performance looks similar. There's an obsessive focus on revenue and growth. You don't hear a lot of talk about quality and you certainly are seeing loosening underwriting standards. So, obviously, we're mindful of that.
But for BB and T, the main message I want to give you is we don't go through risk own and risk off periods. We're always on. We're always focused on being consistent whatever the cycle is. One of the ways we do that is a real obsession around diversification. So, one of the things that Kelly and I put in when we came in our roles was a rolling comprehensive 5 year target portfolio mix process.
So, we have a lot of work that goes into this around stress testing and performance review where we try to model what we think is an aspirational portfolio mix that we can lend into given the market opportunities. And what you can see is substantial diversification since the Great Recession and we're very close to where we think an ideal target mix would be. And again, what drives us is the goal toward lower variability, higher resiliency. So, for us that looks like a conscious effort over the years to reduce our relative CRE and ADC and resi mortgage concentrations and move toward a more granular C and I and non real estate consumer. And we're making great progress there.
We think it will yield excellent results. One of the ways that we drive that is through a very, very strong limits framework. So, we have a myriad of ways that we segment the portfolio both commercial and retail and also a very, very intense focus on granularity through our single borrower and our single project or the individual limit considerations. So, one of the things I thought would be helpful today, we haven't to give you a little bit more color under the covers of what's in our portfolio. We get a lot of questions about that and we certainly disclose a lot, but give you guys a few tidbits today we don't normally disclose.
Remind you all our portfolio is $146,000,000,000 today. It's intentionally diversified between commercial and retail. But the point the takeaway here is that even within commercial and retail, there's a lot of diversification, whether it's in C and I, CRE or on the retail side. And then geographically, with the complement of national businesses we have, particularly in the non real estate consumer, we're much more than a Southeast and Mid Atlantic loan portfolio today. And that geographic diversification I think will serve us well as we look forward.
So I thought I'd dive down just a little bit in the C and I side $62,500,000,000 You can see no single sector concentration intentionally focused on diversification. Couple of things I'm quite proud of that I think are differentiated characteristics. We have a very conservative portfolio. Our average loan size in our C and I book is less than $1,000,000 Our SMIC book is less than 10% of our total loan portfolio. Our top 20 relationship commitments are less than 35% of tangible common equity.
Again, I would ask you to go back and see if anyone else is anywhere near that. I think we look really good from a concentration level. And I've listed out some of the things that we avoid. There's minimal exposure to leverage finance and you can see things like second liens, term Bs, bridge financing, full underwriting. We just don't do those things in general.
So, I think, again, our C and I book is very diversified, very conservative. Similar on the CRE size, average loan is under $2,000,000 Our largest single CRE credit is only $70,000,000 We just don't take big project risk or large significant exposures and we're very diversified by the various MSAs. Another thing that we do is very intentional about governing down CRE exposure limits. It's governed down from what we would do on the C and I side and further limited by project type. Almost no exposures on the mall side.
I know that's probably a question you all have. And we are our loan sizing is more conservative. We use the stress cash flow coverage, which creates higher debt yield requirements than most of our peers. And so we end up sizing our loans more conservatively to stress for interest rate shock. Auto Finance, I get a lot of questions about regional acceptance.
I thought I'd give you a little color there. Regional has been a strong performer for us for a number of years. We've learned the business the hard way. We have very sophisticated analytics. More importantly, we combine that with very, very strong risk controls around the operational verifications and collateral assessments.
You really need to do that in the non prime side. But I've just put some history here to show that it's interesting. These types of businesses tend to stress a little earlier, but they recover really quickly. We actually had some of the best performance we've ever had at Regional coming through the crisis as a lot of prime borrowers fell down. But we're actually producing lower losses today substantially than a year ago.
So, we feel well positioned no matter what the cycle will be. This is a business we understand very well, but we're also not greedy about exposure levels. And so we keep a pretty tight limit on how much we will do even here, even though it's very attractive margins. Resi mortgage and home equity or DRL, very conservative. You can see that we hold conforming loans and we do jumbos for our wealth strategy.
There's no particular concentrations there. Very minimal pre crisis exposure on the DRL side. This is all in the branch direct originated credits in branch world, very, very clean underwriting. We also have a fast growing wealth lending segment that Rufus mentioned, again, very attractive. So, again resi mortgage and our consumer book looks very, very good.
I would mention and I'll talk about this in a moment we are not participating today in any sort of 3rd party unsecured lending platforms. We certainly are evaluating those, but we want to focus our consumer opportunities and cycle tested businesses that we think have more attractive returns. Our card sides, really we're selling cards to our clients. So this is a tidbit I'm very proud of. 70% of our bank card clients have 4 or more services.
They are our clients. We're not doing any subprime or mass solicitation. So, it's a really conservative book. Now, it's growing fast with new product opportunities. This is a huge competitive advantage here for us.
We've worked for 20 or 25 years to make investments in a number of national prime based specialty finance platforms. So,
let me say
that again. These are not subprime platforms. These are prime based primarily small ticket secured finance platforms. And I've listed those out. I know Rufus and Chris and Brent went over a lot
of those. But I think
the main takeaway for you all highly diversified sets of proven cycle tested business models. We would rather spend our time growing these methodically and deliberately than spending our time investing in unsecured lending right now. And finally, I just want to end here how do we look forward? What you can count on from BB and T is to maintain that consistent discipline through the cycle approach to credit risk management. We don't get in and out of lending.
We're steady through the cycle, But we've also proven to you that because of all the diversified investments we've made we have plenty of growth opportunities even with that approach. Where we're spending most more of our time, however, to what you heard earlier is how can we make the operational and client onboarding processes more efficient and a better user experience. So, lots of good investments there. All of those also come within new and improved risk controls. I said it before, our investment bias right now on the lending side are proven through the cycle platforms.
We think we're in a lot of nice businesses and very careful and deliberate evaluation of alternative credit delivery and origination platforms. But I think you will see us be very careful about jumping in too fast and too hard particularly as this credit cycle goes forward in a longer fashion. So again, risk management's more critical than ever and I feel very, very good about our historical performance and our opportunities ahead. So, thank you very much. And I'll now bring in Daryl.
Every time I walk into this building, I see a big building, a lot of associates in it. What I really see is the LED lighting and 25% lower utility bills. So I want to thank all of you for coming here to Greensboro. I know you took time out of your day and your week to come here, and I hope you found this to be very helpful. But we're almost done.
After me, we're going to have a short break and then Kelly is going to come up and we're going to do Q and A. So I'm going to try to close this up and maybe try to pick up a little bit of time. So what we're trying to do, my key takeaways are trying to grow organically through geography and diversification, delivering top tier quartile profitability, also using optimal capital management and using best in class shareholder returns. You've heard a lot of things about associates, culture and business strategy today. All those elements work well together at BB and T such that we provide the best return to shareholders in the sector.
We have a strong history of consistent performance. To produce leading sustainable returns to shareholders, we've grown our business within our risk appetites, driven by diversified strong market share across businesses and markets. We've done it through leading profitability, and we've managed it through capital formation and in the best interest of our shareholders. Organic growth is our top priority. As you have heard from everyone today, we are growing our client base quite well.
We are very well positioned in the markets we serve with leading market share and strong local presence. Our markets are smaller on average than our peers. We like that. Our community banking model works really good in these markets. We're localized, and the client loyalty factor is stronger.
Chris showed you earlier, our footprint on average is growing faster than our peers, which provides a great opportunity for us to grow the business. We like the diversity of the markets. David went over this earlier. Texas, Carolinas and Florida are growing much faster, while Kentucky, Pennsylvania and West Virginia are growing slower. Actually, West Virginia is one of our most profitable markets.
We have found success in each market, and we like the balance. Again, organic growth is a top priority for us. As Clark said, we won't sacrifice our well defined credit discipline. That has served us well for many decades. We don't try to time cycles.
We stick to our risk parameters. It's just our culture. Our markets are a great backdrop to support the organic growth but is also the diversity of our business. Brandt, David, Rufus and John told you a lot about their businesses today. But when you put them together, you create great synergies, diversification that drives consistent and prudent growth.
As Chris went over, we operate in a 15 state branch footprint complemented by many national businesses. We are balanced between spread and fee income. We have a loan portfolio that's about half commercial and half retail with sectors and geographies that are spread out and diverse. As Rufus said, our insurance our wealth management business has significant upside. As John said, our insurance business brokerage is a pure free income business and advisory business that takes no underwriting risk.
It has been core to BB and T for many decades. Insurance has been set up to fry cross sell with our bank clients and with its own business. It is also balanced 50% retail and 50% wholesale and stress tests very well with CCAR. As John said, the public markets attribute a very high valuation to insurance brokers for good reason. They have very strong cash flows with limited capital use and they and in this case, very synergistic with the rest of our businesses.
Diversity of our business has contributed to leading performance historically and will continue to do so going forward. You heard from Clark today about our risk culture. It's a culture that has resulted from our outperformance for a long time. Our business model has resulted in relatively granular loan portfolio versus peers. A much greater percentage of our commercial loans are smaller exposures.
You can see this in the last Moody's report that shows a second out of 67 banks that participated in the survey. We do not take large positions just to grow our loan percentages. We are community bank driven, and we don't compromise on our standards. Lastly, Gerard's ratio, the Texas ratio recognizes the success of our risk culture. We've always been and remain focused on achieving best in class shareholder returns.
As Chris showed you earlier, we have industry leading return metrics and are focused at maintaining competitive position through a variety of economic backdrops. Our net interest margin benefits from balance sheet mix and diversity. But more so, the stability of our net interest margin relative to peers illustrates our balanced approach. We are focused at growing earnings consistently through different cycles, not when rates are moving in one direction. Half of our loan book is fixed, the other half is floating, plus we use a prudent use of derivatives to manage the position.
Our strong return metrics are the result of many items we discussed and will discuss further. These are leading industry returns across cycles and are clear driver for top tier profitability. The continued focus on solid expense management has driven strong shareholder returns. We have generated positive operating leverage each quarter this year and committed to maintaining that discipline in 2019 and beyond. Our strong culture of expense management has led to ratios that continue to trend downward meaningfully below peers.
We have managed to do this without compromising BB and T's client experience. As Dante showed you, our NPS ratio is moving up. Chris showed you earlier that we have many programs going on to drive efficiency and enhance revenue. You heard from John, Brandt, David and Barbara show you how they are transforming their businesses, improving margins and having better efficiency and productivity. BB and T has financial flexibility to make the necessary investments in the new bank, and we are confident we will lead to improving overall shareholder returns.
Our funding base is a key competitive advantage for us. We have transformed the right hand side of the balance sheet materially over the last 10 years. When I joined the company almost 11 years ago, we were in last place in our peer group as DDA as a percent of total deposits. We are now approaching the top quartile. This is attributable to the hard work of Donna, who used to run deposits and now is our Treasurer as well as Rufus, Brandt and David to create products and grow relationships.
On average, BB and T clients have had their account with us 10 years on the retail side and 8 years on the commercial side. Looking back post bank acquisitions, DDA growth has been positive for us while negative for peers. As you've heard from others, we are focused on providing the best client experience for them while providing convenience, which leads to long term relationships. Our strong credit metrics, profitability combined with diversified business markets plus capital and liquidity and great performance over many economic cycles have been well received by the rating agencies. BB and T has some of the highest long term ratings in the sector.
These ratings help reduce funding costs, maintain strong deposit relationships and enhance profitability. While our top priority is strong growing core deposit base, we continue to have a presence in the corporate debt markets. The charts on this slide illustrate the strong performance of BB and T and the compression of our debt levels versus similarly rated peers. Fixed income investors have awarded us with strong debt spreads as they recognize the strength and profitability at BB and T. Optimizing capital has always been a priority for BB and T, and we will continue to hold the right amount of capital relative to our risk appetite.
Peer levels have come down over the last several years, while we have maintained ours at a constant level while maintaining industry leading returns. As you know, our performance through 2,008 stress testing was very positive, representative of a strong and resilient PPNR aided by our insurance brokerage business and diverse and granular credit portfolio. As you have heard from Kelly, organic growth is our top priority. We have been clear on our priorities. 2nd is strong dividend payout.
And last is share buybacks and strategic opportunities. Our capital levels are adequate to support and drive organic growth. We have always paid a strong dividend, and we have every intention to maintain a payout in the 40% to 50% of earnings. Share buybacks and strategic opportunities have helped drive earnings per share growth and will support organic growth in dividends to produce consistent strong overall returns. We expect that these strategies will produce 8% to 12% annualized returns to shareholders.
As you have seen as you have likely seen, the Fed recently proposed changes to our regulatory framework. There still has to be work done before these changes are finalized, but we view these as very positive. We believe, if enacted, that these changes will be positive for BB and T and for the sector in general. The benefits for us are meaningful when we cross over $250,000,000,000 in assets. Cost avoidance by not having to implement the advanced approach is really big.
AOCI relief will free up capital that can be used in the 3rd bucket for buybacks and strategic opportunities. We are not sure yet how CCAR 19 will be structured or whether we will be part of the stress test process, but we plan to have an aggressive share buyback. Given our LCR ratio is approximately 130, we plan to bring it down approximately to 115 over the next year or so. The plans to do this will be by not reinvesting margin and will also grow net interest income with a relatively flat balance sheet. Incremental share repurchases will be about $1,000,000,000 more than what you would typically see out of us over a CCAR year, resulting in solid shareholder returns.
Lastly, Donna and I believe that this strategy will be much more efficient and much more profitable balance sheet. BB and T shareholders have received a compelling total shareholder return over the long run. The chart on the right shows our performance since pre crisis, which oddly compares quite favorably. Many of you in the room and listening have owned our shares over this period and have experienced the appreciation. We thank you for your support.
The earnings profile of our company has allowed us to build tangible book per share at a faster rate than peers while maintaining a strong return on capital to shareholders. As we turn the page to 2019, we are optimistic on the economy and the landscape that we believe will translate into another solid year for BB and T. Our outlook for 2019 is based on a few conservative assumptions, which are outlined on the left hand side of the page. We expect the balance sheet and revenue growth to be in the 2% to 4% range. Credit will continue to be relatively benign and estimate 30 to 50 basis points in net charge offs.
We expect expenses to be flat at $6,800,000,000 excluding merger and restructuring charges for a 3rd year in a row, which will provide another year of positive operating leverage. We believe that these are realistic numbers that we can achieve, and we are already in the midst of executing on this plan. The last slide brings it all together. As we think about our long term targets, the message is clear. We have delivered our goals across the cycles and expect to continue to do so.
Our outlook has improved for profitability metrics since our last Investor Day. We expect a 12% to 15% return on equity, 19% to 20% return on tangible equity and a 1.4% to 1.7% return on assets are best in class. Charge offs to normalize in 40 to 60 basis points range. We expect to achieve returns generating 3% to 5% revenue growth, consistently maintaining positive operating leverage. And we are planning to target a CET1 ratio of 9.5 to 9.75.
In summary, we are very excited about the outlook and our ability to deliver on these targets. So the takeaways from this is we are continuing to grow organic growth through revenue and geography and diversification, delivering top tier profitability, optimizing capital, producing best in class returns. Given I have about 5 minutes left oh, no, Here we go. I had to take a few minutes to talk about CECL. First, BB and T is on track to implement the standard as required in 2020.
We are testing our models and need to finalize certain assumptions that are inputs to the model, but we are on track to go into parallel in mid-twenty 19. As we have built the models, test results show that CECL is more procyclical than the current method used today. These models have been built for stress testing and modified for CECL and are the most scrutinized models. Our stress testing models have hundreds of pages of documentation and have been reviewed by second line, third line, regulators and auditors. Preliminary tests show that these models are fit for purpose and have been back tested using historical information.
When CECL was first approved, it was more of an academic review and the studies assume perfect foresight in the economy. The BPI study that was recently issued mirrors how the models actually work in the CECL environment. In a benign environment, you can see that the total reserves are about the same. However, the commercial reserves are much lower, while the consumer reserves are much higher. In an adverse environment, you can really see the procyclicality of the reserves.
The residential mortgage reserves are up 3.5x and the consumer reserves are approximately double. This creates large earnings volatility, depletes capital and establishes a strong disincentive to lend in the stressed economic environment. Moody's Analytics is a very good economic forecasting group. However, it is impossible to truly predict the future. As you can see, in 2,007 and 2,008, Moody's did not call for the recession.
As the recession played out, they continued to underestimate the magnitude. However, just when the recession was bottoming was when they threw in the towel and the recession was going to get worse. You can see the impact on the residential mortgage portfolio. As we have discussed, these are quantitative results with no qualitative adjustments. However, you have to remember what was going on in 2,009.
You had JPMorgan saving Bear Stearns, Washington Mutual. You had Wells saving Wachovia, PNC saving National City and Lehman's family. I ask you, what regulator is going to allow you to adjust your model results downward with a qualitative adjustment? Coincidentally, in August of 'nine, BB and T was successful in winning a competitive bid from the FDIC at Colonial. We priced the loan book at a 37% discount.
After many years, the economy improved and actual losses came in closer to the low 20s. This is another example of how markets overreact in economic stress. Because the economics of lending has been detached from the accounting, it makes it harder for banks to lend to small businesses and nonprime clients. This slide shows you of our subprime auto portfolio, where we book reserves now that we expect to have in 1 year. Given CECL that impact, the reserves more than double, which will make it very challenging to make these loans when you're losing money and capital.
This hurts the most vulnerable sector of the economy. So what can we do about this? All banks have sent in letters for a pause and a study of the procyclicality. The Fed can easily adapt stress testing models for CECL, and we expect to produce similar results. Also, 21 banks have said into FASB recently a CECL alternative that builds on its strengths but addresses regional banks' largest concerns.
It's a 3 bucket approach where bad loans and 1 year of losses from the good loans will be booked into income with the rest being booked at OCI. This fits nicely with the Fed's NPR on capital that changes that basically backs out OCI for regulatory capital. This significantly reduces the income volatility associated with CECL and approaches and aligns better with the international standards. Investors will have the visibility in the potential losses of this loan book. BB and T supports this approach.
We thought it was important for you to show what we're seeing as we roll out CECL and the potential impact on the capital in
the system. So before
I so let me wrap it up. So to wrap it up, you heard today the vision for the future and why we are so confident we can continue to build our success and deliver top tier returns across the cycle. Our goals remain simple and unchanged for decades. We will grow the company prudently. We will do so with leading profitability, and we'll manage our capital to help continue to drive shareholder returns across the cycles.
Before I turn it back to Rich, I just want to thank some people that basically put on this Investor Day. As you know, doing this is a huge effort. First people I'd like to thank is Alan and Rich, who run Investor Relations. The effort and the leadership that they put on this was really big. Also part of their team, there is Christina Sherrill, who's here somewhere.
She does all the presentations, and I will tell you a story. We got all these presentations about a month ago, and they were great presentations, but they were all great individual presentations. She spent the last month putting it all together, making them all look alike and flow together. So I give her great, great effort and gratitude for what she did there. Others in IR that helped out were Richard, Carla and Jonathan.
And then in IT to help get everything working for this day, Ken Daniels and April Sterling. The others that really helped on this today is, so as we were putting all the presentations together, we were meeting in the evenings about every other day for about 3 weeks. And my team is sitting up here in the back. Our Corporate Controller, Cindy and Henk Sberthy, our Assistant Controller Dale Davies, who's in Corporate Finance and Aaron Ritter and then Hope Danchowski. Hope got the job of actually going back to each of these executive managers saying, we're changing it here or we want to do this over here and did a great job and the executive managers got a little tired of hope, but I think it all worked out okay.
The last group I want to tell you that really helped us out is not a BB and T group. It's somebody that I've worked with for 25 years and it's basically a banking team. It's really they're here today over there. It's Vinny Battenail and Jason Braunstein and their team is Eric and Sabrina. They really helped us work and pull this together.
They were just part of our team and want to thank you for all their efforts in pulling this off. So with that, I will turn it back to Rich.
Thank you, Darryl. Just a reminder, I did get a question earlier. We're going to have the shuttles leave at 3:15, one for the airport and one for the Leadership Institute. I had a question about what that shuttle going to Leadership Institute, what time it would get to the airport. Think about 4 to 4:15, but maybe plan on 4:15 in case you have flights that are leaving shortly after 5.
We're going to take a break now and we're going to start back promptly at 12 I'm sorry, 2:30 with the Q and A session with executive management. Thank
you.
Get started. You've been very patient and to allow us not working? Our first question. Okay, good. So before you get to the first question, I want to recognize Tina Fuller wherever she is.
She's been the event planner and she's done a lot of this work. So, Tina, thank you so much. So we have our first question.
Thanks very much. Jeff Elliott, Autonomous Research.
So you've
got this news about the €250,000,000,000 threshold very likely going away, assuming the NPR proceeds as proposed. And you've also talked quite a lot about the investments you're making in technology. So it kind of feels if you take those 2 together, you've got a regulatory environment that supports acquisitions and you've got investments which can be scaled over a bigger asset base. But you sounded a little bit more downbeat on M and A on the most recent calls. So how do we square those things together and how do we think about the inorganic growth strategy?
Yes. So, as you've heard all day today, my associates talk about a variety of really, really good and I think very exciting strategic organic growth plans. Most of the technological investments you've heard about are either to make the backroom more efficient, more effective or enable the frontroom the new bank as we talk about it, the new digital strategies. And so, all of that is supporting organic growth. As I have said repeatedly, we are laser focused on organic growth.
We have made major investments on behalf of our shareholders over the last several years to prepare us to get really good returns off of those investments. And we frankly think it's time for us to generate returns off of those investments
Mike Mayo with Wells Fargo Securities. So thank you for the day. In Boston, last week, we heard about 15 bank presentations. This might be about the 5th Investor Day many of us have been to this year. And some of what we've heard seems really different, but
some of
it doesn't seem as different than some other banks. And you're saying you're a different bank. We've heard some examples. If we could just maybe go down the line, if you had to pick one aspect that you think where BB and T is really different, what's that one aspect that you'd highlight maybe in each of the different areas?
Just go right down the line, okay?
So for our difference, I would say it's really the culture that we had with management. So I would say one differentiating factor is the management. We spoke last night to a couple of investors, but the team that we have here assembled, there's a lot of us that have worked together for a while. There's some younger ones and they have good growth potential. But we're all focused on trying to achieve the best thing for the company and the shareholder in the long run.
So everybody is aligned for that one goal and there's really focused on that.
Yes, that's obviously the first one always. But I would say diversification. You asked me that last night. I said diversification. You said that's boring, and I said that's good.
So I would say diversification, it keeps it works in good and bad times.
I think from a risk management standpoint, the number one differentiator is the risk culture. We live and breathe our risk culture every day, and I think that's demonstrated in the results, and I'd put ours up against anyone.
I would say the item I shared with you on the co creation, having the 40 professionals, 7 PhDs that are co creating real time with our clients is making a meaningful difference, allow us to make iterative changes in a more positive way.
I think from a branch network perspective, the way we go to market is differentiated. The integrated approach that comes through our community bank strategy that's been around for 30 years, where our retail branch teams are connected to all the other lines of business and support our clients in an integrated way is a key to differentiator.
I would say in our business, it's an unwavering commitment to evolve the business, to do the tough things to move the business forward so that we can very productively serve the client in a very, very efficient way.
Like I think in the Corporate Institutional Wealth Businesses, we have never chased the market. We've never gone after the hot product. We've never gone after the stretch structure. And that leaves us strategically positioned to really gain share because of credibility, but also we're underweight. We are still underweight with the businesses that I represent.
So there's material growth opportunity out there for us in the marketplace.
As new to the Financial division, I would agree. It's really all about our culture.
Mike, I'd say it's our insurance business. No other bank in the United States has an insurance business anything like ours. We're the largest bank owned insurance broker and we're about 20 times the size of the 2nd largest bank owned insurance broker.
You saw it on full display last night. Our leadership institute is a differentiator. We deliver that to our clients and it's unique. We've been doing it for now 4 decades. And you just can't turn that switch on.
It's here to stay. And it's a real differentiator for BB and T.
Mike, I think it's our focus on execution and continuous improvement.
I would just add for our transformation and I would just add for our transformation and technology that we've been putting together, one of the things I talked to our associates about is if you ever seen the movie The Greatest Showman, one of the songs in there is called A 1,000,000 Dreams. And really the transformation that we and journey that we are on really came from the goals and hopes and dreams of our technology associates and what they actually want to do. And it's really the power of the associates actually coming together with their dreams about how a technology organization should run
to be able
to deliver to these teams. And so it's the 1,000,000 dreams of our associates coming together.
Mike, I'd say as you've heard already it's the diversification. It's the risk culture that we've set for ourselves, the steady risk appetite that we've maintained for a long time and really just sticking to that appetite.
So just to follow-up, Mike, Daryl said it right and Don, I apologize. The culture is different. That's why we spent so much time last night. But I get your point. A lot of the strategies that while they're new and different for us, a lot of other companies have a lot of the same strategies.
I'll get you a point. But the real, real difference other than the philosophy, the culture at BB and T is about our what we call integrated relationship management and our integrated leadership approach. This group of people meets every Monday for a number of hours, sometimes all day, integrating all of our strategies. So it's ultimately about execution. Everybody can have great strategy concepts, but it's all about execution.
At BB and T, because we are so tightly woven, we share everything all the time. The team gets along great. It's all about execution. And that's about integrated relationship management to the client and the integrated leadership thinking at the corporate level. Yes.
Thanks. John Ping, Carey, Evercore ISI. Just back to the M and A question. I know you said you're laser focused organically and what you spend here is positioning you better for that. In your mind, is there a change?
Is that a change in how you think about M and A versus a year ago? I mean, are you thinking now given all this investment and given the investment you need to do and what technology is doing that you just are not as interested in M and A as you were previously?
Well, just some perspective, M and A has been a part of our strategy for a long, long time. About 3 years or so ago, we did 3 mergers. I said at that time we were going on a self imposed pause. I have not released that pause. And I have further explained that we are dramatically focused on organic growth.
And I further said that, frankly, doing deals in today's environment is extraordinarily difficult. The world has not caught up with the reality in terms of the economics of all the changes we have talked about. So number 1, we got a lot on our plate. Number 2, we laser focus on organic growth. Number 3, the economics are not very conducive to emerges anyway.
And number 4, nothing is fundamentally changed. I've been saying the same thing for a while.
And then one follow-up on capital, if I could. On the CET1 target of 9.5% to 9.75%, that previously was 10%. Is there opportunity to continue to push that lower? I know it's your
And we had kind of said that was kind of our level. It was a very conservative level. But what we've talked about as we contemplate next year's CCAR, I assume that we're into CCAR, but not our next year submission, which we've not finalized of course as we head into the end of the year, but we think there's 50 to 75 or so basis points that we can release relative to these changes given our very low risk profile.
Ken Usdin from Jefferies. Just two expense questions. First is, Darryl and maybe for Barbara as well in the context of keeping expenses flat as you talked about obviously savings and funding the investments. Can you just help us understand how much is the investments growing versus what your kind of self help is in terms of balancing that?
So is it on? Yes, it's on.
So the way I would answer that is we are basically taking away expenses out of the old bank, whether it's in branches, we're consolidating back offices, reduction in force in individuals, utilities, whatever, and we are redeploying it into the new bank. That new bank includes digital, includes a lot of the projects that Barbara was talking about in IT and also includes some revenue enhancement, new products and services and all that stuff, marketing as well, increasing our marketing budget. So all that's boiled together. If you actually look at the IT budget, she's probably going to be flat to up. But one of her transformations is really getting to be more productive.
There we go. Absolutely, one of the things that we're focused on when I talked about lean process automation and you think about the ability to take out or do additional work around 10% to 15% additional work. So you certainly can make choices about whether you take that cost out or whether you redeploy and do new initiatives. So again, our goal is to make sure that we are as efficient and effective as we can be. And then as we do that and free up dollars, we can look to see how we either reinvest that back into the technology part to support what the teams are doing or if we need to reduce expenses then we certainly can do that as well.
But at least we have the financial flexibility with the activities that we're doing to reinvest in the way that's most appropriate for the company.
And thank you. And then Daryl, just my follow-up on that is you didn't give an explicit efficiency ratio target. You talked about positive operating leverage. I'm just wondering if you can just help us understand just your general thought process of where efficiency should go in the future from the 57 and change?
So I mean, if you look at 'nineteen, we didn't give a specific efficiency number target. But if we can grow the revenue in the 2% to 4% range and keep expenses flat, we're going to be in the mid-50s. When you get out beyond 2019, how much efficiency and operating leverage you can get, It's probably not expenses flat, but it's basically maybe expenses growing 2% and revenue growing 3% to 5%. But hopefully, we can continue to improve upon that efficiency ratio.
And remember, when you're making comparisons to other institutions, there's a couple of 100 basis points inflation in that, if you will, for our insurance business, which is very, very profitable. So if you think about where we are today, we're really already if you adjust for insurance, we're already in that 55 kind of level. So, if you adjust for insurance, what Daryl is saying is we could see our sales going below mid-50s. But a lot of that depends on the revenue. So the efficiency ratio, I know we all like to talk about it a lot, but it's very tricky.
In the last several years, most of us have improved our efficiency ratio by controlling expenses with very meager revenue growth. If we go through a period with more normalized revenue growth, there's lots of potential.
Gerard Cassidy, RBC Capital Markets. Coming back to the differentiation question, you pointed out others have similar products as yourselves. We heard last week at the BAB a lot of digital talk and data and all that stuff from many of your peers.
Are you at a point
yet where this differentiation will allow you to charge higher prices for products or pay lower rates on deposits or we're just not there yet where customers come to expect this type of service, but you really can't price up for it or benefit from
it from a pricing standpoint.
Have you been able to monetize it yet?
Well, yes, in some cases. In some cases, no. So one of the great challenges that companies that banks have today is to pick the areas that they can really create true differentiation and where they really cannot. I mean, it's nice for everybody to say, look, all of our products are better than anybody else's. That's really not true.
I mean, we can't out credit card JPMorgan or Capital One. We have a good credit card product array. We can't say our credit cards are better than theirs. Where we can outperform in terms of quality of small business, medium sized business, there are aspects of our corporate banking business, our wealth banking business, we have our insurance business. So, yes, we have a number of product areas which are truly unique and or differentiatable and we can get a price.
We do get a price advantage. And but there are some that are trickier because they are more commodity like and it's more difficult to get to price advantage.
Thank
you. Is
that okay? Hi. Betsy Graseck from Morgan Stanley. Couple of questions. One, just a quick follow-up on the capital where you're taking out 50 to 70 basis points for next for long term.
Does that does it matter if the NPR goes through or not? So if the NPR does go through, that happens. If it does not go through?
So we really don't want to start lowering the capital ratio until we make sure that the rule is actually passed as it frees up the OCI capital. One thing to be clear, so I had a question between break on this is, if like this year CCAR was a normal CCAR cycle for us, so our dividend payout was in the around 40% range and then we had our share buyback. Our share buyback was 1.7, though we used approximately $300,000,000 to $400,000,000 of it up on the insurance transaction. So when I talked about in the presentation an $1,000,000,000 it's equivalent to like having $2,700,000,000 in buyback when CCAR-nineteen plays out as an approximation.
So to be clear because this is very confusing. In today's world, pre NPR, pre CECL, pre anything else, the minimum level of capital that we have to have is 7%. So, if you start from that and you say, well, we're pretty conservative, we'd like to have 150 basis points or so just to operate the business without because it's all below 7, bad things happen, like you have to cut your dividend and so forth. So that gives you 8.5%. You say, well, yes, but 8.5% to 10.2% is a long way.
Well, then you right now, we're having to hold back 100 basis points of calls of $250,000,000 You got questions about CECL which may or may not impact that. We don't think it will. And then you want to also think about how you feel about the economy and other factors as you look forward. So, we fact all of that in. And so today, we've said we were comfortable in the 10 ish range.
So if you assume all of that stays the same, which you could change, but if it stays the same, then that gets you down to that 9.5% or so level post MPR.
Got it.
Okay. And then just another question on the expense side. I think, John, you mentioned in your presentation on the insurance segment that you're interested in getting up that right hand piece of the pie, the net profit. So maybe you could give us a little bit of a sense as how much room there is there, what kind of timeframe we're talking about and is that over and above the expense outlook, Daryl, that you have? Does insurance is insurance one of those levers?
Or does insurance stand alone? So maybe Johnny could Yes.
So Betsy, the guidance that I gave definitely includes and embeds what John is talking about. Everything that Barbara, Brent, David, everybody is doing with all these projects Chris talked about is all embedded in the guidance that we gave. So obviously, John's operating margins are going to go up, which is part of that.
So in terms of increasing the net income slice of the pie in the chart on the right, when I talk about our transformation and the 31 plus initiatives that we have, they're all designed to do that through a combination of increasing efficiency, reducing expenses, improving organic growth. One of the ways that we went about the project was to look at our starting EBITDA margin. It's a common metric for insurance brokers. And we compared where we were to where our peers were and we were lower than they were in terms of EBITDA margin. So, the plan that we put together was to get to a peer ish EBITDA margin over a 3 year period of time.
Our peers' EBITDA margins will also change, of course. They're all working on improving theirs. But if you look at the improvement, it's significant. I should probably, I imagine, stay away from exact numbers, but it's I'd say it's a pretty considerable profitability improvement.
Okay, thanks. And then just one last one for Barbara. Maybe you could talk a little bit about some of the opportunities that you have for pulling back on some of the IT spend? I know that overall the budget is flat to up and we talked a lot about some of the investment spend that you're making in the platform, but it would be helpful to understand where there are opportunities for IT to get more efficient.
So the primary areas when you think about the spend that we have, we have about 40% to 50% of our spend is in what we call labor spend. And so whether that be direct associate cost or contractors or offshore. And so the key for us is making sure in those areas that we are being as efficient as we can, whether it's making sure what we call smart sourcing, whether we source from the right vendor at the right time, also making sure that we are as efficient as we can across that large population of associates and how they do work. So that's a large lever for us to make sure that we're most efficient at. And then the other area I would say is when you look at the other portions of expense have to do with large contracts, large equipment that we have to do.
And so making sure that our contracts and relationships that we have with vendors, whether it be software or hardware, that we are optimizing that spend as well and being very considerate of the length of terms of contracts and the cost associated with this large spend that we have in the infrastructure space.
Thank you. Lana Chan from BMO Capital Markets. Daryl, the revenue target that you gave for next year 2019, does that embed higher rates for the rate hikes?
Yes. Good question, Lana. So what we have in our forecast right now is that the Fed will move in December and we have a move, I think, in March or April and then one in maybe September timeframe. So 2 moves in 'nineteen, curve moving up slightly, but nothing too dramatically in that period.
Thank you. And does it embed the potential benefit from the LCR moving
down? It does. So with us keeping the balance sheet relatively flat, so if it works, see how it plays out, but as security cash flows pay off, if we put loans on, you're probably going to accrete 150 to 300 basis points higher yielding return on that are marginal assets. And that's really how we're going to get some relief on not having to fund. So little bit less deposit pressure, but also higher yields on your overall earning assets.
Thank you.
Matt O'Connor, Deutsche Bank. I want to ask about loan growth.
And I guess the crux of the question is, why are you not more optimistic on the loan growth outlook for 2% to 4%? And I guess the context I'll put it in is, on
the one hand, I appreciate
that you don't want to overpromise on loan growth when there's not much in the industry right now. On the other hand, as I heard from all your business line heads, there's a lot of initiatives underway to grow, whether it's large corporate, expand in auto, the marine. It seems like the runoff portfolio is largely done across the portfolio. You're in faster growth markets. You're more diversified.
So how do we reconcile what feels like it should be a bigger loan growth opportunity with the guidance and maybe it's Clark getting in the way, getting a little more Let
me make a comment and then some of my colleagues can fill in to it. And that cuts across a lot of the team. So we're conservative. And our portfolio has been through an inflection point this year, as you alluded to, in the mortgage portfolio and the auto portfolio. And even though you may have from trough to peak, you would have higher percentage growth rates, but when you look at average to average because those are going like this this year, that makes it difficult in terms of growth even though it's stabilized.
So mathematically, that's some of it. And then to be honest, we're still trying to figure out right now where we're going in the market with regard to these accelerated levels of payoffs that we've had. I mean, it's been pretty brutal over the last three quarters. I mean, once that stabilizes, which it will as rates continue to drift up, at some point, those permanent type product goes out into the marketplace, you'll see higher growth rates. So I think we're trying to be conservative and reflect the math of some of the changes in our portfolios.
But you're right, all these strategies you heard about are very bullish with regard to loan growth. Any comments?
The only thing I would say is the last 2 years, we've grown loans year over year 2.4% 2 years ago. We'll be about 2% this year. So if we get 3% -plus next year, that's over a 50% increase.
Sal Martinez, UBS. One of the themes of today's disrupt or die, and you've been speaking about that for a while. But can you talk a little bit more about what exactly you mean by disruption, where you see the threats of disruption from both Fintech and Big Tech as well. And everything you do as a bank, whether it's lending, facilitating payments, deposit products, where do you see the biggest threats of insurgents coming in and eating away at the economic value? And conversely, where do you see the opportunities to maybe partner with these players and to provide some of those technologies and capabilities at scale?
So the threat is not coming as much specifically from an individual fintech or fintechs. It's coming from this conceptual change that I've described of real time demand. So the marketplace has moved to where they have a dramatic different expectation in terms of delivery of all products and services and especially in the consumer space. And so, in order to comply, we have to build this new bank. In order to build a new bank, we have to disrupt the old bank.
So it's not an immediate threat from any individual company. It's more of a conceptual understanding that the marketplace has changed and it impacts delivery of all of our products and services. So I would say what we're trying to do is take a broad based foundational conceptual approach to dismantling, disrupting, whatever term you want to use, building the new bank so that you have a really strong foundation for the future. And to be honest, we're not particularly concerned about any individual fintechs. I personally think that the fintechs have added some value to our industry and that they've provided some stimulus in terms of focusing on times.
On the other hand, if you ask me, am I particularly concerned about them inherently being our problem? I would say I'm a lot more concerned about other things than that.
Thanks. Chris Marinac with FIG Partners from Atlanta. You mentioned earlier today about the SNC portfolio having opportunity to grow, I think it was roughly $50,000,000 average size. Is that an incremental source of growth next year or would that be more significant in terms of how you get to the 2% to 4% growth?
Sure. I would say it is an incremental growth. I mean, as we up tier what our intent is just to increasingly become more important to the clients we already have and to introduce net new clients, which comes through our expansion strategies broadly nationally in our markets. But as each as the revolvers as the structures come due, we are critically looking at where is the appropriate tiering level for us. So you get an organic uplift out of those as well as adding net new clients.
So I would say it would be intentional.
We got time for one more question.
Oh, geez, pressure is on. Hey, guys, it's Jimmy Hanna. I've been to 1 or 2 of these Investor Days and I just echo what Daryl said, really well put together. I've got Investor Days for banks, payment networks, credit card companies, trust banks. This is one of the better Investor Day I've seen.
So thank you for putting it together. The question for Kelly on culture, as you think about growing this bank from 19 95, 36 largest by market cap and then you think about today 9th largest bank. Over that time, where have there been challenges in keeping the culture consistent? And how would you what are your learnings for the next 10 years?
Jimmy, that's a really, really insightful question. And we have learned some things. There is no doubt that as you get larger in terms of number of associates, more geographically widespread, continuing the culture becomes more challenging. And the reason is this, continuing your culture and building our culture is about teaching beliefs. It's a back to our leadership model of beliefs change behaviors, behaviors create results.
So culture is all about building a consistent array of beliefs that support what you're trying to accomplish. And that's really about 1 on 1 and group type of interactions in terms of conveying what the belief is all about. There's a lot of scientific knowledge about actually changing beliefs. I actually did a thesis on it a long time ago. And changing someone's belief is actually about the consistent conveyance of credible information by a powerful source over a reasonable period of time.
So bottom line, I tell our faces, you have to preach and teach a lot. And so what we've learned is we had to ramp up the amplitude of our efforts in terms of making sure because all of a sudden we look around and say, we add 5,000 new associates every year. So just because we've got it in our blood, they're new to the company. So we have built in indoctrination, cultural initiatives in the hiring process, the onboarding process. Last year, all of our executives spread out.
We held like 60 or 70 events all around the country, several hour cultural events. I do a quarterly video that goes to every single associate where we talk about a lot of things including the culture. Next year, we're going to do a whole another round of cultural events all around the country where we'll again go over and over and over in the culture. So
it's kind
of like when you're raising your kids, you have to kind of keep telling them to do this and don't do that a lot and changing beliefs in a company is no different. So people ask me, can you do it? As you get larger, answer, absolutely. But you have to be really committed. The CEO and the executive team had to spend a lot of time and then it filters down and then you keep reinforcing.
Really, really good question. So we are out of time. I want to also thank you all for coming. You've been very patient and very nice. Most of you, I think all of you have supported us for a long, long time.
We really, really appreciate it. So what you've heard us say is that BB and T is a different bank. In fact, we're a different kind of company. We are a company that is really focused on accomplishing our why. Our why at BB and T is to make the world a better place to live.
We're really serious about that. Now we know we make loans and deposits and get fees and we know we need to make money and we know we need to get the start price up and all that. But to be honest, that's not what we get excited about. What we get excited about is making the world a better place to live. And in doing so, we end up accomplishing the objectives for all of the constituents to support our organization.
So we are a very values driven organization. We're a very culture driven organization. That is the differentiator as we responded earlier in terms of BB and T. What you've heard today is our recognition that the world has changed. It has really changed big time, especially over the last 3 years or so.
We believe it is necessary to respond to that change and that change involves building effectively a new bank because the world now has real time demand for satisfying their needs. And that's why we've seen so many traditional retailers go by the wayside because new entrants have in fact created a new supply capability that they have not been willing or able to respond to. We are not going to die. We are going to disrupt. And as one of my associates likes to say, Jellies better say, disrupt to thrive.
I kind of like that. And so that's really what we're doing with the truck team to thrive. And we believe all the strategies that you've heard from our team today are designed to do exactly that. I will tell you this also. I don't believe there's another executive management team in the banking industry, maybe not in hardly any company that can compare with this group of folks.
If you look at the relatively young age, if you look at the tenure with our company, if you look at the capabilities, when you saw it today and I live with it every day and I'll just tell you I am super, super proud of our team. Would you help me And don't forget this, while BB and T is working hard to make the world a better place to live, so can you. We have a why. You have a why. You're not a driftwood.
You have a purpose. You can change the world. As I said last night, my hope and prayer for all of you, for all of us, as you get up every morning clear about your purpose, know why you're here, focus on the concept of the power of 1. Live today as if it's the only day you have because it is. Don't worry about yesterday.
Don't wait for tomorrow. Live today and make all the contribution you can to this world. And when you focus on individuals, treat them with the dignity and respect that they deserve. And when you focus on every single interaction that you have with people, realize that every time you touch someone, you have the opportunity to make their lives better and you never know where their lives will go because you have the power to change the world.