Wake Forest MBA student writes an article on Professor John Allison’s most recent accomplishment

12.7.2009 Alumni News, Article, General

Wake Forest MBA student writes an article on Professor John Allison's most recent accomplishment

Leading with Conviction on Advance or In Retreat

Originally Posted on Monday, December 7, 2009 | By Paul Davis (MBA '11)

Reposted from American Banker

John Allison does not pull many punches.

During the 20 years he led BB&T Corp., Allison made it clear where he stood, and why. Second-guessing didn't seem to bother him much.

His M&A strategy is a prime example. Through a string of deals, Allison transformed an eastern North Carolina bank with $4.5 billion of assets into a powerful regional with $165 billion. But he stopped buying in 2003, and though this helped BB&T avoid many of the mistakes that have rocked rivals, it was not a popular decision.

"We just passed, over and over again," Allison said of potential deals. "It was very hard, and we were really criticized for it. But everything we saw was high-risk, and the prices paid made no sense."

In the wake of the financial crisis and amid a global recession, that restraint has left BB&T as one of the few big banking companies consistently reporting profits.

Allison also takes pride in having largely avoided the "crazy stuff," or exotic financial products, some of which BB&T toyed with before questioning their ethics and long-term profitability.

"We certainly were not immune, but we made a lot fewer mistakes than some people did," he said, letting loose a long laugh when asked about past criticisms of BB&T's sluggish growth.

"There is a sense of validation," he said. "You have to realize that banking is a long game."

It certainly has been for Allison, who was the longest-serving CEO among those running a Top 25 company when he gave up the title last year. He is to retire as BB&T's chairman in December, on his terms and his timeline.

In recognition of a career full of conviction American Banker is honored to recognize John A. Allison 4th with its Lifetime Achievement award for 2009.

Allison has hardly been coasting to retirement. He made sure BB&T was one of the first big banking companies to exit the Troubled Asset Relief Program, after passing the government's stress test this spring. And in August, the Federal Deposit Insurance Corp. picked BB&T to buy the failed Colonial Bank in Montgomery, Ala., securing substantial protections from the government in a deal that placed BB&T squarely among the nation's 10 biggest.

Allison attributes his longevity to high personal and professional standards.

"I have tried to do every job I was given better than everyone before me had done it," Allison, 61, said in an interview in BB&T's headquarters in Winston-Salem, N.C. "Looking ahead, I feel really good about the values, the investment and the people we have at our company."

James Maynard, a BB&T director who has known Allison since 1985, describes him as a person you "could set your watch to."

"John had the character, ethics and drive to accomplish something really significant," Maynard said. "John has always had extreme confidence in the things he believes in and a commitment to selling those ideas with others."

Robert Patten, an analyst at Regions Financial Corp.'s Morgan Keegan & Co. Inc., said BB&T's conservative decision-making was a direct result of the ethical culture Allison fostered in the 1990s.

"John created a legacy of forward-thinking leadership," he said. "His vision in the world of money and banking, emphasizing honesty, integrity and ethics to drive a value system really have made a difference in BB&T's significant success through this cycle."

Allison joined BB&T in 1971 and was its president in 1989 when the CEO, Vincent Lowe, died.

Maynard said the board evaluated several internal candidates, and the only knock against Allison was his relatively youth — he was 40 at the time — and overall experience.

Maynard jokes, "It didn't take long to look back at his record."

But Maynard also said, "You could also see more maturity in John, and he always had such a calm sense of confidence without needing to make sure people knew it."

Allison had joined the BB&T executive management team in 1980 and became the manager of the company's banking group a year later. Lowe tapped Allison to be president in 1987.

Allison summed up his early vision for the company: "I wanted us to be rationally optimistic."

The brief management vacuum convinced Allison that BB&T needed a clear-cut succession plan; Lowe was the second company CEO to die unexpectedly.

Allison and the board ironed out his retirement more than five years ago, with Kelly King publicly identified a year ago as his successor.

The process played into Allison's long-standing passion for cultivating leadership. "Developing people has been the most enjoyable part of my career," he said. "We invest in people and provide them with a lot of opportunities."

It has also given those who follow the company assurance that BB&T's culture will remain stable for the foreseeable future.

"John has ensured that what he helped create will continue," Patten said.

The obvious hallmark of Allison's tenure is deals. Under his leadership, BB&T rolled up more than 60 small banks and thrifts — an average of three a year.

By today's standards BB&T's 1995 merger of equals with Southern National Corp. is tiny. But at the time, it was huge, and many see that integration as BB&T's inflection point.

Largely designed to discourage unfriendly takeover bids for either eastern North Carolina bank in advance of the interstate banking era, the deal nearly doubled BB&T's asset size, to $19 billion, and prompted the company's headquarters move to Winston-Salem.

Allison insists that all the attention to his dealmaking skills overshadows his other achievements. He improved the management training program now known as BB&T University and wrote a handbook outlining the company's 10 core values, which include honesty and integrity, independent thinking and teamwork.

He also raised BB&T's profile in insurance brokerage, often with acquisitions, and mortgage lending.

Insurance made up 9% of BB&T's $2.72 billion in third-quarter revenue, and mortgage lending contributed 5%.

But his best move may have been the decision in late 2003 to put bank acquisitions on hold.

For Allison, the impetus was cumulative "indigestion" after a torrid pace of purchases that had accelerated after Southern National and a need to refocus on internal procedures and growth.

BB&T transformed itself from a serial acquirer to virtually a nonplayer in bank M&A, watching from the sidelines from late 2003 until December 2005 as regional peers snapped up bank after bank, many in Florida.

BB&T bought only four banks in Allison's last five years as CEO.

In lieu of acquisitions, he cut costs, studied branch-building strategies and improved BB&T's deposit-gathering capabilities at a time when the banking industry began to realize that low-cost funding was a vital component of liquidity and profitability.

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