Okla.-based BOKF president: Federal stimulus policies slow nation's

Journal Record, The (Oklahoma City), Apr 29, 2009 by Kirby Lee Davis

"Misguided" federal stimulus policies will slow the nation's economic recovery, BOK Financial President and Chief Executive Stan Lybarger said Tuesday.

While crediting overall steps for helping stabilize a reeling industry, Lybarger used the BOKF annual meeting Tuesday to slap remedial Bush and Obama administration efforts to restore confidence in the financial system.

"More of the weaker financial institutions should have been allowed to fail, with more assets liquidated or sold to healthy institutions in government-assisted transactions," he said. "Instead, we have preserved and institutionalized poor performance. This will negatively impact the recovery, by leaving the walking dead in place without the capital, funding, or skill to help support sound economic recovery."

As the nation's largest bank-holding company to turn down funding through the Troubled Asset Relief Program, BOKF remains in a strong position to acquire distressed assets - allowing critics to see Lybarger's Tuesday attack as potentially self-serving.

But the BOKF president spoke from a position of strength. While many lenders lost millions or billions through the three difficult closing months of 2008, the parent of Bank of Oklahoma, Bank of Texas and several other regional lenders posted a net income of $35.4 million, bringing its full-year earnings to $153.2 million, or $2.27 per diluted share. Revenues topped the $1 billion mark for the first time in its history.

"Economic cycles serve an important Darwinian purpose by redistributing capital into stronger and more capable hands," Lybarger said Tuesday. "The current policy is preserving weaker banks and management teams that have degraded credit standards and loan and deposit pricing for many years."

In recounting last year's failure of Bear Stearns, IndyMac Bank, Fannie Mae, Freddie Mac, Lehman Brothers, Washington Mutual, and Wachovia, Lybarger highlighted the federal government's inability to stabilize markets and bolster liquidity through an "alphabet soup of intervention programs."

"A rough count indicates the Federal Reserve has announced 16 separate initiatives, the U.S. Treasury has announced 10 programs, and the FDIC and HUD have others for a total of almost 30 different programs - all within the last 12 months," he said.

Despite these efforts, Lybarger said, the nation's spreading recession led to a near collapse of private-sector demand, hitting everything from natural resources to capital goods.

The sorest example of federal mismanagement could come from Federal Deposit Insurance Corp. moves to boost deposit insurance premiums.

"Unfortunately, this has been politicized, with the rate of the special assessment now dependent on the size of the line of credit Congress will authorize for the FDIC," said Lybarger. "Depending on the outcome, the special assessment will add between $3.5 and $7 million per quarter to BOK Financial's deposit insurance costs.

"The current flat-rate system punishes the strong banks for the irresponsible decisions of the weak," he said. "The FDIC needs to develop a risk-based premium structure to incent banks to avoid imprudent risk. A large opportunity to replenish the insurance fund was missed, when the FDIC under-priced the insurance premiums on their term debt liquidity programs."

With its diverse fee-revenue base, high efficiency ratio, experienced leadership and secure Oklahoma foundation, Lybarger said BOKF has charted strong growth ahead of its peer group despite the national recession. Although some economic hurdles remain, such as continued low commodity prices and commercial real estate instability, he expects BOKF's inherent strength to aid the company as the economy eventually begins its slow turnaround.

"Our clear intent is to maintain solid growth in core operating earnings, while we work through the challenges presented by the recession," he said. "We achieved solid growth in operating earnings in 2008, and thus far in 2009. The aim is to have earnings recover to a level above the record level achieved in 2007. That result should place us well ahead of most of our competitors."

He said that includes one area where lenders have drawn strong attack.

"The news media and politicians continually give the impression that banks are no longer lending money, but that isn't true for BOK Financial," he said. "The bank is actively lending, with an emphasis on quality. Loan growth will be slower in the next 12 months, but not from our lack of willingness to lend. Slower loan growth will result in large part to borrower decisions to defer capital investment and de-leverage."

The bank will slow its branching activities this year, with three opened in Phoenix, two in Oklahoma and one planned in Kansas City. Lybarger said BOKF remains on the hunt for buying high-quality banks or branches.

"Thus far, the opportunities have been limited," he said. "With fallout from the recession continuing, there may well be more attractive opportunities in the future."