Commentary

BB&T, SunTrust Want To Combine Accounts In Deal Valued At $66B

In a consolidation that will create the sixth largest bank in the U.S., Winston-Salem, N.C.- based BB&T is buying Atlanta, Ga.-based SunTrust Banks in a $28.2 billion all-stock deal. The yet-to-be-named new entity -- “a merger of equals valued at approximately $66 billion” -- would represent the largest deal in the banking industry since the financial crisis a decade ago, which some observers see as a harbinger of things to come.

“Regional lenders are struggling to compete with big national banks such as JPMorgan Chase & Co. and Bank of America Corp., which are attracting a greater share of new checking accounts from customers that are drawn to their digital offerings,” write Rachel Louise Ensign and Allison Prang for the Wall Street Journal.

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“Deposit growth at many small and midsize banks has faltered, threatening a key source of funding. BB&T’s deposits were up 2% in the fourth quarter from a year earlier, while SunTrust’s were up 1%,” they add.

But the WSJ’s Justin Lahart contends that “not all of their competitors will be lacing up their shoes,” maintaining that this agreement “reflects the right mix of size and regional overlap.”

To be sure, “the two banks have long been considered natural partners and advisers said they do not expect another bank to make a bid. Hostile takeovers are rare in the banking world,” Reuters’ Aparajita Saxena, Imani Moise, and Liana B. Baker write after pinning the deal on “a more permissive regulatory environment.”

Indeed, they report, “not everybody was pleased about the deal.” Maxine Waters, chairwoman of the House Financial Services Committee, is one of the dissenters.

“This proposed merger between SunTrust and BB&T is a direct consequence of the deregulatory agenda that Trump and Congressional Republicans have advanced. [It] raises many questions and deserves serious scrutiny from banking regulators, Congress and the public to determine its impact and whether it would create a public benefit for consumers,” Waters said.

“The measure passed last year eased regulations on all but the largest U.S. banks. Proponents of the legislation -- including 17 Senate Democrats -- argued in part that it would save community banks from an unnecessary burden,” CNBC’s Jacob Pramuk explains.

In the “all news is local” department, an Atlanta Journal-Constitution headline rues the reality that the merger “...Means Another Bank HQ Leaving For Charlotte.”  

The AJC’s J. Scott Trubey observes that SunTrust is “the last great link to Atlanta’s past as a national banking power.” But it will get some crumbs. “Atlanta will be home to the new company’s corporate and investment banking, and Winston-Salem [N.C] will be the company’s community banking hub,” he reports.

The Charlotte Observer’s Deon Roberts and Danielle Chemtob point out that their city “has struggled to hang on to its coveted title of second-largest banking center, in part as its banks have been swallowed up by others headquartered elsewhere.” 

Bank of America, the second-largest U.S. bank by assets, is the only bank headquartered in Charlotte at present, “though many other banks of all sizes have operations here,” they write. First place goes to New York, which is home to four of the 10 largest banks: JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley. Charlotte “lost its second-place bragging rights to San Francisco” in 2017, but San Francisco’s only Top 10 bank is the embattled Wells Fargo.  

The BT&T/SunTrust deal is expected to close in the last quarter of 2019 if regulators give it their blessing. 

For its part, “the Fed will focus on the firms’ financial capability, management capability and how they performed in their communities, experts said Thursday,” writes Greg Robb for MarketWatch.

“The Fed will look at how they have been operating in their communities, have they done the right thing to help all groups of people,” Stephen Nielander, a partner at financial services firm Cerity Partners, tells him.

BB&T chairman and CEO Kelly King will be chairman and CEO of the new bank through September 21, 2021 and then become executive chairman only until March 12, 2022. SunTrust chairman and CEO William Rogers will be president and COO until succeeding King -- first as CEO in Sept. 2021, and then as chairman in 2022, Fortune’s Erik Sherman reports.

“The combined bank is expected to save $1.6 billion in operating costs annually by 2022. Savings will come from facilities, IT systems, shared service, retail banking, and third-party vendors. There is no mention of how many jobs may be cut through overlap,” he adds.

But appearing on CNBC yesterday, King said: “We are saying to our client-facing performing associates, ‘Don't worry, you have a job.’ If you are a client-facing associate, and doing a good job, then your job is assured,” CBC’s Matthew J. Belvedere reports.

How reassuring is that?

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