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US banks BB&T and SunTrust announce $66 billion merger
NEW YORK, Feb 8, 2019 (BSS/AFP) – BB&T and SunTrust announced Thursday
they will combine in a $66 billion transaction to create a regional banking
giant in the industry’s largest merger since the 2008 financial crisis.
The two midsize banks operating in the fast-growing Southeastern United
States described the move as a merger of equals that would enable them to
compete against heavyweights like Bank of America and Wells Fargo and save
some $1.6 billion in administrative costs.
Shares of both companies soared on the announcement, which establishes the
sixth-largest bank in the country by assets and deposits, and follows
President Donald Trump’s moves to cut corporate taxes and ease banking
regulations imposed after the 2008 crisis.
“This is a true merger of equals, combining the best of both companies to
create the premier financial institution of the future,” BB&T Chairman and
Chief Executive Officer Kelly King said in the statement.
“It’s an extraordinarily attractive financial proposition that provides
the scale needed to compete and win in the rapidly evolving world of
financial services.”
– Competing at scale –
Bank executives touted the benefits of combining their technology budgets
to boost digital banking offerings as the industry scales back retail
branches in response to shifting consumer habits.
Despite overlapping in some markets, their joint client base is limited,
the executives said in a conference call.
The added heft from the merger is expected to boost lending capacities to
the largest corporate clients, better positioning it against national banks
that are also active in the region.
The new organization will have $442 billion in assets, $301 billion in
loans, and $324 billion in deposits serving more than 10 million households
in the United States.
Even with the added size, the company will represent only about a third of
the lending and deposit portfolios of the largest US banks such as JPMorgan
Chase and Bank of America.
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Matt Stoller of the Open Markets Institute, which follows monopoly issues,
expressed concern however that the deal could further concentrate market
power.
“Number of banks in the US has fallen 40% since 2000. Concentration
concentration concentration!” he tweeted.
Bartlett Naylor, a financial policy advocate at Public Citizen, also
criticized the transaction.
“We don’t think such a merger is going to be beneficial to consumers or
employees,” Naylor told AFP. “More banks is better than fewer banks.”
Executives said they did not expect regulators to demand significant
divestitures and that the deal would close in the fourth quarter of 2019.
The merger comes with Democrats newly in control of the powerful
congressional committee that oversees banking, signaling a tougher approach.
Trump’s administration has sought to cut regulations in a variety of
sectors, and Congress eased scrutiny of smaller banks but those with more
than $250 billion in assets still face stringent oversight.
– No name yet –
The transaction, which was described by some leading financial media as a
BB&T acquisition of SunTrust, will entail a swap of 1.295 BB&T shares for
each share of SunTrust. BB&T will hold 57 percent of the combined company.
Each company will appoint half the seats on the board of directors.
King, the BB&T chief executive, will lead the combined company through
September 2021, when he will become executive chairman.
SunTrust Chief Executive William Rogers Jr, who will begin as president
and chief operating officer, will take over as chief executive when King
steps down.
Atlanta, Georgia-based SunTrust, and BB&T of Winston-Salem, North
Carolina, said the combined company — to be based in Charlotte, North
Carolina — would operate under a new name and brand, reflecting “the equal
contribution both banks bring” to the venture.
Shares of SunTrust finished up 10.2 percent at $64.72, while BB&T gained
4.0 percent to $50.46.
Several other mid-sized banks also gained, including KeyCorp, Huntington
Bancshares and M&T Bank.
The deal “could be prescient of similarly-sized transactions, particularly
in the $100-$250B asset range, as banks seek to scale to compete with larger
banks,” said CFRA Research analyst Harrison Webster.
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