Summary
- The planned merger of BB&T Corporation and SunTrust will create the 6th largest bank in the US, with a dominant position in the South-Eastern United States.
- Massive scope for branch rationalization as a consequence of significant overlap is potentially a boon for efficiency through consolidation and cost savings.
- The post-merger strategy has to be completed successfully and on time to obtain the greatest returns for shareholders.
- Expectations are that this merger could prompt other regional bank boards to assess the extent of their scale, and possibly consider similar actions.
Strength in Numbers
The yet to be named bank that emerges from the planned acquisition by BB&T Corporation (BBT) of SunTrust (STI) in an all-stock deal (1.295 BBT shares for each STI share) will be the sixth largest bank in the US. The deal is expected to close in the fourth quarter of 2019, pending regulatory approval, and the merged bank will be headquartered in Charlotte, North Carolina. The management team will be derived equally from the existing management of both merging banks. The new CEO will be the current BBT CEO until 2021, whereby the current STI CEO will take over the reins of the new entity. Both merging banks are considered regional, and both currently have overlapping geographic footprints in terms of branches and offices. The merger will result in a new bank with a concentrated presence in the South-Eastern United States.
After the financial crisis, mergers like this were primarily done for cost savings. However, scale is essential in the US banking business, and the rationale given for this deal concerns scale alongside merging technology, with mention of cost savings also. This deal is being touted as a merger of equals, and the potential for gains in scale and cost savings looks very attractive for shareholders of either bank heading into and beyond the deal.
