The proposed megadeal between BB&T Corp. and SunTrust Banks Inc. has gained one of two key regulatory approvals, BB&T said Thursday.
BB&T received approval July 10 from the N.C. Commissioner of Banks for its $29.7 billion purchase of SunTrust, in which BB&T shareholders would own 57% of the combined entity.
The commissioner’s office said in its order approving the merger that it received more than 800 public comments and 95% of them were positive.
The deal still requires Federal Reserve Board and Federal Deposit Insurance Corp. approval. It is projected to close in the late September to early October range.
Simultaneous shareholder meetings will be held July 30 in Greensboro and Atlanta.
However, Democratic congressional pushback on the formation of another potential “too big to fail” bank could delay federal regulatory approval until early 2020.
A key federal oversight step will take place Wednesday when executives from both banks appear at a hearing before the U.S. House committee on Financial Services.
The N.C. banking commission confirmed the combined bank, named Truist Bank, would remain supervised by its office and the Federal Deposit Insurance Corp. The holding company Truist Financial Corp. would be supervised by the Federal Reserve.
The bank had the option of being state chartered in Georgia or by the U.S. Office of the Comptroller of the Currency.
BB&T is the nation’s largest state-chartered bank with $225 billion in total assets. It operates in 15 states, although BB&T’s operations outside North Carolina are regulated by the state banking commission through a Nationwide Cooperative agreement established in 1997.
As a result, BB&T pays several millions of dollars in assessment fees that represented 30% of the commission’s fiscal 2017-18 revenue.
Megadeal draws congressional scrutiny
A combined BB&T-SunTrust would form the nation’s sixth largest traditional bank with $442 billion in total assets and market capitalization of $66 billion.
The BB&T-SunTrust deal represents the banking industry’s largest since the Great Recession began in late 2007.
As such, the deal is attracting heightened federal scrutiny, said Kelly King, BB&T’s chairman and chief executive, who will remain in those roles with Truist.
King said that while he “expects that the hearing will go well,” he acknowledged it is an unusual event for the House committee to focus on a single deal.
“It’s the first big merger since the (Great) Recession and the fourth largest bank merger in history, so it’s a big deal,” King said.
“They are concerned we’re creating another megabank, a too-big-to-fail bank. We will be saying we’re not a megabank, but a very large regional bank. We would have about 3% (of the national asset totals).
“We will not be increasing systemic risk, but in fact reducing it,” King said. “We believe we will be able to satisfy their questions, and we view it as four to five hours of free advertising.”
Sen. Sherrod Brown, D-Ohio, wrote to the banks’ chief executives in April, saying, “the merger also deserves scrutiny because it would be of a magnitude that we have not seen since the financial crisis.”
Sen. Elizabeth Warren, D-Mass., expressed similar concerns to Federal Reserve Chairman Jerome Powell shortly after the deal was announced. Warren is a candidate for the 2020 Democratic presidential nomination.
Brown said that “it is critical that we understand this merger’s impact on employees, consumers and the communities you serve.”
Brown requests answers on how many BB&T and SunTrust employees will be retained by the combined entity and how employees directly affected by overlapping operations could be reassigned or relocated.
When the merger was announced, King told analysts, “if you are a client-facing associate and doing a good job, then your job is assured.” King said he was speaking on behalf of Rogers. King repeated that pledge Thursday.
Shuffling of local jobs
The reality is the local community will lose several hundred BB&T corporate-headquarters jobs to Charlotte, along with the entire executive-management team moving there as a result of the merger.
Winston-Salem would have the new combined bank’s community-banking division, probably keeping thousands of affiliated jobs and likely moving similar SunTrust jobs here as BB&T wholesale-banking jobs go to Atlanta.
The FDIC’s regulatory notice cautions that the megadeal will likely result in branch closings where the banks have overlapping territories.
There are at least 740 locations across their combined branch networks where they have offices within two miles of each other. It is likely that most, if not all, of those scenarios will result in a branch closing.
The banks are selecting between BB&T and SunTrust employees who will be kept in about 850 mid-to upper-level management positions where the banks currently have operational overlap in their respective markets.
The banks project having about 75% of the combined management positions, down to the branch manager levels, selected by Aug. 31.
The banks have not announced the regional presidents as part of the Community Banking structure, BB&T spokesman Brian Davis said Thursday.
“The community banking function will be based in Winston-Salem under the leadership of David Weaver, who is part of the Truist executive-management team and who will be based in Charlotte,” Davis said.
William Rogers Jr., SunTrust's chairman and chief executive, told analysts Thursday that "from an integration standpoint, we have approximately 50 work streams under way."
"We’ve identified several thousand applications between the two companies. We grouped them into 100-or-so ecosystems. We’re now beginning the system selection process.
"This requires a great amount of thoughtfulness, and we’re focused on selecting the best of the best while also mitigating integration risk," Rogers said.
17-state combined market
The banks expect to serve more than 10 million households in what would become a 17-state Southeast and mid-Atlantic territory anchored by Florida, Georgia, North Carolina and Virginia.
If the proposed deal is completed, it likely will take another 12 to 24 months to close all of the affected branches as part of the integration process.
King stressed the banks “will tackle methodically which deposit system, which loan system.”
Since the end of 2016, BB&T’s “disrupt or die/disrupt to thrive” initiative has led to reductions in employees — down 2,439 or 6.5%, to 35,334 — and branches — down 409, or 18.6% to 1,787.
BB&T’s workforce declined by 563 from the first to second quarter, while the number of branches dropped by 84.
King said the bank has wrapped up the initiative, in part because of the megadeal announcement.
“We want to make it very clear we don’t have an expectation that there’s going to be some dramatic, immediate change in employment in Winston-Salem or Atlanta,” King said when announcing the deal.
“Rather, what we think will happen is that as our company grows and prospers, we’ll see gainful employment increases in Charlotte, Winston-Salem and Atlanta.”