The community and socio-economic effects of BB&T Corp. buying SunTrust Banks Inc. dominated the first of two public regulatory meetings about their proposed $66 billion megadeal.
BB&T’s purchase of SunTrust, announced Feb. 7, has been touted as the largest bank transaction in at least 10 years and potentially transformative for the financial industry. BB&T shareholders would have a 57% stake in the new combined bank.
The chairman and chief executive of BB&T, Kelly King, and his SunTrust counterpart, William Rogers Jr., focused their presentations at the public hearing in Charlotte on trying to reassure the Federal Reserve and Federal Deposit Insurance Corp., as well as attendees, of the benefits of the megadeal in their banking markets.
Critics of the merger, meanwhile, questioned whether the banks’ likely consolidation efforts, in terms of closed branches and laid-off employees, would do more economic harm than good.
The combined bank would be the sixth largest in the U.S., with $442 billion in total assets — within striking distance of US Bancorp at the top of the regional-bank tier.
On March 8, BB&T filed the formal applications to begin state and federal regulatory reviews. The banks project closing the deal over the next eight to 10 months with shareholder votes expected in September.
About 100 people attended the Charlotte meeting on April 25, conducted by the FDIC, The Charlotte Observer reported.
The meeting also brought home the reality that the combined bank’s headquarters would be located in Charlotte, with Winston-Salem getting the community-banking division and Atlanta the wholesale-banking division.
“We express our purpose as ‘Lighting the Way to Financial Well-Being,’” Rogers said.
“This commitment extends beyond any regulatory requirements; fulfilling our purpose is central to everything we do and is rooted in our culture,” he said.
“We are eager to join forces with BB&T and create a new company principally because it is a like-minded institution, with a compatible culture that strives to make the world a better place to live,” Rogers said.
King and Rogers touted their respective employee-oriented community endeavors, as well as a recent commitment to provide up to $30 million in community affordable-housing initiatives in Charlotte.
King acknowledged that “there is also much work to be done when it comes to the inequities that still exist in our communities.”
“Bill and I can both assure you that the combined company will continue our commitment to serving all our communities fairly and equally when providing loans, investments and services,” King said.
He cited as an example the fact that BB&T has been highly rated by the Human Rights Campaign on the Corporate Equality Index, and listed in 2017 and 2018 among the “Best Places to Work for LGBT Equality.”
King said that BB&T’s diverse-supplier spending was $173 million in 2018, a 40% increase from the previous year.
“We operate more than 600 multicultural banking centers throughout our community banking footprint, all with teams that reflect the diversity of their neighborhoods,” he said.
“Diversity and inclusion isn’t just the right thing to do; it is a strategic business imperative that creates more productive associates, a better understanding of the diverse client base we serve, and ultimately better business results,” King said.
‘A seat at the table’
The megadeal must overcome what is likely to be stiff opposition from some congressional leaders and advocacy groups over concerns that the combined bank could potentially surge into too-big-to-fail territory.
For example, The Observer reported that the National Black Farmers Association, a nonprofit organization based in Virginia, stated that its protest of the deal is tied to concerns that the combined bank would make lending less accessible to black farmers.
“If you are inclined to approve it, we ask for a seat at the table to discuss specific therapeutics,” said Lesley Weaver, an attorney for the association. Those include guaranteed lending to black farmers, financial-literacy training for them and keeping rural branches open.
The FDIC cautioned in its meeting notice 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 2 miles of each other.
“We recognize that as we combine our two companies with overlapping markets, we will need to consolidate some branches,” Rogers said.
“We will be thoughtful in performing an extensive market, branch and client analysis before making any decisions, including prioritizing our service to low-and moderate-income clients and communities,” he said.
“We will think carefully about the potential capacity of nearby branches and preserve the branches that are most modern and accessible for clients and communities,” Rogers said.
The banks told analysts that they could divest between $1 billion to $1.6 billion in deposits as part of gaining regulatory approval of the deal. The bank also projected $1.6 billion in annual consolidation savings, primarily in facilities, information technology, shared services, retail banking and third-party vendors.
Other advocacy groups, including the Families Belong Together Coalition, Action NC and MomsRising, held a rally as part of their effort to convince SunTrust to end its financing of “morally bankrupt” private prison companies.
The advocates claim that the private prison industry. led by CoreCivic and GEO Group, has a documented history of human-rights abuses and is currently detaining more than 70% of immigrants in the custody of U.S. Immigration and Customs Enforcement.
Questions from senators
The megadeal is in the cross hairs of Democratic U.S. Sens. Elizabeth Warren of Massachusetts, who is a declared 2020 presidential candidate, and Sherrod Brown of Ohio.
Brown sent a letter to King and Rodgers on March 28 asking for more details on how the proposed megadeal could affect employees, branches and customers.
“It is critical that we understand this merger’s impact on employees, consumers and the communities you serve,” Brown said. “When announcing the proposed merger, your banks touted the combined entity’s large size, the location and core functions of a new headquarters and current home markets, the expected dividends and other returns to shareholders, and the potential for increased technological innovation.”
However, he said that the banks did not provide enough information on how the proposed merger would affect employees, bank branches or their communities.
Brown requested answers about how many BB&T and SunTrust employees would 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 that “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.
However, 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. It will gain community-banking jobs from SunTrust’s Atlanta operations but lose jobs related to wholesale-banking to Atlanta.
In addressing the too-big-too-fail concerns, Rogers said, “Let me assure you, in the case of this merger, bigger doesn’t mean riskier.
“Each company has a conservative risk profile now, and will maintain such as a combined entity, with strong risk management, liquidity and capital management.” he said.
“The combined BB&T/SunTrust entity will actually increase competition by creating a stronger regional bank that reduces the concentration of systemic risk at the top of the market,” Rogers said.
Sharon Jeffries-Jones, BB&T’s director of corporate social responsibility and community reinvestment, said BB&T has provided more than $27 billion in affordable mortgage loans just in this decade.
“This total includes the bank’s proprietary community homeownership incentive program, which does not require mortgage insurance,” Jeffries-Jones said. “The bank also invested $2.7 billion during this time to support the development of affordable housing.”
She said that in 2018, BB&T made more than 103,000 loans to small businesses, “putting more than $2.6 billion into our local communities.”
“We are proud of the impact we have made within our communities, and we believe that impact is why BB&T earned an ‘outstanding’ CRA rating from the FDIC,” she said.
Jeffries-Jones said the banks have held six listening sessions — in Winston-Salem; Atlanta; Baltimore; Philadelphia; Richmond, Va.; and Fort Lauderdale, Fla. — in partnership with the National Community Reinvestment Coalition.
“We heard communities’ concerns and recommendations related to the merger, and this information will be used to formulate our community benefits plan,” she said. “This plan will guide many of the reinvestment programs at the combined company,” she said.
“We consistently heard four key themes: the importance of affordable housing for families; financial sustainability for individuals and businesses; philanthropic support for communities; and diversity and inclusion at every level in our footprint,” she said.
“Each is doing impactful work in their respective markets, but combined, we will be in an even stronger position to actively make the communities we serve better places to live.”