The formation and integration of Truist Financial Corp. may take longer to complete than its first chief executive may be on the job, according to the financial institutions forming the nation’s sixth-largest bank.

BB&T Corp. and SunTrust Banks Inc. gained Tuesday the final two of three federal regulatory approvals required to form Truist.

BB&T shareholders would own 57% of Truist following the $30.4 billion purchase of SunTrust that’s set to close Dec. 6.

Truist is expected 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. The combined bank had $463.7 billion in total assets as of Sept. 30.

The banks have said it could take up to 24 months after closing to integrate the operating systems, including branch networks. It is projected to be the largest bank integration since Wells Fargo & Co. acquired Wachovia Corp. in December 2008, which involved $1.4 trillion in total assets.

Analysts say it is likely the banks will save the Carolinas, Georgia and Virginia for last, which could be the fall of 2021.

“Our goal is to provide a smooth transition for our clients, and we will provide plenty of notice,” BB&T spokesman Brian Davis said.

Kelly King, BB&T’s chairman and chief executive, will serve in the same roles with Truist through Sept. 12, 2021 — his 73rd birthday. King then would become executive chairman for six months before stepping down from that role on March 12, 2022.

William Rogers Sr., SunTrust’s chairman and chief executive, would succeed King as Truist’s CEO and chairman when King retires.

We’ve learned over the years with all of the mergers we’ve done that you can do almost all of the planning work pre-closing so that when you actually close, you go into immediate execution,” King said.

Who goes first?

Although the banks have not announced the order in which they plan to convert markets to the Truist brand and signage, analysts say it is likely they will start with states where they have little or no overlap, such as Arkansas, Indiana, Mississippi, New Jersey, Ohio and Pennsylvania.

“The Carolinas and Georgia will convert last, in part because they’re the largest, most complex and most intertwined of the two banks’ territories,” said Tony Plath, a retired finance professor at UNC Charlotte.

“But it’s also because that’s where sensitivity, and potential backlash, toward the merger runs highest.

“So, you give everyone in the home markets a little time to settle down, take a breath, drain the emotion out of the merger, and then you consolidate operations,” Plath said.

The most basic of bank mergers can create administrative headaches for consumers in the short term.

Bankrate.com said routing and account numbers can change, which can complicate direct deposits and automatic bill payments. Credit-card holders may need to visit a different website to pay their monthly bills. Back-office systems, such as customer support, will likely change.

Plath said the public “is much less forgiving of IT problems that disrupt normal banking activity than they used to be, and they turn almost immediately to social media to complain.”

“So any sort of IT glitch that’s traceable to a merger-conversion problem is going to be immediately attacked by customers, right at the point where the newly combined banks are most vulnerable to customer run-off.”

First Union-Wachovia

The projected integration of BB&T and SunTrust does not provide for a neat comparison to two other megadeals that rocked the Winston-Salem and North Carolina banking communities since the turn of the century.

For instance, it took First Union Corp. 20 months to go from closing on its $14.6 billion purchase of Wachovia Corp. in September 2001 to shifting to a new financial network and signage in the Carolinas in May 2003.

Although First Union was the acquirer, it chose to keep the Wachovia brand because it carried a better reputation with consumers at that time.

After tackling Florida and Georgia, the final conversion step in May 2003 affected the accounts of 3 million customers in the Carolinas. Also at stake was the combined Wachovia’s dominant market share of 26% in North Carolina and 20% in South Carolina.

At that time, the process of integrating two banks’ networks had improved from the 1990s, but was no sure thing to avoid customer-irritating glitches.

Analysts estimated that bank deals are vulnerable to between 5% and 15% customer run-off from those not wanting to be part of a larger bank or not a fan of the acquiring bank.

The Winston-Salem Journal reported that the First Union-Wachovia conversion day evoked a baseball theme of “no runs (on the bank) by customers, no hits (on its reputation) and no major errors (in its network system).”

Plath said in May 2003 that “Wachovia accomplished its goal of having an ordinary busy Friday on an extraordinary day in its history.”

Stressful transition

Fast forward 5½ years, and Wachovia was facing a much more stressful transaction with Wells Fargo & Co. committing to acquiring a collapsing Wachovia in October 2008. The deal was completed in December 2008.

The integration of Wachovia’s Southeast territory was straightforward in part because Wells Fargo did not have a branch presence in most of those markets.

Still, it was at that time the largest bank integration in U.S. history, which is why Wells Fargo methodically conducted nine state market switchovers before converting 1.2 million N.C. households and 317 Wachovia branches in October 2011.

Before attempting the conversion, Wells Fargo and Wachovia spent 18 months applying a hiding-in-plain-sight strategy to ensure customers had Day One access to account information and ATM transactions, and would keep their same account numbers and passwords.

“Waiting several months to consolidate these days has little to do with the technical complexity of the combination,” Plath said. “The industry figured out how to get this part of consolidations right.

“It’s the emotional part of the merger that drives the decision to wait a bit for final conversion to occur, since the passage of time takes the sting out of the deal for people who feel they’ve been stung by the combination of banks.”

Charlotte HQ

The banks project at least 2,000 jobs in Charlotte. Truist’s community-banking division would be based in Winston-Salem, while its wholesale banking division would be in Atlanta.

“The new headquarters in Charlotte will be home to the combined company’s executive management team and accommodate leadership teams for groups including corporate communications, finance, human resources, insurance, legal, technology and risk management,” Davis said.

“Charlotte also will be home to the new company’s Innovation and Technology Center. That transition will happen over time through 2020, depending on the individual business unit.”

By closing the megadeal on Dec. 6, BB&T will gain 25 days of SunTrust revenue for the fourth quarter, which analysts said could help offset integration costs once that process is fully ramped up.

“The Fed really handed them a gift in approving the merger before the end of the year, since Truist can now dump all its merger-related closing costs into the 2019 financials, and start 2020 with a clean slate,” Plath said.

“That’s going to impress the analysts, since Truist’s 2020 numbers will be a lot stronger without the SunTrust closing expenses included.”

Chris Marinac, research director for Janney Montgomery Scott, said one key factor that might be overlooked in the final federal regulatory approvals is that the Board of Governors of the Federal Reserve System did not object to BB&T’s updated capital plan.

“BB&T will not determine the specific capital actions it plans to take until the finalization of purchase accounting and a review of the resulting capital ratios following the closing of the merger,” the bank said Tuesday.

Marinac projects that Truist’s board of directors will conduct share repurchases sooner rather than later after the megadeal closes. “We expect share buybacks approach a 95% capital return in both 2020 and 2021.”

Marinac also said a $58 share price is a “fair value” for Truist, and the combined bank will meet or exceed a pledge of $1.6 billion in cost savings.

CFRA analyst Pauline Bell said the formation of Truist “allows for a larger scale to compete against money center banks, more diversified business mix, a higher tech investment budget of $3 billion, and balance sheet repositioning for the ‘low-for-longer’ rate environment.”

“We expect to see a gradual ramp-up in savings, with about 30% realized in 2020 through branch rationalization and lower personnel/facilities/vendor spend.”

The banks have significant branch overlap in the Southeast, particularly in the Carolinas, Georgia and Virginia. They have 740 branches within two miles of each other within their markets with many, if not most, are likely to be consolidated.

According to the FDIC filing approving the deal, Truist is projected to have 2,593 branches when the megadeal closes.

The banks agreed not to close any branches in the first year after closing their deal, and to not close any branches for at least three years in markets where there are fewer than 2,500 residents.

Branding changeover

The banks have not unveiled the branding, signage, font type and colors for Truist, saying they will be disclosed closer to closing.

Considering the banks have stressed the merger of equals elements of the transaction, it is probable Truist will not contain BB&T’s burgundy or SunTrust’s blue and orange hues.

The latest filing by BB&T about Truist on the U.S. Patent and Trademark Office’s website lists that a “non-final office action has been sent to BB&T from the examining attorney requiring additional information and/or making an initial refusal.

As of the Sept. 6 report, BB&T’s trademark submission consisted “of standard characters without claim to any particular font style, size or color.”

Although it is very unlikely there will be customer run-off related to those factors, what those branding aspects look like could go a good ways toward providing — or not — comfort to existing BB&T and SunTrust customers.

With the First Union-Wachovia megadeal, the banks chose to blend the First Union green and Wachovia blue into the branding and signage.

With the Wells Fargo takeover of Wachovia, the Wachovia branding and color schemes went into the history bins.

“Once the new company is official, the transition to new brand elements — logo, signage, letterhead, collateral materials, etc. — should be rapid enough to capitalize on the excitement and newsworthiness of the now-approved merger, yet deliberate enough to allow consumers time to acclimate comfortably to the new brand name,” said Roger Beahm, executive director of the Center for Retail Innovation at the Wake Forest University School of Business,

“If the changeover is made too quickly, current customers are caught feeling uncomfortable by being forced into the change. Potentially, it could raise a question of confidence in the new entity, wondering if the suddenness of the change might mean a potential loss of previously enjoyed levels of service.

“Yet, if the change takes place too slowly, you reduce the likelihood of generating new customers because the excitement and potential from the merger will have passed,” Beahm said.

Beahm cited the branding changeover from Time Warner Cable to Spectrum as an example of the accelerated approach.

“It happened so quickly that it became somewhat puzzling to some customers until they realized it was still the same service, just with a new name,” Beahm said.

“BB&T and SunTrust need their current customers to know it’s ‘still their same bank.’ “

Beahm said Truist will need at least three months — and perhaps up to six months — of aggressive advertising, in-branch and direct-to-customer marketing “to achieve the same levels of confidence and assurance they had prior to the merger.”

“The new entity must still prove itself through every transaction.”

Beahm predicts Truist Bank “should have a very fast rise in brand equity simply because the knowledge of the institutions that precede it brings much of that equity to the new brand.”

“What changing the branding will do is give people banking elsewhere an opportunity to rethink their current banking relationships, and consider Truist Bank as a possible bank for them in the future.

“If Truist Bank can offer consumers and businesses something new and something important relative to their current banking relationship, then the new brand should be successful in attracting new customers.”

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