In the biggest bank deal since the 2007-2009 financial crisis, US regional leader BB&T has announced a deal to buy competitors SunTrust Banks for about $28 billion in stock. A major consolidation in the banking sector of US, this deal will give birth to a banking giant that will operate under a new name and have around $442 billion in assets, $301 billion in loans and $324 billion in deposits. This new entity’s closest rival will be US Bancorp that has about $467 billion in assets. The bank’s expansion will cover the entire East Coast, with the new corporate headquarters in Charlotte, North Carolina. This yet to be named megabank will retain operations in North Carolina, Atlanta, Georgia and Winston-Salem, the home markets for both companies.
The US government had imposed strict rules and regulations on lenders with more than $50 billion in assets and regulators barred bank with compliance discrepancies from possible expansions. Since the financial crisis a decade ago, the bank has been struggling to achieve their expansion goals. This new deal marks the beginning of a re-consolidation era in the US banking market. With easing crisis-era regulations the Trump administration is also supporting this market change. Changes in the US tax laws have lowered corporate taxes, freeing up capital adding more fuel to banking giant’s expansion goals.
All SunTrust shareholders will receive 1.295 shares of BB&T for each share they own. This per share deal value of $62.85 is at a 7% premium to SunTrust’s closing price last night, according to a financial analysis by Reuters. BB&T shareholders will own 57% of the combined company, and SunTrust will own the rest. The merger will result in an annual cost savings of around $1.6 billion by 2022; it will further generate an internal rate of return of about 18%.
Kelly King, BB&T’s chief executive officer, will be the new CEO of this combined company until September 12, 2021, after which SunTrust CEO William Rogers Jr will take over for the foreseeable future of the bank.