Many of us who are native Southerners sat with mouths agape as we read the announcement of the $66 billion (!) all-stock merger of equals between super regional banks BB&T and SunTrust. Few of us who grew up in Georgia have not been personally impacted by these banks in some way or another. For me, my aunt worked at Trust Company Bank when I was a kid, and BB&T bought a local thrift (Carrollton Federal), making its way into our home market where it remains today. After college, law school barely beat out an offer to work in SunTrust’s commercial lending training program, and BB&T currently holds the mortgage on my home. With all of those ties, I feel somewhat nostalgic when reading that the bank will be rebranded as a part of the merger.
With that said, the real time business implications for all of us are even larger. The day before the merger, my friend Jeff Davis wrote a smart piece ($) detailing the virtues of merger of equals transactions in today’s world. BB&T recently discussed on its earnings call that it was accelerating cost savings initiatives in order to invest more in its digital offerings. With the announced merger, one can assume that the lab for digital innovation of the combined bank (to be based in Charlotte, a bit of a disappointment to the Atlanta community) will make a massive effort to transform the banking experience of the bank’s customers, a truly meaningful segment of the market. We have recently commented that the transformation of the Atlanta banking market is now a reality, and this combination promises to further evolve how many banking customers think of and interact with their banks.
On the other side of the coin, one can also expect that the merger will create opportunities for midsize and community banks operating in the footprint of the combined bank. Many such banks like to “zig” as larger banks “zag,” so we expect that more than a few players will see the merger as an opportunity to lean into their strategies of differentiating themselves from larger banks. Of particular note is the likelihood of availability of legacy branches of the combining institutions. In mergers of this size, it is a common occurrence for the combined bank to sell branches or branch buildings, either due to market concentration issues or rationalization of the footprint as a result of geographic overlap. No doubt midsize and community banks that focus on in-branch delivery strategies will view these opportunities with excitement.
As we approach the year 2020, it seems that a generational shift in banking is occurring before our eyes. We are excited to have a role in that shift and look forward to seeing how bankers take the industry forward.