SunTrust and BB&T banks announce they are to merge in a $66bn deal, February 7 2019. Picture: JIM WATSON/AFP
SunTrust and BB&T banks announce they are to merge in a $66bn deal, February 7 2019. Picture: JIM WATSON/AFP

New York — US banks BB&T and SunTrust announced on Thursday they will combine in a $66bn transaction to create a regional banking giant in the industry’s largest merger since the 2008 financial crisis.

The midsized banks operating in the fast-growing southeastern US, described the move as a merger of equals that would enable them to compete against heavyweights such as  Bank of America and Wells Fargo and save about $1.6bn in administrative costs.

Shares of both companies surged on the announcement, which establishes the sixth largest bank in the country based on assets and deposits, and follows on the heels of measures favored by President Donald Trump to cut corporate taxes and ease banking regulations imposed after the 2008 crisis.

“This is a true merger of equals, combining the best of both companies to create the premier financial institution of the future,” BB&T chairman and CE officer Kelly King said in the statement.

“It’s an extraordinarily attractive financial proposition that provides the scale needed to compete and win in the rapidly evolving world of financial services.” Bank executives touted the benefits of combining their technology budgets to boost digital banking offerings as the industry scales back retail branches in response to shifting consumer habits.

Despite overlapping in some markets, their joint client base is limited, the executives said in a conference call. The added heft from the merger is expected to boost lending capacities to the largest corporate clients, better positioning it against national banks that are also active in the region.

The new organisation will have $442bn in assets, $301bn in loans, and $324bn in deposits serving more than 10 million households in the US.

Even with the added size, the company will represent only about a third of the lending and deposit portfolios of the largest US banks such as JPMorgan Chase and Bank of America.

The new company will hold about one-fifth of the deposits in Florida, North Carolina and Georgia, according to a merger presentation.

Matt Stoller of the Open Markets Institute, which follows monopoly issues, expressed concern  that the deal could further concentrate market power.

“Number of banks in the US has fallen 40% since 2000. Concentration concentration concentration!” he tweeted.

But executives said they do not expect regulators to demand significant divestitures and that the deal will close in the fourth quarter of 2019.

The merger comes with Democrats newly in control of the powerful congressional committee that oversees banking. Financial Services Committee chair Maxine Waters has warned that the days of lax oversight are over.

Trump’s administration has sought to cut regulations in a variety of sectors, and Congress eased scrutiny of smaller banks, but those with more than $250bn in assets still face stringent oversight.

The transaction, which was described by some leading financial media as a BB&T acquisition of SunTrust, will entail a swap of SunTrust stock for 1.295 BB&T shares. BB&T will hold 57% of the combined company.

Each company will appoint half the seats on the board of directors.

King will lead the combined company through September 2021 when he will become executive chair. SunTrust CE William Rogers Jr, who will begin as president and COO, will take over as CE  when King steps down.

Atlanta-based SunTrust, and BB&T of Winston-Salem, North Carolina, said the combined company — to be based in Charlotte, North Carolina — will operate under a new name and brand, reflecting “the equal contribution both banks bring” to the venture.

Rogers told analysts the banks would solicit input from employees on the combined name and branding, adding that getting employees to “build ownership” in the new company “was better than that something Kelly and I could cook up in a back room.”

Late on Thursday afternoon shares of SunTrust were up 6.6% at $62.59 in New York, retreating from its earlier gains, while BB&T’s were up modestly, as both retreated from earlier gains.