SunTrust Banks, the last great link to Atlanta's past as a national banking power, announced Thursday it will merge with Winston-Salem, N.C.-based rival BB&T to create the sixth-largest bank in the U.S., in a marriage that will cost Georgia a Fortune 500 headquarters.
The combined bank, valued by the companies at $66 billion, will be based in Charlotte and has yet to be named. Atlanta will be home to the new company’s corporate and investment banking, and Winston-Salem will be the company’s community banking hub.
Based in its namesake tower on Peachtree Street in downtown Atlanta, SunTrust is Georgia’s largest bank and No. 1 in metro Atlanta in terms of deposits. It is second in total number of branches, with 154 offices as of June. The company has 21,000 employees nationwide, but declined to say how many in Georgia.
BB&T, which has a regional hub in Atlantic Station, ranks fourth in total deposits and retail locations in the metro area. A spokesman said the company employs about 450 people in Fulton County, but did not provide information about the state overall.
The merger is expected to lead to cost reductions totaling $1.6 billion annually by 2022. Overlaps in the markets that the banks serve will undoubtedly mean branch closures and layoffs as the two behemoths combine and find redundant operations.
The companies, which have been shuttering branches as business shifts to online channels, said about 740 of the banks’ more than 3,000 branches are located within two miles of each other, offering prime targets for closings.
The companies did not disclose specifics about how many job could be cut. But SunTrust Chairman and CEO William Rogers Jr. said the merger will lead to new investments and jobs in Atlanta and North Carolina as the new bank ramps up its commercial banking operations, increases spending on technology and marketing and develops an innovation center in Charlotte.
Consumer preferences for the convenience of mobile banking and upstart online competitors precipitated the deal, which BB&T Chairman and CEO Kelly King said came together in a manner of weeks. The speedy and secretive negotiations birthed the biggest bank merger since the financial crisis. And analysts say the deal could usher in the wave of bank mergers that many have anticipated with the looser financial regulation under President Donald Trump.
Regional banks such as SunTrust and BB&T have struggled to compete against larger players like Bank of America and JPMorgan Chase, which have attracted younger customers with their digital banking products.
King said SunTrust and BB&T have competitive technology. But the company will need to spend billions more to develop new products and services and to effectively advertise against bigger rivals that flood airwaves and the web with billions in ads.
“What we have to do is have the scale to continue to advance this technological development, but we have to have the marketing dollars to tell that story in a very active way,” he said. “That’s where scale becomes so important.”
Another loss to Charlotte
Though described as a “merger of equals,” BB&T shareholders will control 57 percent of the combined company. Shareholders of SunTrust will control 43 percent. The board of the new bank will be split evenly among SunTrust and BB&T directors.
The merger, which values SunTrust at about $28 billion, is expected to be completed by the end of the year, though King said he hoped it could pass regulatory muster by September or October.
King will be the chairman and chief executive of the combined banking company until Sept. 12, 2021, then transition to the role of executive chairman until March 2022. He will remain on the board through 2023.
Rogers will be the president and chief operating officer of the combined bank, assuming the role of CEO after King steps down from that position. Rogers also will serve on the board and succeed King as chairman.
Thursday’s stunning announcement, which broke before 6 a.m., is an echo of the bank consolidation waves of the 1980s, 1990s and 2000s, when top Atlanta banks were gobbled up by their North Carolina rivals, diminishing Atlanta’s clout as a banking town and making Charlotte one of the nation’s financial services capitals.
The former Charlotte-based bank Wachovia, which was later acquired by Wells Fargo, traced its roots in part to First Atlanta Bank. Bank of America was once known as NationsBank, whose predecessor institutions included C&S, a storied Atlanta lender.
Now, this latest combination consumes SunTrust, founded in Atlanta in 1891 as Commercial Travelers’ Savings Bank and later known as Trust Company of Georgia. So entwined in Greater Atlanta and Georgia’s history is SunTrust and its predecessor institutions that, in 1919, Trust Company was an underwriter for the Coca-Cola Co., and one of the earliest holders of Coke’s stock.
For decades, Trust Company and later SunTrust secured the beverage giant's secret formula in its vault. (The formula is now housed at the World of Coca-Cola museum.)
SunTrust made a splash a few years ago putting its name on the new Braves stadium in Cobb County. A Braves spokeswoman declined comment, but the ballpark will likely see its name changed to the new company’s moniker.
Rogers, the SunTrust CEO, said Thursday he expected the bank’s partnership with the Braves to continue. He also said Atlanta will be a beneficiary of the BB&T merger.
“We continue to think Atlanta is going to be a place where we grow, that we continue to invest, just like Winston-Salem with the headquarters of community banking operations,” Rogers said. “The badge of honor of a headquarters city, I really get that, I understand that, but the real badge of honor is, are you investing in the community? Are you creating jobs? And we are absolutely going to be doing that in Atlanta.”
Surprise marriage
The new bank will have an estimated $442 billion in assets, $301 billion in loans and $324 billion in deposits, the companies said, serving 10 million households in the U.S.
SunTrust and BB&T were both saddled in the fallout of the financial crisis with soured residential and commercial loans that took years and billions in federal bailout funds to sort out. But the post-recession boom that followed has been good for both banks, which paid back the government loans and returned to healthy profits.
Those profits allowed the banks to remain fiercely independent, and there wasn’t an inkling in the financial markets the two banks might merge before the pre-dawn announcement.
“This was definitely a surprise,” said Chris Marinac, a banking analyst at FIG Partners in Atlanta.
The new bank will lean on SunTrust’s strengths in corporate and investment banking and BB&T’s stronger positions in community banking and insurance services. Banks want deeper relationships with corporate and retail banking clients, which makes it harder for those customers to leave.
Technological change is a double-edged sword. It’s “a great leveler” of the playing field so that smaller banks can compete against their biggest foes, Marinac said, but it’s also foisting major investments on regional banks.
Mobile banking is the future of the industry, and branches are evolving from transaction centers to showrooms for products and places customers seek advice.
Hala Moddelmog, CEO of the Metro Atlanta Chamber, called the tie-up an “undeniably smart business decision.”
“While we’re disappointed that the new company’s headquarters will not be in Atlanta, SunTrust has long been a strong community partner,” she said in a statement. “We are encouraged that the new company is committing to increasing community investment in our region.”
Thursday's announcement is the second big merger involving an Atlanta area company in just three weeks. In January, Sandy Springs-based First Data and Fiserv announced a $22 billion merger of financial tech firms that will be based in Wisconsin.
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