BB&T and SunTrust Banks announced Thursday that they agreed to merge in a $66 billion deal to form a new bank that will be headquartered in Charlotte.
The blockbuster deal will alter Charlotte’s banking landscape, which has lost bank headquarters in recent years through industry consolidation. As a result of those deals, Bank of America is the only bank headquartered in Charlotte.
The combination of Winston-Salem-based BB&T and Atlanta’s SunTrust will form the sixth-largest U.S. bank by assets and deposits, the companies said. It is also the largest bank merger since the financial crisis of 2008, according to an Observer analysis of federal data. Bank of America is the second-largest bank by assets.
It’s unclear where the new headquarters will be in Charlotte, or how many jobs will come with it.
Executives for BB&T and SunTrust indicated Thursday that jobs could be shed as the new company closes overlapping branches and gets rid of duplicate positions. They did not cite any numbers, however.
Asked about job cuts, BB&T CEO Kelly King told the Observer on Thursday there will be “consolidations across the entire footprint.” But he said he expects the new company to expand its employment in Charlotte “from the get-go” and continue growing it.
Executives from both banks said that, combined, they have more than 2,000 workers in the Charlotte region now.
“We would expect our jobs to grow on a steady basis,” said King. “Clearly we see substantial employment opportunities for folks in Charlotte.”
A name for the new bank is expected to be determined before the deal closes in the fourth quarter of this year. Approvals are still needed from regulators and shareholders of each bank. BB&T will buy SunTrust, which will merge into BB&T.
In Charlotte, the new bank will open an innovation and technology center focused on digital transformation, the companies said. King said the center will operate as a kind of lab where new products and technologies are developed. It’s likely the center will be housed in the headquarters offices, he said.
Both banks said they will maintain strong presences in their current home markets. Winston-Salem is expected to keep BB&T’s community banking center, and Atlanta is expected to retain SunTrust’s wholesale banking center.
Thursday’s deal is not the first time Charlotte has stolen banking headquarters from Winston-Salem. That’s what happened in 2001 when Charlotte’s First Union acquired Winston-Salem’s Wachovia, which was bought by Wells Fargo in a 2008 deal.
The new bank is expected to have approximately $442 billion in assets. That appears to put it just behind Minneapolis-based U.S. Bank, the fifth-largest U.S. commercial bank.
Charlotte officials quickly embraced the news.
“I think it’s an incredible reflection of what Charlotte has been able to sort of build on, the success of the companies and the businesses and the people that are already here,” said Ernie Reigel, interim leader of the Charlotte Regional Business Alliance. “It’s a huge, huge opportunity for us from the standpoint of bringing in new jobs, new investment.”
The merger comes as Charlotte remains in a tight race with San Francisco for the title of second-largest banking center in the U.S., a ranking based on the value of loans and other assets held by banks headquartered in both cities. Charlotte was slightly ahead of San Francisco in an analysis S&P Global Market Intelligence conducted for the Observer last fall.
A familiar presence
SunTrust CEO Bill Rogers told the Observer on Thursday that Charlotte’s growing financial technology, or fintech, industry was one factor that made Charlotte an attractive pick for his bank and BB&T.
“Certainly it’s a great place to attract, retain, promote great banking talent and great fintech talent,” Rogers said.
In addition, the banks were looking for a “new, objective, neutral” headquarters site, King said. “We said it’s not going to be Atlanta, it’s not going to Winston. Then Charlotte becomes the next best city in our general footprint.”
It remains undecided where the headquarters for the new bank will be in Charlotte, but uptown is high on the list, King said. Also undecided is whether the space will be leased or built new, he said.
“We want to be in the heart of the business district,” he said.
No state or local incentives are being used to lure the headquarters to Charlotte, King said.
King, who lives in Winston-Salem, said he is looking for a home in Charlotte, where he plans to spend most of his time.
Plans call for King to serve as CEO and chairman of the new company and Rogers to be president and chief operation officer until September 2021.
At that point, Rogers will become CEO, and King will serve as executive chairman until March 2022. At that time, Rogers will remain CEO and become chairman.
One key attraction for companies that combine is reducing costs, including eliminating duplicate jobs.
Speaking on a Thursday conference call with analysts to discuss the deal, executives for both banks said the combination is expected to result in $1.6 billion in savings.
Executives did not disclose how many jobs might be eliminated but said that one plan is to close BB&T and SunTrust branches that overlap. Approximately 740 SunTrust and BB&T branches are within 2 miles of each other, according to documents on the deal released Thursday.
In the Charlotte metro area, the banks have about 100 branches combined, according to federal data.
“One of the most powerful benefits of this merger is that we are able to take significant costs out from redundant areas and reinvest it into innovation, technology and our talent,” Daryl Bible, BB&T chief financial officer, said.
“We have duplication throughout the whole company,” he said, adding that back office operations are one area where costs can be cut.
Consumer watchdogs worry
Some consumer advocates expressed concern over the deal, saying that it will create another major bank around a decade after the financial crisis devastated the U.S. economy.
Regulators and Congress should scrutinize this merger at a time when four U.S. bank already control nearly half of all American checking accounts, Bartlett Naylor, financial policy advocate for Washington, D.C.,-based consumer advocacy group Public Citizen, said in a statement.
“If the business case for this merger is premised on expanding market share to raise fees and rates, that harms consumers,” Naylor said.
”The last thing the nation needs is another bank that is too big to fail,” he said. “Meanwhile, employees can expect pink slips, as the firms announced they expect to save $1.6 billion through what they euphemistically call ‘synergies.’”
Observer reporter Danielle Chemtob contributed