Analyst Predicts BB&T-SunTrust Deal To Close In Late-December

BB&T Corp.'s proposed $26.7 billion purchase of SunTrust Banks Inc. may not be completed until late December, an analyst with Janney Montgomery Scott projected Wednesday.

The banks have projected closing their megadeal in late September to early October. Truist Financial Corp. has been selected as the corporate name of the combined bank.

The banks gained approval for the merger from the N.C. Commissioner of Banks on July 10 and near unanimous approval from their respective shareholders July 30. They await reviews from the Federal Reserve and Federal Deposit Insurance Corp.

Depending on the level of congressional and federal regulatory scrutiny about whether Truist falls into the too-big-too-fail category, approval might not be until early 2020, analysts say.

"We understand a December 2019 close is (the) most likely scenario," Janney Montgomery Scott analyst Chris Marinac said, basing his projection on conversations with officials with both banks.

"A fourth-quarter close does not feel aggressive on our timing."

Tony Plath, a retired finance professor at UNC Charlotte, said an earlier closing than end of the year is probable.

"To date, neither bank has been subject to any new or continuing regulatory orders, and nothing has happened in the last six months to change the circumstances and regulatory response surrounding the deal," Plath said.

"Of course, the Democrats are going to (complain) that (Truist) is growing too large and disconnected from its employees, customers and communities. But, that's no reason to slow the progress of the merger since there's nothing of substance to back up the political posturing.

"It's more likely that there's a delay due to the complexity of the combination, or some sort of legal requirement that's going to require a few more weeks to settle."

BB&T provided an update Tuesday on some financial aspects of the deal in a regulatory filing.

For example, the projected purchase price has been reduced by about $3 billion from the $29.7 billion determined by analysts when the deal was announced Feb. 7.

The banks said they will form the nation's sixth largest traditional bank with $456.4 billion in total assets as of June 30, up $14.4 billion from the announcement date.

BB&T shareholders will own 57% of the combined bank in an all-stock transaction now valued at $61.4 billion, down from $66 billion.

The combined bank would have its headquarters in Charlotte, with its community-banking division based in Winston-Salem and its wholesale-banking division in Atlanta.

It would have a presence in 17 states, stretching from Pennsylvania and New Jersey to Texas, but foremost in the Southeast.

It would be the banking industry's largest deal since the Great Recession of 2008-11. The bank said it could take 12 to 24 months after closing to integrate the operating systems, including branch networks.

The banks have significant branch overlap in the Southeast, particularly in the Carolinas, Georgia and Virginia. The banks said they have 740 branches within two miles of each other within their markets.

Since the end of 2016, BB&T's "disrupt or die/disrupt to thrive" initiative has led to reductions in employees (down 1,628, or 4.3%, to 35,582) and branches (down 317, or 14.4%, to 1,879).

BB&T said in the regulatory filing that the banks "may be required to divest of certain branches or other assets in order to obtain regulatory approval."

"Any divestiture package will be subject to approval by the Federal Reserve Board in conjunction with the Department of Justice and has not been finalized."

Marinac projected a combined Truist could begin repurchasing outstanding shares as early as the first quarter.

The banks have projected annual pre-tax expense savings of $1.6 billion from their merger, which will take until 2022 to be fully realized.

"We feel this estimate ultimately goes higher by 2021, even though the company is unlikely to comment about upticks for several quarters," Marinac said.

The banks provided pro forma financial results as if they had been combined on June 30, and for fiscal 2018.

The combined bank would have had $2.93 billion in net income through the second quarter, as well as diluted earnings of $2.15 a share.

Separately, BB&T had first-half net income of $1.59 billion and diluted earnings of $2.06, while SunTrust had $1.22 billion in net income and diluted earnings of $2.72.

Combined loan revenue would have been $6.24 billion and fee revenue $4.36 billion.

For fiscal 2018, combined net income would have been $5.74 billion, along with $4.20 in diluted earnings, $12.65 billion in loan revenue and $8.1 billion in fee revenue.

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