BB&T, SunTrust Reveal $66B Bank Deal; Branch Closings And Job Losses Likely

Market share for banks held in the Richmond region as of June 30 ranked by the amount of deposits, with the market share in parentheses followed by the number of branches in the area:

Capital One Bank: $69.79 billion in deposits (64.92 percent market share); 1 branch

Bank of America: $14.17 billion (13.18 percent); 22

Wells Fargo Bank: $6.82 billion (6.34); 59

SunTrust Bank: $4.49 billion (4.18 percent); 39

BB&T Bank: $3.16 billion (2.94 percent); 36

Union Bank & Trust: $2.93 billion (2.73 percent); 31

Towne Bank: $860.3 million (0.80 percent); 9

SonaBank: $846.3 million (0.79 percent); 13

Citizens & Farmers Bank: $840.5 million (0.78 percent); 16

Essex Bank: $609.4 million (0.57 percent); 11

Source: Federal Deposit Insurance Corp.

Regional banks BB&T Corp. and SunTrust Banks Inc. plan to merge in a $66 billion, all-stock deal that will lead to branch closings and likely job reductions.

The two financial institutions, which both have a major presence in the Richmond region and employ thousands locally, will combine in what executives called "a merger of equals."

The combined company would operate under a new name and brand, which would be determined before the deal closes. The merger is expected to close in the fourth quarter, subject to regulatory and shareholders' approval.

The merger would create the sixth-largest U.S. bank based on assets and deposits. It would have about $442 billion in assets, $301 billion in loans and $324 billion in deposits serving more than 10 million U.S. households.

The combined company's board and executive management team would be evenly split between the two institutions.

A new corporate headquarters would be established in Charlotte, N.C. BB&T now calls Winston-Salem, N.C., its home, and Atlanta is headquarters for SunTrust.

It was not immediately clear exactly how many jobs or how many bank branches would be affected by the merger.

But the companies said the combined company would be able to cut about $1.6 billion in annual net costs by 2022. Those cost reductions are expected to come from facilities, information technology, shared services, retail banking and third-party vendors.

During a conference call on Thursday, SunTrust Chairman and CEO William H. Rogers Jr. told employees of both banks who were listening that "the combined company will remain committed to developing, retaining and investing in you."

"It's clear that the combined company has the opportunity to do more than we could have done on our own, and all of our stakeholders are going to benefit," he said.

In addition to regional banking operations and branches for both banks, the Richmond region is home to SunTrust Mortgage Inc.'s operations. The area also is headquarters for BB&T Scott & Stringfellow, a full-service regional brokerage and investment banking firm.

Given that the banks have overlapping territories and a large concentration of branches, it seems likely the combined entity will either combine branches or eliminate some, said Steve Marascia, director of research at Capitol Securities Management in Henrico County. "Additionally, this may occur if bank regulators mandate they sell or eliminate branches in order to approve the deal," he said.

Combined, BB&T and SunTrust have about 740 branches within 2 miles of each other, or about 24 percent of all the banks' branch locations, executives said on a conference call.

"We have to be very careful about closing branches - clients are very sensitive," said Kelly King, BB&T's chairman and CEO, during the conference call.

"We will be very methodical and careful about that," said King, who will serve as chairman and CEO of the combined company until September 2021.

SunTrust and BB&T have the fourth- and fifth-largest market shares among banks in the Richmond region based on deposits as of June 30, according to data from the Federal Deposit Insurance Corp. SunTrust had 39 area branches, while BB&T had 36 offices, the data show.

Combined, their market shares stood at about 7.1 percent in the Richmond region as of June 2018. In Virginia, their market shares came in at 13.6 percent, putting the combined bank in the No. 2 spot behind Capital One Bank.

While mergers often result in fewer total employees, the Richmond region's growing economy means total demand for banking services should continue to grow, creating more jobs in the overall industry, said Kim Scheeler, president and CEO of ChamberRVA.

"The benefit for the region will be that the merged bank will be a stronger organization with more assets that it can put to work helping to grow our economy," Scheeler said.

Under the terms of the merger agreement, SunTrust shareholders will receive 1.295 shares of BB&T for each SunTrust share they own. BB&T shareholders will own approximately 57 percent and SunTrust shareholders will own about 43 percent of the combined company.

The stock prices of both companies rose Thursday after the merger was announced. SunTrust rose $5.98, or more than 10 percent, to close at $64.72, while BB&T rose $1.93, or almost 4 percent, to close at $50.46 on the New York Stock Exchange.

That both stocks rose "is an abnormality as the buyer shares typically decline," said Kent Engelke, chief economist strategist for Capitol Securities Management. "It is my understanding the combined bank will have the greatest return on tangible equity of any of the largest banks, a major catalyst for this merger."

"The combined bank is expected to have the resources and products to compete with the global leviathans and will probably earn the elite moniker of a 'money center bank,' offering complicated financial services to companies headquartered in our own backyard from a bank that still has the community bank ethos," Engelke said.

[email protected](804) 775-8123Business Editor Gregory J. Gilligan and The Associated Press contributed to this report.