BB&T Corp. agreed to buy SunTrust Banks Inc. in the world’s largest bank merger in more than a decade, betting that a combination will allow them to keep up with bigger rivals in the arms race for new technology.
The $28 billion deal scraps both companies’ names and headquarters, creating an entirely new bank based in Charlotte, North Carolina, with branches throughout the Southeast. It will be the sixth-biggest commercial bank in the U.S. by assets, supplanting PNC Financial Services Group Inc.
Industry executives have long predicted a wave of bank mergers that until Thursday had played out only in smaller or midsize deals.
Brian Moynihan, chief executive officer of Bank of America Corp., said last month he could envision the creation of another megabank, given the large number of small players spread throughout the country.
And Ernst & Young said it expects a flurry of transactions this year, fueled by easing regulations and the U.S. tax overhaul, which helped lenders build a war chest to spend on acquiring new clients and technology.
SunTrust shares climbed 8.7 percent to $63.84 at 10:10 a.m. in New York, their biggest increase in intraday trading since 2011. BB&T rose 2.9 percent.
The banks said the deal will allow more investment in technology while cutting more than 10 percent of combined total expenses through eliminating duplicate branches and digital systems.
The company will create an “Innovation and Technology Center” in its new headquarters, and the statement on the deal used the words technology, digital and innovation more than a dozen times.
‘Compete and Win’
The combination “provides the scale needed to compete and win in the rapidly evolving world of financial services,” BB&T CEO Kelly King, who will keep that title at the new company, said in the banks’ joint statement Thursday.
In the few hours since the deal was announced, both banks have been calling their biggest clients and shareholders to make sure they understand that the deal is “positive for everybody,” King said on a conference call with analysts Thursday morning. The banks aren’t expecting attrition as they merge, but rather growth, King said.
The deal came together quickly, and the integration process will start next week, according to King. The banks are planning to complete the transaction by the end of the year — King said he’s targeting a Sept. 12 closing, a date chosen because it’s his birthday — and aren’t anticipating any obstacles.
SunTrust CEO Bill Rogers said executives from the two banks will work “extremely hard” to ensure a 2019 completion.