BB&T and SunTrust announced a blockbuster merger that will create the sixth-largest bank in the United States. The $66 billion all-stock merger will see the combined entity serve more than 10 million U.S. households. Also noteworthy is that this deal is the first of this magnitude since the infamous 2008 financial crisis.
BB&T-SunTrust Merger Likely Means Employee Layoffs
The deal, while being called a merger, entails BB&T acquiring SunTrust. SunTrust is moving its Atlanta operations to Charlotte, NC where BB&T is based. Charlotte will be the new headquarters.
Bill Rogers is the CEO and Chairman of SunTrust, while Kelly King is the CEO and chairman of BB&T.
Interestingly, BB&T’s King will be the Chairman and CEO of the combined entity for only the first two years; then Rogers will take the reins. In the meantime, Rogers will be the President and Chief Operating Officer.
“Even though we are establishing a new headquarters, we are still very committed to home markets in Atlanta and Wisdom-Salem North Carolina.”
That’s fine for investors, but what about the workers who will lose their jobs? The CEOs didn’t mention layoffs. However, they are likely.
The Atlanta Journal-Constitution notes:
“[The] overlaps in the markets they serve will undoubtedly lead to branch closures and job cuts as the two behemoths combine and find redundant operations.”
Why More Bank Mergers are on the Horizon
The 2008 financial crisis is burned in the memory of virtually every investor. The collapse resulted in the tumbling of industry leaders, such as Bear Stearns.
Various federal regulations were put in place to help prevent the fall from being a recurring nightmare. This includes the Dodd-Frank Act. Banks complied, and the industry, for the most part, regained its financial footing.
One of the predictions that stemmed from the crisis related to mergers. Bank of America CEO Brian Moynihan said at Davos that he predicted a new wave of big bank mergers, according to Reuters. Bank of America is the second-largest bank in the United States.
In bragging about the merger, King said the combined entity could potentially become “the premier financial institution in the country.”
“[The merged companies] will have the capacity to invest in better technology for our clients in this fast-moving world.”
In addition to strengthening their position against the country’s largest financial institutions, the BB&T-SunTrust merger could help the formerly-regional banks swat down competition from fintech startups such as Square and Robinhood who are increasingly offering products traditionally found at banks.
“It’s an extraordinarily attractive financial proposition that provides the scale needed to compete and win in the rapidly evolving world of financial services. Together with Bill’s leadership and our new SunTrust teammates, we’re going to bring the best of both companies forward to serve our clients and communities.”
Observers commented that this merger will also have wide-ranging effects outside of the United States.
Featured Image from Shutterstock