BB&T, SunTrust announce $66 billion merger

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Zuri Berry WFAE

And Ernst & Young said it expects a flurry of transactions this year, fueled by easing regulations and the USA tax overhaul, which helped lenders build a war chest to spend on acquiring new clients and technology. The combined company will retain operations in Winston-Salem, North Carolina, and Atlanta, Georgia, the home markets for both companies. In a CNBC interview, executives said the merger would allow them to invest more heavily in new technology demanded by customers.

In a reflection of the equal contribution both banks bring to the new institution, the combined company will operate under a new name and brand, which will be determined prior to closing. The value of mergers and acquisitions in the USA financial-services sector more than doubled to US$196.5 billion in 2018 from US$82.3 billion in 2017, EY said. Rogers will be president and chief operating officer.

The added heft from the merger is expected to boost lending capacities to the largest corporate clients, better positioning it against national banks that are also active in the region.

"The end result of the transaction is a very powerful company in some of the best markets in the United States", he said.

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While it may be tempting to explain the deal by pointing to the partial rollback of the postcrisis Dodd-Frank financial reform law that signed was into law last spring by President Donald Trump, the bulk of that law's measures were targeted at banks far smaller than the one that will be created by this deal, if it is approved by regulators. Even though BB&T shareholders will end up with a majority of shares, a key point for SunTrust was that the deal would treat the banks as equals.

Most bank mergers stopped after the crisis because the banks had to clean up their balance sheets, and the regulatory environment under the Obama administration made mergers more hard.

SunTrust shares were up 8.5% following the news, and BB&T's were higher by 4.8%. BB&T shareholders will own about 57% of the combined company. About one-quarter of the BB&T and SunTrust branches, 740 of them, are within two miles of each other.

The two banks have a combined 92 offices in Central Florida and control $12.8 billion of deposits in Central Florida, according to the Federal Deposit Insurance Corp.

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BB&T Corporation and SunTrust Banks said on February 7 that they have agreed an all-stock merger valued at around $66bn. The expected benefits of the transaction include a pro forma efficiency ratio of 51%, peer best ROATCE of 22% and projected tangible book value per share accretion at close for BB&T shareholders of approximately 11%, or 6% fully accounting for one-time merger charges. "So ultimately, (it) should get done".

RBC and Wachtell, Lipton, Rosen & Katz advised BB&T while Goldman Sachs along with the investment banking unit of SunTrust and Sullivan & Cromwell advised SunTrust.

"It's an extraordinarily attractive financial proposition that provides the scale needed to compete and win in the rapidly evolving world of financial services", King said in a prepared statement.

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