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BB&T-SunTrust merger spurs deal talk

Bloomberg

The SunTrust Plaza, the headquarters of SunTrust Bank Inc, is pictured in Atlanta, Georgia, on March 15, 2012.

Photo: EPA-EFE

For years Wall Street has braced for the next wave of mergers in US banking. At last, the first rush has hit.

The tie-up of BB&T Corp and SunTrust Banks Inc, the biggest banking merger since the 2008 financial crisis, could herald a new era of rapid consolidation among the nation’s regional banks.

In many ways the BB&T-

SunTrust deal underscores the growing might of the nation’s largest banks since they were bailed out by taxpayers a decade ago. Their hold over the industry and its customers has left once-thriving regional rivals struggling to compete, making smaller lenders prime targets.

“You can be sure that the investment banks that cover the commercial banks of that size, the middle-market size, are banging on the doors with ideas,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “If you go through all the regions, I think you’ll find some banks that are BB&T or SunTrust-sized, and they’re going to be merging.”

Who could be next? Following are the names bankers and analysts are mentioning:

Alabama’s Regions Financial Corp, based in the heart of the southeast, will be facing a much stronger competitor in the combined operations of BB&T and SunTrust. It is also about the right size, with US$126 billion assets, and could appeal to a number of bigger lenders that have flirted with expanding in the region, including Toronto-Dominion Bank.

In the midwest, three midsize banks are duking it out in Ohio: Fifth Third Bancorp, Huntington Bancshares Inc and KeyCorp. Ample opportunities to cut overlapping branches means a linkup could make financial sense and all three have shown an appetite to get bigger through deals.

Comerica Inc, based in Dallas, is a perennial takeover target and well-positioned in the coveted banking market of Texas, where the economy is booming on the strength of a resurgent oil and gas industry. Under pressure from investors, Comerica executives in 2016 met with advisers to determine the feasibility of a merger, but decided it was a bad time to pursue a sale.

The BB&T acquisition of SunTrust also raises the prospect of whether US Bancorp and PNC Financial Services Group Inc, the nation’s two largest regional banks, would now seek to strike transformational deals of their own.

Minneapolis-based US Bancorp has said it is weighing a branch expansion in Florida, North Carolina and Texas.

“The deal represents an acknowledgment of the growing need for scale in the US banking business,” UBS Group AG analyst Saul Martinez said in a note to clients. “Considerable technology investment needs and limited structural growth suggest even larger regional banks may look to expand through acquisition.”

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