BB&T Corp, a regional lender in the United States, and SunTrust Banks Inc., an American bank holding company, announced an all-stock merger of equals valued at roughly $66 billion in February.
The still-unnamed company will become the sixth-largest U.S. bank based on assets and deposits. It will have an estimated $442 billion in assets, $301 billion in loans, and $324 billion in deposits. To serve 10 million households, the company’s new corporate headquarters will be in Charlotte, North Carolina. Existing operations in Winston-Salem and Atlanta will continue.
With this extensive reach and estimated multi-billion worth of financial assets, the deal is being touted as the largest bank merger since the financial crisis that took place from 2007 to 2009. Canada’s RBC Capital Markets had been an integral part of the acquisition process.
RBC Capital Markets as sole financial adviser to BB&T
The BB&T-SunTrust deal – which analysts say will only be the first in a large wave of mergers among the world’s biggest banks happening this year – has become RBC’s largest M&A sole advisory role to date. RBC bankers who handled the deal directly were Vinnie Badinehal who is the head of financial institutions investment banking and Jason Braunstein who is the head of bank M&A as well as bankers Eric Martinez and Sabrina Kureshy.
The Canadian investment bank had already handled an advising role with a merger as big as the BB&T-SunTrust deal in 2015 but not in a sole capacity. At the time, RBC worked alongside JPMorgan, Goldman Sachs, Moelis, and Lion Tree Advisors to process Dell’s $66-billion takeover of software developer EMC.
Asked for comments regarding the BB&T-SunTrust deal, RBC Capital Markets analyst Gerard Cassidy said there will be more mergers like it in the years to come. One biggest motivation for banks to consider similar mergers is to accommodate the need for digitization, according to Cassidy.
“The technology spending is one of the reasons why I think you’re going to see these mergers continue on a go-forward basis,” Cassidy said on CNBC’s “Squawk Box.”
BB&T-SunTrust merger to invest more in technology
Banks are gatekeepers of highly sensitive financial information and a massive amount of customers’ data. With proper digitization, banks could efficiently and securely keep private information, away from potential cybersecurity risks. Digitization is also the banks’ tool for better customer service since it eliminates human errors.
BB&T and SunTrust, in their joint announcement, highlighted that their primary aim is for the merger to competently keep up with the ever-evolving technology needed in the financial sector.
“By bringing together these two mission- and purpose-driven institutions, we will accelerate our capacity to invest in transformational technologies for our clients,” William Rogers, Chairman and Chief Executive Officer of SunTrust, said in a statement.
“Our shared culture embraces the disruption of technology and we will take this innovative mindset to expand our leadership in the next chapter of these historic brands,” he added.
The new company to come out of the merger will have a designated Innovation and Technology Center to support digital transformation and to ensure competitiveness with markets considered as “digital-first worlds.”
The up-and-coming sixth-largest bank in the U.S. is also expected to bring in an estimated $1.6 billion in annual net cost synergies by 2022 of which a large part will come from information technology.
(Featured image by JHVEPhoto via Shutterstock)