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SunTrust Receives Fed Approval for Merger Deal With BB&T

Zacks Equity Research

SunTrust Banks STI has received approval from the Federal Reserve's board of governors and the Federal Deposit Insurance Corporation for the previously announced “merger of equals” with BB&T Corp. BBT.

However, the Fed has also hit SunTrust with an enforcement action for unfair practices related to customer fees between 2013 and 2017, which the combined company is expected to comply with.

Notably, the merger of equals will create the sixth-largest commercial bank in the United States (in terms of assets and deposits). It is expected to close on Dec 6, 2019, subject to the satisfaction of customary closing conditions.

The all-stock deal is valued at $66 billion. The combined bank, to be named Truist Financial Corp., will be headquartered in Charlotte.

Kelly King, the CEO of BB&T, who will serve as the CEO of Truist, stated, “We are pleased to have received regulatory approval to merge two strong companies with complementary business models and a high level of cultural alignment. We'll be even better together for our clients, teammates, communities and shareholders.”

The merger is projected to result in earnings accretion for shareholders of both companies. Moreover, share repurchases have been suspended by both companies until the closure of the transaction. (Read more: Blockbuster Merger: BB&T, SunTrust to Create 6th Biggest US Bank)

Early this month, SunTrust announced that it will divest 30 branches across North Carolina, Virginia and Georgia to First Horizon National Corp. FHN. The transaction is expected to close early next year, subject to regulatory approvals.

Thus, First Horizon will assume deposits worth $2.4 billion for a premium of 3.40% and roughly $410 million in loans.

The branch divestiture was part of the Department of Justice’s (“DOJ”) conditional approval for the merger.

At the time of announcement of the merger in February 2019, both SunTrust and BB&T had noted that at least 740 branches, within a two-mile radius of each other, might be consolidated or divested.

Our Take

The merger between BB&T and SunTrust is expected to lead to increased growth prospects and creation of shareholder value.

Moreover, the combined company will likely give tough competition to some of the nation’s biggest banks — including Bank of America BAC and Wells Fargo — in terms of deposits per branch.

Currently, both SunTrust and BB&T carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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SunTrust Banks, Inc. (STI) : Free Stock Analysis Report
BB&T Corporation (BBT) : Free Stock Analysis Report
Bank of America Corporation (BAC) : Free Stock Analysis Report
First Horizon National Corporation (FHN) : Free Stock Analysis Report
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