BB&T and SunTrust to combine
$66 billion deal could mean cuts to back-office operations in Allentown
What could a marriage of two Southeastern banks mean for Lehigh Valley consumers?
It’s likely not much, though for dozens of back-office workers employed by one of the banks in Allentown, it could accelerate the loss of their jobs.
The future of Lehigh Valley banking, not to mention downtown Allentown’s financial landscape, became murkier with news Thursday that BB&T Corp., which has a significant Lehigh Valley presence, and SunTrust, which has no presence here, will merge in a $66 billion deal.
It’s the first big bank merger since the chaos of the 2008 financial crisis, with the deal set to create a financial titan in the U.S.
The merger, an all-stock deal that will create the nation’s sixth largest bank in terms of assets and deposits, reflects the growing consolidation in the banking industry.
The two banks, which have a significant presence in the Mid-Atlantic — though SunTrust has no Pennsylvania branches — cited the need to “accelerate investment in transformative technology” as a major reason behind the combination.
Officials with SunTrust and North Carolina-based BB&T, which advanced into Pennsylvania with its 2015 acquisition of Allentown’s National Penn Bancshares and an earlier takeover of Lancaster-based Susquehanna Bancshares, declined to comment on what the
merger will mean locally, saying it was too soon to tell.
Michael Wong, an equity analyst at Morningstar, said that with little to no overlap locally, closing area branches “doesn’t seem like it would be a priority.”
“There is always back-office and corporate overhead costcutting with mergers,” said Wong, whose company favors the merger, “but not a lot of that headcount is at the local branch level. A lot of savings can also be from consolidating vendor relationships, which doesn’t really affect headcount of the merged companies.”
Lehigh Valley activist Alan Jennings, who deals with banks on issues such as reinvestment, agreed more BB&T job cuts will occur among accounting and other back-office positions, though he doesn’t foresee job losses among BB&T’s lenders, tellers and those employees who deal directly with customers.
“The question is what’s left of the back-office operation as it is,” said Jennings, executive director of Community Action Committee of the Lehigh Valley.
BB&T employs 360 people across its 32 branches in Lehigh and Northampton counties, as well as in downtown Allentown’s Two City Center.
But in December, BB&T said it was eliminating its Center City Allentown regional headquarters as well as senior positions held by Scott V. Fainor and David B. Kennedy, former executives at National Penn Bancshares and longtime Lehigh Valley bankers.
The banks said that after the merger they expect to reap cost savings of $1.6 billion by 2022. For BB&T, it could indicate a quicker phasing out of the downtown Allentown offices.
BB&T has a 20-year lease at City Center with two renewal options, according to a 2016 Securities and Exchange Commission filing. The bank has 180 employees on the top three floors of Two City Center at 645 Hamilton St. and subleases two other floors to payroll processing company ADP.
“The lease is the lease is the lease,” said Tony Iannelli, president and CEO of Greater Lehigh Valley Chamber of Commerce. “Relative to the employee dominance that [BB&T] had, that remains to be seen. Large-scale mergers sometimes diminish the necessity in terms of the number of employees.”
Iannelli also said the merger might boost the region’s smaller, community banks, a point also noted by American Banker, a daily trade newspaper and website covering the financial services industry.
“Community banks also have a chance to benefit,” according to American Banker. “BB&T and SunTrust plan to divest $1.4 billion in deposits. Those types of deals tend to get snapped up by smaller institutions.”
As of June 30, BB&T has about $2.1 billion in deposits in the Lehigh Valley, which represents about an eighth of all deposits in the region and is second only to Wells Fargo’s $3.4 billion in deposits, according to the FDIC. It also ranks second in the number of branches, with 36.
The BB&T/SunTrust socalled “merger of equals” is the biggest bank deal since the financial crisis more than 10 years ago. The combined company will operate under a new name and have around $442 billion in assets, $301 billion in loans and $324 billion in deposits serving more than 10 million households in the U.S., according to the announcement by the 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,” BB&T CEO Kelly King said in a statement.
“This is an all-stock deal,” said Sam Stovall of the financial research firm CFRA. “Usually, all-stock deals are done late in bull markets, since share prices are elevated. Conversely, cash deals are typically done early in the cycle since share prices are depressed.”
The deal is expected to close this fall.
Based in Winston-Salem, N.C., BB&T Corp. as of last September had 1,958 offices in 15 states and Washington, D.C. Atlanta-based SunTrust is one of the largest bank holding companies in the Southeast. It was created by the merger of Trust Corp. of Georgia and Sun Banks in 1985.
The combined company will be based in Charlotte and operate under a new name but continue to have operations in Winston-Salem and Atlanta. SunTrust, which had assets of $216 billion and deposits of $163 billion as of Dec. 31, has branches in 12 states.