Charlotte's reputation as a major banking center is getting a big boost. Southeastern regional banks BB&T of Winston-Salem and SunTrust of Atlanta are merging to create the nation's sixth largest bank. The combined company will have a new name, yet to be announced. And it will be headquartered in Charlotte.
WFAE reporter David Boraks joined “All Things Considered” host Mark Rumsey to discuss the merger.
Mark Rumsey: Was this a surprise?
David Boraks: Yes, to many of who us who have followed these two banks for a long time. One analyst I talked to used the word "shock." The Atlanta Journal-Constitution called it a "stunning announcement." In Charlotte, people are buzzing about this new corporate headquarters that seems to have dropped out of the sky.
My colleague Sarah Delia talked with Ernie Reigel, interim CEO of the Charlotte Regional Business Alliance. Here’s what Reigel said:
“General reaction was a big wow, it’s an incredible win for Charlotte. That hits on a lot of different levels. The fact that we've got another Fortune 500 company, effectively, moving their headquarters to Charlotte. To the fact that you have two banks that are very well regarded from a trust and integrity and performance standpoint combining into one, with two incredible leaders — Kelly King and Bill Rodgers — that are going to be a part of the Charlotte region and community.”
Boraks: It's been a decade since Charlotte had two large bank headquarters. The city was the nation's Number 2 banking center before Wachovia was swallowed up by Wells Fargo. But it has continued to grow in importance — with major operations here for Wells Fargo and Ally Bank, the headquarters of online lender LendingTree and a lot of related financial technology businesses.
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Rumsey: How was the news received in Winston-Salem and Atlanta?
Boraks: It hit hard in Winston-Salem, where Mayor Allen Joines learned about it in a phone call at 6:30 this morning. He says he hopes that having the companies' combined community banking headquarters in the city will eventually boost employment. Here’s what Joines said:
“We believe that the job numbers will be OK in the long run, the division headquarters. But certainly we're disappointed that we're losing the corporate headquarters, don't make any mistake about that.”
Boraks: There's also a lot of disappointment in Atlanta. To many, it was a reminder of the merger mania of years past, when banks like NationsBank, First Union and Wachovia gobbled up Atlanta's banks. SunTrust was founded there in 1891. Atlanta news media are pointing out that they'll have to change the name of SunTrust Park, where the Braves play.
And by the way, this also means new names for BB&T Ballpark in Charlotte and Winston-Salem. The upside is those stadium deals mean the new name will be on the tongues of thousands of sport fans.
Rumsey: Speaking of names, they say they'll pick a new one for the combined bank. Why?
Boraks: A couple of reasons. By opting for a new name, they're standing on equal footing — and avoiding a fight. In the conference call with analysts this morning, both BB&T CEO Kelly King and SunTrust CEO Bill Rogers described this as a "transformative deal." They want to signal to investors and to customers that this will be a different company. So, time for a new name.
Rumsey: So, why is this happening now?
Boraks: BB&T and SunTrust have both grown beyond their home states over the past couple of decades by buying up smaller regional banks. But that's gotten a lot harder to do. Smaller banks have gotten too expensive. Especially newer startup community banks seem to have business model that involves growing, then selling out to the big guys. And price expectations are rising, which is why King says they stopped buying smaller banks:
“The economics didn't work. The marketplace has priced smaller institutions at a level that we couldn't make the numbers work.”
Boraks: Another reason is technology, which is expensive and changing quickly. The companies both say they want to improve their use of technology to serve customers better. They said this morning they're planning to spend an extra $100 million a year going forward on technology.
Much of that will come out of Charlotte. In addition to the headquarters, the companies plan an expanded Innovation and Technology Center here.
Rumsey: Are these two companies a good fit? Any worries about this deal?
Boraks: These are two similarly-sized companies — they're currently the 11th and 12th largest U.S. banks by assets. Both in their own way have been seen as conservative southern banks. But they're different, says independent bank analyst Nancy Bush:
“You know much was made this morning about similar cultures and as an analyst who's followed two of these both of these companies for over 20 years I'd say no, not so much.”
Bush says BB&T was largely built by a strong CEO, John Allison, who retired 10 years ago. The culture he built is strong and intact. She says SunTrust has struggled over the years with clashes between its different geographies, and between pushing a retail culture versus a corporate culture. We'll see how those come together when they start making personnel decisions.
Rumsey: So, is this a huge regional bank, or a national bank?
Boraks: Great question. I'd put it in the large regional bank category, but one with national aspirations. They'll be in 17 states and the District of Columbia — but nothing west of Texas and Indiana.
Together, they'll have $442 billion in assets. But that's still a lot smaller than the top four banks, which all have over a trillion dollars. It's still about one-quarter the size of Bank of America and Wells Fargo.
I guess a big question is, will there be another big deal someday to take them coast-to-coast?