NEW YORK (LPC) – The combination of two Southeastern regional banking giants BB&T Corp and SunTrust Banks Inc, in a deal valued at $ 66 billion, positions the combined company to compete with rival lenders nationwide.
In what is the largest US bank merger since the financial crisis, the inflated balance sheet means more resources to expand the combined bank’s syndicated loans for acquisitions, buyouts and growth efforts of mid-market companies, said bankers.
While the joining of forces will allow the merged bank to provide more customer support and potentially move up the lender ranks based on lending volume, some bankers have said upper tier lenders would likely be immune. from this increased level of competition.
“They combine their gunpowder, and after combining their assets, they’ll be where US Bank is – and US Bank is pretty active in extending lending and building relationships,” said a senior banker.
“Once they combine, they might be more active: SunTrust is selective, but already active, and BB&T likes term loans. Maybe they will be another US bank, although I don’t think they will be like a Citi or a BAML, ”the banker said.
As part of the peer-to-peer merger, BB&T purchases SunTrust for approximately $ 28 billion in shares.
“This is an extraordinarily attractive financial proposition that offers the scale necessary to compete and win in the rapidly changing world of financial services,” BB&T Chairman and CEO Kelly S. King said in a statement Thursday.
When merged, the new bank will have around $ 442 billion in assets, putting it on the same side as rival US Bancorp’s $ 467 billion in assets, Reuters reported.
US Bank, through a spokesperson, declined to comment.
LPC’s syndicated bank loan rankings for last year’s overall bookkeeper show the disparity among lenders.
SunTrust ranked 16th with $ 54.4 billion for a 1.99% market share and BB&T is placed well below 52nd with $ 3.6 billion and 0.13 percent share.
While US Bank took third place with $ 60.7 billion and 2.2% market share, Bank of America Merrill Lynch (BAML) took first place with $ 356.1 billion and 13% market share. Steps.
In the midsize business loan market, SunTrust has also been more dominant than BB&T, although far behind market leaders such as Wells Fargo.
SunTrust ranked 9th in the overall U.S. mid-market bookkeeper rankings in 2018 with $ 5.9 billion for a 3.23% market share, while BB&T was 78th with $ 187.5 million and a 0.10% share. At the top, Wells Fargo led with $ 23.8 billion and a 14% share.
ASSESS THE COMPETITION
The new company, whose name has yet to be named, is looking for complementary but distinct business models to drive its growth. According to an investor presentation, the company sees opportunities to leverage SunTrust’s middle market merchant and investment banking business to generate additional income and BB & T’s community banking model to grow.
SunTrust has been more active in the area of sponsor financing, that is, loans to companies financed by private capital. BB&T has focused more on the commercial lending component to businesses through the pro-rata market, which includes loans to banks and revolving credits.
The combined entity will also be the first regional bank-owned investment bank, according to the presentation.
Still, other bankers have said BB&T’s relatively light presence could minimize the threat the combined bank poses to other syndicated lenders.
“BB&T wasn’t much of a competitor in the syndicated loan market, so we don’t necessarily see this as a change,” a banking source said. “The company that was a competitor at SunTrust will just be under a different flag. It is not additive. The folks we competed with at SunTrust, the name is just changing. BB&T is buying capacity that SunTrust owns, so it’s not like there is more than one competitor now. “
Regional and commercial banks that lend to medium-sized businesses as well as privately funded companies have faced intense competition in recent years as the rise of direct lenders has grown.
This bank merger is another indication of the widely expected continuation of consolidation in the banking sector.
This development certainly creates another strong competitor, said a middle-market banking source, but also means one less bank competing in the pro-rated market.
Reporting by Leela Parker Deo and Lynn Adler; Editing by Michelle Sierra and Jack Doran