Banking and Finance Law Daily Fed, FDIC approve merger of SunTrust and BB&T
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Wednesday, November 20, 2019

Fed, FDIC approve merger of SunTrust and BB&T

By Colleen M. Svelnis, J.D.

The Fed and the FDIC have approved the merger of SunTrust Banks and BB&T, which will create the sixth-largest U.S. bank. The Fed also issued a consent order with SunTrust that will continue in effect under the combined bank.

The Federal Reserve Board and the Federal Deposit Insurance Corporation have approved the merger between Branch Banking and Trust Company (BB&T) and SunTrust Banks. SunTrust Banks and BB&T have agreed to an all-stock merger of equals, making the combined company the sixth-largest U.S. bank, with approximately $442 billion in assets, $301 billion in loans, and $324 billion in deposits. The resulting holding company would be renamed Truist Financial Corporation, and the combined bank will operate under the name Truist Bank. The banks will be headquartered in Charlotte, N.C., while maintaining significant operations and investment in Winston-Salem, N.C., and Atlanta, Ga.

In approving the merger, the agencies evaluated statutory factors under the Bank Holding Company Act, such as the transaction’s effect on competition, the financial and managerial resources and future prospects of the existing and proposed institutions, the convenience and needs of communities to be served, the competitive and financial stability impacts of the proposal, and the anti-money laundering records of the institutions involved.

FDIC Director Martin J. Gruenberg issued a statement citing his "concerns with the proposed merger and its potential risk to financial stability." Gruenberg noted that the proposed merger is the largest considered by the FDIC, and the first large merger before the FDIC subject to the new financial stability standard established by the Dodd-Frank Act. Gruenberg concluded that "based on the statutory factors," he would not vote against the merger, but stated that it "would be a serious mistake not to recognize and address the very significant financial stability risks the merged institution would present."

The FDIC stated that the application satisfied those requirements as well as the additional requirements applicable to interstate mergers under Section 44 of the Federal Deposit Insurance Act. The FDIC exercised its authority under section 18(d) of the FDI Act to permit SunTrust Bank’s branches to be established as branches of Truist Bank.

The agencies granted approval conditioned upon the agreement of Truist Bank to divest 30 branches and $2.4 billion in associated deposits and the institutions’ commitment to provide post-merger updates describing any material changes to the legal structure since the submission of BB&T’s last insured depository institution resolution plan, including changes that could impact information technology integration (see Banking and Finance Law Daily, Nov. 8, 2019). The Fed also announced that it will not object to the updated capital plan submitted by BB&T to reflect the merger. The merger must be completed within six months of the approval, unless the deadline is extended by the FDIC.

Comments on merger. According to the Fed’s order, a majority of commenters supported the proposal, believing that it will benefit communities and community organizations through increased resources and services provided by the combined organization. Several commenters commended BB&T and SunTrust for their involvement in their communities and "described positive experiences related to small business, community development, and charitable contribution and investment programs of both organizations" as well as praising both organizations for their corporate cultures.

The order does note that a "significant number of commenters" either opposed the proposal, requested that the Fed approve the proposal subject to certain conditions, or otherwise expressed concerns about the proposal. Many of these commenters questioned whether the proposal would result in public benefits and/or expressed concern that the proposal would result in job losses and branch closures. In addition, some commenters expressed concern that the merged banks would be "too big to fail."

Another issue is the records of the banks in "meeting the credit needs of their communities," particularly minority communities and low- and moderate-income communities. Commenters expressed concerns that the proposal would result in fewer services and less focus on rural communities, and would result in customer confusion, particularly among senior citizens. In addition, commenters expressed concern that the proposal would significantly reduce competition throughout the banking markets in which BB&T and SunTrust operate.

SunTrust Consent Order. The Fed also issued a consent order against SunTrust for unfair and deceptive practices. According to the consent order, SunTrust made misleading or inaccurate statements between 2013 and 2017 to business customers about the operation and billing for some add-on products. Since 2016, SunTrust has repaid approximately $8.8 million in fees to customers and terminated the products.

As a condition of the merger, BB&T has committed that the resulting bank will comply with the enforcement action, including implementing procedures to verify the refunds and providing additional refunds.

BB&T statement. BB&T issued a release stating that the company expects the merger to be completed on Dec. 6, 2019. After the merger, BB&T common shares will become Truist common shares and SunTrust common shareholders will receive 1.295 Truist common shares for each share of SunTrust common stock they own at the closing.

Waters statement. Representative Maxine Waters (D-Calif), Chair of the House Financial Services Committee, responded to the merger approval by noting her long-standing concerns "about the threat that megabanks pose to consumers and our economy." Waters stated that while the agencies "placed some conditions on the merger, they should have gone further and made the promises in the community benefits plan binding on the new bank." Waters stated that the Financial Services Committee "will continue to conduct oversight on the new bank, and will follow up to ensure that it makes good on its promises."

Companies: BB&T Corporation; SunTrust Banks, Inc.

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